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BUSINESS ON THE NET: Vendors Gung-ho, Channels Wait'n Watch

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DQC News Bureau
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Very impressive figures are being touted by various agencies for e-commerce with B2B transactions as the backbone. IT business is no exception to this phenomena. Several vendors have already facilitated their web sites for B2B transactions to complement their regular business. And those who have not yet done so, have shown keen interest. Channels are excited about these developments though they want more attention to be paid to back-end logistics and effective delivery management.



Nasscom estimates that e-commerce transactions in India would increase from Rs 45 million in 2000 to Rs 350 million in 2001 and Rs 1.5 billion in 2002. IDC says that in 1999 with 200 million online users worldwide, e-commerce revenues stood at almost $80 billion. It adds that in 2002, e-commerce revenues will be approximately $550 billion with 400 million users. A report from Gartner states that in 1998 the global transaction value of B2B was only $ 45 billion in 2000, it will be $ 403 billion and by 2004 it will increase to $ 7297 billion. According to Credit Lyonnais Securities Asia, 30 percent of Indian companies have web sites.



All these figures portray a dynamic scenario for the future of B2B transactions worldwide and in India. Some vendors in the country have already plunged themselves into the online B2B waters and have facilitated their own sites for this. Apple Computer is one such example that has introduced its B2B facility to its channel partners just a month ago. Epson too has plans to do online transactions from 1st September. Paramjit Singh Puri, Sr. Country Manager —Epson India says, "This would help dealers to book spare parts online."



Singapore-based IT Resources too has a B2B site. When this facility was introduced the MD of the company, Bobby Sim, was confident that this move would help them service their channel more effectively. He claims, "We are taking a bold step to change our business and the way we work to face the Internet challenge. We will take advantage of its explosive growth in applications and adoption, the unlimited business opportunities as well as to increase our efficiencies — the Internet ways." And their Indian partner, Memphis Technology, is more than glad with this move as they claim that most of their business with the principal is done online. And Memphis itself is now working towards enabling its own site to have B2B transactions.



But for all these movers and shakers, there are other vendors who have yet to put their plans to action. Compaq for example has B2B facilities for USA/Europe and some countries of Asia Pacific targeted for small medium business. But this facility is yet to be extended to India. Says Narasimhan Tupil, E-com Business Manager, Compaq India, "We understand the importance of B2B and have plans to implement the same in India soon."

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Benefits of B2B



  • Shorter procurement cycle





  • Access to past purchases





  • Quicker purchase re-order





  • Faster credit application





  • Faster delivery





  • Faster return authorization process





  • Higher cost efficiency





  • 24-hour, 365 day access





  • Online promotions





  • Technical information at a click





Some more vendors share this feeling. Though they agree that there is a surge in the usage of computers, they are unsure whether this will affect the way business is being transacted. Says Venkat Kedlaya, Managing Director, Convergent Communications, "Though e-commerce has eased transactions to a certain level, we feel the need for channel partners to buy a modem via the Net has yet to catch on."



Besides vendors, even national and regional distributors have plans to complement their regular trading with online B2B. At the moment they are adopting a wait-and-watch policy. This attitude is not surprising if Zenith’s experience with B2B is taken into consideration.

Zenith had started B2B transactions online ....>>>

Zenith had started B2B transactions online some months ago, but the idea failed to catch on. There was a lot of traffic but hardly any sales, which compelled the company to withdraw this facility. Says Shivranjan Gulvady, GM — Corporate Communications, Zenith, "Right now, we have a web presence, but do not have a dedicated B2B site." He adds that once the cyber laws are introduced and if clear guidelines are marked then the company will start online transactions in December this year.



Most distribution contracts stipulate that channels cannot buy directly from the vendors. Instead, they have to purchase the goods from the national or the regional distributor as the case may be. And though many channel partners show an interest in buying online, they have no other option but to wait till the distributors facilitate their sites. Says Gaurang Damania, MD, Compunics, "I am keen to place my orders with Tech Pacific but I will have to wait till the site becomes operational."





Winning the popularity contest



The popularity of doing commerce on the Net, is driven home by the percentage of business transactions that are executed online. While most vendors or their channel partners are unwilling to divulge this information, Sunil Jose, Branch Head, F-X Technologies proudly claims that over 40-50 percent of their total business with principals is done with the help of B2B site. Even Memphis Technology does over 75 percent of their business with their principal online.



Many others are considering setting up their sites in a bid to cut down on costs and have ease-of-use transactions with their channel partners. Venkat Kedlaya for one is keenly looking at this idea as an emerging business opportunity as he feels that people might become Net-savvy and accept the concept of buying products through e-commerce channel.



Sunil Sharma, MD, Kobian India, does many online B2B transaction with his principals and vouches for its ease of use. He plans to make the same facility available to his channel. He says, "I do have a web site. But it does not have RMA (Return Material Authorization). This feature helps monitor online warranty status for a particular product." He expects this to be in place by 2001, probably with some ERP solutions available online.



F X Technologies too does not have a B2B site currently for their channel partners. But they have plans to provide this facility keeping in mind the growing popularity of Internet usage. However, Sunil Jose expressed his reservations about the concept. "Though there is a rapid increase of computer users and e-commerce has eased transactions to a certain level, I still feel that dealers would prefer to deal across the table rather than buy products online." However they are monitoring the way things are moving and will launch their site when they feel that the time is right.



The making of a successful B2B site



So, what differentiates a successful B2B site from an unsuccessful one? A Gartner report puts it simply as "a successful B2B site uses the IT infrastructure, networks and applications for continuous optimization of a company’s value-chain position. To achieve this, an enterprise must integrate its e-commerce, customer relationship, knowledge, supply chain and logistics management applications with its value-chain processes and its business processes."



What this means is that merely having a B2B site is not enough. What the site owner needs to do is make the site user-friendly and set up an effective back-end infrastructure in place to process orders. This is to ensure that the channel and their principals reap the benefits of e-business.



The benefits that a B2B site can offer to the site owner as well as his partners are manifold. For one, it can help in proper inventory stocking as the partner can order goods as and when they need it. This rids them of the problem of over-stocking. The other advantage is that it minimizes interactions, which leads to faster dispatch of orders. Also there is minimal chances of duplication.



An official of a national distributor that is currently running the pilot of its B2B site says, "Quick delivery through a B2B site possible because of shorter procurement cycle due to elimination of multiple channels. A channel partner can also get access to past purchases as well as quicker purchase re-order."



Says Gaurang Damania, "What I like about the concept of B2B sites is that I can place my orders anytime, be it day or night. And then again unlike a real-time office, the site will be functioning all 365 days a year."



Memphis Technology too is happy with the B2B transactions with IT Resources. Says Sujata Pidkar, Marcom Manager, Memphis Technology, "The best part about it is that it has reduced the cost of placing orders as compared to traditional modes like phone and fax. And besides, we can order as and when we see a demand in the market without having to make projections months in advance."



But the biggest advantage that the B2B site can afford a channel partner is the ease of use. All he has to do is log onto the corporate web site of the vendor or the distributor. If he is a first-timer, he merely has to register himself at the site’s secure dealer domain. From then on he can access it anytime of the day or night to find out the latest prices, new products and other relevant details.



Sunil Sharma of Kobian swears by B2B online transactions. "Online transactions have reduced documentation hassles to a great extent and it’s simpler. Also it gives a facelift for the company to provide online transaction options for its customers. This puts the company at par with the others around the world where B2B transactions are going strong."



Contd...>>>

He adds that the advantages include document-free transactions as well as online record of purchase, which could be accessed anytime anywhere with an ID and a password. "And moreover to get a complete record of a particular product would be as simple as a snap of the fingers," he concludes.



In fact, amongst the partners who are already doing online B2B business, the concept has really found favorable response. According to Dhananjay, MD, Computer Factory, online trading is becoming popular because vendors want to make the whole transactions simple, faster and error-free.



Sunil Jose explains this with an example, "We were trading online with Acer earlier when they were based in Taiwan, as it was economical and simpler to place an order with them compared to the money spent on phone calls and faxes. We did this initially as they did not have an office locally. And we did face teething problems for this kind of trading then. But after Acer moved into India things changed and trading became simpler. "



Vendors are the biggest beneficiaries of B2B sites. Paramjit Singh Puri highlights how Epson’s B2B facility is helpful to monitor transactions of warranty/non-warranty products. "Spare parts which fall under the non-warranty category can be booked online and the payment for the same would be put into the credit of the particular dealer who has made the booking," says he.









Plugging the loopholes



But this does not mean that there are no loopholes in the B2B model. On the contrary, there are several of them. And the most critical one among these is the price factor. Elucidates Gaurang Damania, "Critical information like price is openly available. For example the price of printer is mentioned as Rs 4,000 on the site of a distributor. It is obvious that a dealer will sell it for Rs 4,500. But there is a chance that some dealers might sell it for Rs 4,100 in a bid to sell more units. This will lead to undercutting which though beneficial to customers, will be the death knell for us." Of course, what Gaurang says is a fact of life even today without the B2B. But channel partners fear that this situation might aggravate even further.



Yet another sore point is the logistics management. Quite often dealers place an order for a particular brand, but a completely different brand is delivered at their doorstep. Or the goods that are delivered belong to the right brand but might be a wrong model. One dealer says how he had ordered for six units of a particular printer model, and received four units of the same but two units of another model. Needless to say, he is now skeptical about buying products online from his distributor.



Also there are many dealers who still do not have a Net connection and who might not like to access such critical information from a cyber café. To solve this problem, Sunil Jose suggests that it would be a great idea if companies construct showrooms with kiosks or Internet booths for dealers to order online, "thus solving the need of feeling and seeing the product and ordering online."



Says Dhananjay, "B2B transactions would definitely be simpler and error-free, but payment and follow-ups for products might be difficult." Adds Sunil Sharma, "There should be permissible access to the data stored in the database by both the vendor and the reseller. This would help the reseller avoid hassles to collect information about a particular product or the costing for the same. This is something that vendors could focus on when building their B2B sites.



There is no doubt that B2B transactions have an immense potential to revolutionize the way business is done today. But it is also true that at present the take-off is rather sluggish because of logistics being not in place and online payment structure yet to be finalized. Things are sure to change as many banks have plans to establish payment gateways for online transactions. When this is complemented with proper logistics and a ready mindset for e-business, B2B sites are sure to become the critical hubs for business activity.



Vinita Suvarna,



In Mumbai with inputs from our Senior Reporter in Bangalore

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