1 © 1999, Cisco Systems, Inc. Course Number 1084_06F9_c3

1© 1999, Cisco Systems, Inc.

Course Number1084_06F9_c3

2© 1999, Cisco Systems, Inc.

Course Number1084_06F9_c3

Internet EconomyIndicators

Internet EconomyIndicators

John ChambersCisco SystemsJohn ChambersCisco Systems

31084_06F9_c3 © 1999, Cisco Systems, Inc.

Major Economic ChangesMajor Economic Changes

41084_06F9_c3 © 1999, Cisco Systems, Inc.

““

””

The Internet EconomyThe Internet Economy

The confluence of two forces has created the Internet Economy

—the globalization of business and the networking

of information technology.

The confluence of two forces has created the Internet Economy

—the globalization of business and the networking

of information technology.

51084_06F9_c3 © 1999, Cisco Systems, Inc.

Role of ISRole of IS

61084_06F9_c3 © 1999, Cisco Systems, Inc. 61084_06F9_c3 © 1999, Cisco Systems, Inc.

What every CEO should know about e-business

71084_06F9_c3 © 1999, Cisco Systems, Inc.

Government Partnering with Business for Common GoalsGovernment Partnering with Business for Common Goals

81084_06F9_c3 © 1999, Cisco Systems, Inc.

Measuring the Internet EconomyMeasuring the Internet Economy

• How is it defined?

• How large is it?

• How fast is it growing?

• What methodologies are appropriate for measuring activities in this economy?

• How is it defined?

• How large is it?

• How fast is it growing?

• What methodologies are appropriate for measuring activities in this economy?

91084_06F9_c3 © 1999, Cisco Systems, Inc.

World E-Commerce SalesWorld E-Commerce Sales

Source: ForresterSource: Forrester

Current ProjectionCurrent Projection

Six Months AgoSix Months Ago

101084_06F9_c3 © 1999, Cisco Systems, Inc. 101084_06F9_c3 © 1999, Cisco Systems, Inc.

The Internet Economy IndicatorsThe Internet Economy Indicators

111084_06F9_c3 © 1999, Cisco Systems, Inc.

Who Was Involved in the Internet Economy Indicators Study?Who Was Involved in the Internet Economy Indicators Study?

• University of TexasAnitesh Barua

Andrew B. Whinston

• Internet research experts

• 3000 U.S.-based Internet companies

• University of TexasAnitesh Barua

Andrew B. Whinston

• Internet research experts

• 3000 U.S.-based Internet companies

121084_06F9_c3 © 1999, Cisco Systems, Inc.

Four Internet Economy LayersFour Internet Economy Layers

Internet InfrastructureInternet InfrastructureLAYER 1

Application InfrastructureApplication InfrastructureLAYER 2

Intermediary/Market MakerIntermediary/Market MakerLAYER 3

Internet CommerceInternet CommerceLAYER 4

131084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 1: Internet Infrastructure Layer 1: Internet Infrastructure

• Companies that manufacture or provide products and services that make up the Internet network infrastructure includes:

Internet backbone providers

Internet service providers

Networking hardware and software companies

PC and Server manufacturers

Security vendors

Fiber optics makers

Line acceleration hardware manufacturers

• Companies that manufacture or provide products and services that make up the Internet network infrastructure includes:

Internet backbone providers

Internet service providers

Networking hardware and software companies

PC and Server manufacturers

Security vendors

Fiber optics makers

Line acceleration hardware manufacturers

141084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 1: Internet InfrastructureLayer 1: Internet Infrastructure

• Companies that manufacture or provide products and services that make up the Internet network infrastructure includes:

• Companies that manufacture or provide products and services that make up the Internet network infrastructure includes:

IndicatorIndicator RevenuesRevenues JobsJobs

InternetInternetInfrastructureInfrastructure $115 B$115 B 372,000372,000

151084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 2: Internet and Network Applications InfrastructureLayer 2: Internet and Network Applications Infrastructure

• Companies that manufacture or provide products and services necessary to carry out all activities in the digital market includes:

Internet consultants

Web server software and other Internet applications

Multimedia applications

Web development software

Search engine software

Online training

Web-enabled databases

• Companies that manufacture or provide products and services necessary to carry out all activities in the digital market includes:

Internet consultants

Web server software and other Internet applications

Multimedia applications

Web development software

Search engine software

Online training

Web-enabled databases

161084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 2: Internet and Network Applications InfrastructureLayer 2: Internet and Network Applications Infrastructure

• Companies that manufacture or provide products and services necessary to carry out all activities in the digital market includes:

• Companies that manufacture or provide products and services necessary to carry out all activities in the digital market includes:

IndicatorIndicator RevenuesRevenues JobsJobs

ApplicationApplicationInfrastructureInfrastructure $56 B$56 B 231,000231,000

171084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 3: Internet IntermediaryLayer 3: Internet Intermediary

• Companies that increase the efficiency of electronic markets by facilitating the meeting and interaction of buyers and sellers via the World Wide Web and Internet includes:

Market makers in vertical industries

Online travel agents

Online brokerages

Content aggregators

Portals/Content providers

Internet ad brokers

• Companies that increase the efficiency of electronic markets by facilitating the meeting and interaction of buyers and sellers via the World Wide Web and Internet includes:

Market makers in vertical industries

Online travel agents

Online brokerages

Content aggregators

Portals/Content providers

Internet ad brokers

181084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 3: Internet IntermediaryLayer 3: Internet Intermediary

• Companies that increase the efficiency of electronic markets by facilitating the meeting and interaction of buyers and sellers via the World Wide Web and Internet includes:

• Companies that increase the efficiency of electronic markets by facilitating the meeting and interaction of buyers and sellers via the World Wide Web and Internet includes:

IndicatorIndicator RevenuesRevenues JobsJobs

IntermediaryIntermediaryInfrastructureInfrastructure $58 B$58 B 252,000252,000

191084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 4: Internet Commerce Layer 4: Internet Commerce

• Companies that generate product and service sales to consumers or businesses over the Internet and World Wide Web

Online product sales

Fee/subscription-based companies

Online advertising

Online travel providers

• Companies that generate product and service sales to consumers or businesses over the Internet and World Wide Web

Online product sales

Fee/subscription-based companies

Online advertising

Online travel providers

201084_06F9_c3 © 1999, Cisco Systems, Inc.

Layer 4: Internet CommerceLayer 4: Internet Commerce

• Companies that generate product and service sales to consumers or businesses over the Internet and World Wide Web

• Companies that generate product and service sales to consumers or businesses over the Internet and World Wide Web

IndicatorIndicator RevenuesRevenues JobsJobs

InternetInternetCommerceCommerce $102 B$102 B 482,000482,000

211084_06F9_c3 © 1999, Cisco Systems, Inc.

Internet Economy IndicatorsInternet Economy Indicators

IndicatorIndicator RevenuesRevenues JobsJobs

Unified*Unified* $301B$301B 1,203,0001,203,000

InternetInternetCommerceCommerce

$102 B$102 B 482,000482,000

IntermediaryIntermediaryInfrastructureInfrastructure

$58 B$58 B 252,000252,000

ApplicationApplicationInfrastructureInfrastructure

$ 56 B$ 56 B 231,000231,000

InternetInternetInfrastructureInfrastructure

$115 B$115 B 372,000372,000

*Takes into account double counting among layers*Takes into account double counting among layers

221084_06F9_c3 © 1999, Cisco Systems, Inc.

Industry ComparisonsIndustry Comparisons

IndustryIndustry RevenuesRevenues JobsJobs

Energy/UtilityEnergy/Utility $223 B$223 B 671 K671 K

TelecommunicationsTelecommunications $270 B$270 B 975 K975 K

BankingBanking $7,890 B$7,890 B 3,600 K3,600 K

AutomotiveAutomotive $350 B$350 B 1,500 K1,500 K

Source: U.S. Department of Commerce, Fortune MagazineSource: U.S. Department of Commerce, Fortune Magazine

231084_06F9_c3 © 1999, Cisco Systems, Inc.

Internet RevolutionInternet Revolution

19951995 19981998 CAGR CAGR GrowthGrowth

$6,762 B$6,762 B $7,552 B$7,552 B 2.8%2.8%

$5 B$5 B $301 B$301 B 174.5%174.5%

GDP

InternetEconomy

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Future of the IndicatorsFuture of the Indicators

• Quarterly Updates

• Creation of Comprehensive Index

• Quarterly Updates

• Creation of Comprehensive Index

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New Internet EvolutionNew Internet Evolution

AcademiaAcademia

BusinessBusiness

ConsumerConsumer

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($B)($B)

Source: BloombergSource: Bloomberg

Market CapitalizationJune 4, 1995Market CapitalizationJune 4, 1995

AscendAscend

3Com3Com

CabletronCabletronForeForeNewbridgeNewbridge

CiscoCisco CompetitorsCompetitors

$24B$24B

$14B$14B

BayBay

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Market CapitalizationJune 4, 1999Market CapitalizationJune 4, 1999

3Com3Com

AscendAscendCabletronCabletronForeForeNewbridgeNewbridge

$43B$43B

$180B$180B($B)($B)

Source: BloombergSource: BloombergCiscoCisco CompetitorsCompetitors

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$0

$50

$100

$150

$200

LucentLucentCiscoCisco

EricssonEricssonAlcatelAlcatel

NokiaNokiaSiemensSiemens

MotorolaMotorolaNortelNortel

FujitsuFujitsuNECNEC

Market Capitalization—June 4, 1998Market Capitalization—June 4, 1998

Source: BloombergSource: Bloomberg

($B)($B)

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$0

$50

$100

$150

$200

Market Capitalization—June 4, 1999Market Capitalization—June 4, 1999

LucentLucentCiscoCisco EricssonEricsson

NortelNortelMotorolaMotorola

NokiaNokiaSiemensSiemens

FujitsuFujitsuAlcatelAlcatel

NECNECSource: BloombergSource: Bloomberg

($B)($B)

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Source: NASDAQ, BloombergSource: NASDAQ, Bloomberg

$0

$5

$10

$15

Barnes & NobleBarnes & Noble

Amazon.comAmazon.com CBSCBS YahooYahoo MerrillLynchMerrillLynch

eTradeeTrade

($B)($B)

Internet Impact on Market Capitalization June 4, 1996Internet Impact on Market Capitalization June 4, 1996

311084_06F9_c3 © 1999, Cisco Systems, Inc.

Source: NASDAQ, BloombergSource: NASDAQ, Bloomberg

$0

$5

$10

$15

$20

$25

$30

Barnes & NobleBarnes & Noble

Amazon.comAmazon.com CBSCBS YahooYahoo MerrillLynchMerrillLynch

eTradeeTrade

($B)($B)

Internet Impact on Market Capitalization June 4, 1999Internet Impact on Market Capitalization June 4, 1999

321084_06F9_c3 © 1999, Cisco Systems, Inc.

Internet Economy Business Principles for SuccessInternet Economy Business Principles for Success

331084_06F9_c3 © 1999, Cisco Systems, Inc.

Internet Economy AttitudesInternet Economy Attitudes

341084_06F9_c3 © 1999, Cisco Systems, Inc.

Challenges to GrowthChallenges to Growth

GovernmentGovernmentRegulationRegulation EducationEducation

R&DR&DSpendingSpending

Security/Security/PrivacyPrivacy

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