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E-normalization
Written by: John Letzing
Photo: René Jakl, Tomáš Kubeš

Though the days of pie-eyed predictions are history, e-business and e-commerce have made giant steps in this country. Further broadening their appeal, however, remains a crucial stepping-stone.

	Martin Bednar

THE RECENT BEHAVIOR of German software giant SAP says a lot about technology's changing place in the business world. The company's bundled package of e-business tools, "mySAP.com", now on the market for five years, was re-named "mySAP Business Suite" in January. The once golden suffix ".com" has been dropped not only because it now sounds more pejorative than innovative, but also because it smacks of being dated. (The adding of an "e" to "Business" was also deemed extraneous.) "'Dot-com' and 'e-business' have been terminated in this new naming standard because there's no need any more to stress it," says Martin Bednar, country manager for SAP Czech, adding, "now when SAP is saying 'business', of course we mean 'e-business'."
Bednar and contemporaries would have us believe the future, where e-business and e-commerce are concerned, is now; that the volume of business operations, goods and services being facilitated and exchanged electronically here is at least partially matured. Statistics back this up: technology research firm IDC forecasts that the e-commerce market in the Czech Republic - both business-to-business (B2B) and business-to-customer (B2C) - will grow from 313 million USD (CZK 9.3 billion) in 2001 to USD 2.6 billion (CZK 76.7 billion) by 2006 - an increase of over 800%. And on the e-business side, companies in both the private and the public sectors, for which anything e- was at most e-mail in the past, are now beginning to show interest in more complex and costly solutions. But where e-business could hit a wall in this country is by failing to ditch the image of being an elite tool best left only to large firms willing to spend lavishly (a customer base in limited supply). "I'm not satisfied with the level of awareness (among small and medium sized firms of e-business)," says SAP's Bednar, adding, "this is a market like any other... if there are no customers, there will definitely be no growth."
Bednar is quick to point out that SAP will soon bring a new product to the Czech market aimed specifically at small firms, referring to them as "crucial." But SAP's idea of what a firm should spend on IT, or even what is a small firm, is debatable; the market leader's bread and butter is not little guys, but rather the more than 50% of the country's top 100 firms it now calls customers. Contemporaries of a similar size to SAP could also likely subsist on simply re-licensing existing software in large quantities. On the other hand there are outfits like Webcom, hungry up-and-comers striving to make a mark, who may find better chemistry with small-turnover firms in need of smoothing out operations with technology. Tomáš Hamr, business development manager at Webcom, which specializes in .NET integration, estimates that his firm goes head to head with big players in only about 5% to 10% of tenders. Webcom now counts among its clients roughly 70 small to mid-sized companies which, according to Hamr, are generally unwilling to spend much more than one million crowns on single e-business projects. He adds that opportunities are arising in sectors not traditionally associated with e-business, like food production and distribution, which are beginning to show interest in investing more significantly. "They are in a different stage of development," than traditional clients from telecommunications and information exchange fields, says Hamr, adding, "there are no pilots for them, anywhere."
Something SAP, Webcom, and other local IT firms currently share an interest in is hospitals. Notoriously strapped for cash and just as notoriously mismanaged, Czech hospitals have recently undergone significant administrative changes that may fasten their gaze more firmly to the bottom line. "It's not just about making people healthy any more," says Hamr. "The management at hospitals have to solve this with a not very large budget, and this requires technology, it requires new vision in management and IT." While it may be valid to wonder if they really have the money to invest in e-business, or whatever SAP wants to call it, their complex webs of suppliers, financials and records may dictate that hospitals won't have much of a choice. SAP is in the process of setting up a financial solution for Masaryk Hospital in Ústí nad Labem, and hopes success there will prick the interest of others. When asked if, Ústí aside, other famously inefficient hospitals will have the funds necessary to partner with the likes of SAP, Mr. Bednar replies: "if somebody has the money to be wasted, he should also have the money to be invested properly."

Finding a market
This market poses uniquely problematic conditions for e-commerce. While IDC tells us that it has come a long way, e-commerce is still overwhelmingly dominated by B2B. "We expect this trend to continue," says IDC analyst Joshua Budd. Retail analyst GfK estimates that there are now some 800 thousand online shoppers in this country, clicking daily through some 1,100 different shops (though seemingly a large group, it should be noted that the shops are dominated by a small cadre of players like vltava.cz and obchodnidum.cz). An interesting aspect of recent e-shopping habits surfaced in research conducted by GfK during the 2002 Christmas season: While 38% of internet shoppers used an office connection, often considered more popular for extended surfing trips due to ease and cost, 40% used their at-home connection. If people are already willing to click through online shops using ridiculously outdated dial-up connections (the norm for at-home connections here), it seems DSL, a technology that enables a faster and relatively financially accessible connection to the Internet, would provide vital stimulation. Budd of IDC points out that benefits of DSL could be enjoyed not only by customers: "right now businesses are dependent on leased lines or fixed wireless access for a permanent always on connection, and these services are quite expensive. Whereas DSL gives you a permanent connection at high bandwidth, and it's significantly less expensive...so it will open up the internet to many more small and medium sized firms."

	Tomáš Hamr

When can we expect DSL?
The Czech Republic is one of few European countries to not yet have a DSL product available on its market. The problem is a traditional one for local telecommunications: a dispute between dominant fixed line operator Český Telecom and alternative service providers. Český Telecom first attempted to launch ADSL, a variant of DSL, last summer, only to be held up by the regulatory authority (ČTÚ) for not having made a proper wholesale offer to other operators hoping to sell it as well. The wrangling continues, with alternative service providers unhappy about a number of conditions including the potential for ČT's online arm, Internet OnLine (IOL), to benefit from a lack of additional overhead as the only non re-seller, effectively allowing Český Telecom to be the only provider of ASDL keeping both margins.
Furthermore, if ČT's wholesale price ends up driving everyone else's tariffs higher, says Tomas Elbl, of alternative operator Nextra, it could prove self-defeating for the overall market. "Český Telecom is driving the whole market, and there is no way other licensed operators can achieve better prices. In fact, the level of prices slightly alters the targeting of ADSL itself... (as) a form of nonstop fast internet access for a reasonable price." As The Prague Tribune went to press, five alternative operators had come to terms with Český Telecom. "We want to reach an agreement with as many companies as possible," says ČT spokesman Vladan Crha, adding that ADSL should be ready to launch by late March. Regarding any potential advantage for IOL, Crha remarks: "we have to prove that won't happen. IOL will have exactly the same terms as the other ISPs."
Many industry observers suggest not even bothering with PC connections, but rather working toward an e-commerce future based on mobile phones. Josef Krejčí, business development manager of software producer EDS, cites great potential in building upon a readily accessible and widely familiar platform. True, if statistics are to be believed, mobile penetration stands at a tremendous 80% now. But it's highly improbable that eight of ten people in this country are actually active mobile phone users, much less that they might use a phone for anything but voice services. So while they may, as Krejčí says, be habituated to phones, becoming even slightly habituated to shopping with a phone seems unlikely to happen in the near future.
For any IT firm, the possibility of a Czech public sector one day able to invest heavily in technology is enticing. Proposed changes in public procurement law, for example, could facilitate broader e-procurement, or the bidding for all large tenders to be done electronically (and therefore transparently). A spokesperson for the Ministry of Regional Development says that, pending government approval of the proposed law, "everything concerning public tenders will have the potential to be made public on the internet." This will of course require significantly more investment in software, security and servicing. But as with anything involving government spending, timelines are always in danger of being woefully distended. "It's a good idea for the state to invest in IT," says Webcom's Tomáš Hamr, "but the idea is being realized too slowly."

No free lunch? Jiří Hájek For mobile phone operator T-Mobile, 2003 began with a public relations nightmare. At issue was a question essential to any business considering a significant e-commerce presence: how much of a service to give away for free in order to first rope in users. Rumblings began when T-Mobile announced price hikes for SMS text messages in January, but what really drew the ire of the mob was the subsequent closure of its free internet SMS gateway. Free gateways are enormously popular web services, started years ago by all operators to help introduce text messaging in its infancy. When T-Mobile announced in January that users would have to start divvying up for every SMS sent, the text-messaging public was far from pleased. T-Mobile spokesman Jiří Hájek, in an attempt at public bandaging, agreed to take part in a Q & A session about the closure on popular server mobil.cz, only to be deluged by some 300 queries, many unpleasant. Despite Hájek's effort, customers later took the fight further by announcing a one-day boycott of all T-Mobile services (the boycott proved patently ineffective). Many watched these events and wondered why T-Mobile would allow itself to fall into such an onerous PR trap. But the logic behind the elimination of free gateways is irrefutable - T-Mobile's Hájek estimates the service was costing hundreds of millions of crowns per year to operate, while subsidizing some ten to twenty million messages per month. The onus is now on the other two operators, Eurotel and Oskar, not to decide if they will discontinue their own free gateways - this seems a fait accompli at this point - but when. And then to figure out how to avoid a PR morass similar to what T-Mobile succumbed to. Eurotel spokesman Jan Kučmáš told The Prague Tribune that Eurotel is "not preparing anything that should prevent our customers from using (our) free SMS gateway." But he also allows that Eurotel must maintain a software platform, security and connectivity for the gateway that cost tens of millions of crowns monthly. While Eurotel and Oskar may not want to, as Kučmáš says, "disturb" their customer base, as SMS use is both now more common and a significant driver of revenues - only if paid for - they likely will have no choice. "If a service has value for a customer," says Hájek, "those using it should pay for it."

Send money immediately Tomáš Ivanský ONE OF THE BARRIERS to e-biz progress is with payment, whether it's a large sum to a supplier or ten thousand micro-payments for SMS messages. Many Czech firms and e-merchants stand to benefit from solutions currently being hammered out by banks and payment systems developers. "As some customers demand immediate delivery of goods (ed. note: the just-in-time system), unnecessarily expensive warehouses are being done away with," says Tomáš Ivanský of Logica, a consulting firm. "Suppliers are able to deliver products immediately, but they want to be certain that their bills will also be paid immediately," he adds, noting, however, that no solution currently exists. "Ways are being sought to make bricks-and-mortar banking products electronic." He documents the process for a deposit certificate, which is a banking service that allows a customer to deposit the money with a middle-man (a bank) until he receives and checks a delivery. "Today the manufacturer provides the document, which is processed by several officials prior to the issuing of the certificate. It is necessary to create an electronic tool through which it will be possible to set the precise conditions under which the payment can be released to the supplier," Ivanský explains. This would enable the company to know exactly where its assets are - through an on-line application - and thus be able to control its cash flow far more effectively. So far, real-time payments have been pushed through on the electricity market. Logica developed the SFVOT (also known as B@fir) system for joint-stock company Operátor trhu s elektřinou (Electricity Market Operator). "Electricity cannot be stored. Traders buy it in real-time on the basis of future contracts. The program ensures the processing of all transactions that go through the bank so that payments can be arranged with minimal limits. So firms need not maintain large financial reserves in their accounts just in case they want to buy something," Ivanský notes. Besides Logica, the Belgian company SWIFT is also developing similar solutions. Another topical problem is micro-payments. For the time being, this field is dominated by payment cards issued by Visa, MasterCard, etc. In all, this involves billions of transactions - both in shops and with respect to payments over the internet. Merchants see payments made via cards as expensive due to fees that can represent up to 5%. One alternative solution could be payments via mobile phone. However, it isn't simple to create a system that is acceptable to both banks and mobile operators. This is why the Association for Mobile Payments was established last fall. "Theoretically, it's possible to make a payment from the operator's account, a payment card, a bank account, or a special account for mobile payments," says Martina Kemrová of T-Mobile, explaining the options. "It is possible to access the payment means with a SIM Toolkit menu, an application for the telephone, or direct access to the payment method by means of WAP, SMS messages, etc. The mix that is selected depends on the operator's intentions," she adds. However, operators will have to ensure unified communications for their existing m-commerce services, such as GSM Banking, if payments via mobile phones are to be used on a mass scale. Jasna Sýkorová