by David Kellar

By shaping new ways for businesses to access and disseminate information, implement services, and conduct transactions, the Internet has forever changed the rules of play in many global industries. Nowhere has the Internet's impact been more profound than in the Asia-Pacific region. Companies in the developing economies of Asia are competing fiercely to gain a foothold in both domestic and global markets. And many of these companies are embracing the Internet as a competitive tool.

The Asia-Pacific region currently accounts for nearly one-quarter of the world's $500 billion information technology (IT) market. Although Japan alone accounts for some 70% of Asia-Pacific IT spending, the markets in economies making up the rest of the region are growing at a much faster pace. In fact, the results of Access Media's recent Asia-Pacific Internet Study* show that companies in all countries other than Japan expect to increase their IT spending in 1998. Only in Japan, due to several years of a lethargic economy, are large businesses making efforts to cut IT costs through downsizing.

Interestingly, these increases are expected despite the economic and currency difficulties that many Asia-Pacific economies have been experiencing since July of last year. Moreover, corporations in the majority of these economies say they intend to spend a greater proportion of their IT budgets on Internet-related projects and technologies in 1998 than they did in 1997.

The acceptance of Net technologies

The question is no longer whether the Internet and Internet protocol (IP) technologies will become driving factors for IT spending strategies in the Asia-Pacific; they will. The real question is exactly how corporations in this dynamic region will implement Internet technologies to their advantage.

The results of the Asia-Pacific Internet Study show that e-mail is the most common of all Internet technologies currently used, being implemented in 96% of all organizations surveyed. E-mail is followed by World Wide Web access, which is used by the majority of Internet-using organizations in all 14 countries except Vietnam (where Internet use is largely restricted to basic services such as e-mail and FTP).

Technologies and services that require a larger monetary commitment -- specifically, corporate websites, intranets, and extranets -- are not yet as common. Yet, 50% of all organizations in the sample have already established a website, and 38% have implemented an intranet. This indicates that companies in the Asia-Pacific are aggressively adopting these technologies.

In terms of corporate strategy, company websites are generally positioned as a means to communicate with people and other organizations outside of the company. Intranets and extranets, on the other hand, are used for communication within the corporation or corporate group. These are both important functions for companies in the Asia-Pacific, especially those attempting to extend their presence nationally or internationally.

The new commerce channel

Of all Asia-Pacific organizations with corporate websites, the majority use their sites primarily for posting company and product information for promotional and public relations purposes. Surprisingly, however, some one-quarter (26%) are already implementing some type of Internet commerce.

Of these, a majority of commerce sites are selling goods or services to consumers, while nearly half are involved in selling products and services to other businesses. These results indicate that organizations in the Asia Pacific are aggressively adopting Internet-based commerce methods as extensions of their traditional sales channels.

The future of Internet commerce in the Asia-Pacific region looks even brighter. Of all Asia-Pacific organizations with websites that have not yet implemented Internet commerce services, 45% responded in the survey that they plan to do so in the future, and 12% have definite plans to do so within the next year. As security standards evolve and telecommunications infrastructures develop, it seems likely that Internet-based commerce transactions in the Asia-Pacific will grow to a significant scale over the next three years.

The new communications infrastructure

Due to the developing nature of many Asia-Pacific economies, implementation of efficient enterprise network infrastructures is high on the priority list of many corporations based in the region. Such infrastructures are seen by these corporations as necessary in order to become globally competitive.

Moreover, due to the high level of cultural, economic, and political fragmentation in the region, international communication is important to many Asia-Pacific businesses (as opposed to larger, more consolidated economies such as the US). Indeed, the Asia-Pacific region including Japan accounts for nearly 30% of the world's telecom services market.

Over the past two years, Internet-based technologies have developed to the point where the obvious solutions to these needs for many companies are intranets for their enterprise infrastructure, extranets (also called virtual private networks) for communicating with remote sites and affiliates, and the Internet itself for low-cost telephony services such as fax and even voice communications.

Access Media's Asia-Pacific Internet Study shows that, overall, more than one-third of Internet-using organizations in the region have installed an intranet. Intranet penetration varies between 20% and 60%, depending on the economy; this represents a significant increase over the state of intranet usage just a year earlier.

In most economies, the majority of organizations surveyed that have not already implemented an intranet stated that they plan to do so in the future. Looking at the region in its entirety, some 74% of all organizations without an intranet plan to implement one in the future, with nearly half stating that they plan to do so within one year. From these results, following a strong start-off in 1997, Access Media expects that 1998 will be the true "Year of the Intranet" in the Asia-Pacific.

Extranet installations lagging

The low percentage of extranet installations, on the other hand, reflects the relative newness of the extranet concept in the scheme of the corporate information systems environment. The addition of (or transition to) an intranet is a natural extension of the internal client/server concept that can be relatively easily cost-justified. The usage of extranets, however, involves WAN (wide area network) connections with outside companies and/or remote workers, which requires more planning and consideration of issues such as security. Moreover, companies already using traditional EDI (electronic data interchange) systems cannot quickly switch to extranet technology due to the necessity of interacting with existing third-party networks.

Although extranets are a step behind intranets in terms of implementation, Access Media expects usage of extranets to soon enter a strong growth phase. Nearly half of all companies surveyed that have not yet installed an extranet plan to do so in the future. This suggests that implementation of virtual private networks based on Internet technology will grow significantly in the Asia-Pacific region over the next few years.

The time is now

For Internet-related hardware, software, and service vendors serving the corporate community, the timing couldn't be better for building a presence in the Asia-Pacific. And for other companies operating and competing in the region, it makes sense to watch these trends closely. Traditional power structures and competitive archetypes may someday be overturned by a new elite with more nimble and efficient business models supported by Internet-based technologies.

David Kellar, based in Tokyo for the past 11 years, is vice president of Access Media International, Inc., a global digital media ventures consulting firm with management bases in New York, Tokyo, and Singapore. Access Media provides consulting services and market intelligence related to interactive new media. Mr. Kellar's previous article for Computing Japan was "The Internet: A Path to IT Market Opportunities in Japan and Asia"

Mr. Kellar receives e-mail at davek@ ami.co.jp. You'll find Access Media International's US website at http://www.ami-usa.com/.

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