US Dominance Seen Slipping in Internet Use, Commerce

The US is rapidly losing its dominance in Internet usage and e-commerce, according to a report by International Data Corp. (IDC), which found the world to be moving away from a US-centric, English-speaking Web.

According to the report “Web Site Globalization: The Next Imperative for the Internet 2.0 Era”, the number of total Internet users worldwide will reach 602 million in three years, with the percentage of American users dropping from one-half in 1998 to one-third in 2003. The next 6 to 24 months are critical, according to IDC, for for corporations to build strong footholds in foreign markets through effective Web globalization strategies.

The report also found that US companies are missing the international e-commerce explosion, with the overwhelming majority (70 percent) drawing less than 10 percent of their e-commerce revenues from overseas.

IDC’s report, which was sponsored by eTranslate Inc., forecast that worldwide B2B purchases will ignite the Internet, jumping to $1.1 trillion in 2003 from 107.7 billion in 1999, a 1,300 percent increase. Western Europe will surge past America for the global e-commerce revenues at more than double the US growth rate.

“Now is the time to gain competitive advantage globally,” said Barry Parr, IDC’s Director of Consumer eCommerce Advisory Research, and author of the report. “With more than half the potential market outside the US, companies failing to expand internationally are leaving one-half their potential revenue on the table.”

IDC found that Internet spending outside the US will surge to $913 billion, two-thirds of the projected $1.64 trillion worldwide 2003 e-commerce total. While the percentage of US e-commerce revenue continues to drop, Western Europe and Japan’s share will rise substantially from 29 percent to 47 percent between 1999 and 2003, to a total of $764 billion. In three years, one-third of all Internet users will prefer using a language other than English. By regions, 84 percent of Japanese users prefer operating in a language other than English. For Latin America and Western Europe, those percentages are 75 and 52 percent.

The fastest Internet user growth is in the Asia-Pacific region, where it will triple to 75.6 million from 19.7 million between 1999 and 2003. Northernmost Western European countries, such as Finland, Sweden, Norway, and Denmark, currently have the highest online penetration rates of more than 30 percent, closely mirroring that of the US. Southernmost European countries such as Greece, Italy, Spain, and Portugal have the lowest penetration rate, typically less than 10 percent.

While Internet penetration in Western Europe today lags behind the US, European businesses are better positioned than their American counterparts to leverage trans-border commercial success and exploit the e-commerce boom there, according to the report.

“Those that move on Web globalization now will win the international e-commerce race,” Parr said. “This first-to-market advantage has long-term pay-offs as overseas markets continue to grow.”

According to the “2000 Worldwide Web 100” survey, European big business is leading the way in terms of using Web sites as an avenue for making money. Independently research by the London School of Economics and Political Science for Novell, the survey ranked 100 of the world’s largest Fortune 500 multinational companies to assess how they are publicly implementing their Internet strategies.

According to the report, European companies continued to show a strong e-commerce presence with 10 out of the top 20 places occupied by big organizations based in Europe. Deutsche Bank rose seven places to head the rankings, with Tesco and Sony making up the top three. The top American organization was Walmart, which just made the top five. In regional terms, the US was represented by 14 firms in the top 30, 13 European, and three Japanese, suggesting the American domination of the e-commerce environment may be over.

But American companies are continuing to invest in Web initiatives, especially in internal processes that aren’t visible to the outside world. In its “2000 Web Spending Model: Forecast and Analysis by Vertical Industry,” IDC found that an increasing portion of US companies’ IT budgets is being invested in internal and external Web initiatives. In 1999, just over 12 percent of all US companies’ IT spending was on Web initiatives. This percentage will more than double to 27 percent by 2003, when US Web spending will exceed $282 billion.

“Beyond the promise of e-commerce, industries are looking to leverage Web technologies within existing internal business processes such as purchasing, procurement, and inventory management,” said Christian Silva, an analyst with IDC’s Internet and eCommerce Strategies research program. “These ebusiness initiatives, while less visible to the outside world, are critical prerequisites to outward-facing e-commerce initiatives and continue to drive much of the real investments in Web hardware, software, and network infrastructure.”

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