E-Commerce 

Creating a Web site and doing business over the Internet
probably is cheaper and less complicated than you think

Craig Maszer, below, director of electronic commerce for Interpath Communications,
calls e-commerce a “fundamental, historical shift in the way the world works.”

Five years ago most people spoke of a global economy in terms of trade deficits and currency exchange rates. Today, those same conversations are just as likely to include words like “Java-enabled web pages” and “encryption software.”

The Internet has changed the face of business and the way business is conducted. It has allowed home-based entrepreneurs to set up “virtual” companies and allowed traditional brick and mortar companies to reach customers and vendors around the world. But it also has empowered the consumer. No longer are they limited only to products and services offered locally or through mail-order catalogs. The entire world has now become their shopping mall.

“You can't ignore e-commerce,” says Craig Maszer, director of electronic commerce for Morrisville-based Interpath Communications Inc. “It's a fundamental, historical shift in the way the world works. It's broken down all geographic and time boundaries.”

According to Simba Information's research report, “The Electronic Marketplace 2002: Strategies for Connecting Buyers and Sellers,” e-commerce will grow 57.5 percent to $28.2 billion this year and will grow more than 30 percent each year over the next five years to reach $102 billion by 2002.

The report also predicts that business-to-business e-commerce will continue to be the largest segment of e-commerce, accounting for 64 percent of total sales in 1999.

These predictions are supported by a survey conducted by ICR Survey Group of Media, Pa., for Atlanta-based BellSouth Telecommunications.

Respondents from mid-sized to large companies, including those with annual revenues between $100 million and $1 billion, say e-commerce will be an important part of the way they do business.

Nine out of ten companies surveyed said they currently use the Internet, with 69 percent reporting that they have their own web sites. And 72 percent of the companies surveyed said e-commerce will definitely be important to the future of their organization.

What Will it Cost?

With more and more companies putting at least part of their business on the net, Maszer says you don't have time to draw up an extensive business plan. “You can spend six months to a year analyzing it. And by the time you finish, all you have is a history lesson,” he says. “Is it hard to do? Will you make mistakes? Absolutely. But everything you learn happens after you go online.”

This kind of Internet-based competition appears to be driving many small companies into e-commerce, says Bob Meara, BellSouth's team leader for shared hosting and electronic commerce. “For the most part, small businesses see their competition doing it or they see it as another form of advertising,” he says.

But Todd Johnson, CEO of Winston-Salem based BizNexus, says that incorporating e-commerce into your business takes a good deal of planning. “Companies have to figure out how this fits into their overall business strategy, then what they should do to ramp up e-commerce for their company,” he says.

“Your web presence has to be meaningful so you get a good return on your investment,” Johnson adds. “You can go out and purchase a cheap e-commerce package for a couple hundred dollars. But it's not like purchasing some word processing package. E-commerce is a critical function of a company.”

Start-up and maintenance costs, however, can vary dramatically.

Jeffrey Hoffman, president and CEO of Carrboro-based WebslingerZ Inc., says a small company can set up an equally small e-commerce site through established Internet companies like Yahoo.com for as little as $1,000. But Hoffman warns that while these Internet companies take care of the “back-end technology,” you often will get what you pay for. Hoffman's company charges, on the average, about $10,000 to $15,000 to set up a customized small business e-commerce web site.

Interpath's Maszer says companies with annual revenues of around $50 million can expect to pay between $100,000 and $200,000 for an e-commerce package with maintenance and support costs adding between $10,000 and $20,000 per month.

Dave Lieberbach, director of e-commerce marketing for IBM, says mid-sized companies can expect to pay about $100,000 in start-up costs, while large enterprises can spend upwards of $10 million.

However, Lieberbach adds, “We have customers who say they have captured or exceeded the amount of their initial investment in two to three months.”

BellSouth's Meara agrees that most companies may pay an average of $25,000 per month to keep their virtual doors open, but he also notes that his company is trying to make e-commerce as simple and cost-effective as possible.

Last October, BellSouth rolled out its “Internet for Business CD-ROM” which offers small businesses an end-to-end suite of online and software tools that include Internet access as well as a full-service web presence.

For the do-it-yourselfer, Meara says this CD-ROM features a five-step process and a “buffet-style” selection of seamlessly-integrated Internet services from which a small business can pick and choose only those that apply to their business.

Meara says featured applications include “Site Builder,” “Site Builder Catalog” and “Site Builder Store.”

Site Builder provides templates for easy design and updating of web sites and costs $39.95 per month. Site Builder Catalog, which was just released in March, enables small business owners to create an online catalog of up to 50 items for only $59 per month. And Site Builder Store takes this online catalog to the next level by providing real-time, secure credit card processing and the ability to integrate accounts receivable, accounts payable and inventory management.

A new version of Site Builder Catalog allowing up to 500 items will be available this summer, he adds.

Meara says total costs for designing an e-commerce web site using BellSouth's tools and applications include a $75 set-up charge; $59 per month for maintenance and hosting of the site; and $19.95 per month for Internet access through BellSouth.net.

Of course, once a company decides to incorporate e-commerce into its business and is willing to design a web site itself or pay someone else to do it, the company has to start thinking of it as a separate but integral part of its existing business, says Interpath's Maszer. “Businesses have to think of an e-commerce web site as just another office or store. You have to decorate your new office or store and you have to put signs up to advertise your new office or store,” he says.

Deciding how you want to present yourself to the world often determines “how quickly you can go live,” he says. And that, Maszer adds, means coming up with a web-based strategy.

What Vendor Should I Choose?

Maszer says most small to mid-sized companies don't have the staff or the expertise to design and maintain their own e-commerce web sites so they outsource the work.

Not only does this ensure that they will get a customized site, but they also will have a predictable and measurable start-up cost, he says. And using his analogy of a web site as a branch office or store, Maszer says that once a company knows what the monthly fee will be, it can be added into the operating budget as would the rent on any other property.

Like most web-design and web-hosting companies that now provide e-commerce solutions, Interpath will custom design and handle every detail in launching and maintaining either a business-to-business or business-to-consumer web site, Maszer says. “Businesses want a turnkey environment. And that's what we're trying to provide. We provide a complete end-to-end solution.”

Maszer says that solution includes all the necessary hardware and software systems, the design of e-commerce catalogs if required, registration of a domain name, registering with major search engines and even obtaining a merchant ID for clients so they can start accepting credit card orders online.

As a company that started out as an Internet service provider, Interpath also has addressed the issue of security which, according to Maszer, is still a concern for many who want to do business online.

Using the restaurant analogy which has become a popular argument these days, Maszer says, “Basically, in a restaurant, you've handed your credit card to a stranger who walks away for a few minutes. On the Internet, you want to know you're on a secure page.”

Are Financial Records Secure?

Advances in firewall technology, encryption software, the use of off-site servers and password protection have made e-commerce more secure than traditional paper-based commerce, Maszer says.

WebslingerZ's Hoffman agrees. “We use a secure server and a credit card merchant server,” he says. “Because we use CyberCash, the credit card number doesn't sit on our server. The number goes directly to CyberCash. They do the verification, and within seconds, the money is deposited in the merchant's account.”

Tighter security also has allowed businesses to gather more detailed information on their customers. “As a service provider, when a client asks me to save credit card information on customers, that information is encrypted,” Maszer says. It's also stored in a locked vault, he adds.

Companies that want to engage in business-to-business e-commerce also have expressed concerns about security, Maszer notes. “They'll say, `we know we have to do this but we have resellers or franchisers across the country who are nervous about us going online.'”

Fortunately, the same kinds of security measures that protect consumers can protect the company's vendors.

Most business-to-business applications use an “extranet” — a separate part of a commercial web site that typically requires a password to gain entry.

But many large companies now use a three-section web site: a password-protected “intranet,” which is accessible only to employees; a publicly-accessible area which usually contains company information and press releases; and an “extranet,” which could include such information as order forms; inventories, product pricing and the shipping status of orders.

And according to Hoffman, keeping accurate online inventory records and making them available to your clients is essential if you're a manufacturer or wholesaler. “They want to know if they can get all the products they need over the next couple of months,” he says.

Being able to track orders also is important, he adds. In most cases the tracking number is given directly to clients so that they, themselves, can log onto the web site of any major carrier and see where their orders are on any given day.

Hoffman says that credit card protection is not a major concern when dealing with business-to-business applications because most vendors use purchase order numbers in their transactions.

However, you may not want every vendor you deal with to see every product you carry, or every variation in price.

IBM's Lieberbach says his company has solved that problem. “You are taking a point-of-sale device and putting it online,” he says. “They need to be assured there's high security around that application. Our Net.Commerce allows me to see only that which I've contracted for. Other clients will see different terms and conditions and only the products they've contracted for.”

IBM developed its flagship product line called IBM Net.Commerce as a result of the company's refocusing in 1996 to provide customers with turnkey e-business solutions.

IBM Net.Commerce START is for medium- to large-sized companies that want to set up an e-commerce site for a low entry price. This version includes a browser-assessable store creation tool which guides the user through every aspect of store creation, in addition to use of an IBM Payment Server for secure payment processing.

The cost for IBM Net.Commerce START is $4,999 for AIX, Windows NT and Sun Solaris platforms.

IBM Net.Commerce PRO is for advanced customers who want to build a second generation web site requiring additional functions. This version features tools that can be used to create “intelligent catalogs” that are customizable to the buying habits of customers; two intelligent search methods; and electronic data interchange (EDI) capabilities.

The price for IBM Net.Commerce PRO is $19,999 for AIX, Windows NT and Sun Solaris platforms.

Who Are the Leading Players?

There is no question that IBM has, so far, become the world leader in providing business-to-consumer e-commerce solutions. Last year Big Blue's revenues totaled $78.5 billion. Of that, one third or approximately $27 billion came from its e-commerce business.

And its retail client list is impressive, including such well-known names as Wal-Mart, Victoria's Secret, Nordstrom, Brookstone, REI, Borders, Land's End, Duck Head and LL Bean.

Although IBM has been concentrating more on business-to-consumer solutions, it has worked with a number of companies to help them develop business-to-business applications. But Lieberbach explains that these solutions require a total integration of a company's back office systems. “E-commerce connects your suppliers to your financial applications and databases. So these business systems must be integrated.”

BizNexus' Johnson says his four-year-old company focuses on these “back-end,” mission-critical applications. By using Cold Fusion application servers, Oracle and other databases running on Solaris or Windows NT platforms, he is able to integrate these systems and automate functions that typically require the services of a sales rep.

BizNexus has built a number of web sites for Hanes and one for Staton Wholesale, the silk screen printing wholesaler for Hanes Activewear. But the one designed for Hanes Printables lets wholesalers check where inventory is in the warehouse, the quantity of specific items in stock and shipping times for each item, Johnson says.

BizNexus designed a similar e-commerce web application for Sara Lee Corp. in Winston-Salem which facilitates the placing of orders and reorders, creates check requests and tracks consumer contacts, adds Johnson.

The company also designed and helped launch an e-commerce web site for International Resistive Co., Inc.'s Wirewound and Film Technologies Division in Boone.

According to Molly Miller, IRC's sales secretary who also is in charge of regularly updating the online catalog, this manufacturer of passive electronic components launched its interactive database-driven web site in January. Now, customers can locate inventory, verify order status, track shipments and view product information.

Besides that, this web site has solidified IRC's global presence. “We have 40 to 50 offices and branch offices throughout the U.S., and we have sales reps in Taiwan, Korea, Japan, England and Australia,” Miller says.

In the past, a sales rep in Asia, for example, would have to place a call at 2 a.m. or 3 a.m. in order to talk to someone in Boone during normal business hours. Now, specific product information can be accessed from the company's database 24 hours a day, seven days a week.

Rob Hudspeth, BizNexus' director of sales for strategic alliances, was largely responsible for designing the web site and its related extranet. But the project is only half done, he says. “Phase one has been completed. Phase two, which will involve real-time ordering, should be completed in a couple of months.”

Then, he says, after an order is placed, “customers can verify that the order was placed and what part of that order was shipped.” Since its launch in January, IRC's web site has been accessed about a thousand times a day, Hudspeth says. And while he would not disclose the costs involved in designing and launching the site, he says IRC already has realized a return on its investment.

The growth in business-to-business e-commerce also has led BellSouth to expand its offerings, according to Meara. This telecommunications giant last year joined forces with the global information services provider, EDS, to form the Managed Network Solutions (MNS) Alliance.

Providing outsourcing services for mid-sized and large businesses, the Alliance offers “Managed E-Sales” and “Managed E-Purchase” solutions, Meara says.

The Managed E-Sales product is targeted at the business-to-consumer market, while Managed E-Purchase is designed for those needing business-to-business applications.

Both employ Internet/extranet technology, Meara adds, and both provide secure web site hosting, catalog creation, credit handling, tracking services and 24-hour-a-day monitoring and maintenance.

Other companies, as well, have jumped on the e-commerce bandwagon.

Raleigh-based HAHT Software Inc. in February announced the release of HAHT e-Scenario for Sales & Distribution, according to Elizabeth Shimmel, the company's public relations manager.

This customizable, cross-industry application is the first of a family of packaged Internet application extensions for the industry-leading SAP R/3 ERP system, she says. Its capabilities include product search and availability checks, order pricing and placement, bill of lading information, and sales order status. And it also allows companies to deploy a distributor or dealer extranet within 30 days, she adds.

Armstrong World Industries Inc.'s new web site now provides a means for customers (wholesalers, distributors and contractors) to have “anytime, anywhere” availability of product, order and shipment information over the Internet, Shimmel says.

And Bridgestone/Firestone Inc., a subsidiary of Bridgestone Corp., the world's largest tire and rubber company, also is using HAHT's products and services to create an extranet application that will be located in the secure “Partners” section of their web site, according to Shimmel. With it, retailers will have direct access to information on orders, back order status and cooperative marketing campaigns.

For those businesses that are still wondering whether to take the plunge into e-commerce, IBM's Lieberbach makes a strong argument for it. First, he says, improved customer service is driving e-commerce. Second, companies on the web can pick up additional revenue by attracting new customers from around the world. And third, they don't need to send a sales rep to each and every customer because the customer now can come to them via the Internet.

On the supply chain side, Lieberbach points out that the greater efficiency produced by business-to-business e-commerce means a reduction in the expense of managing multiple suppliers and, very often, better deals from those suppliers.

And there is little doubt, according to BizNexus' Johnson, that e-commerce is here to stay. “The public is going to have to realize,” he says, “that this is the way business will be done in the future.” -- Richard Rogowski

COPYRIGHTED MATERIAL. This article appears as the cover story in the May 1999 issue of the North Carolina Magazine