META Group Research Determines Internet's Impact on Retail and Distribution; Increase in `E-Tail' Customers Means New Rules for Externalizing Business.

ORLANDO, Fla.--(BUSINESS WIRE)--Feb. 4, 1999--At METAmorphosis '99, META Group Inc. (Nasdaq:METG) today announced its new service, Retail & Distribution Information Strategies (RDIS), to provide guidance to clients in industries whose businesses are dramatically affected by the Internet.

"Retail and distribution are among the industries most dramatically impacted by the Internet and e-commerce," said Dale Kutnick, META Group president, CEO, and co-research director.

"The growing use of electronic commerce for product/service delivery and consumption requires redefining retail and distribution business models to create a virtual demand chain market," said Tim Harmon, vice president and director of META Group's RDIS service. "By 2002, critical success factors in the retail channel will revolve around effective optimization of point-of-interaction (POI) branding and customer service."

The Current State of Retail

Most retailers have oversubscribed retail space and have implemented a "patchwork quilt" IT architecture that is not conducive to collaboration with distributors and suppliers. Brick-and-mortar branding and IT infrastructure need to be blended -- not replaced -- with electronic channels. According to META Group, retailers will increase IT investment allocation for "e-tailing" from 5% of their IT expenditures in 1998 to 9% in 2000. -0-

   What Retailers Are Doing               What They Should Be Doing
-------------------------------        -------------------------------
-- Store systems re-engineering        -- Y2K supply chain testing

-- Y2K remediation                     -- Relationship marketing

-- Supply chain management             -- Cross-POI branding and
   (replenishment)                        systems integration

                                       -- Adaptive architecture
                                          development (flexible IT
                                          systems)

The Current State of Distribution

Distributors face critical issues of their own, including industry consolidation through mergers and acquisitions, and the threat of Internet disintermediation -- or elimination of the middleman. Appropriately applied e-commerce strategies will fuel the transition of distributors from physical goods intermediaries to virtual information aggregators. META Group research indicates that distributors will increase investment allocation on supply chain management from 28% of IT expenditures in 1998 to 39% in 2000. -0-

 What Distributors Are Doing           What They Should Be Doing
-----------------------------          --------------------------
--  Warehouse management               -- Supply chain collaboration

--  Online order management            -- Transportation planning
    (extranet)                            (delivery)

                                       -- Mass customization
                                          (postponement)

The Bottom Line

According to META Group, retailers and distributors will have to follow a new set of rules to succeed in the new millennium.

-- Treat/leverage customer data as a strategic corporate asset

-- Focus IT initiatives on externalization -- supply chain and

customer-facing systems

-- Manage the shift from point-of-sale (POS) to point-of-interaction

(POI) emphasis

-- Identify the correlation between IT investment, gross margin

return on investment (GMROI), and profitability

-- Use architectural and infrastructural metrics for package

selection and adhere to a long-term architecture plan

About RDIS

META Group's RDIS service addresses the trends and issues involving business and IT alignment necessary to prepare the organization to exploit the 21st century model of products and service delivery/consumption. RDIS customers benefit from working with top analysts to anticipate future business models for early market advantage; reduce IT investment risk and total cost of ownership; affect consistent, quality customer service across POI channels; improve merchandising effectiveness; and lower store personnel training costs.

RDIS has developed the E-Commerce Risk Assessment Guide, an e-commerce scorecard created to help retailers compare their plans to those of leading e-businesses. The guide also helps retailers establish and prioritize critical success factors, uncover and address risks in the go-to-market plan, and improve communication about strategies to management, line managers, end users, customers, and partners.

About META Group

META Group helps companies make better information technology (IT) decisions by providing research and unlimited analyst consultation relevant to their specific business needs. Offering advisory services, consulting/benchmarking, and publications that span the full spectrum of IT, META Group addresses the latest technologies, industry trends, and business challenges. With more than 1,700 client companies worldwide, META Group differentiates itself from other information providers through its commitment to highly personal service (enabling "analysis in context"), bottom-line answers, and objectivity. To support this promise, META Group maintains a client-to-analyst ratio of 50:1 -- the lowest in the industry -- and reinvests almost 50% of its revenue back into research and client services -- the highest percentage in the industry. For details, connect with www.metagroup.com.

Note to Editors: This and other conference sessions will be repeated on the West Coast at METAmorphosis '99, February 16-18, in San Diego, at the Hyatt Regency La Jolla, 3777 La Jolla Village Drive. For more information or to receive a copy of Harmon's presentation, "Welcome to the Retail and Distribution Juggler's Ball," contact Dee Anna McPherson or Michelle Rutledge at 214/520-3555.

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