Craig Barrett
Dublin, Ireland
June 19, 2000

MR. BARRETT: Good afternoon. It's a pleasure to be here to talk about e-Business and what the Internet is doing to all of our businesses, really whether we like it or not.

It's that period of time wherein the sea change coming over the environment which is effecting all of us and I think occasionally it's appropriate to step back and analyze exactly what's happening, why it's happening and what we can do about it, and that's what we hope to discuss with you during the next 45 minutes or so.

I really want to talk about the Internet and how that is thriving under the circumstances and how that is changing the way we do business. It's rather interesting to note that the last decade was really an era of using computers to improve personal productivity; that is that productivity that the individual involved in the workload, involved in the corporation, going forward, is really an era of the Internet; and the Internet has impacted, not so much on personal productivity, but corporate or organizational productivity.

We're really looking at cutting the time; bringing new products into the marketplace; lowering inventories; increasing operating margins; streamlining our operations, making them more efficient; and this focus on business efficiency is what the whole concept of the Internet economy, or e-Business, is about.

I am going to spend most of my time talking about business-to-business transactions on the Internet and not business-to-consumer transactions; but I think most of the things I say regarding business-to-business will be directly linked to the more common business-to-consumer type things we read about in the newspapers, such as the Amazon dot-coms or the eBays; where a consumer buys something directly from the business. The realistic thing is looking forward. The bulk of the transactions of the Internet will be business-to-business transactions; some 80 to 85 percent of the transactions; and we'll focus on that part of the business flow and see what's happening, what we need to do to prepare ourselves and what some of the trends in the overall industry are.

One of the things we'll talk about is what the infrastructure has to look like and what are some of the applications that run on that infrastructure and what are some of the implications of the infrastructure you put in place for electronic commerce. And this is one of the reasons we have this bit of equipment behind me; this is going to be used for a few demonstrations later on in the presentation, we'll be simulating an online company that's doing business and look at some of the ramifications of the sort of infrastructure you put in place, how rapidly it has to grow and expand as the number of customers grows and expands; and we'll try and do fun and interactive things at that point in time; and hopefully they'll all work. One of the thrills of doing live demonstrations in front of people, occasionally it breaks and when it does break I usually blame Bill Gates because it's the software not the hardware. We'll try to make sure that it works, without blaming anyone, as we go forward.

I do want to talk about four things. One will be the demands of the Internet economy; how fast it's growing. We'll talk a little bit about perspectives on Ireland and how Ireland's attitude and infrastructure play in the Internet economy; then we'll talk about general strategies for doing e-Business; and again it will be business-to-business strategies; and then we'll come back and talk a little bit about the infrastructure and use the equipment behind me when we do talk about infrastructure.

One important thing to note about the Internet is that it is not a simple scaling issue. The Internet grows by factors of 10. And you have to get used to tremendous scaling. And one way to look at that is to see how many Internet users there are fluctuating with time

If you look at that, these are only rough approximations in time, but in each five year period over the last ten years there's been about a factor of 10 fold growth in Internet users; and if you project out to the year 2005, we're talking somewhere in the range of a billion users. That is a billion separate connections to the Internet around the world, and a billion people you can communicate with; a billion people you can do business with; a billion people working either in small, medium sized enterprises, big business or individual consumers.

And we've continued to make these estimates, if anything they're usually underestimates. The business is growing faster than we can project, that is the number of users is growing faster than we can project. If you look at the amount of commerce that's been conducted over the Internet you see a similar increase.

In this case we've done a linear plot, but you can see there's an exponential character to the greater growth of commerce. Forecasted to do something in the range of $400 billion around the world this year, I think that that would be revised upward by the end of the year. But growing to something over $7 trillion of commerce by the year 2004. So more than a ten fold increase between now and 2004. $7 trillion, well it's only about 7 or 8 percent of the world's gross domestic product, I guess that's the gross world product, which is about a hundred trillion dollars. It is an appreciable amount of money. It's about 70 percent of the United States gross domestic product, for example.

So just in the space of a few years we're effectively going to convert something -- the equivalent of 70 percent of the US GDP over from its normal form of doing business, that is with purchase orders, people calling one another with telephone and fax; to business conducted over the Internet. And if you project out another five years to 2010 you can see that it's probably not going to continue to grow at an exponential rate because if it did you would consume the entire gross world product. But it's going to continue to grow rapidly; so major sea changes, major impacts; major impacts on the way we do business across the board.

You can take this example which is the world, you can break it up into geographic areas, you can see that the US has something of a lead with Europe relatively close behind the US in terms of business-to-business E-customers. The Asian Pacific companies, minus Japan, are growing to something over a trillion dollars by the year 2004 and then Latin America coming along somewhat slower, although again each time we make these projections we have to come back and revise it a year later, and we always revise them upwards, so these are probably conservative estimates rather than aggressive estimates.

The concept here though is it's growing very rapidly and it's growing very rapidly everywhere around the world. And you can look at this growth rate by just the amount of commerce that do e-Business, or you can look at it in other sorts of transactions; and I want to just show you two simple forms of transactions that occur on the Internet, to show you how it impacts the infrastructure. Just looking at gross dollars is one way to see the magnitude, but if you look at behind the scenes and what goes into the infrastructure you get a slightly different view.

There is a company in the United States called Google; and it's kind of a weird name, but if you can remember from your days in mathematics, the Google is ten to the hundredth power. This company in the US actually took this name because what they wanted to do was to create a new type of search engine for the Internet and to use some new technology to be able to use all of the previous searches that have taken place. It's kind of a learning experience so that they can get the answer for you faster if you're searching for some information on the Internet.

If you just look at this one company and look at the number of transactions that they are experiencing, in sort of growth in the transaction rate from when they were formed in 1998, when they first started doing business to today, they're doing 1,000 times more transaction searches on the Internet. They've seen a hundred fold increase in the infrastructure in that same period. This is fairly typical with companies that start off on the Internet. This is an infrastructure company doing searches, but very similar to some of the other types of things you see.

If you pick a company such as my own, Intel Corporation, and look at our infrastructure and the amount of business we do on the Internet, you see something fairly similar. It's important to know in this time frame from 1996 to the year 2000, we've gone through several stages. We first started to advertise our products on the Internet in 1996. We didn't start to do business on the Internet, that is take orders to sell products on the Internet until 1998; and by the end of this year, 2000, we will effectively have converted all of our business to the Internet; some 30 billion dollars a year of sales take place, essentially on the Internet.

But in that four-year period you can see a 50 fold increase in the amount of infrastructure and the number of servers we have put in place to, in fact, service our customers, service our employees, then service our suppliers. We are just starting to purchase the goods on the Internet. We purchase billions of dollars worth of raw material and processing equipment each year on the Internet. We're just starting to turn those thousands of suppliers we have in our collection of suppliers into Internet suppliers. And as we go forward, obviously the number of servers are in that small gray bit of the stack, number of servers dedicated to our suppliers will swell substantially as well.

But this is typical of a large company on the Internet,putting infrastructure in place. Google was an example of a relatively small, born on the web, type of company, putting their infrastructure in place. In both cases very, very strong growth of infrastructure transactions; inquiries taking place on the Internet. You can see what the drivers are for a company like Intel, they're everything from business volume and the functionality, to the services you want to provide, buyers or sellers, recovery mechanisms, redundancy put in place; if it's a mission critical application you always want to have a redundant network for it and bringing all of the suppliers and raw inventories of the product into the fold; so in this case we have some 700 or so servers just dedicated to doing this business. I can go on and tell you about other examples, but I thought what I would do is show you a short video which described this exponential growth; and what we'll do in the video is we'll use a few European examples to show you the sort of growth you see locally here. Please roll that video.

CUE VIDEO ON EXPONENTIAL GROWTH.

MR. BARRETT: I think those examples give you a measure of what new and upcoming companies on the Internet face when they see explosive growth taking place.

Let's turn to Ireland for a moment and just look at what's happening in Ireland with respect to e-Business; and yet focusing on the business-to-business aspect; and it's clear with the resurgence of the Irish economy in the last decade, the strength, the export nature of the Irish economy, it appears to desire to be a major player in this new-found commerce; and it's not only having large corporations involved in this, but also the small, medium sized business as well; and some of the infrastructures being put in place to achieve that; one is international bandwidth and bandwidth hooking up Ireland to the main backbone over the Internet, it's kind of interesting; as I travelled around the world the last two years, I've been able to go to many countries around the world and ask them how much international bandwidth they have; then I always compare that to the Intel Corporation. We have about 250 message bits of International bandwidth ourselves, as a corporation. Most countries don't have that much, but with, cables and fiber that's being laid between countries and hooking everyone up with a backbone, that bandwidth is going to increase substantially; but it is a prerequisite to have relatively inexpensive high bandwidth from an international nature to hook you up to the Internet and allow transactions to take place country to country.

There's a strong knowledge based work force here. My interpretation though, is that Ireland is getting to be alittle bit like the United States. The success you're finding in the high tech center here is putting a strain on the educational infrastructure to produce enough qualified engineers and technicians to fulfill the IT jobs that are available. As I said, much like the United States, I think there's much work that has to be done in the primary school levels to get young children interested in math and science and also to make sure that those children carry forward into the technical schools, into the universities, because there's a ready flow of hardware/software engineers that are able to become involved in the e-Commerce infrastructure set up. There's growing government support,an e-Commerce bill which has been proposed, a relatively simple straightforward bill, which is targeted at enabling e-Commerce, not to inhibit it or over regulate it, and looking at the very positive thing on the movement by the government in that direction.

One area that I think you should need some work on is Internet access costs which are relatively high. They're coming down. Forms of competition are starting to appear, but access costs are still relatively high and high access costs can diminish Internet users. These are access costseither for relatively low band widths on the intermediate bandwidth ISDN or DSL or PDSL bandwidth.

If you look at the correlation of bandwidth to Internet usage; there's a lot of information on this slide; critical axis is really a measure of per capita Internet users. So the higher you are up on the vertical access, the more Internet users you have per capita. So we organized it through a per capita basis. The horizontal axis is the average price of Internet access over a period of time; that period is 1995 to the year 2000. You can see where Ireland sits here in the blue dot in the far right. Relatively limited per capita usage of the Internet; relatively high access costs; you can see the general trend that follows the higher the access costs, the more limited the actual access. It's not 100 percent but there is avery strong correlation, and if there's one thing the country can do it's in fact to deregulate the telecommunications infrastructure, promote competition, promote alternate forms of high bandwidth, then let the consumer decide.

This is one of, perhaps the strongest things that Ireland can do in fact as they're moving forward to try and improve the infrastructure as far as e-Commerce, e-Business is concerned. So this competitive communication cost is an issue. Implementing e-Business in small, medium sized enterprises in this, is primarily enough education and availability of high bandwidth Internet business, which typically small/medium businesses need more to have the connection standard modem, the capability, and issue of technology, education and assuring that enough technology graduates into the system; and all of these things, I think perhaps the thing that can bear the most immediate attention is probably the issue of access rates and competition in the telecommunications sector to increase the overall Internet adoption rate. My best information on Internet adoption rate is something in the range of 14 or 15 percent of the population, which trails quite a few of the developing countries and will put you at a disadvantage in terms of becoming more active as a whole, and the whole issue of Internet commerce.

Now there are a number of strategies, once you have the infrastructure in place, that you can adopt. Moving forward with the Internet economy; and one of the things I want to do here is to talk about a specific example here in Ireland, and I'm going to invite someone up on the stage in just a minute, but what I want to do is show a brief video first, before I invite that individual on the stage.

The company we are going to talk about is VHI, which is the health insurance business; and the individual who is going to come up is Oliver Tattan, who's the CEO of VHI; but I want to show an introductory video before I pull Oliver up on the stage. Please roll that video.

CUE VIDEO ON VHI.

MR. BARRETT: I think when the video -- Oliver, everybody comes up on stage has a video, so why don't you come up and join me here. Welcome. Can you give the audience an idea of the what VHI does and who they are and how big they are?

MR. TATTAN: Principally we're a health insurer and we've come from a hospital aspect of insuring hospital equipment, when you get ill and go to hospital; and the main contextfor our investment is moving from illness to health and trying to be relevant to people on their health agenda and wellness management agenda; so because we're mature about managing risk, about moving money around, not moving information around, it's inconceivable that we would try to run a business strategy without using the Internet.

MR. BARRETT: You sound like a CEO who's got the Internet bug?

MR. TATTAN: Absolutely, yeah.

MR. BARRETT: Tell the audience how you got started and what you've done to get where you are?

MR. TATTAN: We started about at the beginning of last year and we started looking at the Internet. We were thinking about how to make a better web site, that's where we started. It was a long process for us. I don't think we came up with an Internet strategy in a month and brought it out, and I don't think speed to market was -- that that was an issue for us really. We spent a lot of time benchmarking, we went to the States, we went to the West Coast, had a lot to talk to a lot of companies there, providers of all types, and we worked through our -- We ultimately came up with an e-Business plan which included a B-to-B part for our customers front end B-to-B.

So what we do now is online billing; effectively we allow our customers to deal with us completely over the Internet. We sell to a lot of corporations, so all of their interactions with us can now happen online. Then also the B-to-C part, which is actually getting through the consumer; and that is very much about the wellness side, wellness management.

So those two components evolved over time, out of what we were trying to do; and what we had to do, effectively withour e-Business plan was we saw things in it that affected our main business plan so we had to go back to our main business plan. Some of the things we were thinking about in the beginning are not right anymore. We had to change them.

MR. BARRETT: I think most people who get involved in this find that there's an equal amount of adopting new technology, modifying the existing structure to be consistent with what you wanted to do with greater efficiency going forward?

MR. TATTAN: Absolutely. Part of what we were doing was our own back office was our operation's parent valuing generation and we did have to change a lot of things.

MR. BARRETT: How big is the company?

MR. TATTAN: 700 people now and we're growing about 15 percent per year.

MR. BARRETT: A lot of IT people coming in?

MR. TATTAN: Nearly half are IT.

MR. BARRETT: Buying a lot of hardware?

MR. TATTAN: Buying a lot of hardware, boxes here, hardware and software and we're still customizing a lot of stuff.

MR. BARRETT: What's next on your agenda? Where's your strategy carrying you?

MR. TATTAN: I think we've done the kind of forward part, the B-to-B out to our customers and B-to-C out to our customers. So there's a lot of roll out map, but also we want to contact in with our suppliers, so we're looking at dealing with the providers and trying to get all of the health care providers; doctors and hospitals online, and, you know, effectively moving all the information around and money around online; and we would see kind of the center of this as probably electronic medical records; so if you can imagine, you know your medical records, where is your medical record today? If it's stored safely online somewhere, you won't have to be examined by different physicians and so on, so we would like to know that moment.

MR. BARRETT: If I drop dead, I won't drop dead, nearly dead. You want my EKGs to be available immediately, wherever they may be?

MR. TATTAN: Wherever you are. They're always going to be standard online, so any provider can access them. But this is going to basically make it easier for providers so if you do something for them, we can see it.

MR. BARRETT: I always get nervous when we start talking about health care, but there is a huge opportunity because of the administrative costs and also the information that's resident in the health system. To automate that more efficiently and more productivity, the estimate in the US is hundreds of billions of dollars in savings associated with the transactions that are carried out just in health eventually alone.

Let's go forward here and just look a little bit at the technology history because I think it's always fun to look at what's happened over the last few decades, which has bought us to the time where we are today. And the Internet didn't just arrive one day, although it seems that way. There's really been a series of technological factors and technological innovations that have brought us to where we are today; and you can kind of divide these into three or four different key technologies over the last three or four decades.

If you go back into the 1970s, for example, prior to that we had mostly stand alone computers which really did not transfer information back and forth, they were either isolated computing segments, and someone came up with a technology called packet switch which allowed you to transfer large amounts of information between the computers, so computers could start to be connected and talk to one another.

We then came up with some communication protocols, TCP and IP which has allowed us to have connected networks and communicate almost real time over connected networks. And this is what really gave rise to e-mail, basically a very simple communication protocol; if you had a computer here in Ireland or computer in Russia or computer in the United States connected to a network, you could communicate using this protocol back and forth and send your e-mail messages. What really brought the World Wide Web to our attention was another set of protocols and these were really display protocols, these were the sort of HTTP and HTML and URL addresses, referred to as URLs; such as if you were on the web someplace and had a URL, or unique destination or unique address, someone on the web could address you and you could display information in the protocols such as HTTP or HTML on the web. And that was all great, that's what's led us up to the present time. But we are now starting to talk about commerce on the Internet, and we're starting to talk about commerce, there are a series of protocols you can feed as well, because if you're carrying out transactions you need to talk about quantities; pricing; returns and adjustments; sales contracts; all sorts of information associated with the most routine types of business transactions we have, which we have separate forms and pieces of paper for each one of these, so that we know exactly what we're talking about; but when you start to put these on the Internet, a bunch of ones and zeros, you have to have protocols; and XML is the business protocol on the Internet which is now giving rise to electronic marketplaces.

So it's rather interesting that these protocols, or these technologies, as they have come along have spawn very, very interesting applications which we take advantage of; and because most us are users of the technology and not basic technologists ourselves, we're interested in the applications; but it's always kind of interesting to go back and see what the base technology is behind the application that you see in front of us on the screen. So it's this XML technology which is driving the electronic market places today; and in fact most of the industry consortia set up today are really being set up to comply with the XML protocols to transactions within their chemistry, whether it's petrochemical, auto goods, or chemicals sets; you need to have a common link on the Internet, so we can open these marketplaces up around the world.

This is one cut at the history of what's happened, going all the way from basically connecting computers and e-mail and World Wide Web to e-Markets. If you look at the progression of e-Business, there's a somewhat similar trend, although very, very compressed. And what you typically see here is people start off first by describing their goods and services on the Internet, new marketing. If you want to find out about Intel's products you go to "Intel.com" then rather than giving you 12 inches of detailed specifications in book format, all of that information goes hundreds of thousands of pages of product specifications on the Internet. So anyone can address us at any time and find out everything they need to know about our products, how they work, schematics, pricing et cetera.

The next stage you go to from there is in fact taking orders on the Internet. To put this in perspective we first started to do marketing through our customers in 1996, two years later, 1998, we took our first order; by the middle of this year, 2000, we will have converted all of our order taking from all of our customers on to the Internet. So you can, in the space of one or two years, you can make a massive conversion, even in a large existing business.

The next stage is something that I've listed here as "auctions" and this is one of the interesting topics in the industry today. In fact, don't just use the Internet for a one-to-one transaction but use it for an auction to either buy or sell. And if you look at the business-to-consumer area, eBay was one of the first companies that started to do this and they were doing it by, rather than having a yard sale or a small auction in the local environment; if you have something to sell, put it on eBay's site and let everyone around the world bid on it.

So this was basically opening an auction up to the international marketplace. Well if you're going to sell your goods and services, you might choose to do it from an auction or if you're going to buy things you might choose to do it via a reverse auction and we'll show you a little bit later on how you can do a reverse auction, where perhaps you want to buy a thousand golf balls and you want to buy them from the lowest bidder who is posted electronically for quote on the Internet to a list of qualified suppliers and see which one of those suppliers, realtime, is willing to bid the lowest price to sell you golf balls, we'll see how that's done. And that's just starting to happen today; in fact if you look at the popular press there's much talk about these auctions or e-Market sites. There's a lot more talk than there is action, actually. The bulk of the electronic commerce done today is still single point business-to-business transactions as opposed to free market or money market bidding processes.

The fourth stage, and the one which we're still also trying to just talk about is to use the concept of supply line management, supply chain management. This is where you're trying now to minimize inventory levels, where you have a multitude of suppliers and all of their products have to come together and all of their raw material companies have to come together to do your manufacturing operation at the right time to build the product; and if you're missing one of them you can't build the product. Then what you do is you schedule all of that material to arrive when it is all available. You don't have 99 percent of it there and one piece missing because that's an inventory carrying cost and loss of productivity, so you can run your supply line management electronically back into your suppliers to make sure that the material is delivered at the right time and it is all scheduled to be there, consistently with the bill of materials, all there at the right time.

So this is the progression of e-Business is compressed into just a few year period. Transactions I showed you on the previous slide took place over the last three or four decades. All of this is taking place in just the space of a few years.

Now, there's a number of things you have to be concerned about when you look at this; and there are, as in any management task, there are competing backwards, competitors you have to contend with. Let's imagine you're taking the hypothetical case we want to become 100 percent e-Business company and our e-Business system is the heart of our company that we're setting up. When we set it up obviously we want to set it up to focus on the customer first of all, because if you do any of this and you're not bringing value to your customer, whether it's in the insurance industry orthe electronics industry, automotive field industry; unless you bring value to your customers, there's really not much sense in moving forward and making something. Customer value is always a critical aspect in this.

The second aspect really is rapid employment. You've seen some of the videos I've shown you about companies growing very rapidly, so they not only want to bring value to their customer but they want to be able to capture exponential growth which is associated with business done on the Internet. So how do you roll out infrastructure rapidly enough to have ten customers today, 1,000 next week and 100,000 next month? So very rapid deployment of the infrastructure gets to be important.

The third aspect is really operational excellence. You can choose to do something which brings value to your customer and allows you to capture market share without worrying about operational excellence, but eventually to be competitive you have to be low cost, high productivity in your operation; so the concept of operational excellence comes into place, and then ultimately what you have to do is have all three of these and also then rapidly move into new marketplaces and have new business opportunities.

So it may be that you're servicing clients here in Ireland but you want to be able to deploy rapidly since you can also expand your business to the rest of the European Community or move to the United States or to Latin America and embrace customers there and have new business opportunities there, or bring new products into the marketplace using the infrastructure you put in place. So it is one of the standard management challenges we all have and there's not just one simple method, but you have to balance three or four different competing forces all at the same time to get the best answer for your company.

This is one simple way to look at this concept of electronic business in marketplaces. There's a slightly different way to look at it, which is what, if you charter your company to become 100 percent e-Business, what does that mean? What do you have to do to achieve that? I've tried to show the same sort of infrastructure here as on the previous slide. That is the computing environment, whether you look at customer value, rapid deployment, operational expenses and new business opportunities, to exactly who you have to interact with on this slide if you want to be a 100 percent e-Business company. And if you look at it for a few moments, you start to realize "Gee, there are a lot of people that I have to interact with if I'm going to sell to my customers, they're key to me; and I have to be hooked up and interactive with them if I'm going to buy from my suppliers".

That's pretty obvious, but there are two other classes here which are indirect customers and indirect suppliers which get to be very important. If you're struggling with that nomenclature, think of a company like Intel. We sell our product to people who make computers, primarily. People like Compaq and Dell and Hewlett Packard and IBM and others, they're our direct customers. Our indirect customers are the people who buy computers from our customers; and we want to communicate with them as well. We do it with the "Intel inside" program and we want people who buy computers to know something about the microprocessors, so we need to communicate with our indirect customers. Both on a business standpoint and on a consumer standpoint as well.

We can go back and look at the suppliers of our suppliers and have indirect suppliers that we want to communicate with and find a specification of their product to see how it impacts our production process. By then, if you look more thoughtfully at this, we have two other categories of people we have to deal with. Our internal customers, or our employees, and there's great savings to be made by using the Internet to communicate with your employees on all employee benefit matters; health matters; employment matters, et cetera. Most of us today, for example, even do our recruiting on the Internet. We may do some normal media recruiting as well, but we effectively use the Internet as a very efficient tool to gather resumes of people and conduct transactions with potential employees.

Lastly, there are some people who are not your customers or your suppliers but perhaps your partners, joint venture partners, you're communicating with them. If you have an issue where you need to supply a product and a joint fellow traveler needs to supply another part of the product to make it part of the solution, you can use the Internet to communicate with those people. So this concept of becoming a 100 percent e-Business company is not just focusing on the front end or back end of your manufacturing sales slide. It's really looking at and taking a holistic viewa nd looking at the totality of the people that you have to deal with.

There's got to be some rationale for wanting to do this, to become a 100 percent e-Business company; and the rationale is better customer service, more efficient transactions, expanding into new marketplaces; but I think there's a more fundamental rationale as well; and that is every transaction you do on the Internet is a digital transaction. Every digital transaction lends itself to analysis in the very simple fashion. You add it to a database and once you do that transaction, you can analyze that transaction, learn from it, get value from it and use it to expand your business.

So one of the fundamental issues I think we need to hold in the back of our minds here, is that, yes, we can provide immediate customer service, but the concept of learning from our past experience and then fast forwarding to use that as a competitive advantage dealing with the next customer that comes along can be used for our advantage. You see some classic examples of this in the business-to-consumer space where Amazon.com, for example, started off selling books but can use their customer base, which is a big digital database, to in fact start to sell toys or CDs or other goods and services to their customers. This is the sort of transaction that allows you to move forward very rapidly. So I think this is an important point to keep in mind.

Now, let's turn our attention to what sort of infrastructure do we need for e-Business? And again, there are lots of different types of companies and they all have different infrastructures and different strategies, but let's show a -- look at the same three companies we had in the previous video; let's take a quick look at them, see what they have to say about infrastructure and then we'll come back on stage and do a few demos. So roll that video please.

CUE VIDEO ON INFRASTRUCTURE.

MR. BARRETT: What I'm going to do is finish up the discussion today by demonstrating what a net company looks like; and to do that we need to know a little bit about the structure of the Internet; and what I've tried to show here is a very simple graphic of what the Internet look likes and four basic elements of what you have to look at will be of significance for the rest of the discussion.

One is their clients. Clients are really the thing you access the Internet with, primarily PCs, though you can get on with cell phones or Palm Pilots or things of that sort; so we have clients which are Internet access devices. Then information goes from then down telephone lines or through this Internet space, ends up at a database, at a datacenter which holds some information, comes in through arouter somehow and that information gets directed to various parts of that data center.

In that data center there are three parts; one is the front end and those are the servers that really interface with the client. These are the things that do electronic mail catching, fire walls or secure web servers. The servers which insulate your database from the outside world and directly interface with the customer. Behind those front end servers, those web servers are application servers. These are the servers that actually carry out transactions for what you're going to do, financial transactions over the Internet or to order something or pull up some deep information; but we access some of these web sites, say "do this, do that, do something else" it has to go back and grab some information. These application servers go back, grab that information, assemble that in an intelligible fashion and display that back to you. The deep spot in your e-Business data center or big servers or big memory storage areas big databases and this is the equivalent of mainframe computers, or scalable high volume, big standard building block computers or intelligent storage devices. This is where detailed information terabits and terabits of information can be stored, if you go into somebody like Amazon.com or eBay or anything that is a big business-to-consumer type of company, they have huge databases, and it resides, typically, on carryovers of many mainframe computers or big proprietary computer structures in the back end.

So think of this as clients; how you access it; here are the web servers, front end servers, interfacing directly with the clients and application servers behind those, then big database servers. That's what we basically have up here behind me; and what we're going to do is pretend that I am the president of my own company; my own company is not Intel, my company is called sportsmecca.com. Sportsmecca.com is an online provider of sports equipment and services to consumers. And we've set up my company such is, that I'm pretty much e-Business.

I'm a company, I use the Internet to, in fact, deal with customers and deal with suppliers. I'm going to have three of my employees come up successively; first a sales person who really is involved with interfacing with customers. Secondly a line of businessmen here, someone who does take place with the internal operations of my company, internal workings of my company; and then the last person who is going to come up is my favorite; it's my Information Technology Vice President; business is so good that I'm going to have my IT Vice President to show you how to add capacity on the fly.

I'm just going to throw a server at him and he's going to plug it in and work the first time. If you believe that you'll believe anything. But we're going to try that.

Elizabeth, is in fact my salesperson, secretly my Vice President of Sales and she's going to come over here and show us what's going on; show us what we're doing and what sort of equipment we have; is that right?

SPEAKER 1: That's right, yeah. Good afternoon.

MR. BARRETT: Hi.

SPEAKER 1: First of all, what I'd like to do is tell you a little bit about what all this is running in the background. First of all, on top we have what's called the "e-Commerce director" and that's assembling the load balancing for all of the systems we have around. After that we have AZL Accelerator, and what it does is it then indicates, encrypts and decrypts transactions as they pass through the system. Under here we have a raft of front end servers, these are new high density servers, serving up the pages of Sports Mecca's web sites. In the myth, here we have application servers opening the applications covering the web site; and finally, in the back end, we have our database servers.

MR. BARRETT: So we've got some control/server appliances here, some web servers, application servers and a big database server which we'll get to later on; and you've probably got clients here as well?

SPEAKER 1: : That's right. Over here, this is a LAN client, it's Intel's next generation desktop platform, it runs at speeds over one gigahertz and will be available the next half of this year.

MR. BARRETT: Let's show them what we can do with this gigahertz PC accessing the Internet.

SPEAKER 1: : The first thing we're going to do is look at the home page of sportsmecca.com, as you can see SportsMecca offers a lot of different kinds of sports; and as you mentioned before Sports Mecca is a fictional company, we've set up and what they do is they're a B-to-B and B-to-C company, online company, offering sporting goods and services on a worldwide basis. We'll be using Sports Mecca in all of the demos today to show how any company can work towards being 100 percent e-Business.

MR. BARRETT: Let's show them what we can do.

SPEAKER 1: What we've got are a lot of choices of different sports. Since we know you're a golf fan, we'll show you the golf products.

MR. BARRETT: Call me Tiger Woods.

SPEAKER 1: : All right. Now, unfortunately we've had an error with one our videos, we're not going to be able to show that this morning. What I would have done is shown that you are able to look at a pro golfer rotate around, see the different things he's doing. What happens also is that here are some shoes pro golfer was wearing during that video, so our customers -- it's a very interactive site, our customers can come on, take a look at the video, say "those are cool shoes, I want to order them"; he clicks on the shoes and the order page comes up automatically.

MR. BARRETT: Don't even say Intel on this site.

SPEAKER 1: No, there's not enough room for the logo there. We collect to order, you automatically get an order number.

MR. BARRETT: You can probably do something more exciting with all that processing power than show you a video.

SPEAKER 1: : You bet. What I've got here on the second system which is running this afternoon is, this is an interactive application that we have, we really want to make sure our customers have a great experience on our site and keep coming back to our site; so let's say that the golfer we're here to see is you, you've gone -- the video process, you've take a picture of your swing, what we do here is click and record the swing right away; and what we have here is system that analyses what you've done here looks at the grip, looks at your standing weight distribution and puts out that information. Do you think that looks accurate for how you take a swing?

MR. BARRETT: Absolutely.

SPEAKER 1: Absolutely. All right. Let's look at this swing. Keep going, here's the really cool part of this system. It's able to take the data that came from your swing analysis and recommend the exact driver. Going to make you the most of out of that swing.

MR. BARRETT: If it were only that easy. All right. Good. Now I want to buy one of these obviously.

SPEAKER 1: Let's go ahead and accept. And what we'll see now is the detailed information about the driver so if 299.99 is okay with you, you can go ahead and continue with the order.

MR. BARRETT: Anything to help my golf game.

SPEAKER 1: Okay. Now the beautiful part of this technology I'd like to point out is partnership between sportsmecca.com and company called I2, an e-Business server provider. They have a capability that's enabling you to tie into the back end so rather than just saying we'll send you the golf clubs sometime in the next two weeks, we can actually select our delivery date. So let's go ahead and do that. Now are you going to be back by June 27th?

MR. BARRETT: If my club is ready, I'll be back.

SPEAKER 1: It says that's accepted. What happens with the I2 technology, it checks through the supply chain, makes sure it will be okay and confirm that the clubs will be waiting for you when you get home.

MR. BARRETT: Is that all that I2 does?

SPEAKER 1: Does even more. It's from the customer'sperspective -- let's turn this around and see what it's like for someone who works at Sports Mecca. We're seeing the desktop and we've got the warning at the bottom somewhere in the system, something's gone wrong. Double-click on the alert. In the control panel we've got customer service data, all of your order information there on one side, then here I've got the complete supply change that I've got an overview. Got my red flag on manufacturing, double-click here, see what's going on. We've got an improper weight on the head that's causing me delay in production. The I2 system is intelligent and it's able to not just tell you something's wrong but suggests a solution.

MR. BARRETT: So what it's done is once you ordered that golf club, it went back through the entire supply chain, made sure everything was okay and get that delivery date. Something was wrong, it automatically flags you and is smart enough to give you an alternate solution.

SPEAKER 1: Exactly, that's what happens. So it tells me that if I air freight the shipment I can make up for the lost of last two dates. I'll accept that, flag goes away and golf clubs are on their way.

MR. BARRETT: Thank you.

That's what happened in the front end. What we'll get to do is use a lot of processing power in the client, analyze my golf swing which is on the video. If my golf swing was only that good.

What I want to show you now is what happens inside the company for someone who's not dealing directly with customers but is dealing with one of the particular businesses and we'll pursue golf again. So Lisa's going to come up and she's going to be my vice president of Turner Golf something or other, right?

SPEAKER 2: That's correct, Craig. Good afternoon. As you said I manage Turner Golf, one of our specialty brands of sportsmecca.com and I want to show you how automated and integrated this can be. Let's start off by talking about the technologies we'll being using. This is the Itanium™ processor based server running a 64 bit version of Windows 2000 and 64 bit version of SAB application server.

MR. BARRETT: And that's kind of as I was saying earlier, that's the big back end database server as far as we're concerned here and I presume that can interface rather seamlessly about 32 bit databases?

SPEAKER 2: That's correct. What we have here in our 32 bit servers is seamlessly integrating an existing 32 bit database into a 64 bit environment.

MR. BARRETT: All right. Why don't we show the audience how you do that on the screen.

SPEAKER 2: Let's go over to my desktop here. What we hav ehere on my desktop is my SAB dot-com Internet portal allows me to use all applications and relevant data in one place. On the left-hand side here are a bunch of applications I use every day. On the upper right-hand side is a direct link to my supply chain so I can check on orders. In the summer I have filtered Internet news on the golf industry because that's what I'm into, and down on the bottom is what my coworkers are working on.

MR. BARRETT: Basically everything you need to do in your daily routine is shown on this one screen and it's kinds of an opening portal to all of your business activity, correct?

SPEAKER 2: That's correct. I'd like to show you how easy it is to access the Itanium processor based server and what we're going to go ahead and do here is go ahead and access my expense report management and I have one of my employees just hounding me on getting one of my expense reports signed off.

MR. BARRETT: I can see why he's hounding you, it's from 1999.

SPEAKER 2: What I'd like to actually show you right now is something that's becoming very popular in the business-to-business arena, it's called marketplace and this site is called market site by commerce one, which is the leading marketplace solution provider. What I'm going to go ahead and do is get some golf balls made for our upcoming tournament and I want to create a reverse auction to show you how simple it is by filling out some information on the Internet, putting in specifications of how many golf balls you need to have and an opening and closing date of the auction. Once I fill that information, an e-mail is to be sent out to a list of qualified suppliers. Upon the completion of the auction I will be notified either through Internet or e-mail or if I happen to be away from my office, I can actually be alerted through my web-enabled cell phone. You can see here right now it says I need to log into the web site to check my results. Let's go ahead and show everybody where I login.

Now once I've logged into the web site, I can see the information that I have actually loaded into the Internet from my PC and you can see that my auction results are completed and I have a winning bid by a company Callaway. I worked with Callaway before so I really like their work, so I'm going to go ahead and approve that bid. You see all the quantity and information is there and in another simple click I can create a requisition and get the job completed. See here, I have all the information; vendor's part number; our unit price; and even our tax and total information.

MR. BARRETT: So simply what you did is create an electronic request for quote, send it out to your qualified suppliers, they had a specific time they could bid on that, and you're going to make your choice on the basis of "lowest bid" or "best supplier" or some combination of all that; and now you expect me to believe that not only did you do that here, but you accessed this through your cellphone?

SPEAKER 2: Yes. I can do my business anywhere, anytime.

MR. BARRETT: Pretty cool. Thanks, Lisa.

That's a real life demonstration actually of the database, she was addressing that, it sits in Stockholm, not here in Ireland, but she is addressing over her cell phone, a direct link into that. That is the sort of thing you're going to be able to do, routinely in the future, all that increases productivity, increases efficiency, increases customer service.

The last demonstration I want to do for you is what happens if you grow customers dramatically; and if you look at the Internet infrastructure, there are really two aspects to this. One aspect is how do you grow the front end? That is the heart of the Internet infrastructure that deals directly with the customers, and that's really the application servers and front end servers. These are the servers that take the customer requests, process them, interface directly with a customer; and we usually call that "scaling out", scaling out towards the customer, putting more and more servers closer to the customer so that you improve customer services. If you look at the backend, it's really where you have big databases, big storage arrays. We call that scaling up. You're scaling up to be able to handle bigger and bigger databases. What we want to do is show you an example of how you can scale out; how you can add a single server or an array of servers to interface with the customers, as the customer contact grows and grows, increases, addressing your web site.

So Don's going to come up; he's my Vice President of Information Technology; and business is great at sportsmecca.com we've got lots and lots of customers coming in, so I just happen to have a server here on the floor and I'm going to hand this to Don here in a moment.

SPEAKER 3: That's right; because as you said, things are very good. We have good news and bad news. And the good news is Sports Mecca is growing like crazy and the bad news is that Sports Mecca is really growing like crazy, so I can use all the servers you can give me.

MR. BARRETT: Why don't you plug this one into the system.

SPEAKER 3: Let me get this guy plugged in and started booting and we'll talk a little bit more about our infrastructure here. We can set up here and I'll try not to hit myself in the head with it. We've got a power cord here, plug in the power cord and now the next thing I need to do is get plugged into the Internet and let's see; I think I --

MR. BARRETT: You just happen to have a cable in your back pocket.

SPEAKER 3: All good IT managers carry these around. This plugs in here and I bring it over, plug it into our network, so as he's heating up what I'd like to talk about here is our front end infrastructure. What we have are two web servers that are serving up the web pages and they're connected into our 100 megabyte network. We've got a couple of hubs and a switch here and up top here we have the Intel net structure 7180 e-Commerce director; and this is also hooked into the network and this is going to be doing all the load downs across these.

MR. BARRETT: By "load balancing" you mean it's going to give the customer the best customer experience by making sure that you're getting the maximum use of the available resource you've got?

SPEAKER 3: Exactly. If we bring up our customer experience I'll be able to give you a good example of what's happening. If we look at the audience here, we can see we have two servers online; server one and server two; and we have four browser sessions and you can tell whichs erver is serving up which browser session. This is what I mean by "load balancing". You can see that the 7180 is basically distributing the customer request fairly evenly across both of the servers.

MR. BARRETT: What happens if something goes wrong with one of those servers?

SPEAKER 3: We have something else built in.

MR. BARRETT: Part of the experiment I want to do is I always want to walk into a data center and walk up to an IT guy and say "what happens when I unplug this, what happens?".

SPEAKER 3: Normally I'd have a heart attack. But normally we've got our front end servers here; we've got interfaces on those, so what's happened is that the server itself has been detected on the interfaces, gone away and rerouted all the activity of that second interface and that's reliability, that's what we need. You can't have a 500 dollar switch for a ten dollar network cable that goes back.

MR. BARRETT: If I pull the other one off what happens. Can I pull it out?

SPEAKER 3: I don't think I can stop you.

MR. BARRETT: I love this. Ahh, now what happens?

SPEAKER 3: Now you kill the server. You may be the boss, Craig, but I'm going to have to ask you to quit taking my servers, I've only got one left. But we can see that the 7180 has detected that that server has gone down. Most load balancing softwares wouldn't be able to detect that the server was offline, so that would send error messages back with the customer, either disconnected or "there's an error and no server is available". 7180 says "wait a minute, it's offline, I'll reroute everything to the main server."

MR. BARRETT: I'll let you put your server back online if you want.

SPEAKER 3: Thanks. Plug it back in here.

MR. BARRETT: And if all goes well that server wants to come back in a minute.

SPEAKER 3: Back up here in just a second.

MR. BARRETT: While we're waiting for that to come online, start to tell --

SPEAKER 3: What I'd like to do now --

MR. BARRETT: It's back online.

SPEAKER 3: I'd like to demonstrate the scalability of the environment; and we're going to do that by adding in the server that you handed me here, so if we could skip over to the 7180 management console we have here; I want to show you just how easy it is to go in and add a server. So we'll click here; and all I have to do is type in the IP address, hit "apply" and now if we could switch back to the customer experience window again, we should see server three start to show up there in just a second, I hope. There it is. While I'm at it, I'm going to go ahead and add one more server to make things exciting here. If the audience keeps watching the screen we will see server four here show up in just a minute.

MR. BARRETT: There it is. So what we're doing is just adding servers on the fly. You don't have to take, do you think, any of your system. These are basically just standard building blocks in that you just plug this one into the control unit and brought it online, you could bring up tens or hundreds of servers in that section. That means more and more customer contact comes in, you can administer more capacity.

SPEAKER 3: That's right, you can manage it very easily with the 7180.

MR. BARRETT: Thank you.

SPEAKER 3: You're welcome.

MR. BARRETT: That's what's going on in these data centers today and that's why people are going from 10,000 to 100,000 to a million customers overnight, how they can keep the customer experience uninterrupted and it's really the issue of putting in infrastructure which supports exponential transaction growth; and many of the requirements today are really that if you're going to be involved in electronic commerce, electronic business, you really need to put it by almost ten X, your average capacity in place, to accommodate bursts in customer usage.

You just think of some of the simple examples of this, people that are in the business of online computer sales; Charles Schwab in the United States a leader; he is a leader in the area of selling stocks over the Internet. If you have an extremely busy day on the stock market, going up or down, the stock volume may fluctuate wildly from an average number; and you want to be able to take care of all of your customers, so you need to have this excess capacity put in place. Standard building blocks, which is what we have here, allow you to do that.

Let me just summarize some of the interesting aspects that you need to be concerned with. What is exponential growth? This is the way the Internet has gone for the last five to ten years. This is the way I expect it will continue to grow. You need to expect exponential growth and plan for it.

Ireland has a unique issue in terms of accommodating electronic business, electronic commerce; and that's the access rate which will facilitate more and more small business, medium sized business and consumers getting involved in electronic commerce. I'd encourage government and industry here to work together to get more competition and lower access space.

This concept of more transactions equals more business advantages is a key, and these are digital transactions.

They can be analyzed, they can be characterized, they can be dissected, they can be used to gain business advantage. Each one of these transactions is information that should be used as such.

Lastly, we need to be able to put an infrastructure in place, to build you our scalable building blocks to which we can rapidly add additional capacity to this exponential growth.

Having said all that, there's still lots of excitement going on in the industry. The electronic marketplaces, auctions, reverse auctions, supply line management, all of these things are coming about, all of these things will help dictate winners and losers going forward; all of these have to be taken into account by senior management; that means work or participate in this revolution.

I think it's easy to see and we're seeing increasing evidence on almost a daily basis in the US, which is somewhat of a leader in this area, but you also need strong business models. You can't just throw anything up on the Internet and expect it to be successful. You need a real business model. You need to provide real customer service, real value to the customer, real efficiency and productivity from your internal operations to be successful. These are some of the requirements, but nothing supersedes this issue of a solid business plan.

That's one of the exciting things going forward; new business models, new business plans, new efficiencies, creating new marketplaces. So we're going to see lots of different winners and losers going forward. The only thing I need to caution people about is to make sure you understand what you're doing. There are lots of, kind of dumb decisions that are being made on a daily basis. People succumb to the hype of the industry. Make sure you have a solid business model moving forward. That has to be the first and foremost priority. After that, make sure it's scalable, make sure you grow rapidly with standard building blocks.

I want to thank you for your time this afternoon. I think this is an exciting time when all of our business careers, the rate at which change is happening to us is really astronomical, going forward in the space of just three or four years this phenomenon of E-marketplaces, doing business on the Internet has come about; and really within a space of five to ten years it's going to change the way all of us do business. What we're going to do is have many, many, challenges and many exciting opportunities that either fail or succeed; and that's always what makes business interesting. Thank you for your time this afternoon.

* Other names and brands may be claimed as the property of others.