E-business adoption rate is ... dropping. A recent InformationWeek survey of 375 IT managers shows a decline over the past year in the use of nearly every type of Internet application. For example, use of e-commerce dropped 10 points from a year ago to 57%, and the use of Internet-based supply-chain management dropped 4 points to 51%. The only growth area was intranets, which rose 3 points to 94%. Furthermore, although the drop was observed across all size companies, it was greatest among companies under $100M in annual revenue. Interestingly, the one bright spot is manufacturing, where Internet sales now account for 13% of revenue, versus 8% last year, the greatest increase among all industries.

This drop in adoption is consistent with a trend we first noticed in the Institute of Supply Management (ISM) survey, which showed a small drop in e-procurement adoption from Q4-2001 to Q1-2002. At the time, we thought it might just be statistical noise. But now, the drop has been confirmed more generally by InformationWeek.

Several factors appear to be behind the general decline in e-business adoption, including cost and complexity of solutions, traditional ways of doing business, and the general economic slowdown, which limits investment.