M’sia Still Needs Some Convincing
Anita Devasahayam , 1-Oct-2000

Not so long ago, a typical Malaysian B2B scenario smacked of real set-ups jostling for space with the B2B wannabes. The excitement quickly fizzled when the Nasdaq crashed in April sending chills down to B2B players and forced many to look hard into their business models.

The media hype was held accessory for not demystifying the nature of B2B when it chose to highlight benefits without truly explaining the process and the arduous task of implementing an actual B2B set-up. Yet players welcomed the splash of cold water as it signals that the marketplace and its participants are maturing to the true prospects of e-commerce.

Most foreign multinationals here have some form of private B2B network with their suppliers that have emerged from automating their supply chain or using an existing Extranet for communication. But only some of the small and medium businesses and a large majority of the local multinationals prefer to ignore the economic wave triggered by information and communication technologies.

The lack of initiative and the wait-and-see approach is prevalent among Malaysian compa-nies, said Francis Meganathan, senior manager, Resources Market Unit, Andersen Consulting.

“Nobody has really jumped in yet although some firms have initiated feasibility studies. They basically are unsure of the returns on their investments. Prior to the Nasdaq crash it was all about realising the value at IPO. But now they are not so sure,” he added.

Oracle Systems Malaysia director for e-business exchanges Loh Lee Soon attributed the slow up-take in B2B e-commerce to a lack of top management awareness of what it takes to make e-commerce works. Many, who want to be seen to be doing the “in-thing” often allocate insufficient resources and funds for the project to succeed.

“The give-it-a-try approach without understanding the principles of B2B often invites failure. Companies need to re-examine its business basis--starting from “who?” and “where?” its customers are, and how it satisfies customers’ needs, then working the answers back into internal operations, and even back up the supply chain.”

B2B requires synchronisation of business processes between business partners. The parties involved must understand, among others, business processes, message formats, timing, catalogue codes and pricing negotiation mechanism. “It is business as usual in B2B, and the set-up time is no different whether you use the Internet or not; only after the re-engineered business process begin to work, and volumes build up, do the real benefits begin to flow in,” argued Loh.

Group managing director at Formis Malaysia Berhad Rudi Nazaruddin agreed, naming set standards used in communication as critical. “Transmission is simplified and problems are reduced. The second factor is connectivity to ensure access. No access, no communication, no transaction, no trading,” he added.

Rudi lamented that many Malaysian companies have yet to automate their workflow. “An electronic workflow system for internal transactions is vital for ‘Net transactions. However, most of what is automated today are the accounting systems.”

He added that the situation is further complicated with technology vendors confusing the marketplace with choices and touting their solution as the best when the issue at hand is the security factor to make companies comfortable enough to trade electronically.

Observers agreed that local companies are managed by people from the old school of thought who are set in the conventional way of doing business and are not likely to be convinced of adopting the virtual way of doing things.

“The key would be the entrepreneurial spirit and a passion to go with it. This is a tiring business. Many talk about 24/7, responding at ‘e-speed’ which reflect the true workings of any Internet business. Without passion, it is tough to survive in this business,” said Andersen’s Meganathan, reiterating that companies need to harness the ability to change and re-write the rules of the game and be willing to discard the old behaviour and culture.

Erasing Scepticism
Proponents of the Malaysian Trade Electronic Exchange (MTeX) should know. Launched in December 1998, MTeX is a potent collaboration of big wigs including the Malaysia External Trade Development Corporation(MATRADE), Malaysian Timber Council (MTC), Federal Agricultural Marketing Authority (FAMA), Malaysian Rubber Products Manufacturers’ Association (MRPMA), PricewaterhouseCoopers, BERNAMA news agency and Export-Import Bank of Malaysia (EXIM).

With close to 100 companies signing up for the service, MTeX’s Director Zurina Datuk Zubir admitted that many companies are “not proactive” in e-commerce. “The best way we discovered is to hold their hands all the way in what they want to do. Once they get past using the system the first time around, they become comfortable.”

She added that the company actively educates users on security over the ‘Net, how to make online transactions apart from providing infrastructure support for companies wanting to use the ‘Net as an alternative avenue to grow market share.
The GartnerGroup projects that the value of B2B e-commerce in the Asia-Pacific region, excluding Japan, will jump from US$9.2 billion in 1999 to an astounding US$995.8 billion in 2004. The estimated growth for Malaysia this year is US$47.4 million, from US$4.2 million in 1999.

The Lilliputian nature of the local market will not stop new players from entering the already crowded arena. Last August, Internet telephony company VCN set up a subscription-based B2B portal www.mytrade.net aimed squarely at local organisations. “Companies pay RM50 (US$14) a month to post information on the bulletin board and we will match the leads,” said CEO Alvin Foo.

He plans to publicise the portal through an aggressive RM3.5 million (US$930,000 million) advertising campaign to generate awareness and build a community to support it. Sales staff will be beefed up from 250 to 400 to sign up new clients. A total of 300 companies have signed up under the pilot programme and the portal expects to garner 10,000 active subscriptions by the year-end.

“We use traditional methods to get people online because businessmen by far will not go online to sign up and B2B is limited to those who are aware of it,” he said, adding that a plain vanilla portal holds no appeal unless participants can make money out of it.

Essentials to Be
The success of Foo’s model is left to be seen but observers are unanimous that strong functionality and marquis partners provide branding which in turn gives confidence to business partners invited to participate in the B2B scheme.

Meganathan pointed out that key factors in the new e-economy, is about having sound technology infrastructure, effective people, the right processes and effective information use.

“I believe many are challenged to truly understand the real value that can be derived from e-commerce. What is critical at this point is for us to think about how the Internet can help Malaysian companies achieve a greater level of operational efficiencies and extend our reach to a larger market place--globally versus domestically,” he said.

As companies move into this mode of business, they will need to figure out how they can collaborate at industry or cross industry levels to achieve this goal. “If these collaborations, result in profitable business ventures, that’s great. But the initial goal should be focused on driving cost down rather than setting up a new business to make lots of money just from transactions,” he cautioned.

Formis’ Nazaruddin warned that companies must also look at what they do long term, then figure out how technology can help them. “You cannot cut bits and pieces of what you are doing as a business because sometimes these pieces come together again. While service is important, accuracy and accountability to customers is more important.”

The general sentiment is that B2B that focus on pure-plays are better off leveraging on business models that have a regional or global market appeal. Oracle’s Loh noted that local B2B e-commerce service companies here have effectively become application service providers (ASPs), and are struggling to provide full service in logistics, payments and catalogue acquisitions. Pure-plays would eventually need the support of a brick-and-mortar business as in the case of Amazon.com that has invested millions in logistics facilities.

Get to The Dirt
Fancy technology is not enough to make the transition to B2B. Exploiting the full value of information needs the human touch. “What people do with information is as important as the technology they use to manage it. In the New Economy, managers need to learn and unlearn, be fast yet flexible, become team players, get their hands dirty and be aware of what is happening out there,” said Meganathan.

Nazaruddin agreed, pointing out that during the days when EDI, the predecessor to B2B, was the buzzword, the high cost of implementation was a hindrance. “Today, control is the culprit.”

He argued that B2B should be relatively cheap to implement as its technology is based on the Internet standards even though many B2B enablers’ rates were exorbitant. “What they do not realise is that any Internet-based system integrator with good understanding of how their customers do business are in a position to provide B2B solutions.

“Granted that local infrastructure still does not offer adequate bandwidth to result in rapid response time to compel local companies to embrace B2B, the tidal wave is already hitting our shores. We can avoid the technology, but certainly not the globalisation of the marketplace.”

Malaysian companies are deciding between going “all the way” or adopting a wait-and-see approach to e-business. But it’ll take more than fancy technology to reach their goals.