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Published:  23 July, 2008

There is a new reality in the virtual world, with developments in software promising to change the day-to-day business practices of companies large and small. So if AOC means more to you than ADSL and ASP, you need to read on. Especially when ASP may be the last thing your IT team will tell you about. By Neil Beckett

About 20 years ago, two of the world's most powerful computers, one from the US, one from the USSR, were made to talk to each other. The American machine came up with a phrase for the Soviet machine to translate: "out of sight, out of mind". The Soviet machine came back with the answer: "invisible idiot". Exactly the epitaph in store for those in the wine and spirits world who do not realise that computers have become much better at communicating with each other since then. Despite all the cyperbole surrounding dotcoms, computers and the Internet continue to play an ever more crucial role. As Professor Steve Woolgar of the Sad Business School at Oxford University bluntly states, "The Internet isn't going to go away." It has become a clich to say "there's no e-business, just business". But the false distinction may soon be equally well expressed the other way round: "there's no business, just e-business". Merrill Lynch is still predicting that by 2009, as much as 85% of all business will be conducted on the net. With a third of all UK households and half of all UK businesses already on the net (Office of National Statistics/ NOP Research Group), who is to say that the prediction will not prove to have been right? And who is to say that small companies may not have benefited at least as much as large? It is a fatal mistake still made by many in the wine and spirits world to suppose that high-tech solutions are only in the reach of large organisations. In the UK in the first half of 2000, the average increase in Internet take-up was 20% among businesses, but 22% among small businesses, representing 70,000 new connections for companies with fewer than ten employees. David has as much reach as Goliath on the web. And some of the latest software - as affordable as it is practical - puts bigger pebbles in the slings of Davids everywhere.

Safer, faster, cheaper Now that there is greater reality in the virtual world, the two key themes are consolidation and integration. But especially here, nothing ever stays still. The first of three general developments are the efforts being taken to improve security. Breaches of security and the spread of viruses pose a real threat to the success of the web as a whole. According to a DTI survey in 2000, 60% of businesses in the UK suffered a breach in the previous two years, the cost of an incident often exceeding 100,000. And the problem is getting worse worldwide. Reports of breaches in the first three quarters of 2000 rose 54% over all of 1999, says the latest McConnell International Global Cybercrime Report. Many are still not aware of how easy it is to pick up a virus, which may be in an attachment added by somebody you do not know to an e-mail from somebody you do (good protocol is never to open an attachment unless it is mentioned in the e-mail). At Lay & Wheeler, John Foxley of the IT Department says that its software screens out viruses every week, and that when he calls the innocent parties who have unknowingly picked them up and passed them on, it is often too late: "their whole world is falling apart". The good news is that having a prudent protocol and the latest screening software should greatly reduce the risk, and that the issues are being addressed with urgency by government and industry. While there will not be any single solution, the Council of Europe's Convention on Cybercrime, due to be passed by the end of this year, is a step in the right direction. The second development is equally important and far more positive: the advent of Asymmetric Digital Subscriber Lines (ADSL), by which existing copper telephone lines are converted to give always-on and far faster connections to the net. (Asymmetric because data moves more quickly to the customer from the exchange than vice versa.) The advantages of this "broadband" technology are threefold. First, speed; which at between 500 kilobits per second (kbps) and 2,000kbps is between 10 and 40 times faster than conventional modems. Second, a constant connection to the net, charged at a fixed rate, regardless of how much data is sent or how much time is spent. And third, fuller integration, allowing simultaneous use of net and phone or fax. Nick Gabb, director of Vintner Systems, describes ADSL as "the biggest thing that's ever happened to the net, especially for B2B [business-to-business] transactions". Different companies are offering different packages. But after installation of the modem by a BT engineer (less than two weeks after the order is placed), its version for home use (500kbps) costs 39.99 (ex VAT) per month, its version for business use 159.99 (ex VAT) per month. ADSL is still not available everywhere in the UK, and BT estimates of how many exchanges will have been converted by the end of the year have been scaled back from 80% to 75%. Nevertheless, London and most large cities are now covered, and the roll-out will spread south and then north. While ADSL brings many benefits now, it will bring many more soon. For along with digital terrestrial (offered by ONdigital), digital satellite (Sky Digital), and digital cable (Cable & Wireless, ntl, Telewest), it is one of the four major platforms for digital TV. Jonathan Wilson, account director at BBC Resources, endorses estimates that 10.3 million homes will have DiTV by 2003, and that sales through TVs will have overtaken sales through PCs by that stage. The third development is the use of Application Service Providers (ASPs). These are companies which have highly advanced and powerfully protected IT installations, and which allow customers to employ an integrated range of software over the web. The number of organisations subscribing to such services may be lower than the hype over the last year suggests. But at least in part this may be because what would be good for the company would be bad for the IT department best placed to recommend this route. Such is the view of David Tanner, administration director of Seabrook Freight Group, among the first companies in the industry to have gone over "lock, stock and barrel" to an ASP (Futurelink Europe). He is convinced that contracting out IT to an ASP can bring many benefits to many companies, especially small and medium-sized ones. For them, he says, it is often difficult to retain and retrain IT staff, not to mention keep up with the regulations on software and software upgrades: "Now I know I'll always be running a legal copy of the latest version." Seabrook has been able to reduce its IT team from three to one. It now needs only a programmer for its specialised software, though this, as well as all the standard Microsoft software (Word, Excel, Outlook Express), is run from the ASP. There are big cost savings, not only in terms of human resources but in terms of hardware: "We can get by fine with 300 machines rather than 1,000 machines." All in all, Tanner reckons that IT costs will be cut by about 50%. Accessibility and security are other advantages. Tanner can access company information from any connected PC anywhere in the world, in cybercafes from Acapulco to Zanzibar. Or from his portable. Or from his mobile. Because all data is automatically backed up every few seconds, and the ASP is April Fool-proof, bomb-proof, fireproof and equipped with an emergency power supply, disaster recovery is less of a worry. Best of all, as a result, says Tanner, the company can concentrate on its core competence: "We can focus on what we do best. We can get back control of our destiny." Some are still to be convinced, doubting whether ASPs can be everything to everybody, and suggesting that they will only work well for companies which do not need much beyond the standard, off-the-shelf software, supplied on a one-to-many basis. But several drinks software suppliers (such as Mancos and Vintner Systems) say that they will sell to ASPs, and that there is nothing to stop ASPs holding many individually tailored versions. David Mills, UK vice president of Futurelink Europe, insists the sceptics are unaware of the services that the best ASPs now offer. Accepting that "people don't buy part solutions any more, they only buy whole solutions," he stresses that ASPs can deliver "complete functionality". Futurelink is able to host and integrate customised and standard software. It also allows customers to access and use the data any way they like, and says they are better crunching the numbers on the powerful servers which it provides. Another development favouring ASPs is a fundamental shift in the way the whole IT world works. More and more software suppliers will be offering their products as web services. The biggest companies (Microsoft, IBM, Hewlett Packard, Sun and others) are preparing to lease rather than sell their products, so that they have a constant and constantly increasing revenue stream. They will no longer be dependent on sales or upgrades. Microsoft has already stopped sales of its software in Poland, which it is using as a test market. And Mills predicts that in three years all of the major software suppliers will be leasing rather than selling. Businesses will be able to rent from ASPs, who will rent from the suppliers.

End-to-end solutions What ASPs do not offer is the creation or customisation of software, which will continue to be the strength of suppliers such as the CERT Group, Mancos, Online, Trinity and Vintner. But here, too, integration is the key theme. And several suppliers are acting, independently or jointly, with web-based companies, in a similar way to ASPs. The difference is that the drinks applications will be their own, regardless of any other services they may offer. The CERT Group, best known for its logistics operations, emphasises that it is now providing "end-to-end solutions". Rob French, managing director of CERT, says that its was designed originally as a profitable retailer in its own right, but that since the dotcom downturn it has been more valuable as a way of showing that dotcoms in general can be successful. The brand is playing second fiddle to the model. CERT recognises that companies trading on the web have to achieve a certain critical mass, and that this can be done by having one "back end" serving many "front ends" on the web. A bit like buyer's own labels, the same product (the logistics and the software) is used by different companies under different names. As Tom Cannavan recently reported (Harpers 6 July), has also sacrificed some of its brand identity to serve Goldfish and Safeway on the web. The biggest net firms - Amazon, eBay and Yahoo! - have been showing the way, selling the software which has always been so crucial to their success to other companies (The Economist 3 February). Mancos asserts that the strength of its Maginus Commerce Software (used by 200 companies, such as Oddbins and The Wine Society) is its complete integration of financials, logistics and Customer Relationship Management (CRM). "Customers are frequently surprised by how much we have to offer," says Harry Manley, sales and marketing director. Vineo, the UK-based B2B marketplace, and Vintner have recently agreed to offer the latter's software over Vineo's site as part of a comprehensive package. Greg Rice, Vineo's CEO, says that it offers "a complete e-commerce solution". By being able to access the Vintner software on the net, hotels and restaurants may place orders in the middle of the night for delivery the next day. Gabb describes the ability to order even one bottle direct from bond as another of the best features of the programme., the US-based marketplace for bulk wine, approaches the integration and software issues from a different perspective. Gary MacDougal, chief technical officer, attributes its success to the fact that it does not require users to have any special software. Kathleen Cantillon, director of marketing communications, says: "We integrate in the sense that we mirror actual business processes in the real world." MacDougal argues that in a many-to-many marketplace, which brings together buyers and sellers from all over the world, the integration of software is not realistic. Some of those who are attempting to set themselves up as ASPs, he suggests, are doing so because they have not been able to make it in a many-to-many marketplace, and a one-to-many marketplace gives them another bite at the cherry, as catalogue systems. While some of the most powerful solutions are available only to companies with annual turnovers in the 5-10 million-plus range, others are completely free and do not require special software. Shipper FFG Hillebrand launched its UK version of Axis, an advanced, interactive order-tracking tool, on the web last year. According to commercial director David Mawer, all of its large UK customers (more than 200 in total) use the programme. The company recently released its Global version, with versions for brokers, suppliers and warehouses. Again, the emphasis is on integration. As well as being able to follow individual orders or products (using the company's own product codes), customers are able to book deliveries and design their own reports. They are able to merge Axis data with company data, downloading information for analysis in other programmes, such as Excel. Mawer says that many users wanted Axis to become the industry standard. In response to such requests, the degree of integration has been further improved, and Axis now accepts data feeds from other service suppliers (eg other shippers) who pay to use it. One package which may be bought at low cost, and which may make a big difference day-to-day for many smaller retailers in 18 European countries, is the Wine Merchant's Price Calculator, written by Dermot Nolan MW. The calculator works on duty-paid wholesale prices (one which works on under-bond prices may follow) and allows accurate, easy and quick calculations of retail prices, unit profits and profit margins. It also takes account of discount and multi-buy schemes. The application will work on any standard PC supporting Windows 95 or later. The cost depends on the number of users, but is as low as 19 for one user, 15.50 per user for two to ten, 12.50 per user for 11 or more. Nolan says "It saves on the hassle of setting up complex spreadsheets and can pay for itself in a matter of days." (Available from Dermot Nolan Wine Services.)

Avoiding the trash While the computer world seems to be spinning at a slower speed, the dual processes of innovation and integration continue. As applied to drinks, hard has happier associations than soft. As applied to computerware, it is the other way round. Apart from ADSL (and other broadband platforms), it is the new software and software distribution which will have the greatest impact. After - as before - the dotcom downturn, B2B is the area of greatest activity and profitability. But many of the latest developments will also assist in B2C when the dotcom upturn comes, as surely it will. As Woolgar reminds us, it has all happened before to many of the technologies which have changed the way we live and work - railways, electricity, radio and telephone. Boom followed by bust, followed by steadier, sustained growth. If you concentrate on IGT to the exclusion of ICT (Information and Communication Technology) you are in danger of ending up in the trash.