Putting E-Commerce in PERSPECTIVE.

• Author: Millman, Gregory J.

The dot-com debacle stripped the blush from the rose, and many finance executives have soured on e-commerce. But it has been a success for some. A look at three real-life experiences.

What a difference a year makes. When Financial Executive magazine last cast an eye on the e-commerce space, dot-com fever had scarcely abated. Though the tech-stock correction in April 2000 had rattled some nerves, plenty of people thought it had been a mere bump in a road still wending steadily upward. The ensuing months have shown that, for the first time in almost a decade, optimism about technology can be an unprofitable sentiment.

The lesson holds not only for stock traders but also for corporate e-commerce strategists. Both the business-to-business (B2B) and business-to-consumer (B2C) sectors have been shaken by events of the past year. Our reportorial inquiries to financial executives found that attitudes toward e-commerce often range from blase to hostile.

"I may be the odd man out, but I think it's just another mechanism by which we transact business -- no more, no less," says Thomas Berger, deputy treasurer at the National Gallery of Art in Washington, D.C. "There was a lot of hype about how e-commerce would transform businesses, but nobody answered the question of what it was going to do. So I can do spread sheets in less time than if I had to write them out by hand. The question becomes: What do I do with the time I have captured?"

Well, he's far from the odd man out. A number of businesses are discovering that this whole e-business arena is much harder than it seemed -- especially back in the days when a Web-happy stock market couldn't rain money on dot-coms fast enough.

And some are bitter. "Last year, three of our major accounts signed with technology companies that promised to cut their costs by put ting the whole purchasing function online," says one CFO who requested anonymity for both himself and his company. "The technology providers get a fee from our customer, and a fee from us. Their systems are a foe of value-added selling, because they treat all vendors the same. They don't differentiate between quality and service. They just reduce the whole sales effort to an online auction.

"Whoever comes back with the lowest price gets the job. We've had cases where we did not get the job; it went to someone else because the price was lower. The other vendor couldn't deliver on time, and the delay closed down our customer's line."

He wasn't alone. Another similarly disposed CFO (who also requested anonymity) said, "We're a niche company, and we have dozens of large Fortune 500 accounts where our relationship is such that we don't fear competition because we've gone down the path of showing them how to do things better. We exist in order to help drive costs out of the system without hurting quality -- and many of these online systems create cost, create administrative difficulty. The e-business companies call us and ask us for a fee that we have to pass along to the customer.

"Why do customers swallow this? My guess is that they're under pressure, the economy is tight and they don't see the expense. If an e-business company charges us and all our competitors $10,000, then all of us will include the fee in our quotes to the customer. Some may charge the customer directly, and some indirectly, but they're paying for it one way or the other -- nothing is free."

No doubt such attitudes are at least partly responsible for the failure of several large online exchanges, and the faltering of others, over the past year. But hope is not entirely dead. Peter Giamanco, director of commercial print management at AOL Time Warner, is a believer for the long term. "The shakeout is not the end of the story," he says. "It's safe to say that the Internet will be an extremely important part of business."

The following scenarios examine three high-profile companies whose experiences with online business have been dramatic -- and different. Each illustrates a separate aspect of the e-commerce phenomenon. Barnes & Noble.com has at last caught its high-flying dot-com competition -- though not in the way it would have preferred. General Electric Co. followed the advice of ancient sages to "look within yourself' and is reaping great gains by applying Internet technology to...