Companies gird for e-commerce land rush

Discuss strategies at e-Congress show.

By Ellen Messmer
Network World, 6/8/98

Boston - Despite the high cost and some uncertainty at times, corporations are eagerly trying out electronic commerce on the Web if only because they feel compelled to figure it all out before their competitors get there and claim the online territory first.

That's the heady gold-rush sense of it all based on what a wide variety of businesses had to say about their EC activities during last week's e-Congress conference here. For E*Trade Group, Inc., for instance, that means expanding its stock-brokerage site in the near future to become a "financial destination site" to offer insurance, online financial research, and bill payment services.

For Bank of Boston, it means launching an electronic check project with the Federal Reserve by month's end that will eventually let consumers pay for goods with an e-check instead of a credit-card on the Internet. For manufacturer Fruit of the Loom, Inc., which has begun taking purchase orders from garment screen-printers ordering T-shirts in bulk from its Web site, it's the chance to act as an advisor to Trane Corp., its Nashville, Tenn. neighbor which wants to try EC with its distributors for air-conditioning parts.

And for industrial giant United Technologies Corp. (UTC), it's the hope that by just buying office supplies off Web catalogues instead of paper-based ordering, the company could double its after-tax profits.

"We make $1 billion in profits after tax on $24 billion in revenues," said Dan O'Malley, UTC's manager of purchasing. Paying the 180,000 UTC employees costs about $11 billion, with another $12 billion going to all types of purchases. "If you could save as much as 10% on what you spend on purchases, you could nearly double the net profit of your corporation," O'Malley asserts.

All 180,000 employees at UTC are buyers of goods, and, O'Malley said, "it's hard to enforce corporate contracts that UTC has in place" that guarantee low prices for volume purchases. UTC thinks the best way to enforce purchasing discipline is going to be through Web-based catalogue purchasing where users required to buy by placing electronic orders by desktop computer.

But unless suppliers and buyers can easily exchange purchase orders and other information easily without worries about interoperability across e-commerce systems, it's not going to work well, said O'Malley. And to that end, UTC has become a key supporter of the Open Buying on the Internet specification, based on sending EDI purchase orders over the Internet,. OBI was finalized just over a year ago.

O'Malley acknowledged OBI has failed to take off so far in product implementations. While it's hard to say why exactly, O'Malley said it may be because users are expending time and money on putting in large enterprise resource planning systems, such as SAP. In the meantime, UTC isn't entirely waiting around for OBI either. O'Malley said some divisions at UTC have ditched the traditional EDI process to let suppliers download non-EDI purchase orders directly off UTC's Web site.

At General Motors Corp., which operates the GMbuypower.com site to showcase its cars, there's the conviction that the Web is here to stay when it comes to shopping for cars. "We get 500,000 hits per month from just four states," said Robert Gingras, director of electronic commerce at GM. "But what we've learned is there is a lack of trust in giving GM e-mail names. What people don't want is for a large company to hit them with a lot of spam."

GM is not finding technology to be a barrier to EC on the Web. The real challenge is figuring out exactly what you want to do from the business point of view because it may demand organizational changes internally and with trading partners.

"Web applications could let the buyer sitting on a porch put together their own car with specific wheels or hood, a CD player and the like, and then get the cost for it all," said Gingras. But is the car industry ready for this type of just-in-time manufacturing? These are the questions the Web raises for the future of electronic commerce, he noted.