Pushing 'e' beyond the buzz
Written by: Jasna Sýkorová
The recent obsession with e-business
and e-commerce did nothing if not inflate already outsized expectations.
In the wake of expired hype and hand-wringing, why are local companies
still making considerable investments?
vendors: tailor made
by: Vladimír Weiss
Selling high-tech hardware, by definition, requires
an intimate knowledge of everything up to and including
e-sales. Or at least making it appear that such knowledge
exists. This, more than the potential for increased
sales, has led many local hardware vendors to maintain
a polished e-presence.
Compusource recently launched a refurbished version
of its online store, which CEO Anthony Hasek describes
merely as "one step beyond brochure." But
he adds, "it (an e-store) is important, especially
for an IT company, from an image standpoint. The standpoint
of looking like you know what you're doing."
While high volume of online sales may not be a factor
(Hasek estimates that though he invests about CZK
1 million into the site per year, it's still "really
just another channel to bring customers in")
one undeniable blessing the web brings is virtual
floor space. "We have a brick-and mortar-store
and showroom, but I don't want to have ten of them,"
declares Hasek. "Because the business that we're
in - IT and hardware - is cutthroat. The margins are
very slim, and rent is just an unnecessary expense."
This rule seems to apply to bigger players as well.
AutoCont, with annual revenues over CZK two billion,
also benefits from its rent-free web store. "Online
sales are of course important, but on the whole, my
e-division in considered to be like one of the almost
60 outlets," says the head of AutoCont's e-shop,
JIŘÍ PROCHÁZKA was recently sent a mailing from a mobile phone
operator advertising new roaming rates. But Jiří Procházka doesn't
have much of a need for roaming, as he's been dead for the better
part of the last nine years. In Procházka's stead, his daughter
received the mailing, which seemed less a piece of slick marketing
than a macabre prank. Needless to say, her fondness for the operator
has greatly diminished.
Enter e-business: the new world of efficiency that is supposed to
rectify the sometimes sloppy ways of big firms. Yes, replies e-solutions
provider APP's CEO, Ivan Hruška, when asked if e-solutions exist
that could have, and should have, prevented the mailing to the erstwhile
Mr. Procházka. "There are many areas where someone's name could
be in a system," he says. "The target of integration is
to find a way to have correct data and not to duplicate." As
the mailing proved quite succinctly, solutions such as integration,
which APP and other companies specialize in, are not always foolproof.
They are, however, employed at considerable expense. APP, which
counts among its clients Czech Telecom, Oskar and Aliatel, provides
solutions that according to Hruška, range in price from five to
15 (and sometimes more) million crowns. The biggest single project
undertaken to date, rang in at USD 1.5 million (CZK 47.2 million).
Market research firm IDC estimates that overall market value for
integration this year is worth USD 150 million (CZK 4.8 billion).
For concerns like telecoms and financial institutions, where the
number of daily transactions and customers is dizzyingly high, pouring
money into a way to make vast and complicated systems run more efficiently
is all but imperative. For these companies, says Hruška, going electronic
"is a question of life or death." For all companies, however,
the withering of global internet and IT markets over the past few
years has prompted a far more skeptical glance at anything associated
with 'e'. The calculating of a return on investment into e-business
solutions, a particularly murky science, doesn't help much. "I
don't think they (companies) are calculating at all," says
Petr Koubský, editor-in-chief at Inside, an IT and internet magazine.
"It's very complicated, and I think there is no real chance
for a return on this type of investment right now." At least
half of all companies that have invested in e-business solutions
here, claims Koubský, have done so simply to keep up with trends,
or "basically because they see it's done in the West."
It's interesting to ponder the satisfaction of CEOs should they
really take a hard look at what the money they've dedicated to e-business
has bought them.
Of course, for every ugly case of an errant mailing, or excessively
expensive e-business solution, there exist many more of genuinely
increased efficiency. In these cases it's difficult to gauge a return
on investment, not because a return doesn't exist, but because it
has been splintered off into so many intangible areas. While customers
are, says APP's Hruška, "more careful" now about investing
in e-business solutions, it has not necessarily cut into his company's
revenues as much as it has brought him a more savvy sort of client.
More adamantly factoring in the bottom line applies pressure on
them to pay closer attention to the exact way e-business aids the
streamlining of processes, billing, and scheduling. "Potential
savings are huge," avers Hruška, "if a company invests
300 to 500 thousand dollars (CZK 9.4 to 15.8 million), you could
see the return on investment in two to four years."
Quite popular these days, says Killian Jenkins, CEO of solutions
provider Ilikethis!, are company intranets and project management
solutions. The fees for the construction of an intranet, says Jenkins,
"go for anywhere from a half million to five million (crowns),"
and given added levels of functionality, "can really balloon."
For local clients such as Philips and Ericsson, and international
clients such as the World Bank (Ilikethis! maintains an office in
New York), Jenkins' company has provided tangible ways for employees
and management teams to stay on the same page both generally and
for specific undertakings. "A lot of people are seeing the
advantages of having consolidated business processes and communication
within their company," says Jenkins. "Our intranets address
many of the needs, basically using web technology to help companies
streamline their general processes, digitalize them, and generally
become more effective, and therefore more competitive," he
E-commerce, much like its e-business cousin, is now more closely
scrutinized than ever. While this means a tepid immediate future
for pure internet ventures, many traditional brick-and-mortar companies
have nevertheless managed to integrate an e-commerce aspect that
provides considerable support for other activities.
"A lot of people thought e-commerce was a new way to boil water,"
says Serge Grimaux, owner of ticketing agency Ticketpro. "When
in fact as it turns out, it's just another way to distribute products."
As Grimaux points out, raising your hand at a company meeting these
last couple of years to offer any sort of 'e' idea has been a good
way to earn a leave of absence. Yet, Grimaux has invested tens of
millions of crowns into an e-commerce application; an m-commerce
tool, it will allow his already considerable customer base at Ticketpro
to purchase tickets with their mobile phones. With about seven million
GSM units in circulation throughout the country, Grimaux's prospects
for success by focusing on mobile internet are solid. Of course,
none of it would be possible had he not already established a premier
ticketing company, popular throughout the land. "People have
to have extreme trust in who they are dealing with," says Grimaux.
Perhaps the most striking example of achieved synergy between online
and established brick-and-mortar market presence is Computer Press,
an IT publisher and operator of a number of leading e-shops. Originally
founded in 1991, the firm branched into online in 1996 by opening
Vltava.cz and Zive.cz - a books and music retailer and IT media
site, respectively. Coupling a position as a premier IT publisher
(CP controls 70% of the IT books market, and puts out many top industry
titles including Computer) with solid and innovative e-commerce
has proven a potent combination. Computer Press CEO Jiří Hlavenka
estimates that annual revenue from the publishing side of his business
for 2002 will reach EUR 8.5 million (CZK 250 million). The e-commerce
side (comprised mainly of six different shops) will account for
an additional EUR 3.3 million (CZK 100 million). Not a bad boost
for something that started more or less as an experiment. "There
was no big business idea in the beginning," says Hlavenka of
his early venture online. "It was okay, why not build e-magazines,
and offer all our books on the internet - a very simple idea, without
any new business plan, or partners and investors." The acknowledged
key to e-success, adds Hlavenka, is a firm footing in the non-virtual
world. "Obviously, the publishing side is the highly profitable
part of the business," he says, "coming mostly from a
very good market position. With all the internet things, everything
is more difficult."
Mix and match
Buying a new car over the internet is a concept still breaking
ground here. Traditionally, customers like to have a more
tactile sense before purchasing - a look under the hood, a
spin around the block, the smell of new leather seats. Understanding
this, Škoda Auto has nevertheless pushed its presence on the
web nearly as far as possible. 'Auto na přání' (roughly, 'Auto
as you wish') is an interactive catalogue application (found
on www.skoda-auto.cz) that's proven wildly popular. 1,500
users per day show up to virtually mix and match parts, colors,
engines and other customization, all while gauging varied
price packages. Škoda Auto's e-commerce project manager Milan
Dědek reckons that, as the company sells between 7,000 and
8,000 cars per month, "within one week you get as many
configurations made (on the web site) as cars sold."
A second edition of the application launched last summer to
accompany the release of the Fabia sedan, 'Auto na přání'
was designed internally at Škoda, and stems from an already
prominent web presence. "We know that about 52% of our
customers visit our internet presentation before they buy
a Škoda," says Dědek. More additions to the site are
expected soon, including an online shop for accessories and
an online list of virtually customized models that are available
for immediate pick-up at a dealership.
Photo: Vladimír Weiss
Tickets are a natural fit for e-sales, while mobile phones
have proven a natural fit for local consumers (evidenced by
a roughly 70% mobile phone penetration). Ticketpro, the country's
largest vendor of tickets for a range of different events,
is combining these two phenomena to bring to market the first-ever
means to buying tickets through a mobile phone. Currently
only available to members of Ticketpro's interactive program
'Ticketpro klub', the company plans to make the m-commerce
application available to the general public this autumn, pending
current negotiations with financial organizations capable
of providing a payment system. This could add a great deal
of ease to the ticket-buying process, as users could scroll
through event and concert schedules via WAP, clear a bank
transaction, and receive a code number to be given verbally
at a venue entrance, all with a few button-pushes on their
phone. Of course, Ticketpro is no stranger to sales over the
internet. Grimaux says that currently e-sales are relatively
thriving: "we are the company that sells the most units
(one ticket = one unit) on the internet in this country. These
days, our internet sales exceed ten percent." The company
now sells over five million tickets per year, and has set
its sights on pulling up even with the general level of sales
over the internet in the US (meaning reaching 35-40%). It
has invested heavily in the m-commerce application to help
it do so - Grimaux estimates that over USD 500, 000 (CZK 16
million) have been spent on its development already.