Brainstorming Consultation:  Programme  | Participants   |  Summary   |  Interviews

Statement from the Market: The Digital Economy and Trade in Services

>> Voices from the Brainstorming: Day 1

The focus

The focus of this session was on four topics:

·         What export opportunities are emerging for Web-enabled (i.e. e-service) companies and which services have the greatest potential for developing and transition economies?

·         Who are the principal service buyers and what are their sourcing criteria and buying practices

·         What are the areas of competitive advantage in the international market for e-services and what is the best approach for market development?

·         Is the Internet creating new export models and/or efficiencies in established service industries? What are they?

New demands 

Introductory remarks highlighted the issues of access costs, power supplies and infrastructure determining the opportunities open to export-oriented service suppliers. The infrastructure inadequacies could include the financial system: "Why does it take three weeks for money to be transferred through a bank when it takes seconds to transmit the order?" asked one brainstormer. Brainstorming participants underlined the need for an exporting service firm to have international credibility, while noting that online visibility could be critical for them. However, e-business requires service firms to focus particularly on the new demands on them made by the Internet: on marketing of capabilities rather than products, and on meeting client needs in a personalized and customized way.

Visible or not?

It was pointed out that registering a site in a company's home country has advantages, particularly with regard to visibility. One participant observed that some companies might not want visibility in a culture where business dealings were kept out of the view of tax authorities. Companies would also resist the loss of commissions as the Internet abolished intermediaries in transactions, it was suggested. Likewise, in many developing countries, government incentives for service companies are lacking, often because of a dearth of information on such firms and inadequate understanding of their importance to the economy.

Opportunities

Where are the opportunities? Latin America has several examples of where the Internet has spawned new opportunities for service companies. Distance learning, for example, is a major business. Telemedicine, remote diagnosis of medical problems in areas without doctors, and distance consulting have been introduced. Agricultural consulting and research firms and lawyers have all gone online. Tourism firms and some local communities have quickly adapted to the international e-commerce, one even offering tours of former war zones to American tourists. Document handling at a distance, from scanning to translation, is providing a new source of revenue for communities.

What the big boys want

One specialist noted that large companies are going online, often together, in B2B contracting, not to reduce prices so much as to reduce transaction costs, reduce lead times and improve the quality and dependability of supplies. However, they do demand that suppliers learn to standardize their offers. And suppliers have to learn how to get the best benefit from electronic deals from buyer consortia, including learning how to make their service products directly comparable with those of other firms and aligning business processes to allow economies of scale.

A number of structural as well as delivery problems stand in the way of developing and transition economies seeking to capitalize on export opportunities for e-service providers. The stumbling blocks range from the difficulties of setting up an electronic payments system when credit cards are only economic for orders of over $50 to the problems of providing samples of a service.Companies also need to align back-office practices and ensure they have adequate trained human resources. In the break-out session it was noted that frontline staff, at present often at the bottom end of the salary scale, take on a new importance in electronic commerce. Reward structures may therefore need to be changed. It was even suggested that aligning business processes and making the organizational transition could take from nine months to a year before launching into e-business.

New intermediaries

Solutions to these problems were also offered. One participant pointed out that new intermediaries are appearing on the scene to offer services that are not otherwise so easily available, for example: market makers, online trade credit companies, and trust brokers offering third-party rating of service providers. Service companies could be judged by whether they were in professional associations and databases or subscribed to ISO 9000 standards. In India some companies used a cash-on-delivery system to compensate for the scarcity of credit cards. Another participant noted that in highly e-developed countries, "private money" -- such as mileage credits by airlines for frequent flyers and bonus points from retail chains -- is now common.

It was observed that there is no product without a service component, and export potential continues to be based on fundamentals -- finding out what the customer wants and making a value proposition.