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To: Mark Fowler who wrote (46956)	3/23/1999 2:51:00 PM
From: Glenn D. Rudolph	Respond to of 164684

18 “DMZs” (a phrase coined by Forrester Research) will demand separately managed and replicated applications and databases which will speak with internal systems in a disconnected, batch mode. This should ensure that critical internal systems like ERP applications and customer service applications remain untouched by outsiders. So the longer companies are hesitant (for organizational reasons) or unable (for technological reasons) to connect their back-office and front-office applications to those of their partners, suppliers, or customers, the greater the market opportunity for Internet application vendors to provide that functionality. Unfortunately, there are no simple indicators by which investors can measure changes in MIS managers' attitudes toward opening up their internal systems. We will be focused mostly on how MIS managers' development and deployment intentions for security technologies change in 1999 and how much these separately maintained Internet applications increase the systems management burden on an organization. These two factors are likely to be most influential in driving acceptance of these types of applications. The successful emergence of new Internet-based enterprise applications then is entirely possible, given the current organizational and technological constraints that many companies feel about opening up their internal front-office and back-office business processes to customers and partners. Though we have touched on the greater potential for the Internet to automate business processes in the front-office than the back-office, the question of where Internet applications can specifically succeed has not been completed answered. Web applications' inherent strengths, faster, cheaper, and more flexible, are ideal for either back-office or front-office applications that have a potentially large, disparate user base, demand simple, intuitive user interfaces, and require adaptive, dynamic (i.e. change-on-the-fly) applications. In areas like procurement, customer support, customer service, product configuration, and order entry, we suspect Internet applications could thrive. Internet applications have material advantages over their C/S counterparts; we take as proof of concept that several vendors (like Ariba and Commerce-One) have already made real inroads into major corporate IT departments. And though these applications and vendors are still in the early stages of their development, we fully believe that they will find a foothold in corporations over the next several years thanks to several enduring advantages: they are cheap, they are flexible, and they naturally extend outside of an organization's four walls. Their ultimate success depends on (1) speed: time to market with fully functional enterprise-class applications will be key, (2) functionality: scalability, robustness, and features will be important, (3) value-added: these applications need to be deployed in new, novel ways that lever the Internet's cheaper, faster themes, and (4) inter-operability: these applications need to speak to legacy applications and data in order to achieve their potential. In our view, then, we see Internet application vendors flourishing in the near term (1) at the low end of the market with non-mission critical applications, (2) as OEM suppliers or technology partners to major ERP vendors, and (3) within early-adopter vertical markets that understand the nature of these applications, have businesses that are attuned to their deployment, and operate under the dynamics of increasing returns. Keep you eye out for these emerging new enterprise software vendors; the market cap that has been lost in the ERP space within the last few quarters may just be found in these new players in the next few quarters.