Barriers to electronic commerce
European companies are beginning to realise the potential benefits of e-commerce, but there remain significant hurdles to be overcome according to a recent ICX report supported by the European Union's Esprit programme. The report, 'Blockers to E-commerce', is a distillation of knowledge from experts in the USA and Europe in the fields of computer security, management consultancy and multinational business, put together by Chris Taper of International Computers Ltd for the International Commerce Exchange (ICX). It showed that the climate in Europe is lagging behind the United States where electronic commerce has been embraced wholeheartedly, encouraged by enabling technology, electronic signature legislation and low cost access to the Internet compared with Europe. Different states are even tackling the implications of possible loss of tax revenues. A recent MORI poll showed that those European companies which have access to the Internet appear to be using its potential for more sophisticated activities, with around half reporting significant increases in productivity and efficiency as a result of applying the Internet to their overall business strategy. However the ICX report shows that many more firms are not harnessing the potential of the Internet, and those who do could use it more efficiently. A main benefit of electronic commerce is the reduction of costs per purchase order. Recent research by Warwick University Business School shows that companies can save up to 50% of their total purchasing costs by replacing their paper-based practices with Internet-based systems. So far at least 75 US companies have introduced systems for purchasing standard products and have reported significant savings according to research group Giga, while many more are being developed. However in Europe tentative trials of these systems are being conducted by only between 20 and 30 businesses, and few have seen much return on their investment. A Directive concerning a European framework for electronic signatures is currently being scrutinised by MEPs and Ministers, but may take some time before it becomes law. The report suggests that insurance companies could help manage the risk involved in installing Internet-based systems until the regulatory and legal frameworks are in place. The report points to several factors that impact the uptake of electronic commerce, especially for small and medium-sized enterprises (SMEs). These include the need for the implementation and acceptance of electronic signatures, a legal framework, agreed government policies, reduced costs in the supply chain and greater general awareness amongst middle and senior management. In particular, high telecommunications costs, upon which consumers pay additional VAT, inhibit early take-up. Electronic signatures are a basic requirement of e-commerce but the report pointed to several requirements that first need to be satisfied for them to become workable. The first is authentication, the ability to tie the individual or originator with the transaction. The second is integrity, or knowing that the information has not been changed. Thirdly there needs to be no doubt over whether the intended recipient has received the transaction and cannot subsequently deny it. Fourthly the information must be confidential and the information must be transmitted reliably and in good time. Finally the audit trail must be traceable and available in case of dispute. The report points to cryptography as a significant part of the solution, however it is a complex area and itself raises a number of issues. Notably the requirement for law enforcement agencies to have access to plain text or the private encryption key has caused much debate. Businesses however would not wish to be 'strangled' by governments controlling or not enabling the use of strong encryption devices. Furthermore the issue of authentication needs to be examined carefully to ensure that the originator or author can be identified with sufficient confidence. Editor of the report Chris Taper said: 'US companies are interested in what the Internet can bring them and are doing something about it, but European companies are lagging three or four years behind. 'Communication costs in Europe are far higher than America - even with cable companies and on top of that you're paying tax which makes the Internet comparatively less attractive. These costs will need to come down. 'The business to consumer market in Europe is showing interesting signs though there needs to be greater security. In the business to business market there needs to be much greater management awareness. 'Governments in Europe are being sluggish in establishing a framework for electronic commerce. It's going too slowly. The market is expanding across borders and the legislation needs to keep up. The European arena is an ideal basis for governments to work together and make electronic commerce work.'