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Pushing 'e' beyond the buzz
Written by: Jasna Sýkorová

The recent obsession with e-business and e-commerce did nothing if not inflate already outsized expectations. In the wake of expired hype and hand-wringing, why are local companies still making considerable investments?

Hardware vendors: tailor made Anthony Hasek Photo by: Vladimír Weiss Selling high-tech hardware, by definition, requires an intimate knowledge of everything up to and including e-sales. Or at least making it appear that such knowledge exists. This, more than the potential for increased sales, has led many local hardware vendors to maintain a polished e-presence. Compusource recently launched a refurbished version of its online store, which CEO Anthony Hasek describes merely as "one step beyond brochure." But he adds, "it (an e-store) is important, especially for an IT company, from an image standpoint. The standpoint of looking like you know what you're doing." While high volume of online sales may not be a factor (Hasek estimates that though he invests about CZK 1 million into the site per year, it's still "really just another channel to bring customers in") one undeniable blessing the web brings is virtual floor space. "We have a brick-and mortar-store and showroom, but I don't want to have ten of them," declares Hasek. "Because the business that we're in - IT and hardware - is cutthroat. The margins are very slim, and rent is just an unnecessary expense." This rule seems to apply to bigger players as well. AutoCont, with annual revenues over CZK two billion, also benefits from its rent-free web store. "Online sales are of course important, but on the whole, my e-division in considered to be like one of the almost 60 outlets," says the head of AutoCont's e-shop, Vladimír Skácel.

JIŘÍ PROCHÁZKA was recently sent a mailing from a mobile phone operator advertising new roaming rates. But Jiří Procházka doesn't have much of a need for roaming, as he's been dead for the better part of the last nine years. In Procházka's stead, his daughter received the mailing, which seemed less a piece of slick marketing than a macabre prank. Needless to say, her fondness for the operator has greatly diminished.
Enter e-business: the new world of efficiency that is supposed to rectify the sometimes sloppy ways of big firms. Yes, replies e-solutions provider APP's CEO, Ivan Hruška, when asked if e-solutions exist that could have, and should have, prevented the mailing to the erstwhile Mr. Procházka. "There are many areas where someone's name could be in a system," he says. "The target of integration is to find a way to have correct data and not to duplicate." As the mailing proved quite succinctly, solutions such as integration, which APP and other companies specialize in, are not always foolproof. They are, however, employed at considerable expense. APP, which counts among its clients Czech Telecom, Oskar and Aliatel, provides solutions that according to Hruška, range in price from five to 15 (and sometimes more) million crowns. The biggest single project undertaken to date, rang in at USD 1.5 million (CZK 47.2 million). Market research firm IDC estimates that overall market value for integration this year is worth USD 150 million (CZK 4.8 billion).
For concerns like telecoms and financial institutions, where the number of daily transactions and customers is dizzyingly high, pouring money into a way to make vast and complicated systems run more efficiently is all but imperative. For these companies, says Hruška, going electronic "is a question of life or death." For all companies, however, the withering of global internet and IT markets over the past few years has prompted a far more skeptical glance at anything associated with 'e'. The calculating of a return on investment into e-business solutions, a particularly murky science, doesn't help much. "I don't think they (companies) are calculating at all," says Petr Koubský, editor-in-chief at Inside, an IT and internet magazine. "It's very complicated, and I think there is no real chance for a return on this type of investment right now." At least half of all companies that have invested in e-business solutions here, claims Koubský, have done so simply to keep up with trends, or "basically because they see it's done in the West." It's interesting to ponder the satisfaction of CEOs should they really take a hard look at what the money they've dedicated to e-business has bought them.
Of course, for every ugly case of an errant mailing, or excessively expensive e-business solution, there exist many more of genuinely increased efficiency. In these cases it's difficult to gauge a return on investment, not because a return doesn't exist, but because it has been splintered off into so many intangible areas. While customers are, says APP's Hruška, "more careful" now about investing in e-business solutions, it has not necessarily cut into his company's revenues as much as it has brought him a more savvy sort of client. More adamantly factoring in the bottom line applies pressure on them to pay closer attention to the exact way e-business aids the streamlining of processes, billing, and scheduling. "Potential savings are huge," avers Hruška, "if a company invests 300 to 500 thousand dollars (CZK 9.4 to 15.8 million), you could see the return on investment in two to four years."
Quite popular these days, says Killian Jenkins, CEO of solutions provider Ilikethis!, are company intranets and project management solutions. The fees for the construction of an intranet, says Jenkins, "go for anywhere from a half million to five million (crowns)," and given added levels of functionality, "can really balloon." For local clients such as Philips and Ericsson, and international clients such as the World Bank (Ilikethis! maintains an office in New York), Jenkins' company has provided tangible ways for employees and management teams to stay on the same page both generally and for specific undertakings. "A lot of people are seeing the advantages of having consolidated business processes and communication within their company," says Jenkins. "Our intranets address many of the needs, basically using web technology to help companies streamline their general processes, digitalize them, and generally become more effective, and therefore more competitive," he adds.

Whither e-commerce?
E-commerce, much like its e-business cousin, is now more closely scrutinized than ever. While this means a tepid immediate future for pure internet ventures, many traditional brick-and-mortar companies have nevertheless managed to integrate an e-commerce aspect that provides considerable support for other activities.
"A lot of people thought e-commerce was a new way to boil water," says Serge Grimaux, owner of ticketing agency Ticketpro. "When in fact as it turns out, it's just another way to distribute products." As Grimaux points out, raising your hand at a company meeting these last couple of years to offer any sort of 'e' idea has been a good way to earn a leave of absence. Yet, Grimaux has invested tens of millions of crowns into an e-commerce application; an m-commerce tool, it will allow his already considerable customer base at Ticketpro to purchase tickets with their mobile phones. With about seven million GSM units in circulation throughout the country, Grimaux's prospects for success by focusing on mobile internet are solid. Of course, none of it would be possible had he not already established a premier ticketing company, popular throughout the land. "People have to have extreme trust in who they are dealing with," says Grimaux.
Perhaps the most striking example of achieved synergy between online and established brick-and-mortar market presence is Computer Press, an IT publisher and operator of a number of leading e-shops. Originally founded in 1991, the firm branched into online in 1996 by opening Vltava.cz and Zive.cz - a books and music retailer and IT media site, respectively. Coupling a position as a premier IT publisher (CP controls 70% of the IT books market, and puts out many top industry titles including Computer) with solid and innovative e-commerce has proven a potent combination. Computer Press CEO Jiří Hlavenka estimates that annual revenue from the publishing side of his business for 2002 will reach EUR 8.5 million (CZK 250 million). The e-commerce side (comprised mainly of six different shops) will account for an additional EUR 3.3 million (CZK 100 million). Not a bad boost for something that started more or less as an experiment. "There was no big business idea in the beginning," says Hlavenka of his early venture online. "It was okay, why not build e-magazines, and offer all our books on the internet - a very simple idea, without any new business plan, or partners and investors." The acknowledged key to e-success, adds Hlavenka, is a firm footing in the non-virtual world. "Obviously, the publishing side is the highly profitable part of the business," he says, "coming mostly from a very good market position. With all the internet things, everything is more difficult."

Dial-up entertainment Serge Grimaux Photo: Vladimír Weiss Tickets are a natural fit for e-sales, while mobile phones have proven a natural fit for local consumers (evidenced by a roughly 70% mobile phone penetration). Ticketpro, the country's largest vendor of tickets for a range of different events, is combining these two phenomena to bring to market the first-ever means to buying tickets through a mobile phone. Currently only available to members of Ticketpro's interactive program 'Ticketpro klub', the company plans to make the m-commerce application available to the general public this autumn, pending current negotiations with financial organizations capable of providing a payment system. This could add a great deal of ease to the ticket-buying process, as users could scroll through event and concert schedules via WAP, clear a bank transaction, and receive a code number to be given verbally at a venue entrance, all with a few button-pushes on their phone. Of course, Ticketpro is no stranger to sales over the internet. Grimaux says that currently e-sales are relatively thriving: "we are the company that sells the most units (one ticket = one unit) on the internet in this country. These days, our internet sales exceed ten percent." The company now sells over five million tickets per year, and has set its sights on pulling up even with the general level of sales over the internet in the US (meaning reaching 35-40%). It has invested heavily in the m-commerce application to help it do so - Grimaux estimates that over USD 500, 000 (CZK 16 million) have been spent on its development already.