Siân Green, Editor, PEi
There is a simple explanation for the dot.com crash of March 2000: hype (hype n. 1. a deception or racket. 2. an intensive or exaggerated publicity or sales promotion).
One year ago, dot.coms were surrounded by hype: the high stock values, the fortunes of the paper millionaires. But the bubble burst, the stock tumbled and the paper millions went up in smoke.
There is a well-known mobile telephone retailer in the UK which takes a simple philosophy to its business: if in doubt, under-promise and over-deliver. The company instils this in all its staff and its customers go away happy.
But surrounded by hype, the dot.coms, it seems, over-promised and under-delivered, not just to their customers, but also to their investors. Flawed business models could not cope with back-office logistics, customer demands and above all, growth.
Now that the dust has settled, e-commerce looks set for a more stable and sustained period of growth, particularly in the B2B market. While independent start-ups are exploiting niche or new areas, established players are finding that the internet can be an incredibly effective tool for selling, procuring and trading as well as for serving existing customers and reaching new ones.
In the power industry, e-commerce has been facilitated by deregulation, especially in the US and Europe, and supported by advanced IT technology. The boundaries that once existed in trading and retailing energy have been broken down and many players – both old and new – have embraced cyberspace.
According to market consultants Frost & Sullivan, the value of e-commerce transactions in the European utilities market (gas and electricity) reached $36 million in 1999 and is set to grow rapidly, driven in part by the introduction of consumer-friendly electronic billing standards. By the end of 2006, it estimates that the market will be worth $23.7 billion.
The internet also appears to be proving its worth as an equipment marketplace and is revolutionizing the supply chain. OEMs, for example, are cleverly combining the functions of customer service and operations and maintenance to their advantage. This move into the on-line world may even help to bring down the lead time for spares, but in the mean time, the likes of sparesFinder.com are taking advantage of a unique opportunity.
At the other end of the supply chain, utilities in Europe and the USA are using the internet to combine their buying power to procure goods and services. European utility consortium Eutilia believes that its initial annual spending will reach $28 billion and that its members will make savings of ten per cent by procuring through the portal.
There is little doubt that the internet is starting to revolutionize the power industry, or that it is quickly becoming an essential business tool. In the long term, it will prove to be a great leveller and a measure of success. And that is not hype.