As the dot-com frenzy dies down, companies are focusing on how they can use the Internet to boost their business and improve their efficiency

Much of the focus of the new economy up until now has been on dot-com start ups and speculators buying and selling stocks. The fact that e-commerce is merely a tool to increase businesses' efficiency seemingly got lost in the stampede to get rich.

As a result, according to a Gartner Group analyst, Asia's Internet market has fallen into the "trough of disillusionment," due to hype, recession, and failure for many dot-coms to turn a penny.

Speaking on "eBusiness: Crash & Burn or Wildfire" at a recent forum, Joseph Sweeney, research director, Gartner's International, said current interest seems to be more focused on failures rather than success stories of how businesses are revitalising themselves with the power of 'e'.

Surveys, such as a recent report published in the China Daily Business Weekly, which said nine out of ten Chinese Internet start-ups may go bust this year, only bring a smile to the faces of pessimists.

But the dot-com reality check is not all bad. It has increased awareness of how the Internet can help boost businesses' efficiency.

"I think a lot of Hong Kong companies in the past six to nine months have started to understand the implications of e-commerce," said Chamber e-Committee Chairman Cindy Cheng (right). "The e-Committee did a small survey not long ago and it showed that there are companies that are already implementing e-commerce strategies in their business operations."

Kurt Cavano, CEO and chairman of TradeCard, speaking in a telephone interview from the U.S., said that while he doesn't feel the potential of e-commerce has been overrated, the ease by which you get there definitely has been overestimated.

"I think what we are aiming at now is moving from the innovators to the adopters. Everyone talked about it being the nirvana that solves all our problems. But people are finding that while it is good, we need to get up the adoption curve. Like anything in business, it requires hard work and we need to work at it," he said.

Some companies in the U.S. have now crossed over the chasm of adoption, and he thinks it will only be a year before Hong Kong catches up with the States.

But Danny Yip (left), CEO of TradeEasy, an i-trade solutions provider, said Hong Kong lags far behind the U.S., Taiwan and even Singapore.

What he calls 'brochure-ware' is basically a static Web page which a company uses as an online brochure. By contrast, companies in the U.S. have now passed the next stage, e-commerce, and are at the "e-business" mark, which involves using the Internet to automate some aspect of their business, he said.

With the Internet being developed by the U.S. army, it is no surprise that U.S. firms are ahead of the race, but other countries in Asia are catching up rapidly, he said. Hong Kong firms are not among them, however, and by dragging their feet on e-commerce they are in danger of losing their competitiveness, he warns.

Ms Cheng also fears that moving slowly will hinder the growth of e-commerce here and the territory's competitiveness. "E-commerce is here and it's here to stay and if we don't take advantage of it other countries or other regions will. If we do not build ourselves the infrastructure for it, it will be very difficult to compete in the long run," she said.

According to Mr Yip, the governments in Taiwan and Singapore have been very pro-active in encouraging companies there to use the Internet to increase their efficiency and competitiveness.

"The [Hong Kong] government should organise more free talks for companies because they do not have enough information on how the Internet can help their businesses. It could also subsidise SMEs or give them tax incentives if they use this new technology," he suggests.

In November 1998, the government announced its Digital 21 strategy, which it hopes will encourage companies to adopt the Internet to drive their businesses forward. The backbone of the scheme is the Electronic Service Delivery (ESD) programme which will allow people to access public services through the Internet. Private companies can also use it to conduct e-commerce. But critics of the programme say it does little more than allow people to download government forms over the Internet, and that a much more pro-active approach is needed to educate businesses.

Packed out roundtables on e-commerce organised by the Chamber demonstrate there is no shortage of willingness among SMEs to learn about e-commerce.

Besides the lack of information, another serious question is: do SMEs have the money and resources to use the Internet as a business tool?

About 95 per cent of Hong Kong's SMEs cannot afford to set up new systems or even spare people to implement and manage Internet strategies, Ms Cheng said.

"They [SMEs] are still struggling to see whether it really brings benefits for them. And if it does, the complication of how do they implement it with the limited resources and dollars that they have arises," she said.

That is where i-solution providers are hoping to cash in. By providing enterprise resources management (ERM), or supply chain management (SCM), a business can get their e-commerce strategy up and running relatively cheaply, said Mr Yip.

He advises companies not to try and set up such a system alone, nor all at once. Instead, companies should start with some aspect of office or factory automation and build from there.

Ms Cheng echoes Mr Yip's comments and stresses that e-commerce is still more business oriented that technology oriented. Technology is just a tool that helps make it happen more efficiently, she explained.

"Hong Kong companies don't have to jump very far to take advantage of this. They just need to take the first step. Get their business on e-commerce and move forward with the rest of society," she said. "If they don't, then they will be left behind."

The core old-economy businesses are cracking on with e-commerce in a low key manner. The big companies, and even banks are now starting to fully utilise e-commerce. They are now in the process of laying the railroad tracks that their businesses will run on. And without tracks businesses cannot move.

Many companies have sprung up to help companies lay those tracks. Total-solution chain management systems and similarly grand names are met with glazed eyes.

But as Mr Yip points out, almost every company in Hong Kong is now using the Internet to help them do business. "That's is e-mail. That has been very quickly adopted and some people even feel they cannot go two days without checking their inbox," he said.

Few would argue that emailing has changed the way we communicate and that the cost savings over telephone or faxing messages overseas, for example, are fantastic.

Likewise, electronic commerce offers similarly incredible savings once businesses discover them, he said.

As an example, he explained a typical trading company scenario. Say you are a trading company and still mail your main buyers photo offers. The time and cost involved in developing thousands of photos and mailing them are high. By putting photo offers online, your buyers can see instantly when you have new samples and even give you instant feedback on the products, and even place orders. There are no concerns that competitors will copy a company's new line, because you can control which buyers can access which pages, he said.

This is only one of the most basic efficiency savings e-commerce brings.

Removing obstacles
Among the obstacles slowing adoption of e-commerce has been the lack of a standard credit system and security concerns. Until recently, only the first steps of a trade could be performed online ?exploration, negotiation and the actual placement of the order. But you still have to automate financing, fulfilment and payment.

"Security is not an issue. Security was an issue a few years ago, but the technology has brought it up to a level where it is no longer an issue," Ms Cheng said. "And banks starting to move into e-banking is going to do a lot to help e-commerce move up a notch or two."

TradeCard's Mr Cavano said he also thinks that with more banks offering e-banking services, people will get used to handling finances online, and with them businesses.

"It's just going to take time, experience, and maybe encouragement from trading partners. If they look at the price difference ?they can pay US$500 for a letter of credit, or US$150 under TradeCard ?we should start to see some adoption of more online settlements," he said.

Whether e-commerce will continue to be as hot remains to be seen, analysts and industry experts said, but they expect it to grow as more traditional companies get on board. Some industry estimates said that global e-commerce will hit US$7.3 trillion in 2003.

With such growth, Hong Kong firms cannot afford to sit back and be complacent about the whole issue.