PERSPECTIVES - Vendor viewpoint

Vendors are setting up direct operations in a bid to grab a piece of the profit to be made by selling over the Web. But this brings with it the need to rethink network security issues to attract users to their sites.

Every vendor is interested in exploiting the internet - and not just the profit to be made by selling over the Web. But this brings with it the need to rethink network security issues to attract users to their sites. as a way of cutting out the middle man and going direct. Few, if any, will admit to that, although just about every one has already opened up direct sales routes on the internet. The danger of missing out on potential sales is too great.

Almost every vendor sees the Net as a way of fuelling sales. Data access is pivotal for software vendors that view the internet as being a platform over which their applications can be deployed, and one that opens up potential for their systems. Networking vendors already have the infrastructure and remote access products and see the internet making access easier and extending the network way beyond the organisation.

Then, of course, there are the vendors with a specific interest - the ISPs, browser companies, security firms, network management vendors and those developing thin clients and other, more specific internet access devices. Every vendor wants a piece of the pie.

They want it because the potential is seemingly endless. Even the provision of the simple internet connection - although many companies are giving it away now - has massive potential.

Axel Lagerborg, strategic alliances manager at corporate ISP GX Networks, says revenue from fixed connections, for example, private leased lines, is expected to increase from £1.4 billion in 1999 to £1.9 billion by 2004.

The reliability of leased lines means larger companies in particular will continue to invest in digital leased lines, generating a continuous revenue stream.

During the same period, revenue from ISDN will increase from £750 million in 1999 to £1.7 billion, mainly driven by more home workers installing second lines to achieve faster internet access. At the same time, the market for value-added network services will grow from £200 million this year to £650 million in 2004, the main areas being hosting, security services, messaging and application software rental (ASR).

'These areas, coupled with managed data services such as ATM and VPN, and managed intranets, is where telcos, corporate ISPs and other network management companies will drive growth in the coming years,' says Lagerborg.

ISPs are trying to enthuse the channel and are starting to appoint resellers in an effort to broaden their markets. They have, until now, been largely direct sellers. But to penetrate the wider business market they also need to enlist the channel's help.

Tools vendors are also recognising the need for channel assistance if they want to reach their full potential. Star Internet, for example, recently launched a partner programme for its NetTools range of virus scanning, email and remote back-up software. Jos White, marketing director at Star, says by August this year, half of the vendor's tools business will be done through the channel.

'With the increase in convergence of voice, data and internet, people are looking for a single supplier, or at least a joint proposal,' he adds.

'These elements used to be segmented, but are all being pulled together now. Resellers can offer a more complete system. They have their own specialist sectors and clearly understand their customer base well. We realise we don't have the resources to reach every potential customer in the UK, and need partners to secure more routes to market.'

White admits the available margins aren't big enough to buy in skills for the reseller and says it is up to the vendor or ISP to offer the required training. Star trains resellers to a level where they can talk to customers without any assistance and provides the next line of pre-sales support as a backup.

As well as NetTools, Star is making its Netstar Enterprise and Small Business Edition - leased lines, Web hosting services, security products and consultancy - available through the channel. Clearly it wants the channel to sell but also feels the need to offer fairly open-ended availability of expertise and support.

This cautious approach is typical of a vendor seeking to exploit third-party routes and get resellers on its side without asking too much of them. But as there is little margin available in such products and no guarantee of take-up, resellers are always more likely to be reactive with such products. They belong to the utilities category of the general market as much as they do to the internet segment. In the end, for Star and other tool vendors, marketing is what will count.

But the opportunities are there to be taken, White insists, and timing is important: 'The recent outbreak of the Melissa virus has highlighted the need for companies to be more alert to the dangers of email-borne viruses. The results were potentially catastrophic, but using virus scanning technology, we caught 100 viruses in less than 24 hours. A reseller's customers would see this as real added value.'

Catherine Jamieson, general manager of Mimesweeper publisher Content Technologies, also sees the security side of the internet business growing fast and spilling over into the network management sector over the next few months.

'They are getting closer. We're seeing areas such as human resources putting authorisations in place to dictate how applications are being used and email is moving away from being a chat system into a legal form of communications. The opportunities are endless because the Net throws up a number of challenges and new threats, such as Melissa, and they have to be dealt with as they appear.'

Security is certainly a significant issue and an area in which the channel can develop specialisation. Many vendors are seeking to exploit this sector, which is high on the agenda of most firms when developing internet connections.

Kevin Black, sales and marketing director of Internet Security Systems (ISS), says it's a relatively easy sell at the moment, due to the high level of uncertainty among users. 'As more organisations absorb internet usage into their core business activities, the potential threat from internet-based attacks increases significantly. The potential impact of an attack also rises as organisations start to rely on the internet to support their line of business activities.

'Having a Website defaced by a cyber-vandal may be annoying, or even very embarrassing for some high-profile organisations, but that's about as bad as it gets if a site is used simply as an electronic shop window.

But now many businesses are striving to reduce processing costs and exploit global markets through e-commerce. This means opening up the heart and soul of their networks and databases to provide direct access to their customers over the internet.'

It also means firms are vulnerable to attack and data theft, he adds.

And the fact that the threat of internet security breaches not only exists, but is growing all the time, is a mixed blessing, creating demand for security but also perpetuating fear of the technology.

The issue has to be addressed head-on. 'Most organisations trying to address this threat face two problems. The first is their own lack of knowledge - how can they assess their risk if they don't know what threats are out there and what their vulnerabilities are? Secondly, there is a severe shortage of people skilled in computer security. So only the very largest organisations can afford to buy in the technical skills they need to address security issues,' says Black.

Knowledge and skills gaps have developed because of the speed of innovation in Net-based technologies. These fundamental problems are compounded by the secrecy surrounding most security breaches. Those that are actually discovered - and many are not, Black claims - often go unreported to protect the victim's reputation.

For the channel this presents a good opportunity and one that ought to be taken early on if possible, he says. 'Selling and supporting network security products gives resellers every chance of being in on the ground floor as companies build their internet-based business architectures. That represents a great opportunity to establish a position as preferred supplier status for future projects.'

The level of concern is not likely to fall off either. Novell recently sponsored the production of a report on computer crime by the National Criminal Intelligence Service (NCIS), which found that nearly one in five UK firms have been hacked and more than a third have been the victims of some form of email harassment.

Despite this, 38 per cent of UK companies have no defined internet security policy and a further seven per cent of respondents were unsure if their firm had a policy.

Steve Brown, UK country manager at Novell, says businesses will have to act themselves to secure their systems. 'As there is no single regulatory body that polices the internet, the onus is on UK businesses to individually address this problem and protect themselves. There are criminals in all walks of life and 100 million users on the internet, so there are always going to be people who will use this medium for their own ends. The good news is that IT companies recognise this threat.'

Confidence in internet trading is starting to improve as awareness of security systems grows and the systems are proven to work. Dutch consumers have recently become the first in Europe to use debit cards for secure shopping over the internet through a service being run by Interpay, a cooperative owned by Dutch banks.

The I-Pay system uses an enhanced version of the international secure electronic transaction (SET) protocol to authenticate internet merchants and customers to each other, and to protect both debit and credit card numbers.

It is based on public key infrastructure (PKI), security technology provided by Entrust Technologies, and is expected to have as many as two million users by the end of the year 2000.

Fred Stolk, head of business development at Interpay, says: 'SET had a patchy start in Europe, but we believe that by supporting both debit and credit card transactions, Interpay is going to be a catalyst for growth. Companies in 18 European countries are already SET-enabled and we're seeing interest from retailers and financial services institutions in what we are doing here.'

Slowly, confidence is building and the internet is acknowledged in all areas of the market as a significant driving force. So much so that it is getting hard to separate the internet-specific business from the non-specific business, claims IDC - it's an integral part of the industry now. No vendor can afford not to adapt its systems to meet the internet requirements of users.

Software vendors at every level are seeking to exploit the internet in a myriad of ways. SAP already has a Web-enabled version of R/3 and most ERP, database and financial software houses already have some kind of internet-oriented range - Oracle, Informix, Peoplesoft, Baan and many others are all promoting their internet capabilities with vigour.

The Net makes it possible for applications to be used in a completely different way. Front-end browser interfaces make it much easier for all users to access the data that they need, simply by using a search engine or browsing around the database system.

Internet-enabled applications also make it easier for remote access and for the supplier and customer to have access to information. They also make it possible for applications to integrate seamlessly through the supply chain with online ordering being linked into stock control, order processing and customer management. Potentially, the whole process of ordering, analysis of customer needs and active marketing - emailing the customer when they might be running out of stock again - could be automated over the Web through the software applications.

Even the smallest vendors are examining all these possibilities - and those serving the smallest customers. Sage is working towards the time when its customers will link their e-commerce systems into the order system, according to Paul Stobart, business development director at Sage.

But, he admits, there is a long way to go just yet. 'What we are doing is setting up a storefront, which is an extension of the order processing activity. We'll be making sure the internet service integrates with the accounting system so that the process is automated, whether it is done online or offline. We are some years away from being able to do that seamlessly, but every product we bring out from now on will be Web-enabled.'

Indeed, all vendors are taking steps to ensure that their software is able to connect to the internet in some way. There has already been close integration from Microsoft with its desktop applications, although there is already fairly close integration between the desktop Office applications, Outlook and Explorer.

But there may not be any great hurry, particularly in the SME markets.

Sage's analysis of its 300,000-strong user base in the UK found that only nine per cent had access to the internet and only three per cent had their own Website. Admittedly, the figures were collected some months ago, but Stobart doubts that access levels will have reached more than 20 per cent by now.

So even though it may be possible to deliver at the moment, there may not be enough demand for concepts such as the hosting of standard Microsoft applications across the internet to be delivered for some time. However, with Windows Terminal Server, and later with Windows 2000, there is the potential for the development of ASP (applications service provider) services.

The ASP may emerge on the back of the thin client wave. When the use of client versions of Windows applications across the thin client architecture grows, the idea of 'renting' the applications as and when they are needed is expected to gain support. The internet - or intranet - will be the transport system for such services which will allow users to have access to the application they need only when they really need it - and to pay only for that time.

It's already happening. Progress Software has recently announced a programme - dubbed Aspen - that packages products and services aimed at encouraging its ISVs to offer their applications for rent via the internet. Forrester Research estimates the application rental market will be more than $11 billion by the year 2001.

This shift away from licensing may have a profound effect on the cost model for software. However, the prospects of a market in which users pay for time on applications, rather than for the licence, are distant yet.

CATCH THAT INTERNET WAVE

Number of adults accessing the internet at least once:

1998: 10.6 million

1997: 7 million

Number of people accessing the internet from home:

1998: 6 million

1997: 3.4 million

Number of people accessing the internet from work:

1998: 5.3 million

1997: 3.5 million

What people are using the internet for: (four-week period - December 1998)

Searching for information on a particular company

2.9 million

Searching for travel information

1.9 million

Searching for financial information

1.3 million

Searching for a job or employment

1.2 million

E-commerce: (Q3 and Q4 1998)

1.3 million users shopped online

4.8 million purchases were made

£470 million worth of goods were purchased.