Business-to-business e-commerce hype received a healthy dose of reality last week with the launch of IT Facilitators' online procurement Web site.
John O'Meara, managing director of reseller IT Facilitators, claims the site is the first true B2B procurement site in Aust-ralia and one of the better ones worldwide.
He also claims it will lift IT Facilitators out of the cutthroat reseller industry.
`There are about 6000 resellers now, according to analyst Inform. There were 17,600 in 1995. I expect that within a year those numbers will drop to about 3000.'
O'Meara's pessimism stems from cost inhibitors preventing resellers moving into the world of Internet trading, in addition to their unwillingness to band together in the face of vendor direct strategies and minuscule margins.
`About 47 per cent of resellers turn over less than $1 million. If they're only making margins of about 10 per cent that's only $100 000 a year before rent. A system like this costs about half a million to build,' he explained.
And it is not just e-commerce that resellers will struggle to embrace; it is the move towards services that is sweeping the IT industry.
`Resellers simply can't afford to provide services with an engineer costing $60,000. Even then he won't know all he needs to. So vendors are providing the services instead.'
The only solution is for resellers to `band together' rather than compete so vigorously against one another, he claims.
`Resellers are one of the few industries that don't have an association behind them. If they set up an organisation, not only would it mean that they can use one engineer instead of hundreds specialising in the same thing, but they will be able to stop vendors going direct. If one reseller says stop screwing me they [the vendors] won't listen. If 5000 say that it's a different story.'
O'Meara believes IT Facilitators will avoid this abyss by `niching in the corporate market' and bringing the customer and the vendor closer together through the Internet.
`Vendors and customers have conflicting agendas. Vendors want to make more money and customers want to pay less. And people can't communicate, they don't have standards and protocols like an IT system does,' said O'Meara. `E-commerce is the answer but the E doesn't stand for electronic. It stands for easy, efficient, effective and economical.'
An additional driver for the adoption of B2B sites is the fact that local information is often hard to obtain through the Internet, with O'Meara estimating that the majority of representatives of international companies in Australia connect direct to their home turf, consequently displaying different product codes, availability and prices.
Specifically, IT Facilitator's site ranks customers into four categories depending on the type of information they provide IT Facilitators. Bronze is basic contact details, Silver is more pertinent information regarding products sold and revenue and Gold and Platinum are simply more detailed company biographies. The more information they provide the less they pay.
Customers then use the site to order products, which can be done over two financial years and within budgetary constraints. The client can constantly change orders. Prices used in the order are the cheapest for that particular product that can be found across the sites of 128 participating vendors and distributors.
Price variations are also reflected in a client's order. For example, if a client has ordered goods worth $1 million and the price of those products goes down, the total will automatically be revised.
Payments can be made through the site by credit card, direct debit or an account.
All this information is automati-cally passed on to vendors on a regular basis, with the names of the companies involved withheld, and used to determine vendor strategies, allowing them to plan inventory shipments and warehousing in advance.
Clients are also able to manage purchases and budgets across their entire organisation, with the site offering staff administration facilities and a history module.
`The MIS manager can add staff to the system. They then have the authority to purchase goods up to a certain amount. If they need something more than that the administrator can come in as a proxy,' O'Meara said.
This means a company's budget can be broken down into money spent on particular products, by a particular division or state or even department.
Support issues are also addressed through what O'Meara calls his R rated strategy. `Basically retired, retrained or retrenched people can work from home through a chat program. People will be able to look up their particular skills, see how much they charge per minute and select a technician. A history of what is said is kept.'
Yet the beauty of this site, according to O'Meara, is not only its purchasing and management features, but also its speed.
`There are a lot of Web sites out there that I see as simply marketing tools. E-commerce sites are focused on procurement. That means the site has to be a fast, clean, mean machine, out to get the job done,' said O'Meara, who claimed that 120,000 products could be downloaded in two seconds through IT Facilitators' site.
Only live for a week now, O'Meara has already had to revise initial revenue predictions upwards.
`We've got one client that wants to purchase $22 million worth of products through the site, another who wants $14 million and another who says they'll buy $7 million worth. So our initial estimation of an annual turnover of $22 million should be blown out of the water,' said O'Meara.
Yet this is only a tenth of what IT Facilitators has planned for the site. O'Meara has 17 new modules either in development or on the drawing board he hopes to integrate into the site, one each quarter.http://www.itf.com.au