Dot-coms tipped to fail as old economy fights back

According to a white paper released today by the Gartner Group and Cisco, there will be a phase of intense growth - almost 87 per cent per year - in the industry, before it tapers off mid-decade.

The UK was identified as a front runner in the European internet race due to the high concentration of multinationals and IT companies in the country. The early adoption of new technology is also a major factor.

However, contrary to common perceptions, Germany and Finland lag behind their North European counterparts because of their focus on non-IT industries like forestry, paper and construction

Germany is set to catch up however, and by 2004 the UK along with Germany will generate over half of all European internet revenues.

But even by 2004 the report predicts only four per cent of business transactions will take place over the internet.

Speaking to silicon.com, Dick Gillespie, UK MD of Cisco, said: "It depends on whether you see the power of the internet to be transactions with consumers or whether you see it to be automation in large organisations. The measure is not transaction volumes, it is how well people can automate their businesses and what kinds of productivity increases they can see."

Author of the report, Nick Smith, an analyst at Gartner, agrees that success is a long term goal, but stressed that four per cent is a strong starting point.

"What it indicates is that we're on a path towards an internet economy. The reality is that four per cent in four years time could easily double a couple of years after that and will go on growing.

"Ecommerce is an irreversible business trend. The way we do business is changing. In a few years time it won't even be news," he added.