| KN72023 |
| KEY NOTE INTERNET USAGE IN BUSINESS : July 2003 |
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This report covers: Internet Usaage in Business
Companies covered include: BT,Computer Associates, IBM UK, Microsoft,Oracle Corporation,
EXECUTIVE SUMMARY
| Expenditure on Internet software, services and hardware by UK businesses was worth £6.28bn in 2002, and is predicted to grow to £7.84bn in 2003. If spending on intranets and extranets is included, the total expenditure in 2002 rises to £11.5bn and will further increase to £14bn in 2003. In its current phase of development, the prime focus of Internet activities is to strategically realign the forward facing and internal operations of organisations. Consequently, revenue from e-commerce and advertising is growing rapidly, reaching £139.22bn in 2002. |
| This report focuses on the business usage of, and spending on, the Internet and also briefly covers related areas, such as intranets and extranets. In particular, the report examines two areas: business expenditure on Internet services and software, and business revenue from the commercialisation of the Internet, which refers to the revenue generated from Internet advertising and e-commerce. |
| For the majority of large and more advanced medium-sized organisations, usage of the Internet has progressed through the establishment phase (marketing and making initial e-business investment), and is now at the exploitation phase, which involves establishing e-catalogues, e-ventures, extranets, mobile portal (m-portal) solutions, online ordering and tracking. In the next 5 years, the focus will increasingly shift towards the integration phase, which will see the full integration of e-business activities between organisations, suppliers and clients, and will include collaborative planning and product development. The following will characterise business investment in the Internet: |
| The focus will move from the front end (outside of business systems such as websites), to the back end (inside of business systems such as electronic payment systems). |
| Corporate vanity and fashion will no longer drive the market, meaning that web projects will be scrutinised and will have to be justified in terms of the return on the investment. |
| There will be increased attempts to gain as much as possible from existing projects before consideration is given to investment in new projects, meaning that e-business initiatives will be smaller in scale, more realistic in ambition and lower in risk. |
| Internet connectivity is almost ubiquitous among UK companies and is no longer seen as only a tactical weapon used to improve business communications, but is increasingly being viewed as a strategic weapon used to improve the entire value chain of a business. |
| Key Note expects rapid growth in both e-commerce revenue and expenditure on Internet hardware, software and services in the next 5 years. The future will see a greater emphasis on the optimisation and consolidation of existing IT infrastructure and a greater emphasis on the building of integrated systems in order to streamline processes and gain efficiency. |
TABLE OF CONTENTS
| Executive Summary 1 |
| 1. Market Definition 9 |
| REPORT COVERAGE 9 |
| MARKET SECTORS 9 |
| Internet Software, Services and Hardware 9 |
| Connectivity 10 |
| E-Commerce 11 |
| MARKET TRENDS 11 |
| Growing Maturity 11 |
| Exploitation — the Prime Focus 12 |
| From Outside to Inside 12 |
| E-Business 12 |
| `Big Bang' 12 |
| Integration 13 |
| Table 1: Businesses with Ordering System Linked to Other Internal Systems (%), 2002 13 |
| Broadband Growth 13 |
| ECONOMIC TRENDS 14 |
| Population 14 |
| Table 2: UK Resident Population by Sex (000 and %), Mid-Years 1998-2002 15 |
| Gross Domestic Product 15 |
| Table 3: Index of Growth in UK Gross Domestic Product at Current Prices (index 1995=100), 1997-2001 15 |
| Inflation 16 |
| Table 4: UK Rate of Inflation (%), 1998-2002 16 |
| Unemployment 16 |
| Table 5: Unemployment Rate and Actual Number of Unemployed Persons (% and 000), 1998-2002 16 |
| Household Disposable Income 17 |
| Table 6: Index of Household Disposable Income (index 1971=100), 1997-2000 17 |
| MARKET POSITION 17 |
| Table 7: IT Expenditure on the Internet, Intranet and Extranet by Value (£m),1998-2002 17 |
| 2. Market Size 18 |
| THE TOTAL MARKET 18 |
| Growing Penetration 18 |
| Table 8: Trends in Internet Access in the UK (% of companies†), 1998-2002 18 |
| Table 9: Penetration of the Internet, Intranets and Extranets in the UK (% of companies†), 1999-2002 19 |
| Web Development 20 |
| Table 10: The Registration of New Domain Names in the UK, 1997-2002 and Quarter 1 2002-2003 20 |
| Rising Expenditure 21 |
| Table 11: Total UK Business Expenditure on the Internet, Intranets and Extranets by Value (£m), 1998-2002 21 |
| E-Commerce Revenue 21 |
| Table 12: UK Internet Advertising and E-Commerce Revenue by Value (£m), 1998-2002 22 |
| By market sector 22 |
| Internet Software, Services and Hardware 22 |
| Table 13: The UK Internet Software and Services Market by Value (£m and %), 1998-2002 22 |
| Software 23 |
| Browser Software 23 |
| Table 14: The Browsers Used to Access Websites Hosted by Access Group in the UK (million and %), Week 17 and 18 2003 24 |
| Server Software 24 |
| Table 15: Share of the Global Installed Base of Servers by Volume (number and %), March 2003 25 |
| Table 16: The Leading Server Products in the UK (number and %), March 2003 25 |
| Other Software 26 |
| Major Service Companies 27 |
| Hardware 28 |
| Table 17: The UK Internet Hardware Market by Value (£m and %), 1998-2002 28 |
| Connectivity 29 |
| Table 18: The Method of Connection to the Internet (% of companies†), 2001 and 2002 30 |
| Table 19: The Methods Used by SMEs to Connect to the Internet (% of companies), November 2001-November 2002 31 |
| Table 20: The Main Type of Internet Package Used by SMEs (%), May 2001-November 2002 32 |
| Table 21: The UK Inland Private Leased Circuits Market by Value and Volume (£m and 000), 1997/1998-2001/2002 33 |
| Market Share 34 |
| Connectivity 34 |
| Table 22: The Share of SMEs' Internet Access† Taken by ISPs by Volume (%), February 2002-November 2002 34 |
| Table 23: The Largest Suppliers of Inland Private Leased Circuits by Volume (000 and %), March 2002 35 |
| E-Commerce 35 |
| Table 24: Penetration of E-Commerce Activities by UK Businesses (% of companies†), 2000-2002 36 |
| Table 25: The Type of Online Information Businesses Provide to Their Customers and Suppliers (% of companies), 2002 36 |
| Advertising Revenue 38 |
| Table 26: UK Internet Advertising Revenue (£m), 1998-2002 38 |
| E-Commerce Transactions 38 |
| Table 27: UK E-Commerce Revenue by Sector and by Value (£m and %), 1998-2002 39 |
| 3. Industry Background 40 |
| Recent History 40 |
| Number of Companies 40 |
| Table 28: Number of New Media Agencies and Consultants by Service, 2003 41 |
| Table 29: Number of ISP Companies in the UK (number and %), 2003 42 |
| Table 30: Number of Internet-Related Software Products, 2003 43 |
| REGIONAL VARIATIONS IN THE MARKETPLACE 43 |
| Table 31: The Percentage of Businesses† With Internet Access by Region, 1999-2002 44 |
| Table 32: The Percentage of Businesses† Trading Online by Region, 2001 and 2002 45 |
| HOW ROBUST IS THE MARKET? 45 |
| LEGISLATION 46 |
| The Regulation of Investigatory Powers Act 2000 46 |
| The Lawful Business Practices Regulations 47 |
| Electronic Signatures Directive/Electronic Communications Act 2000 47 |
| Proposed Anti-Spam Legislation 47 |
| KEY TRADE ASSOCIATIONS 48 |
| Association for Standards and Practices in Electronic Trade 48 |
| The Association of Communication Services Providers 49 |
| European Forum for Electronic Business 49 |
| Intellect 50 |
| Internet Services Providers' Association 50 |
| UK Web Design Association 50 |
| 4. Competitor Analysis 51 |
| THE MARKETPLACE 51 |
| Connectivity/Carrier Providers 51 |
| Internet Service Companies 51 |
| Software Companies 52 |
| E-Trading Organisations 52 |
| MARKET LEADERS 52 |
| Accenture Ltd 52 |
| Company Structure 52 |
| Current and Future Developments 53 |
| Financial Results 53 |
| AOL (UK) Ltd 54 |
| Company Structure 54 |
| Current and Future Developments 54 |
| Financial Results 54 |
| Atos KPMG Consulting Ltd 54 |
| Company Structure 54 |
| Current and Future Developments 55 |
| Financial Results 55 |
| British Telecommunications PLC 55 |
| Company Structure 55 |
| Current and Future Developments 56 |
| Financial Results 56 |
| Cap Gemini Ernst & Young UK PLC 56 |
| Company Structure 56 |
| Current and Future Developments 57 |
| Financial Results 57 |
| Computer Associates PLC 58 |
| Company Structure 58 |
| Current and Future Developments 58 |
| Financial Results 59 |
| Deloitte Consulting Ltd 59 |
| Company Structure 59 |
| Current and Future Developments 59 |
| Financial Results 60 |
| Freeserve PLC 60 |
| Company Structure 60 |
| Current and Future Developments 60 |
| Financial Results 60 |
| Fujitsu Services Holdings PLC 61 |
| Company Structure 61 |
| Current and Future Developments 61 |
| Financial Results 61 |
| IBM UK Ltd 61 |
| Company Structure 61 |
| Current and Future Developments 62 |
| Financial Results 62 |
| MCI/WorldCom Incorporated 63 |
| Company Structure 63 |
| Current and Future Developments 63 |
| Financial Results 63 |
| Microsoft Ltd 63 |
| Company Structure 63 |
| Current and Future Developments 64 |
| Financial Results 64 |
| Oracle Corporation UK Ltd 64 |
| Company Structure 64 |
| Current and Future Developments 65 |
| Financial Results 65 |
| SchlumbergerSema PLC 65 |
| Company Structure 65 |
| Current and Future Developments 66 |
| Financial Results 66 |
| Other Companies 66 |
| Demon Internet 66 |
| Easynet 67 |
| Xansa 67 |
| Parnell Kerr Foster 67 |
| Ariba UK Ltd 67 |
| i2 Technologies Ltd 68 |
| Commerce One 68 |
| Concur Technologies Incorporated 68 |
| Hewlett-Packard UK 68 |
| EDS UK Ltd 68 |
| MARKETING ACTIVITY 69 |
| Main Media Advertising 69 |
| Table 33: Main Media Advertising Expenditure on ISPs, Internet Services, E-Business and Internet/Intranet Software (£000), Years Ending March 2002 and 2003 69 |
| Table 34: Main Media Expenditure on Broadband, E-Business, Internet Services, ISPs and Software by Companies (£000), Year Ending March 2003 70 |
| Exhibitions and Trade Shows 71 |
| Domestic Events 71 |
| Aug-71 |
| Sep-71 |
| Oct-71 |
| Nov-71 |
| Dec-72 |
| International Events 72 |
| September 2003 72 |
| October 2003 72 |
| November 2003 72 |
| January 2004 72 |
| February 2004 72 |
| March 2004 73 |
| May 2004 73 |
| 5. Strengths, Weaknesses, Opportunities and Threats 74 |
| STRENGTHS 74 |
| WEAKNESSES 74 |
| OPPORTUNITIES 75 |
| THREATS 76 |
| 6. Buying Behaviour 77 |
| CUSTOMER PROFILE 77 |
| By Company Size 78 |
| Table 35: Access to the Internet by Size of Business (% of companies†), 2001 and 2002 78 |
| Table 36: The Proportion of Businesses with Websites by Size of Business (% of companies†), 2001 and 2002 79 |
| Table 37: The Online Trading Indicator† (% of businesses‡), 2000-2002 79 |
| Table 38: The Methods Used by SMEs to Connect to the Internet by Type (%), November 2002 80 |
| By Industry 80 |
| Table 39: Breakdown of Expenditure on the Internet, Intranet and Extranet by Industry Sector (%), 2002 81 |
| Service Industries 82 |
| Non-Service Industries 82 |
| 7. Current Issues 83 |
| the impact of ADVERTISING 83 |
| Spam 83 |
| Broadband Developments 84 |
| Expansion Continues 84 |
| Table 40: DSL Developments in the UK (number and %), July 2000-March 2003 85 |
| But is Expansion Fast Enough? 86 |
| DSL Aggregation 86 |
| On-Demand E-Business 86 |
| 8. The Global Market 88 |
| THE GLOBAL INTERNET 88 |
| Table 41: The Number of Internet Hosts (000 and %), 1999-2003 88 |
| UK Business Internet Usage: International Comparisons 88 |
| Table 42: Access to the Internet (% of businesses†), 1998-2002 89 |
| Table 43: Connectivity to the Internet (% of businesses†), 1998-2002 90 |
| Table 44: Uptake of the Internet by Connection Type (% of businesses†), 2002 91 |
| Global E-Commerce 91 |
| 9. Forecasts 93 |
| INTRODUCTION 93 |
| Forecasts 2003-2008 93 |
| Internet Software, Services and Hardware 93 |
| Table 45: The UK Internet Market by Sector and by Value (£m), 2003-2008 94 |
| Connectivity 94 |
| E-Commerce 94 |
| Table 46: UK E-Commerce Revenue and Internet Advertising by Value (£m), 2003-2008 94 |
| FUTURE TRENDS 95 |
| 10. Company Profiles 97 |
| British Telecommunications PLC 98 |
| Computer Associates Plc 100 |
| Ibm UK Ltd 102 |
| Microsoft Ltd 104 |
| Oracle Corporation Uk Ltd 106 |
| 11. Glossary 108 |
| 12. Further Sources 112 |
| Associations 112 |
| Publications 112 |
| General Sources 113 |
| Bonnier Information Sources 113 |
| Government Publications 114 |
| Other Sources 115 |
Text © 2004 Key Note
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Last updated by Amanda Porteous February 2004
