Who shot mobile commerce, and will it ever walk again? Repeatedly named the Next Big Thing by the now-humbled New Economy crowd, M-commerce suffered a flameout every bit as dramatic as any individual dot-com's during the bust. Suspects include rank fear of another tech-economy bubble, cost, customer indifference, and vendor inability to create a common infrastructure on which to base wireless commerce. It's a safe bet that the downfall resulted from a combined attack, but M-commerce's prognosis isn't as clear.

Limited tests in the restaurant industry indicate that consumers will accept wireless transactions in some cases. And at the same time, infrastructure standards are coalescing. But business' fears, which mobile-commerce fans can't control, and cost concerns, which should subside with time, are proving to be tougher barriers.

Stephen Culver's experience with wireless is representative of the technology's attraction and repulsion. As CIO of Giorgio Armani Corp. in New York, he supervised the purchase and rollout of a wireless customer-relationship management system a year ago. The product, from retail-systems maker Retek Inc., makes store-operations management applications available to employees via handhelds logged on to a wireless LAN, and Culver says it has helped the upscale clothing retailer better control its inventory and labor costs. "I think of it as a mission-critical application," he says. With Retek's application, stockroom workers keep track of incoming merchandise with PDAs that can link to Armani's IT systems. This has let Armani cut distribution centers and all but eliminate parts of the supply chain. Merchandise goes directly from the factory to the store that ordered it.

But Culver's enthusiasm shrinks when he's asked about putting that same technology in the hands of consumers. Would Armani consider letting customers log on to the wireless network with their own mobile devices so they can gather product information or even pay for goods? "I don't think so," he says. Lessons learned following the dot-bomb are as fresh as day-old road rash. "Since there's no established model, the development cost and the time line would make it very hard to justify."

This despite the fact that wireless LANs are increasingly common, mobile phones and PDAs are as familiar to many employees as PCs, and business technologists won't leave the house before holstering their wireless messaging devices of choice.

To many, prophecies of consumers buying goods anywhere, any time, over a mobile network seem further from reality than ever. In December 2000, when InformationWeek Research asked IT managers what they thought about M-commerce, nearly 20% said it would make a major contribution to revenue within 12 months. More than half of all respondents thought it would make at least a minor contribution. Just 18 months later, only 5% of those responding to the new InformationWeek E-Business Agenda survey say they think M-commerce will make a major contribution to their companies' revenue during the next 12 months, and 64% don't think it will contribute at all.

That attitude gets stronger as company size shrinks. Small businesses are particularly skeptical; nearly three-quarters of them expect to see no M-commerce revenue. Large companies are only slightly less dismissive, at 58%.

Some proponents of M-commerce blame the withdrawal on economic conditions. "It's the recession," says Craig Mathias, an analyst with the Farpoint Group. "We've seen this across the board in IT spending. We're dealing with shell shock." Dwindling expectations of M-commerce revenue have less to do with the technology and more to do with reduced revenue in every area, he says. "Storage is off, processors are off, telecom is nearly dead," Mathias says. "So it's not at all surprising that you're seeing less interest in wireless."

Cell-phone carriers are taking some of the blame for M-commerce's stall. Industry insiders say cell phones and PDAs are more than ready to handle M-commerce. "The customer-side technology is all there," says Steve Sakoman, chief product officer of PalmSource, the operating-system subsidiary of handheld champ Palm Inc. He points out that the newest version of the Palm OS, version 5, which shipped last week, addresses mobile commerce by supporting strong encrypted networking (see sidebar story, "Palm Addresses Pitfalls Of Mobile Commerce").

But some observers have "issues with the networks," Gartner analyst Mike McGuire says. The third-generation cellular networks needed to provide the high-bandwidth backbone of mobile commerce don't exist yet across the country.

Mathias argues that this, too, is a product of the slumping economy. 3G networks are ready to roll, he says, but the cost for telcos to begin replacing older networks with 3G technology is still too high, given M-commerce revenue and other unknowns.

"The rollout of the data networks still hasn't really happened," Sakoman says. Problems such as low bandwidth and a paucity of data services required for M-commerce are subsiding, but the issue of intercarrier cooperation is more pressing.

For true M-commerce to work, it will have to run seamlessly among different carriers, networks, and handhelds. Presumably, Sprint PCS customers will still want to buy things while roaming on a Cingular Wireless network. "There has to be basic interoperability," McGuire says.

To solve that problem, technology heavyweights have been working to develop standards. Hewlett-Packard, Lucent, Oracle, and Sun Microsystems belong to PayCircle, a consortium developing application programming interfaces for various Internet languages. HP also plays a role in the Mobey Forum, a standards group dominated by European financial-services companies.

A few weeks ago, Sprint disclosed an alliance with a subsidiary of First Data Corp., a financial-processing company that's the United States' largest processor of credit-card transactions; they plan to design and implement a U.S.-based mobile-payment network within the coming year. The way they see it, consumers will take baby steps into the world of mobile commerce by first buying premium content for cell phones, such as downloadable ring tones or games. Once that mobile-payment network is in place and consumers are used to storing credit-account information on their phones, it should be an easy step to full M-commerce, Yankee Group analyst Adam Zawel says.

The Sprint--First Data alliance is a big deal because it brings mobile commerce into the "larger picture," Zawel says. At this stage, the consortiums all have competing standards, with competing views of how M-commerce should work. But they're starting to work together. "There are reasons to be optimistic," says Zawel, who adds that a unified system is likely.

That may not be enough to get M-commerce off the gurney, though. Restaurateur Pete Perdikakis, an avowed technophile and early adopter, says an attempt to buy a book from Amazon.com Inc. using the Web browser on his cell phone went poorly. "You can't see. The screen is too small," he says. "And then, after I went through the whole maze, it still rejected me," failing to process his order. Perdikakis decided that mobile commerce just wasn't worth the trouble--and it seems that, to some extent, Amazon agrees with him.

When Amazon launched its "Amazon Anywhere" initiative in 1999, CEO Jeff Bezos said mobile commerce was "going to be the most fantastic thing that a time-starved world has ever seen." He predicted that within a decade, all the company's sales would come from mobile channels. Today, the effort has been largely dismantled, and the company has yet to post numbers suggesting it's made any money on them.

Who's left to blame? The user, of course. "People have to start using their phones in a very different methodology than they have in the past," Gartner analyst Michael King says. "You're talking about a fundamental shift."

"People need to become comfortable with the whole concept of mobile commerce," agrees Farpoint analyst Mathias, who sees that change as a natural evolution of a new technology. Look at the Web, he says; people started talking about it and building hype several years before anyone was really doing business online or the general public had logged on.

Armani's Culver says businesses have backed away from M-commerce "because it's hard to get bang from your buck." In his case, he says, even if all the technology were proven and in place, he can't imagine making money from people buying clothes from their cars. "Our product is not suited for people purchasing it without being able to feel it and see it," he says.

Culver expects wireless to increase Armani's revenue in other ways, though. He'd like to give sales data to sales staff on the floor, so they can recognize and serve customers as individuals. Armed with access to individual customers' buying histories, he says, staff can make more sales. "Our salespeople really don't know when a customer comes in that this person spends a hundred thousand a year."

That's how Perdikakis is improving the bottom line at his three Skyline Chili franchises. Each server in the midwestern restaurants is equipped with a wireless tablet PC networked into a computer in the back office. When a customer places an order, it's entered into the PC right at the table, reducing errors and getting the order started before the server has walked away.

The main benefit of the system for customers is order accuracy and shorter waits for their food, Perdikakis says. But he gets even more out of it; the PC is tied into his inventory system, helping him track exactly what ingredients have been used, how much, and what supplies he needs to order. The system automatically tabulates checks, eliminating math errors that used to cost him money. And the PCs even double as time clocks for servers. The resulting boost in efficiency has cut the restaurants' costs as much as 14%, Perdikakis says. He's convinced that other restaurants will soon follow his lead. "The flexibility that it gave me was way beyond my expectations," he says. "I have no doubt this is the wave of the future."

By the time other restaurants implement his tactics, Perdikakis expects to be on to bigger things. He's already thinking about leaving a tablet on each table, allowing customers to punch in their own orders. They could even swipe their credit cards through the devices to pay for meals. All he needs to make the switch, Perdikakis says, is for the tablets, now more than $3,000, to come down in price.

Other restaurants are thinking along the same lines. Sandwich chain Schlotzsky's Deli is planning to open two "wireless stores" in the Austin, Texas, area, where consumers can download store locations, directions, and menus to their PDAs, then place orders for pickup. Down the road, it wants customers to pay that way, too. And McDonald's is testing a system in several cities in which drive-through customers can bill their food to the transponders used to pay highway tolls.

All that M-commerce might need to rebound is time. "There's a very tech-savvy group of young folks out there," Gartner's McGuire says. For them, mobile devices are just as natural a tool as pen and paper. Kids are already heavy users of mobile instant messaging, he says. "For many kinds of transactions, they'll default to mobile."

Adults will come around, too, Farpoint's Mathias says. It all ties into convenience. "Mobile commerce ... is about doing what you need to do when you need to do it," he says. "I'm very bullish on mobile commerce. It's the killer app for wireless in the long run. I think by 2005 we're going to be doing a lot more mobile commerce than we're even dreaming of today."

Meanwhile, CIOs need to pick their battles. M-commerce will be an individual proposition, McGuire says. "This is not an either/or," he says. "It's an augmentation." Pure M-commerce may only come to exist in narrow areas, he says, such as paying for public transportation. Wireless self-checkout may wind up limited to a handful of convenience stores. And many businesses don't need to do more than make their existing Web stores accessible via mobile devices. "You may just want to make sure that your Web site has a mobile channel," he says. "You need to stage this based on what your customers need and want. Do you need to be thinking mobile? Yes. Does that mean you need to build a mobile infrastructure within your entire organization? No."