Canada Harmonizes Score To Enter Digital Economy

March 2000
By Maryann Lawlor
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Government, industry adopt evolutionary, not revolutionary, online business tactics.

The music of the e-commerce overture in Canada is getting louder and increasing in intensity. Even before year 2000 work began winding down, the country's government agencies began fine-tuning their ideas and following the lead of its prime minister in what has already become a global symphony of economic change.

During the last several years, the Canadian government has been working to make its residents the most connected in the world. With education, medical and service to the citizens initiatives well underway, attention is now turning to developing strong policy and procedures that will guide work on technical infrastructures and protect consumers.

Military, government and industry leaders are anxious to have Canada play its part as Internet commerce builds to a crescendo, but they are taking a very deliberate approach. As they monitor their neighbors to the south as well as the international community, John Manley, Canada's minister of industry, says his government's goal is to become a center of excellence for e-commerce while encouraging its use throughout the economy. The military community views itself as a part--admittedly a large part--of this governmentwide effort.

Canada is building its e-commerce strategy around seven key points that its leaders believe must be in place before and during its immersion into the digital economy. A top priority is an industry-friendly policy on the use of encryption technology. The country also is seeking voluntary new consumer protection guidelines. Like many European countries, Canada is concerned about privacy issues that are an integral part of conducting business online. To address this point, privacy legislation is being discussed that would balance both business and consumer needs. In addition, national legislation will be needed to give electronic signatures a basis in law. This move would allow for secure, end-to-end authorized purchases through e-commerce. Tying both security and authentication capabilities together would be the framework for a strong public key infrastructure (PKI). Government officials are seeking an established set of standards to ensure the interoperability of networks and applications. Finally, a neutral taxation regime will be designed that will treat virtual and traditional transactions equally.

Although government officials are focused on e-commerce within Canada, they are drawing on expertise in the business sector and international organizations to design the plans. In October 1998, Canada hosted the Organization for Economic Cooperation and Development ministerial conference. This was the first such conference to be held outside of Paris. The meeting brought together representatives from various governments as well as business, labor and social interest groups. Canadian representatives have also participated in e-commerce conferences led by the business community.

While the e-commerce movement is burgeoning in U.S. companies, and the Canadian government is designing strategies that will support the growth of online business interactions, a survey conducted last year for Andersen Consulting, Toronto, showed that 70 percent of Canadian firms do not consider e-commerce a high priority. However, at the same time, 90 percent of these firms plan to spend more money developing e-commerce capabilities in the next year or two.

This apparent contradiction is no surprise to Richard J. Simpson, director general, Electronic Commerce Task Force, Industry Canada, Ottawa, Ontario. Spending during recent years, when U.S. online commerce was growing, has focused instead on year 2000 readiness. "It has been a reflection of our own concentration," he offers. With many of these issues now resolved, it will be one of the government's objectives to ensure that e-commerce will be at the top of the investments list. "Part of the priority of connecting Canada is e-commerce É connecting Canadians to the economy of the future," he adds.

The country's proximity to the United States is one driver. "Our policy encourages awareness. In particular, because the two economies are connected, it's extremely important that we adopt business-to-business electronic commerce that will affect the supply participation," Simpson says.

The task force was formed in 1997. Its primary goal is to develop Canada's national strategy on e-commerce, both domestically and internationally. Domestic work has concentrated on forming a legal framework and policies that support an e-commerce-friendly environment. In addition, the team is working with government revenue agencies to address issues such as taxes. The government is in favor of instituting a technology-neutral approach to ensure that there are no biases either for or against doing business online, he offers.

Privacy and security are two key issues for consumers, Simpson explains. "People are looking for, in e-commerce, a high level of security and looking to create the same level of trust as in the regular marketplace. In some instances, that raises the bar higher. The government's strategy is based on providing the level of trust, which led to the high priority on privacy and providing high levels of security and a policy framework that businesses can adopt," he states.

These are also the two highest priorities for the military sector of the government. While the defense department does not have the same type of connection to citizens, it is one of the biggest procurement powers in the government and will work with other agencies in developing e-commerce policies.

Peter Cardarelli, director general, information resources management, Department of National Defence (DND), Canada, believes most of his department's interactions will occur within internal networks. However, the department will also develop relationships with vendors. For the military, successful online commerce will demand a high degree of trust--which means putting in place acceptable levels of security.

"We're concerned with the key infrastructures--public key infrastructure. We need to develop a PKI that not only works within the department but also will interface with the government departments to set the stage for fairly safe transmissions between all," Cardarelli says. The government's current goal is complete electronic service delivery by 2002.

Government officials view PKI as the primary enabler for successful e-commerce. The technology provides not only encryption but also authentication and identification verification capabilities (SIGNAL, August 1999, page 27). From an administrative perspective, PKI requires directory services that are well organized and effective. Cardarelli predicts the DND will be more heavily involved in PKI during the Canadian government's next fiscal year, which begins on April 1. Several projects are already in the procurement cycle, which includes the purchase of the technical infrastructure that will be needed. Business processes are also being developed and reviewed, he says.

The DND is also concerned about interoperability. "We don't want all the departments developing their own approach. We recognize the disadvantage of going down different paths. So, we want to use a common approach. There's a lot of willingness to cooperate," Cardarelli says.

Military leaders recognize the benefits e-commerce brings in supporting troops, and that is one reason for increased involvement. "From the national government's standpoint, it [e-commerce] is the number one priority. From a national defense standpoint, peacekeeping and defending the nation is still the number one priority, but we have to be able to get supplies to the troops faster and cut costs, so it also is a priority," he offers.

According to Brig. Gen. William Richard, CF, chief of staff, Canadian Defence Information Services Organization, the military's effort will be complementary to the e-commerce government movement because defense procurement is centralized within the government. This will be particularly true in purchasing information technology items, but military leaders are also concerned in general about how long procurement procedures take. Electronic commerce will be part of changing that process in an effort to be responsive to customers' needs. In this case, the customers are the men and women in uniform.

In light of the collaborative nature of many missions, the DND also recognizes that it must support its own troops as they are involved in operations abroad and progress in e-commerce as the rest of the world progresses, the general states.

While the government and military ready their processes and technology for the digital economy, firms in the Canadian marketplace have taken some initial steps. However, a revolution of business affairs is not necessary at this time for companies that specialize in defense products only, according to Lt. Gen. Robert N. Fischer, CF (Ret.), vice president, Computing Devices Canada (CDC), Nepean, Ontario. The general also is the chairman of the Canadian Defence Industries Association.

A majority of CDC's business involves large developmental products specifically designed for military use. Companies that provide items such as spare parts or commercial off-the-shelf products to military units will most likely make the first move into e-commerce, Gen. Fischer says. In addition, Canadian companies that currently work with or wish to have a relationship with major U.S. players such as The Boeing Company will also have to become e-commerce savvy, he adds.

The increasing commercial factor also is sure to play an important role in firms' decisions to invest in e-commerce. Nearly 1,500 Canadian companies logged hundreds of thousands of dollars in sales to the DND, but no more than 30 of them were specifically defense contractors, Gen. Fischer says.

"It's not fair to state that industry does not want to embrace e-commerce. Those of us who are in this area want to invest in areas where it makes sense to do so," the general explains.

Despite a conservative view of e-commerce, several Canadian-based businesses, or those that recognize economic potential in the country, have stepped in with specific products or services.

After determining that PKI offers a premier approach to security, the government chose Entrust Technologies Incorporated as its primary supplier of the technology. The company is headquartered in Plano, Texas; however, its research and development facility is located in Ottawa.

Canada's Government Telecommunication and Informatics Services, a branch of Public Works and Government Services Canada, implemented an Entrust-based PKI to provide security of common applications.

Among the products the company offers is Entrust/PKI 5.0 software, a managed solution that enables organizations to conduct trusted e-business with customers, suppliers, business partners and employees. Desktop Solutions 5.0 works with the software to allow users to send and receive secure business transactions such as e-mailing confidential data to clients or partners, providing online services to World Wide Web customers, and storing confidential company information on laptop computers. Entrust/Roaming 5.0 extends the capabilities of the software to mobile users, who can securely access their credentials anywhere on the network from a centrally managed directory. Finally, Entrust/Toolkits 5.0 enables organizations to encrypt, digitally sign and authenticate electronic transactions across all applications.

According to Brian O'Higgins, executive vice president and chief technology officer, Entrust, once these types of products are in place, they will be transparent to users and application writers. "There is no other technology out there that provides so much security bang for the buck. Digital signatures are the most important part. Now, we're using a new term--privilege management infrastructure, or PMI," O'Higgins explains.

At one time, the security demands of the military were greater than those of business. Electronic commerce has changed this. "Solutions are the same for providing security for the military as with commercial work. It used to be that the military demanded higher security, but with e-commerce, top security is needed by all," he says.

The model of security approaches has also changed. With protection software other than PKI, managers block systems access to everyone and then decide whom they will let into an area. PKI turns this on its head by providing security measures that are always on. Managers then choose who is denied access to a system.

Canada is currently reviewing cross certification as one means to facilitate digital certificate issuance and management. If adopted, citizens would be granted a single certificate that could be used in different places. For example, the same certificate a person uses to conduct banking transactions could also be used for communications with the government.

Companies rolling out PKI generally take an incremental approach, according to O'Higgins. Internal security is put into place first. Second, the infrastructure is extended to include business-to-business secure transactions. Finally, protection is expanded further to guard business-to-customer or, in the case of the Canadian government, government-to-citizen interaction. Because PKI can be used in the wireless realm, cellular telephones could eventually become new points of sale or service, he adds.

Customer Service Must Remain High Priority

Just as security solutions are gradually being accepted, e-commerce continues evolving. Using the broadest definition, online business began with providing information about products and services on a World Wide Web page. New technologies made online purchasing possible. As hardware and software continue to improve, companies are expanding their offerings.

Corel Corporation, Ottawa, a firm that specializes in productivity applications, graphics and Internet software, is employing a three-pronged approach for its move into e-commerce, according to the company's strategic Web business development manager, Sheldon Speers. At first, Corel used the Internet to support its traditional business model by providing online technical support. The firm is now in a transition phase as it becomes an application service provider (ASP), offering service agreements through the Internet that allow customers to "rent" hardware or software. ASPs are part of a growing movement toward the thin client model of networks, where applications reside on a server, or in this case on the Web, rather than on individual desktops. Users access the applications as they are needed.

According to Speers, ASPs offer a lower total cost of ownership and will "take the market by storm by providing full service for one low cost. They are horizontal applications that plug into a vertical market." Confidence in this prediction has led the company to determine its third phase. In the future, the company plans to extend this second step by providing content to thin-client devices such as cellular telephones.

Phyllis Brock, vice president of the Web business organization at Nortel Networks, Brampton, Ontario, believes her company is leading the way into the second wave of e-commerce--human interaction. The firm both develops and uses Internet technologies that facilitate interaction between the retailer and the customer.

The abundance of product information on the Web has produced a few results that companies need to respond to, Brock says. Because consumers can acquire a great deal of data, they have more sophisticated questions than they did in the past. While home pages can provide some of the answers, many times customers need to talk to a vendor's representative. Some become frustrated when trying to locate the correct telephone number on the Web site. Others want to continue to work on the Web site while talking to the customer service department. This phenomenon has fostered a new customer relationship and a new standard in the industry, she offers.

One Nortel Networks product meets this requirement head on by offering Web site visitors the ability to contact a human being, not just a recording, with a click of the mouse button. The Internet Voice Button enables site visitors to connect to a customer service representative directly from a company's home page. Contact can be made either through voice over Internet protocol or traditional telephone lines.

When customers use the Internet Voice Button located on the Nortel Web page, customer service personnel have available in front of them the calling client's information, including past problems or questions, products the client owns and order status. Home page visitors can opt to speak to a representative immediately or select to be called back at a more convenient time--all from the home page.

According to Brock, a survey conducted by Jupiter Communications Incorporated, New York, showed that 90 percent of customers want human interaction when dealing with firms, and Web sites will get only about 15 percent of potential business unless they incorporate human interaction with their Web capabilities.

To help Nortel capture the largest amount of business it can in the virtual marketplace, the company creates customer profiles. As updated information is available or relevant seminars are scheduled, clients are informed via e-mail. "This is the level of service that customers are going to start expecting," Brock says.

Experts agree that the best strategy for starting an online business is an incremental approach, much like the one being employed by the Canadian government. They advise companies to begin by using the Web to support products and services they already have in place. Later, as security measures are put into place and the firm is prepared to interact with other companies to conduct business online, the business-to-business items should be put into place. Brock admits that Nortel's setup is successful because the firm has both the technology and personnel to provide the required support.

"When you're talking about the second wave, we're assuming you've got a fully functional Web site. First, you have to work on the Web site, infrastructure and backup. Then you have to put in the right content and make it as proactive and relative as you can. Then after people are informed, move them into the next stage and allow them to purchase online, and that takes quite a bit of technical capabilities. Think through the scenarios from the customer perspective, then post service to the customer," Brock offers.

Canadian Prime Minister Jean Chretien is challenging Canadian companies to use these types of techniques to grab their share of what is predicted to be, in U.S. dollars, a $4.75 trillion market by 2003. While traditionally the Canadian portion of this amount would be 2.1 percent, or about $97 billion, the prime minister would like to see the country's firms capture a 5 percent share of the world electronic commerce by 2003 and do well over $200 billion worth of business.