Economics of Business over Internet

Kishore C.S. (May 2001)

I never understood importance of "Direct Mail Marketing" and "Internet Business Scenario" back in India because of my ignorance. The following is the knowledge I have gained after living in US and I wanted to share the same.

US is geographically vast. Population is spread over great lands. Distances like 50 miles are covered by Cars which can travel at 70-80 mph and people live at a different "distance" level. Compared to India where we may travel maximum of 10-15 Kms by bus for work this simple aspect changes lot of things for Business organizations in US.

Relatively the time needed to travel and complete shopping or doing any business is high. If you wanted to go to Bank which is 2-5 miles, you need to spend anywhere between 15-30 minutes which involves: travel to bank, transaction time, travel back home.

This distance and time factor can discourage you to a great extent. To overcome this problem business organizations depended on "Phone". You can do almost any business transaction over phone. You can open a bank account by phone and get everything delivered at home by post. To reduce costs to customers, companies go in for Toll Free Numbers where the company bears the cost of telephone call.

If some people are lazy to call, they can be motivated to do business by the "Direct Mail" based selling. You will get a form that you just fill and send it back (with postage pre-paid) which triggers business transactions.

Cost of Labor

Cost of labor in US is very high. And cost to organizations which were employing to keep business flowing through "phones" was quite high. Sometimes a business transaction over phone can take more than 15 minutes. This involves precious time of employees and customers.

Advantage of Internet

Providing services earlier offered over phone are now being offered as "self-service" over Internet. A business organization saves precious time of customer and also its own labor usage. If users are able to use self-service and perform transaction in a time half that would normally take over phone, every one stands to gain a lot. So each organization strives to provide the services over Internet.

Providing a self-service over Internet involves one time cost of developing application and maintenance and hardware costs compared to recurring costs of "employing people". Yes, Enabling business transactions over Internet makes sound business and economic sense.

Once you are used to doing this business over Internet, it is so easy. Who wants to wait on phone for 10-15 minutes, if you can just logon to Internet and complete your business in 2 minutes? That is Business @ Speed of Internet.

Understand these perspectives while doing project for a company in US can help software development organizations in other countries especially India to build 'user-friendly' systems that will be accepted better by customers in US.

Enabling ‘self-service’ business transactions over Internet saves cost for business organizations and definitely applications over Internet will continue to extend services that benefit business organizations and customers at the same time. Understand this aspect well and keep in mind when incorporating usability into applications deployed over Internet.

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