| BUSINESSWEEK ONLINE : OCTOBER 25, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| INTERNATIONAL -- ASIAN BUSINESS
Asia's Biz-to-Biz E-Boom (int'l edition) Asian companies are flocking to the Net--and selling to one another Aaeon Technology, a Taiwan maker of specialty computers, is typical of the thousands of small companies that make Asia the world's workshop. The managers who run it have slaved away to make Aaeon a success, and they've watched every penny as they pushed sales to $20 million. Any big expense that takes away from the bottom line--well, Aaeon's executives just don't spend that kind of money. That thriftiness is what makes a recent purchase by Aaeon so exceptional. Its board of directors, after contentious debate, has decided to shell out $500,000 for a top-notch internal system from software giant Oracle Corp. that will let Aaeon manage parts procurement, inventory, sales, and finances over the Web. It's a huge leap for Aaeon, but the company figures it has no choice. ''If we want to stay competitive, we definitely need to have e-commerce,'' remarks Jessica Chu, Aaeon's marketing manager. SECRETIVE WAYS. Internet mania is sweeping through Asia, with venture capitalists rushing to buy stakes in portals that cater to consumers. Those portals may generate most of the sizzle. But it's the action in business-to-business e-commerce that could have a profound impact on the way Asia's manufacturers operate. Once they venture onto the Net to sell their wares or source parts, traditional Asian companies are finding their old, secretive ways must change to meet the challenges of a Web-based world. Already the business-to-business segment is Asia's fastest growing area of e-commerce. Demand for software to automate supply chains and manage sales and inventories is rising fast. By 2003, sales of business-to-business e-commerce software alone are expected to top $1.3 billion per year, according to International Data Corp. projections. At the same time, online e-commerce sales in Asia are expected to surge, from $2 billion this year to $32.6 billion in 2003. The pressure on businesses to go online is mounting daily. Overseas customers such as Kmart Corp. and J.C. Penney Co. now do business only with suppliers that know how to manage orders online. Governments intent on boosting competitiveness are a driving force as well. Taiwan wants 50,000 companies to be online by 2001. Thailand recently passed a law requiring all export and import documents to go online before 2000. Luddites who cannot do this themselves must hire agents who will. Governments ''have recognized the Internet as the vehicle to leapfrog them into the new millennium,'' says Pete Hitchen, a Singapore-based Internet analyst at IDC. Building this new model isn't going to be easy. Unlike in North America and Europe, the supply chains and distribution networks of East Asian companies often stretch from Taiwan to mainland China to the Philippines--and to other countries with their own currencies, laws, languages, and business practices. Businesspeople also prefer dealing face to face and relying on relationships cultivated over years rather than through intermediaries they've never met. But plenty of entrepreneurs are betting that these attitudes will change. Wang Xiaolai is setting up an online service in Shanghai to integrate car manufacturers with parts suppliers around China. Wang's 20-employee company, China Automotive Rainbow Network, hopes to have 1,000 members and charge them for transactions made on its system. The service should make everything from parts purchasing to aftersales service vastly more efficient. ''We can make a complete supply chain,'' says Wang. Meanwhile, online marketplaces--which bring together buyers and sellers--are helping to break down geographic barriers for thousands of small Asian manufacturers. Manila-based Asian Sources operates an online service that links Asian manufacturers with overseas buyers. It has quadrupled in the last three years, to 63,000 members. Western software and equipment makers are also arriving in droves, hoping to persuade Asian companies to outsource back-office functions such as billing, e-mail, customer databases, accounting, and shipping, using the Web. For example, Sun Microsystems, Baan, Ardent, Sybase, and PeopleSoft are now cooperating to offer Net-based business software from Hong Kong. Taiwan has been among the fastest to adapt to e-commerce. Zero One Technology Co., a $45 million maker of computer network servers, now generates 10% of its sales through the Taiwan Computer Assn.'s Computex Online Web site, allowing the six-person sales staff to reach new customers in the U.S. and Europe. The embrace of e-commerce by Asia's largest companies is helping drive this growth. Singapore-based Advanced Manufacturing Online, which boasts such giants as Motorola, Matsushita, and Taiwan Semiconductor Manufacturing as clients, now has some 600 Asian companies using a system that enables suppliers and customers to send orders, share delivery forecasts, and solicit price quotations over the Web. AMO's annual revenues are ''just a few million dollars, so far,'' says co-founder Leong Choon Cheung. ''But growth is tremendous.'' AMO recently raised $20 million to expand into the U.S. NEW MINDSET. One big obstacle to e-commerce is the reluctance of Asian companies to outsource important functions, such as accounting and billing, which is a key element of business-to-business e-commerce. And supply-chain management programs require users to open their inventory and procurement processes to suppliers and customers. That calls for a big change in mindset, especially for family-owned companies accustomed to secrecy. ''People don't have the confidence to put sensitive information on the Internet,'' says Kevin Jiang, director of Computex Online, a Net marketplace for computer hardware makers. But here, too, there are signs of change. In Asia, IBM used to sell its e-commerce services almost entirely to big conglomerates, but now there is strong growth from small and midsize companies such as Aaeon. And these small companies are asking for more advice on redesigning management. ''They used to say: 'Tell me what I should buy,''' observes Howie Lau, who heads IBM's e-commerce operations out of Singapore. ''Now they are asking more sophisticated questions.'' They should keep asking, because the faster Asian business gets Net-savvy, the better. By Jonathan Moore in Taipei, with Bruce Einhorn in Shanghai _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Asia's Biz-to-Biz E-Boom (int'l edition) CHART: E-Biz Rising INTERACT E-Mail to Business Week Online | |||
