Saturday - September 30, 2000

European Consumer Internet Penetration Growing Fast

The rapid growth in PC-based consumer Internet usage in Western Europe – expected to nearly double from 24 million households in 1999 to 45 million households by the end of 2001 – has been a double-edged sword for European ISPs, according to the findings of a new Report from The Yankee Group Europe's Internet Strategies Europe service. According to the report, "European Consumer Internet: Growth, but at What Price?," while this acceleration in Internet usage has been spurred on by the availability of so-called "free", free-metered (free ISP subscription, but local calls charged for), and unmetered access, it has come at the cost of long-term sustainable access revenue, and is now fueling rapid consolidation among consumer ISPs.

"Within most Western European countries, consumer take-up of Internet services is jumping at astounding levels, particularly in areas termed 'Internet poor' in the past, such as Spain and Italy," said Scott Smith, Director of the Internet Strategies Europe group at the Yankee Group Europe, and an author of the report. "These countries are growing at a faster rate than Europe's more advanced Internet economies, such as Germany, Sweden, and the UK. But we are also seeing ISPs in these and all markets choosing to buy customers and revenue through acquisition as their access revenues suffer under competition from aggressive access pricing."

The Report forecasts that revenues directly from fixed-line dial-up access in Western Europe will grow from $5.5 billion at the end of 1999 to just under $9 billion by 2003 on the momentum of rising user numbers. However, the Yankee Group believes that year will see the peak of dial-up revenues as prices continue to fall and users shift to broadband. By 2005, the forecast predicts dial-up revenues will fall to just over $8 billion, and will continue to fall as broadband takes off and pricing for high-speed access becomes more attractive.

The report identifies other trends, including:

"People Issues" Top Challenge in E-World
Canadian and U.S. bricks-and-mortar companies agree that people issues are a top challenge in transforming their organizations into e-businesses. However, Canadian companies are more likely to experience problems managing the e-business effort, while U.S. companies are finding it more difficult to recruit e-business talent, according to a recent survey by Hewitt Associates, a global management consulting firm specializing in human resources.

Results from a survey of more than 130 North American companies indicate that almost two-thirds of Canadian and U.S. respondents believe their e-business activities are behind non-traditional competitors, such as dot.coms and start-ups - and both countries cite people as one of the main reasons why.

Sixty-two percent of Canadian companies and 61 percent of U.S. companies say people are among their top challenges to achieving e-business success. The same number of companies in each country also cite organizational commitment as another stumbling block.

But dig a little deeper and differences between Canadian and American companies emerge. While "finding talent for e-business activities" ranks as one of the top three people-related challenges for 40 percent of U.S. companies, only 13 percent of Canadian companies report the same. Canadian respondents (56 percent) indicated that the real problem lies in "managing who's governing the e-business efforts and how"; only 33 percent of U.S. companies agree.

Twenty-six percent of companies in both countries report that keeping e-business talent ranks as one of their top three people-related challenges. "Motivating and engaging employees is consistently important across any border in any industry," says Roger Duguay, responsible for Hewitt's e-business strategy in Canada. "This is particularly true in the case of companies trying to transform into e-businesses. It's crucial for an organization to align its culture with its e-business environment for employees to remain engaged."

Almost two thirds of Canadian and U.S. companies agree that people are a top challenge to achieving e-business success--ranking this challenge ahead of technology, funding, market/customer/product development, and production/operational efficiencies. Respondents ranked ten people-related issues. The following list indicates the percentage of respondents who consider each particular issue to be one of their top three people challenges in becoming an e-business.