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Report on E-business

Companies underwhelmed by business portals

Firms large and small have resisted siren
call of Web sites offering one-stop shopping

Friday, May 25, 2001
Source: SES Research, Web Entrepreneurship Surveys

A funny thing happened to business portals -- they ran into guys like Rick Broadhead.

Mr. Broadhead is usually described as an Internet analyst and author. You could even call him an evangelist.

Still, when this guru of business-to-business Web commerce wanted to get some office supplies, he didn't surf to a business portal, punch in his order and increase his productivity by returning immediately to his computer.

Instead, he walked out of his Toronto office and headed to a local office-supply store to buy his stationery and envelopes.

Why? He needed the break, he says.

"People said the Internet's so easy, so why wouldn't they use it?" Mr. Broadhead asks.

His answer: "People need the face-to-face experience."

He's not alone. Other small-business owners and even buyers for large enterprises have also resisted the siren song of portals -- Web sites that act as a kind of department store that seeks to offer one-stop shopping for businesses requiring anything from copier toner to advice on setting up small networks.

They, too, have stuck with the way they've always done business, and they're not in a hurry to change.

Still, business portals are riding the crest of a wave of enthusiasm all over the Internet, each hoping to fulfill the corporate dream: a phenomenal efficiency that makes lots of time for massive advances in productivity and, therefore, profits.

The problem, says Dave Carter, another tech-savvy small businessman based in Mississauga -- he used to be a senior product manager at Microsoft Canada Co. -- is that business portals share the same problem: They're all about selling you things.

"Every time a business portal comes up, 50 per cent of it is about office supplies. Call it a business portal if you like, but it's all just aggregated advertising."

Mr. Carter, who recently opened shop as WebPartz, a Web content-management software system for e-business, says that, despite all the efforts of business portals to do something for him, there were things they never prepared him for. He was, for instance, "blindsided" by the notion of incorporating Worker's Compensation into his business, a concern he never worried about as a corporate employee. He's also worried about accounting procedures, and the portals aren't offering any help he needs.

Statistics aren't very encouraging either. Annual Canadian on-line business-to-business sales reached $1.3-billion in 2000, an increase of $540-million from 1999, according to a recent survey of 1,000 small businesses conducted by SES Canada Research.

But SES also found that the number of decision-makers who did e-commerce remained the same as the year before -- 40 per cent.

And the number of small businesses in Canada that are connected to the Internet, the report continued, has crept up only marginally -- to 76 per cent from 74 per cent.

The reason? Nik Nanos, marketing director of SES, says that "their expectations of the Internet are lower, and they are not rushing to get on-line as they were."

Though Mr. Nanos blames this on the fallout from U.S. dot-bomb failures, Americans themselves tend to be far blunter about what went wrong.

Mike Qualley, a vice-president of Illinois-based Commerx, a portal for the plastics industry, hit hard times last year when businesses didn't flock to it. "People by nature don't like change," he says.

Bill Westhead, who is purchasing manager for a large Chicago hospital, says that, after checking out prospects of going on-line with the hospital's purchases, he came to the conclusion that "no one has shown us anything that indicates that [shopping through business portals] will work and save us money."

More telling, after boldly predicting in 1999 that there would be 100,000 business portals by 2001, The Gartner Group, an Internet consultant and research company, this month quietly stopped tracking their growth.

International Data Corp., an Internet consultant group, reports that, of the 1,000 B2B exchanges launched over the past 18 months, just 100 are up and doing any business.

Josephine Allan, who runs Mississauga-based BizTown, the newly opened e-commerce portal owned by Hewlett-Packard Co., the giant U.S. printer company, says that most of the shakeout has come because people didn't know how to drive traffic to their Web sites.

BizTown's advantage, she says, is that it's an extension of HP's own Web site, which already has a large customer base.

"Hewlett Packard's been in business for 50 years," she says. "We already have hundreds of thousands of customers, whether we advertise or not. It's brand equity."

The problem with many portals, she says, is that they never addressed the fundamentals.

"The whole idea of a Web site selling pet food -- is that what customers were asking for?" she asks. "There was a lot of hype, but no value. Nobody asked people if they wanted it. That's not how the world works."

Over at TD Marketsite, the business-to-business e-commerce arm of TD Bank Financial Group -- and, at 18 months, one of Canada's oldest operating business portals -- director Tim Bradshaw acknowledges that human nature is the main obstacle to success in business portals.

"Our biggest challenge is changing people's behaviour," he says. "People don't like change. We do a lot of handholding with our customers. So it's just a matter of getting over that hurdle.

"But if they put a value on their time, then they'll see the value in what we do," he says.

He says the Marketsite portal is following a path indicated by research conducted by TD Bank before the site was opened.

About 900 people in seven Canadian cities were asked how they saw the future. The answers, he says, told him one thing: There should be little difference between what people do on-line from what they do off-line.

"We don't stand in the middle," he says. "We just take existing relationships and put them on the Internet."

In fact, Mr. Bradshaw -- who describes TD Marketsite as "Canada's classic portal," boasting 400 buyers and 41 suppliers -- thinks the current cooling of enthusiasm for e-commerce is a blessing in disguise for portals, especially his.

"I see a benefit in the slowdown," he says. "People will be looking for greater efficiencies."

It's a philosophy echoed by Ms. Allan. "We facilitate what they might do in a virtual world that they do in the real one, only you minimize downtime, such as travel and meetings."

A slightly different approach is being taken by Ken Headrick, manager for small-business on-line services at Microsoft Canada, whose bCentral Canada, an arm of the U.S. bCentral portal, will be opened in a few months.

The purpose of bCentral, he says, is to be a part of Microsoft's .NET strategy, a complex collection of software services delivered over the Internet and directed at businesses -- small businesses especially. And so Microsoft has announced in no uncertain terms that it intends to get particularly intimate with businesses and their needs, and bCentral will be part of that.

"Service will be a revenue opportunity for us," Mr. Headrick says. "It will be an opportunity to understand the small-business audience better by understanding how our customers use these products."

And what makes Microsoft think it will work, when so many business portals have not?

"We have patience," he says. "And a lot of these dot-bombs didn't have the patience to make their businesses work."

And there is nothing like patience when it comes to transacting business at the speed of light, agrees Gerard Mercer, dean of the School of Business at Sheridan College in Oakville, Ont.

He believes all the predictions about the rosy future for e-business are all true. In two to three years, he says, there will be a seismic shift in North America's approach to business, one that will result in trillion-dollar e-business.

But before that, he says, people will have to wait.

"It's like launching anything in a new area, it's basically a pendulum swing," he says.

"People were looking for quick profits, and they failed. But there is a very strong sense of growth for the future."

As a consumer of business services, Mr. Broadhead, the toughest kind of customer a business portal can try to woo, has also concluded that time is on the portals' side.

"The reality is that businesses are going to take a lot longer to come around," he says. "It will take the market a while to mature. We're human, after all, and humans take a long time to change and to change their habits.

"So it's not going to happen overnight."
Jack Kapica's column Cyberia appears on the Internet at
Growing pains
Survey of 1,000 Canadian entrepreneurs with small and medium-sized enterprises (SMEs) with fewer than 50 employees

                                    Spring   Fall   Spring   Fall

Internet use                        1999     1999    2000    2000

SMEs using Internet                  61%      74%    74%     76%

Growth                               --      +13%     0      +2%

Buying and selling

Has bought or sold over Internet     27%      35%    41%       40%

Growth                               --      +10%    +6%       -1%

E-commerce dollar value growing     Fall     Spring   Fall

$million                            1999      2000    2000    Change

SMEs Internet purchases             $430      $410    $720    +$310

SMEs Internet sales                  240       350     590     +240

SMEs Internet values                 670       760   1,310     +550

Deficit of sales to purchases        190        60     130      --

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