December 11, 1996 11:15 AM ET
IBM's Gerstner kicks off Internet World with words of caution
By Charles Cooper and John Dodge

  NEW YORK -- IBM Chairman Louis Gerstner warned today of a customer backlash to what he described as the equivalent of an industry food fight.

"It's just plain confusing and exasperating for our customers," said Gerstner, in a keynote speech to an overflow crowd here at Internet World.

Pointing to the polarizing debates that have captured the attention of the computer industry in the last year, he warned that customers would sour on the continuing splits between browsers, access providers and proponents of the network computer vs. the PC.

"I wouldn't be surprised to see an Internet backlash soon, a Net weariness set in," he said. "All those end users wondering if this isn't a waste of time, all those businesses wondering if this isn't a waste of money."

"Where's this headed?" Gerstner asked, following up with the $64,000 question: "Where's the money to be made?"

"I don't think as an industry we pay nearly enough attention to customers," he continued. "We are very narcissistic about our inventions and our science. And we certainly aren't shy about telling people how beautiful our babies are long before they are born. The customer has to make sense out of the industry food fights that we have every day, and the customer has to sort out fact from fiction."

Nevertheless, Gerstner was upbeat about the business potential of the Internet and its applications in the corporate world.

"There's no question that millions of people have been drawn to this new medium. In one year, commercial Web sites have increased by a factor of 10. ... Is there real money to be made in the Internet world? The answer is yes, yes, there is," he said, punching the air with his hand.

Gerstner took the industry to task for the internecine conflicts that have preoccupied its leaders for much of 1996.

"All of us in this industry have to resist the temptation -- it's almost an addiction -- to lurch from one thing to the next," he said in a sometimes mocking tone. "The cries are shrill, the arguments are heated, the logic is fuzzy. We have to be thoughtful about this."

Gerstner was not wont to take sides as he offered a ringing endorsement of Java.

"Java has unified the entire industry--with perhaps one exception," he said, drawing laughter and applause from the crowd, which enjoyed the obvious allusion to Microsoft Corp. "Let's not blow this. Let's not do to Java what the industry did to Unix."

Returning to a central theme of his presentation, Gerstner suggested that customers are being left out of the equation.

"Is anyone talking to customers?" he said. "What do they want? They want access -- access to applications and the most cost-effective, high-impact way to deliver that functionality."

Gerstner, who said three-quarters of World Wide Web investments in software will be made in developing intranet applications, cautioned that the move to Web-based electronic commerce was nonetheless uncharted territory for most customers.

"The payoff is harder to predict, but the potential is enormous," he said. In particular, security issues must be resolved to smooth the way for E-commerce. In that vein, Gerstner said IBM plans to announce another framework to build security tools around open standards.

Peering into his crystal ball, Gerstner predicted a redefinition of the term "killer application."

"The killer app will not be a shrink-wrapped program that sells millions," he said. "The killer app will be a Web site that touches millions of people and helps them do what they want to do."

Gerstner added that corporations will have to reassess the way they merge technology with their internal processes.

"Before any of these great apps come online, the business or enterprise must fundamentally decide to change the way they work. And changing the way a business works is hard. Believe me, I know."

He said IBM and its Lotus Development Corp. subsidiary will spend hundreds of millions of dollars on Java development over the next several years.

Later at the IBM Booth, Gerstner told PC Week "hundreds" of customers have expressed interest in the network computer, which the company will sell in volume next year.

"It's like telephone equipment. Some like one phone, others like a [fancy phone]," he said, comparing the PC and the barebones network computer.

Gerstner said insurance companies in particular have expressed interest in certain NC applications.

"We looked at 140 applications and boiled them down to about 40," he said.

He also mentioned the oil, pharmaceutical and manufacturing industries as ideal network computing customers. And he agreed with a reporter's interpretation that NC applications are simple and best suited for clerks.

Asked if the network computer will put a dent into PC sales, Gerstner said, "We will sell lots and lots of PCs."

Scurrying away from the booth after 10 minutes, he said IBM will "absolutely" continue to support OS/2 in a "network computer" world.

Finally, he said IBM is "100 percent" behind the idea of cross-platform Java and that it remains to be seen if Microsoft is firmly committed to that end as well.

Copyright(c) 1996 Ziff-Davis Publishing Company. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Ziff-Davis Publishing Company is prohibited. PC Week and the PC Week logo are trademarks of Ziff-Davis Publishing Company. PC Week Online and the PC Week Online logo are trademarks of Ziff-Davis Publishing Company.

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