B-to-B: Not In it for the Revenue

CHICAGO (03/20/2000) - Consumer Web sites may be after revenue, but some business-to-business sites aren't even going to pretend that their e-commerce efforts will bring in much money.

Many manufacturing companies are Internet-enabling their businesses not to immediately increase revenue or find new customers but rather to improve customer service and reduce operating costs.

So said manufacturing company representatives at the National Manufacturing Week trade show here last week.

"The real business value of having our Web site is not so much the ability to buy products from there" as the ability for customers to make more informed purchasing decisions, said John A. Pasquarette, an executive at National Instruments Corp. in Austin, Texas.

"A lot of the people hyping business-to-business e-commerce are applying business-to-consumer thought processes," said Bill Swanton, an analyst at AMR Research Inc. in Boston. But although the Internet promises to quickly open broad new markets and revenue opportunities for companies selling to consumers, the same isn't always true in a business-to-business environment, he said.

"When you're talking of small and medium-size manufacturers, they're usually part of a tiered supply chain, they have a fairly steady customer base and their job is to give the best customer service and the lowest cost" to these customers, Swanton added.

National Instruments' site provides customers - most of which are electronics product manufacturers - a slew of decision-support tools and configurators that help them choose the right products for their automation and measurement needs without much involvement with National Instruments' sales staff, Pasquarette said.

"That, from a strategic level, is where we see the value of everything we do on the Web," he said. Web-based sales currently account for less than 5 percent of all sales at the $300 million maker of technical measurement and automation systems.

"E-commerce is not a high-value or a high-priority part of our Web focus," echoed Andy Andrews, an export sales manager at Paratherm Corp., a Conshohocken, Pennsylvania-based manufacturer of heat-transfer fluids.

Since Paratherm's products need to be engineered for specific applications, the purchase process typically involves a lot of interaction with the customer before the sale is made.

The Web provides a way to reduce the time and the cost of delivering such information, Andrews said. "We have an e-commerce [component] on the site only because we wanted to be ahead of the curve" in giving customers the option to buy from the site, he said.

In fact, the only manner in which many Web initiatives provide a return on investment is in how they help companies cut operating costs and thereby increase margins, said David Krauthamer, an information technology director at Advanced Fibre Communications Inc., a manufacturer of telecommunications equipment in Petaluma, California.

"It gives you a way to take your low value-added processes, such as phone support, and move [them] to the Web," Krauthamer said.

"There's a lot of uncertainty about the real business proposition" of having an e-commerce-enabled site for many small and midsize manufacturers, said Thomas J. Orlowski, vice president of information systems at the National Association of Manufacturers in Washington. "When a [company] president asks, ‘How soon am I going to get a return on this investment?' nobody's really sure."

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