Internet Commerce Expo – Chicago, IL

Transcript from John Patrick speech in Chicago, Illinois
Note (Aug. 08, 2013): The exact date of this speech is unknown, however it possibly dates from sometime in April 2000.  
Good morning, everybody. Nice to be here at Internet Commerce Expo. Thanks for coming by. I’d like to talk to you about the future of the Internet and specifically to discuss what this concept of e-business is all about, at least from the point of view of one fellow traveler. I hope I’ll be able to give you some ideas for what it takes to make this transformation. I’d like to discuss some of the issues and technologies that I see on the horizon. And if you plant a seed here and there with you, that will be helpful with the work that you do.
And lastly, to talk about what it’s going to be like when we’re all connected in this universally connected in this universally connected world with lots of band-width and exciting things going on.
I’d like to start by touching on four meta-trends — sort of back-drop issues that are going on, that I think are changing everything — right under our nose — at break-neck speed. Changing everything not only about our business lives, but our personal lives, as well.
It starts with the natural evolution of the new medium. I think to some degree, a lot of people still think about the Internet as the Internet — you know, about this network sort of out there in the corner, having its roots in government and educational and research activities. And routers and hubs and bridges and switches and TCP/IP and all these technical things — but, from a business point of view, I think it’s time we really do think about this as the evolution of the new medium.
Just like radio evolved from AM to FM to FM stereo and T.V. evolved from black and white to color, to color surround sound, theater sound, much in the same way, the Internet is evolving as this very rich new medium that will facilitate natural human interaction.
Pretty soon, there’s going to be incredibly large numbers of people connected. I have no idea how many are connected right now. Everybody has their number. I don’t believe any of them. But I know it’s growing very fast. And pretty soon, it’s going to be a billion. Now, where are those billion people going to be connected? How will they will be connected? Will it be the NC?, the network computer or the personal computer? And the answer is, yes.
And also, the PDA and the phone and your car and appliances and televisions and many different ways that people will connect — many of them through kiosks. Kiosks, in churches and schools and government buildings, on the street corner, in the jungle, on the plant floor, airports — universal access so people have connection to this medium.
Pretty soon we’ll think about this pipe connected to our house and through this pipe will flow packets — packets about 2,000 zero’s and one’s on average, in each packet, and these packets will make up e-mails, faxes, web-pages like this one; telephone conversations, radio and television broadcasting — not only the evolution of a new medium, but the medium.
Now, secondly, an important trend is the network putting power in the hands of people. Now, this is not just a consumer statement, it’s a people statement — individuals. And this theme I hope will come out in the examples that I show you and the things we talk about, that this is not about just consumers clicking here to buy. It’s about people, purchasing agents, students, professors, government contractors, people in large organizations or small, interacting with other people.
And people will have the power. People will decide what they are interested in and when they are interested in it, and the degree of depth to which they want to explore. People will decide the hours of business. Don’t you love it when you go to a website and it says, click here for additional information and up comes this page and it says, our office hours are 9:00 to 5:00, Monday to Friday. And you go, huh?
You know, you might be in Australia at the time that you see this, and it’s a perfectly normal time to you and it’s 3:00 A.M. somewhere else and they’re closed. So, people will have incredible power — the power to click that mouse. It’s much more than we take for granted. It’s an economic statement, it’s a powerful statement when somebody clicks on anything in this new medium.
And people will set the agenda. More on this, as we move along. By the way, people will have tremendous expectations and this is a key thing I believe we should all think about — is this notion of expectations. A one hour photo is terrific in the physical world, 45 seconds to download a picture on the Internet is slow.
And everyday, our expectations get a little bit higher. We know what’s possible, and we don’t want to accept a click here to print out this form and fax it to us or things of that nature.
Third, is web-centric marketing. This is a juxtaposition that’s going on. It’s a little bit subtle, but I believe powerful. All organizations have their information technology systems over here, with all their data and applications, and they have their website over here, and they begin to connect the two together, but which one is driving which?
And I think that’s what’s going to be changing — is, it will start to think of the web first, because, after all that’s where all the people are. And then we’ll work our way back into those core information technology systems that contain the applications and the data that have always been there.
And lastly, a shift in the way we think of assets. Today, we think of assets in terms of a balance sheet. We look on our balance sheet and the more branch offices of our company we have, the better. As we think about this universally connected world, is having branch offices or stores or outlets, is that an asset or is it a liability?
More and more I think assets will become digital — will become intellectual property oriented. Assets have to do with how well our people can work together. Our skill at collaboration is a key asset. The intellectual property that we can digitize and encrypt and enable for distribution become powerful, powerful assets.
Well, there are a few of the backdrop factors. It presents a lot of questions, needless to say. How will people find you? How will you project you unique strengths? What will be your advantage? Why will people trust you? Trust being, perhaps, one of the most important aspects of all of this.
Someone said recently that at the turn of the century, there will be a billion pages and all that counts is the lowest price. Well, I don’t think so. In fact, studies already are showing that’s not what’s most important. What’s most important is the ability to find information, to create relationships, and I believe out of this will emanate the most important factor, which will be trust.
Logos and brands will be incredibly important at the turn of the century, and that’s how I believe people will gravitate. Now, how do you solve these questions? What are the answers to these questions? And I would suggest there aren’t really good answers right now, but a possible way to find the answer is to be connected — externally. To be out there.
And I would say that it is very tempting in this connected world that we have today, to spend a lot of our time sending e-mails to each other in our companies. And in fact, we really need to be connected where the people are, and see what’s going on out there.
Last weekend, a friend of mine gave me a call and said he was building a new house and did I have any ideas on where to find information on home automation? And I said, well, actually I didn’t, but let me look around and see what I could find. So, I used my favorite search engine, dogpile, and started looking around the web and I found a lot of information about home automation, but the thing that really blew me away, was this page here — this very simple home page called Home automation and Electronics Links Page.
It was put together by Wayne. This is Wayne’s page. Wayne who? I don’t know. Wayne somebody. Wayne somebody who loves home automation. I think, actually, Wayne may be the God of automation. And I went through this site, it became clear, that not only is there a reference to just about every link, everything going on with regard to home automation, but there’s some points of view here.
Wayne is having an influence in this industry. I don’t know if he knows that or not. But more importantly, I wonder if the companies who make home automation equipment, have ever heard of Wayne. I bet they haven’t. Now you know, this could be X,Y,Z Home Automation Corporation and Wayne bring you the Home Automation and Electronics Links page, couldn’t it?
So, what’s the point here? The point is every industry has a Wayne. Last year, if any of you were here, I spoke about this subject and I showed you Steve Shook’s directory of wood science forest products and marketing. He’s the God of paper. I’ve since gotten an e-mail from him and found out that he really does exist and he’s a Professor in Paper Marketing at the University of Washington.
Every industry has a person like this who just loves what they’re interested in and they take the time to create a Mecca about that subject. Do we know who they are, in our individual industries? Are we out there, connected? Do we have a student working for company, who’s job it is to just be out on the web, seeing what’s going on, what are people saying about our customers, our competitors, key universities that are effecting the technology of our industry — being connected outside. It’s so powerful.
Well let’s talk about e-business. Now, what is e-business, anyway? Is this IBM’s word for e-commerce? No, it isn’t. E-business is a larger thought. It has to do with a full transaction capability. E-commerce is click here to buy a bottle of salsa. E-business is click here to initiate the supply chain; click here to start Just In Time inventory flow from Company A to Company B.
Click here to let a new employee step through the on-boarding process in joining the company. Click here to let 6 companies come together in a virtual conference room and act as a contractor, much larger than their individual sizes.
So, let’s talk a bit about some of the things happening here in this arena — some of the examples. I hope you get a few ideas here.
Generally speaking, I think you could say that e-business is about content, commerce and collaboration. And all activities, all transactions, or some combination of these three things, but I find this sort of a handy way to parse the opportunity and talk about it.
Let’s start with content. What’s going on with content? Well, there are many issues here. I think expectations is one of the powerful ones that I mentioned earlier. But, I think more important is the extension of brands, and the ability to create value webs. It’s not so much about get your catalog out there or lots of information, it’s how you link that information to others — how you create an image, how you create a place that people want to come back to.
And this is the key thing, giving them a reason to come back. Now, every newspaper, of course is on the web. I think last year I showed you, which was a very similar capability to what you’re looking at here with New York Today. SF Gate is doing something similar in San Francisco.
This doesn’t look like the New York Times. This is an extension of their brand. By the way, did you know we actually have the web back east, in New York, we actually do. So, the New York Times has created this site — New York Today — which, in a sense, I guess you could call this a portal.
It’s a place where people come, a lot of people. This will be where they start their day — it’s news, weather, sports, it’s in a different context than the New York Times itself, which, of course, is also on the web. This is a place where you can come and see what’s going on in your neighborhood. You can learn about leisure time, entertainment life, lots of different things.
And, oh, by the way, you can buy things, because you can link through subject matters of interest to you through this value web. So, this is not just the newspaper, it’s the linking together of common economic interests in a physical community to create a virtual community.
I don’t think there has to be just 1 or 2 or 3 or 6 winners in this portal issue that we read so much about. I think there will be a huge number of portals — many, many companies will become successful as e-business will, in effect, become portals for their customers, and through that portal, will they not only be able to do e-business transactions with that company, but also be able to link to other things that are useful.
And the successful people here will be the ones that create this value web that includes, of course, all of their things, but linkages to many others as well.
Now, second issue and content has to do with our culture. Many, many issues here, of course — you know, will the Internet make our culture disappear or will it enable us to learn more about cultures in parts of the world we might not otherwise get to?
Will this enable us to get to the Vatican library and read letters from King Henry VIII to Anne Bolyn and see the works of Aristotle and Tolmy — things that previously only specially approved scholars could see.
And the answer of course is, yes. We will be able to extend our horizons. And with regard to language, we used to have 30,000 dialects, now we have 5,000. Are we on the way to just one — French? No, I don’t think so. I think, in fact, the web will enable previously threatened dialogues to come back. And in fact, I believe clever businesses will see this subject of culture is a way to extend across their borders.
Here’s a page from — it’s actually sort of a boring page about some software technology or something, and somebody who may be interested in it, and they’d be reading it, but based on who they are and what IP address they’re coming from, they may find it on the fly translation that produces this page, which may be hard for some of us to read and easy for others.
And the point is, that people will be reaching in across your boundaries to go after your customers, and of course, you need to be aggressive and reach across other boundaries. And culture should not be a barrier. The technology, in fact, should help you leverage across that — what formerly was seen as a boundary.
Now, what about the nature of content? Today, if you go to a web page that’s black and white, courier, monochrome text, you go, blecch! Boy, what a boring page. And tomorrow, if you go to a page that doesn’t have some video on it, you’re going to say, what’s going on here, there’s nobody home at this page.
But in between that time of today, and when we had lots of band width and ubiquitous video, I think there are a lot of opportunities to leverage media types that we’re not taking advantage of today.
Let me show you an example of what I’m talking about. This is Lonny Neilson, a golf pro. Here’s a picture of Lonny — now let me fire him up here — You could hear the wind on the course there made that a little hard to hear.
But let’s take a look here at this picture, or is this a picture? Or is this a movie? What is this, anyway? Let’s take a look. If I grab this with the mouse, I can sort of take control here. In fact, let me zoom in a little bit on this.
Okay, now I see what he was talking about. And I can just tune this in a way that it’s meaningful to me. I think of this like just in time training for golf.
Now, envision your own product. Think about installation instructions for a product that your company might sell, or how to do something — putting together the assembly of toys or products or repairs on your car or whatever it might be. It’s not a picture, and it’s not a movie. It’s something that we call hot media, and it’s a combination of technologies that allow for manipulation of multiple images.
And it’s a powerful notion because it takes very little band width to do this. And there’s no plug in. Raise your hand, if you love plug in. This is all Java — the data and the application are encapsulated together. It comes down together and you can use it on any platform, of course.
All right, well, let’s move on to commerce. Commerce, of course, is what we’re all interested in during this particular conference — that’s why we’re here. What’s going on in commerce? Well, a lot of things, of course, and you’ll learn much about it from other speakers and demonstrations.
I think the most important issue here, frankly, is a very simple notion, which is to have a different business model. And what I mean by that is, just putting up your catalog is not enough. In fact, I think a lot of companies are hurting themselves putting up their catalog because they’re putting up just a part of their catalog — like, maybe their top 10 selling items, or their highest margin items.
But what people want — coming back to this point about expectations — is, they want to find everything. They want to find what they want, not necessarily what you want to sell.
So, having a powerful business model is a way, I think, to rise above the averages here. An example that I can give you here is what’s going on with net grocer. I’m particularly fond of this because I think it really makes the point on business models.
You go to net grocer and you fill up your cart with your salt and pepper and Tabasco and ketchup — and I like to buy potato chips there. Believe it or not, they arrive — Fed Ex never breaks a chip. And canned goods and diapers for the grandkids and pet food and thousands of items that you can get from net grocer.
Not only do you get them in a couple of days by Fed Ex, but it saves the list and you can say, for that list, send that to me every six weeks or every four weeks. Oh, and this other list I created, send that to my daughter at the university every four weeks. And this other list, that goes to, send this one to me once a week.
And can’t you just imagine over time, how that list can be monitored by you, or perhaps by them, with your permission, I would hope. It would make suggestions to you that say, you know, John, you really ought to up that potato chip. It ought to be two bags a week, not just one. Or, whatever it might be.
No business models. Think about bridal registries and auction models and other types of shopping, bidding, going on a bargain hunting spree kinds of models. Now secondly, we should begin to think, I believe, about how to link together across these boundaries.
Ultimately, this is the power of the new medium — is to link across boundaries, whether it’s intranet to Internet, Extranet to Internet, company to company, cross industries.
One project that we’re pretty excited about right now is working across the automobile industry to link together the whole supply chain. To create, what we call, net-folders, that allow for suppliers to be able to look at the engineering designs, specs from the manufacturer without having to know what kind of design software they use.
And to allow the manufacturer to look into the individual net-folders from the inventory levels of suppliers to see what’s available. And to tie this together from design concept, to engineering, to plant floor, shop floor, control, to manufacturing, production, shipment, distribution, retail service — cradle to grave concept. It’s a powerful idea and I think we’ll begin to see this from industry to industry.
Now, let’s take this notion power to the people a little bit further. I think there’s a really profound aspect of this that has yet to have been fully tapped. Now, this is a mock-up of a website. I call it It’s a bookstore. And the idea here is that I’m looking at this banner, and it’s a little bit intriguing to me, hopefully, and I click on it. And when I click on it, it comes alive. It changes.
It doesn’t change to one thing, it becomes interactive. And in effect, now, I’ve left my surfing experience on the web page and I’m now surfing inside of the banner. And I’m surfing along here — whoops, there’s something I’m interested in, games.
And I see this little hot spot in the banner. Let me click on that. And I click on that hot spot and the banner dives deep. So, I’m not in the website now, I went somewhere else, but it’s just not a click through from the banner. I’m actually interacting with logic that’s in the banner.
I’m looking at this chess piece here and I say, hmm, that’s a pretty handsome chess piece. Click here to buy, $47.95, it’s a deal. Okay, I’ll take it. All right, so what’s the idea here? The thought is to take this inner activity a step further, beyond the web page and into the banner. I didn’t show you the full demonstration of that, but if you dive a little bit deeper, you can actually fill out the order form inside of the banner.
Now, what’s a little bit unique about this hot media approach I’m showing you here, is that it’s all Java, there’s no plug-in and it’s all client side. Now, you may have seen some approaches similar to this that are based on the interaction with a particular server, and that might be a good idea for many people, but others would like to be able to have the control to use this technique within their own particular domain.
Let’s move on to collaboration, a lot of action going on here. In a sense, collaboration is the ultimate extension of commerce. And this is where we get relationships going, we get discussion going and it results in the flow of money.
Here’s an example, I think, that’s particularly powerful. A small company called Intra Links was formed about a year ago — I believe it was July, a year ago, in New York City. And this little start up company is in the business of loan syndication. So, their customer might be a large bank, such as Chase Manhattan Bank, for example.
And the large bank gets an inquiry for a loan. Some company wants to borrow $100 million dollars, and they look at that loan and say, this is a really big loan. We want to syndicate this among our hundreds of participating — potentially participating banks — so, we’re going to go the Intra Links website and post this loan. Here’s the potential borrower, here’s the interest rate, here are the terms and conditions of that loan.
And then the various potentially participating banks visit intralinks website and they have, through very granular security, a private view that only they can see. And they look at this loan and they click here to participate. And when they click here to participate, they enter into a work flow, and the work flow consists of accountants and lawyers and financial people — closers, bankers, people who work together to bring this loan to conclusion through a workflow collaborative process all secure, all encrypted on the Internet.
And when it’s time for the closing, there are no faxes, there are no phone calls, there are no briefcases full of closing documents to come into the conference room table, not the traditional way. They claim to save 30-35% on average at the participating bank level.
Now, while we’re surfing around the consumer sites of the web and reading about companies that do $100 million or maybe even $10 million in revenue, and we all go, wow — this little company has done $100 billion dollars of loans in one year — $100 billion dollars. It’s there, on the web — You can’t dive too deep and get in to see these loans, because you’re not one of these participating banks, and it’s a very secure site.
But the point is, that while consumer click here to buy commerce is vitally important and necessary to our economies around the world — business to business is at least as big, maybe quite a bit bigger, ultimately, in facilitating and utilizing this new medium.
Here’s another example I find quite exciting, it’s called CyQuest. Now, it has many characteristics of a consumer buying site in terms of enter what you’re looking for and click here to buy. But the fact is, this is a business to business site. This is a place where a buyer, a purchasing agent, or perhaps a scientist or medical practitioner would go to buy scientific products and to enter into some dialogue and discussion about these various services for analytical light science and clinical industries.
It says save money by using — the ultimate marketplace for suppliers’ surplus inventory. That’s not a very consumer sounding phrase, is it? So, business to business is a very powerful capability, which is just now beginning to become more visible.
Look at this, the metal exchange. This came from Weirden Steel in Pittsburgh, Pennsylvania, part of innovation — Coal Valley in Pittsburgh. Here’s an idea that came together from a few executive at Weirden Steel on how to create a metal exchange.
So, if I’m a designer and I want to find a bronze part, or I want to build a bronze part and I’m not sure about what are the characteristics of machining of bronze — what quantities is it available in, how much does it cost? What’s the nature of the various materials? How can I talk to an expert about bronze? This is where I go — to metal exchange, to learn, to discuss, to have a dialogue, and of course, click here to buy, make a deal.
So, business to business emerging is a powerful idea. Now, the public sector is also emerging as a very innovative user of the web. I love what Plano Police Department is doing. They have an incredible amount of information that they’re making available here to their citizenry. Burglaries by street — a popular report here on this website. You know a lot of people care about burglaries by street. You know is crime happening in my area? Is it happening more often? Less often? Is it moving closer? Is there someway I can reach out and report a suspected criminal activity. Is there some way I can collaborate with the investigative department of my community?
And yes, the Plano Police Department is reaching out to their constituents, from their point of view. How are we doing? Tell me about your needs? Tell me about you, so we can better plan for our budget process. So we can have the right capabilities and services on hand to meet your needs.
And what about that medium I talked about — that single medium where all forms of communication take place. Look at what’s going on in the public sector here. Okay, that’s car 42 in Los Angeles, the Los Angeles Police Department you just heard. I don’t know about you, but how many would go out and spend $200 or $300 dollars to buy a police scanning radio? I don’t see a lot of hands going up. I don’t have one either. But now we all have one, don’t we. The new medium. It’s just packets. It’s just zeros and ones, another way to communicate.
There are 15 hundred radio stations on the Internet now, which is another powerful aspect of this. Well, last but not least, I always have to talk about this little group of the population. I’m sure some of you have heard me talk about this before. But I must repeat that the senior group is a powerful and important segment of the market that you don’t want to overlook.
… has done a study that suggests that 19% of the users of on-line services are over 50. They used to call them seniors, but now that I’m 53, I don’t think of myself as a senior either. And, in fact, focus groups have made it very clear that people don’t want to be thought of themselves as seniors, if they’re over 50. They think of themselves as being very well connected, technically able people.
I so often have heard people say, well, you know, when this gets easy enough for my mother to use, I’ll know this is real. Let’s start a mother’s revolution. We know our mother’s are using this. Our grandmothers are using this, our grandfathers are using this. And this holiday season, they’ll be watching the kids under the tree and video. Fourteen marriages have been spawned out of senior net, so far, probably more by now.
Fifty percent of these people have bought something on the Internet. Fifty percent have made investments — personal investments on the Internet. They’re motivated to form relationships. So, this is a powerful segment of the economy and, as a for profit business now is capitalizing on this new portal, sort of speak, for people in that category.
Well, lots of interesting things going on. What’s it take to make it happen? What’s it take to become an e-business? I think there are five, very simple concepts at play here.
First is to recognize that this is a dramatic extension of traditional information technology. It’s not a replacement for it. It’s an extension of it. And all we have to do is marry the two together. The core business applications and data are already there in most companies. And the web provides a way to be able to link back in through Java gateways, bridges, connectors of all forms, to be able to leverage the power of the new medium.
I think it’s very important to build the organizational concept within a company from the outside in, from a perspective of out there, where all the people are.
And third, is to have a blueprint, just like you do for traditional information technology systems. Just like you would for building a payroll system or an inventory control system, you likewise, in thinking about a website, should go beyond the marketing and glitz of how it looks from a billboard sort of a perspective, to thinking through the information technology aspects of it.
Another way to say it is that the web has become mainstream. It needs to be tightly integrated with your information technology strategy. In fact, eventually it will become what drives your information technology strategy.
And fourth, is connecting the dots. This is thinking through your technology partners and how you want to link together the hardware, the software, the services, the education, the financing, the consulting, the networking, hooking it all together and making it real — making it seven by 24, making it mission critical, just like you would if you were building a payroll.
And lastly, fueling the culture change. If you’re a large company, find that pocket of people in your business who are thinking outside of the box. You don’t have to put them in charge, but listen to them. They know what people expect. Talk to the kids, they know what to expect as well, more on that in a moment.
Now, with regard to technology, there are many issues. I think from a very high level perspective, what’s going on here is that we’re entering a period where we can expect to see pervasive computing — computers in our pockets, on our wrists, in our cars. Computers everywhere.
We can expect to see those little green boxes that sit on telephone poles have smart disc drives in them. You probably heard about the disc drive we announced last week — the little one-inch in diameter disc drive — 340 megabytes in the size of a poker chip. Think about what that means having those in cameras and PDA’s and all sorts of small form factor devices.
So, pervasive is upon us. The PC as we know it, obviously will continue to be vitally important, but it will not be the only game in town. Consumer devices will emerge which will be much more tailored to consumers.
I think even the most PC lover among us, which is probably me, would have to admit, that at times it’s really hard to use. And so, I think we’re going to see very more specialized devices arise. And we need to begin to think about distributed content management because content’s going to be in a lot of places.
And you’ll have versions of your e-mail in your PC, but you’ll also have it in your Work Pad or Palm Pilot or whatever kind of device you like to use. And what happens when you go through a tunnel and become disconnected? And how do you replicate? And where is there a proxy that’s able to convert web pages into a format that fits on your device?
And so, there’s a huge number of issues emerging here for how to manage the distribution of content through a pervasively connected world with computers everywhere.
We need, secondly, to start to think about standards at a higher level. At the level of the Internet itself — the Internet engineering taskforce, I think is making great progress in working out the nits and nats of very detailed specs for how the Internet will work in the future.
There’s a hundred working groups who are very committed and dedicated in this area and making terrific progress. But what about standards at a higher level? What about standards for how catalogs work? You might be interested to see what’s going on with OBI here at the show and learn about how a lot of competitors have gotten together to create a standard that will enable catalogs to be interchanged more effectively, which is good for everybody.
We need to make standards like SCT become realities. And in fact, for those of you who didn’t hear, the report of its death was an exaggeration, much like Mark Twain said sometime in the past. It’s going to become vitally important, not only to have a secured connection to a web server and be confident that nobody will steal your credit card number, but also to know who is it on the other end of that connection — not just that only they can read it, but who are they?
And this is an issue we really haven’t dealt with in the world of the new medium today. And the need for digital signatures — digital I.D.’s, multiple digital I.D.’s that we all need to have in this new medium are urgent, and we need to move faster in this area of standard.
What about Java? Where does Java fit in all this. Well, I would say just very briefly that Java is, first of all, is not about what’s going on with Sun and Microsoft and all that — that’s not what it’s about. And there’s a lot of interesting discussing there, but that’s not the key issue.
The key issue here is connecting a heterogeneous world. The key issue is being able to build these gateways, these connectors, the glue to allow heterogeneous systems to be hooked together. It also has to do with not 100 million desktops, but trillions of things, little bitty things, that have the need to be connected.
How are they going to connect? They’re not going to run operating systems as we know them today. They need to have a very low level way to securely connect and Java, I believe will play a very significant role here.
And lastly, scalability as a technology factor is quite important. It is not about how many transactions can you do in a day. That is not the issue. The issue is much more, how many can you do with reliability, with availability, with security and with manageability. manageability is a much bigger issue perhaps than we give it credit for today.
As the web becomes mission critical, then we need to be able to have fail-safe systems and we need to know what to do when something breaks. And that’s what manageability is all about — I believe a very critical emerging issue.
Well now, let me touch on what I believe are five foundation issues for the health and growth of the Internet itself. You know, underneath all this glamor of Internet commerce expo, is a presumption that the Internet’s going to be there when we need it and that it’s just going to keep growing indefinitely. And it’s going to be unregulated, and global.
And that’s not an assumption that we should take for granted. There’s a lot of hard work we all need to do together to make sure, in fact, that does happen.
It starts with governance. Who’s in charge of the Internet, anyway? Well, you may not know this, but as of right now, the United States government basically controls the working of the Internet. Now, they really don’t want to. In fact, they’re very desirous of stepping away from that and turning it over to a private, non-profit, international group with an independent board of directors, which is capable of representing the intellectual property, trademark and technical issues that are important to the continued health and growth of the Internet. But we haven’t quite got that all finished yet. So, we have to keep pushing.
I’m hopeful that by the end of the next week or two, actually, that that agreement will be in place. Security, of course, is vital to all of us. The question is not is it good enough — it’s plenty good enough. The questions are, do we take it seriously enough? Are we deploying the right policy and management and auditing to security? Do we know who runs our firewall?
I spoke with a group of CEO’s recently and we were talking about firewalls and the CEO actually asked me, what’s a firewall? I said, well that’s a specialized computer. It stands between your company and the Internet, and it allows your employees to be able to go out to the Internet and see what’s out there.
And it also allows the other 100 million people out there to come into your business, if it isn’t set up right. By the way, do you know the state of the morale of the person who administers your firewall? Do you know that most firewalls — the password for operating the firewall is the word ‘password’.
So, how seriously do we take it when employees put a post-it on the screen with their password on it, is that okay? Or do they get a slap on the wrist just like they made a mistake on purpose on an expense account?
Those are the kinds of questions that are important about security. Content labeling has to do with is the Internet okay in the minds of parents and teachers? Is that important? You bet it is. Enormous political pressures of different kinds in different parts of the world are in place on this issue.
Currently, there are over 100 bills pending in the United States Congress to in some way regulate the Internet. Now, you and I know that regulating the Internet is like regulating the wind, but that won’t stop really silly laws that we can’t afford or can’t make work getting passed.
So we need to move on self regulation — all of us that are with companies. We need to move forward here. We need to utilize technologies like Pix, the platform for Internet content selection that provides a way to supplement the parent and teacher discussions of values with their kids with a technology that allows for content rating to be programmed into a browsing experience.
Privacy — how many companies in this room have a privacy policy on their website? And, have teeth in it? And audit it to make sure it’s being followed.
Well, you don’t have to raise your hands because the FTC did a study for us to find out how many companies have a privacy policy, and it was not a very pretty answer.
Now, this is a critically important issue. Europe has significant regulation in this area, and they can’t understand why we don’t have lots of rules on this. In fact, they’ve gone so far as to say, if we don’t put rules in place, American companies won’t be able to do business in Europe.
So, we got to get moving here folks on this one. We need to have privacy policies. That doesn’t mean you can’t collect and sell and use marketing information about people who visit your website. It doesn’t mean that at all. It just means you need to disclose, what is your privacy policy? And your policy can be, do you want to be anonymous? We’ll let you be anonymous. You give us information, we’re going to use it no matter what. We’re going to sell it in fact.
Privacy policy could be, we’ll give you 5% discount on our products if you let us use information about you. There’s a lot of different ways to do it, but the point is we must do it and we must disclose.
Infrastructure has to do with the health and strength of the underlying capability of the Internet. This is a long discussion. I would tell you that we’re making very good progress here. Internet two is the next generation of the Internet — an initial backbone has complete, well, the design has been completed. It will be running, I hope, at the end of the year or early next year.
It will provide initially the potential for billions of bits per second and ultimately, trillions of bits per second in the backbone. Internet two, in a nutshell, is about speed, it’s about new standards and it’s about advanced new applications — applications that were previously not possible. Things like full screen distanced learning, digital television, which we hope to be demonstrating within the next 30 days.
Applications like reading a mammogram from 5,000 miles away, on screens that might have 10 or 20 times the density of what you can see today.
So, a lot of exciting things are going on. In a nutshell, I would tell you that the Internet is evolving like a fibrous root system. It’s very highly distributed and I’m quite optimistic that we can count on, as long as we all work together on these issues, the continued health and growth of the Internet.
Now, what’s coming on the horizon? These are the things I believe are most important as we think about the future. First of all, is ease of use. Ease of use has to do with how easy is it to turn it on and get it working and all those kinds of things. And I would say that my own company and many other companies are dependent on solving that to keep selling more computers. So, that will get fixed, I feel confident.
But, ease of life is a lot harder to fix. This is an end to end concept. In a nutshell, this is about making the life easier for your constituencies. So, if I go to your website and click here to buy, and then I click here for support and it says call this 800 number, that’s not ease of life.
If I click here to buy and it says, well, if you want this special feature, that’s available only in our supplementary catalog, call this number if you want us to send you one. And there are so many examples of that.
Ease of life is when it’s easier to set up your educational curriculum on the web, based on your schedule, not the course catalog that the university previously offered.
That you want to renew you driver’s license to when you have it easier to do things — easier for your life.
Real time collaboration is emerging as a powerful new way to work together. It’s changing the world. Today, it’s mostly teenagers. But it’s emerging inside the firewall for companies.
This is my buddy list at work, and on the buddy list are people that I work with and those who are connected right now — their name is highlighted in blue. And if I see them highlighted in blue, and I send them a message, they get it right now. It’s not e-mail. It’s a peer-to-peer messaging. It doesn’t replace e-mail, it supplements it.
You know, people have the ability to think, to multi-plex. They can be on the phone and they can doing a buddy message at the same time. It’s a powerful new supplementary way. And pretty soon, we’ll expect to see this kind of capability. You get the idea. Instantaneous communication — it’s something you’re going to see very soon emerging as a powerful supplement to the way we work together today.
Insight becomes the competitive advantage. Bass ale delivers 2500 times a week to 1500 taverns, 150 different products. That’s a lot of data. How do you get insight out of that? How do you even know what questions to ask? And the answer is, you don’t. But by using business intelligence software and data mining, you can allow the super computer to sort that out for you and figure out what the relevant relationships are.
And they might find out that on Wednesday afternoons in Chesshunt, people drink dark ale. Why? Who knows? But if it’s true, then you can target your marketing programs, you can target your distribution programs to take advantage of it.
This is one element of what we call deep computing that we’ve learned quite a bit about through our chess games. Let me give you a glimpse of this notion now of natural net.
Natural net is what it’s going to be like when we have a lot of band width. And I think it’s quite a powerful notion. I’m going to show you quickly two little examples of this. You all know about midi music. Midi music used to be sort of boring, tinny sounding stuff, but by replacing the sound blaster tones with actual tones that were created and captured in a data base, we can begin to do some interesting things.
Now, imagine this little virtual band here. I’ve got a number of musicians. Each is on a different continent. That’s me in the lower right, the bass player. And I’m going to bring in my friend over in Beijing here, the guitar.
Over in Vienna, I have Victor and his violins going here. Okay, here comes the voice lead in L.A. and the guy coming in from Chicago. Here comes New York. Gotta get the drummer in.
Okay, so we got our little virtual jam session going here on the web. Now, we might want to see how each other’s doing. I want to see how Barry is doing with the … in Beijing. Go Barry.
Okay, well you get the idea. Let me show you one example of what this is going to be like, maybe. Music is such a powerful thing on the web. That was Mozart’s 41st Symphony. Those little needles here — this is digital music, by the way. So, this is CD stereo music without the CD. I put those needles on there just to make this look analog.
Okay, here comes the quiet part, listen to the distortion. There isn’t any. Just zeros and ones. The human ear cannot tell the difference. Now, of course, I learned about this from my 16-year-old son. Kids know all about this new form of music emerging on the Internet. It’s called M-Peg Layer Three.
You can learn all about it on my website, if you’re interested. It obviously is fraught with enormous intellectual property issues. But I think there’s no stopping this, and I don’t mean by that that there’s a problem from an intellectual property point of view.
It is clearly possible to take this public domain, open standard space approach to music and encrypt it, and use data hiding technologies so that only the intended purchaser, authorized person is able to use it and can have a fixed life, if necessary. There’s a lot of ways to control this and I think it’s going to emerge as a very powerful new force on the web — a force of enjoyment, a force of making the web more natural.
And of course, this has commerce implications for customer service, so you can have elevator music now while you’re surfing through the web pages and so on.
Well, I think as we look forward we can expect to see that e-business will be the driver here. Entertainment is important, education is important, but it’s e-business that’s going to be the driver to keep this going.
Yes, things are simplifying in many respects. But at the same time, accelerating. So, we don’t have a lot of time to study this. It’s very important to start simple and grow and fast. Try things, either inside the firewall or better yet, out there with real customers and let them know what you think you should do.
Lastly, there’s a tremendous explosion of opportunities happening here and I think you can all sense that — that’s why you’re here. Let me just conclude now by telling you why I am so optimistic about the future of this. And it comes down to one word. Kids. The kids are really what are going to make this all be what it can be.
Recently I got an e-mail from a young boy named Jeremy — 14 years old. Dear Mr. Patrick: I was surfing around the web the other day and I came upon your personal page. Not bad, Mr. Patrick. I want to tell you about our page at Saychem Highschool. We have 14,500 students in East Suffolk County, Long Island, and at Saychem High School we have a web site. It was built by our little group — we’re called the web slingers. And we designed the site, we built the site and we run the site.
By the way, Mr. Patrick, we have sponsors on our web page. Is there any chance that IBM could be cool enough to be one of our sponsors? Well, I was pretty impressed by Jeremy’s e-mail, so I went to take a look at the Seychem pages, and I was blown away by what I saw. This isn’t MIT here, this is not UCLA. This is a high school, 14 and 15 year old kids built this incredible website. They don’t know this is supposed to be hard. They just do it.
So, I dive a little deeper to see who these people are. Here’s the new CEO of the company, right here. Here’s a little discussion about the “other contributors” — that’s the teachers. You can almost see the …, and they don’t get it.
And you dive a little deeper and here’s the web slingers. Here they are, their pictures and their avatars. These kids totally get it. So, I replied to Jeremy — Dear Jeremy: Would you like to come to IBM and see Deep Blue? Would you like to see what we’re doing and come learn a few things? And he said, we’d love to come. Great, come on over.
So, the next thing I know, this yellow school bus pulls up to IBM and out of this bus gets these 15 kids with their backwards baseball caps and they come out of the bus and they came in to learn from IBM. Well, I got news for you, we learned more than they did.
These kids are going to be knocking on our door pretty soon — our door and your door, looking for jobs. And they’re not going to wait for us to interview them, they’re going to interview us. They want to know if we get it.
They have really tough questions. They don’t care about our organization charts, they don’t care about our strategies so much. They care about how good’s the connection going to be.
If I come to your company, do I get a 45-inch display or just a 21-inch display? Do I get a T-3 at my desk or just a T-1? When I dial in from my home 3,000 miles away, where I might decide to live, do I get access to all the corporate systems and databases that I need to do my job and unfiltered access to the Internet? Because if you don’t have good answers there, pal, forget it.
So, that’s what we’re up against. And I can tell you, it’s a very positive thing, but we got to get ready folks for these kids. Well, I appreciate your attention. I invite you to visit my website, like Jeremy did, and feel free to drop me a note or leave comments at my visitor center.
I just launched a new version of — this is my hobby — this site. It’s at And you’ll find this presentation there with that hot media technology that I described earlier. You’ll find some various papers about Java and security.
You’ll find a lot more about those foundation issues on the future of the Internet. I do wear another hat as the Chairman of the Global Internet Project, and you can find some information about that as well. And, of course, things about running and
GPS and music, and motorcycles and micro-breweries and brewer guides and other important business information.
So, thank you very much for coming. I hope you enjoy the rest of Internet Commerce Expo.