SuccessfulE-Business

Prepared for AWC

September 19, 2000

James Wong, President & Founder

www.focitech.com

Agenda

A Little Background Answer 5 questions:

Why E-Business? How does E-business Fit with Current

Business? What are the economics of E-Business? What are the risks? How do you prepare for E-business

Market Challenges Why Foci (Of Course) Question & Answer

Backgrounder

Met at Arthur Andersen Largest bond scandal investigation Pioneered real-time online extranet Every business needs this in 1996

Yeah right Mom’s banana bread

I. Why E-Business

Currently less than 1% of US Economic Activity Implications: Disrupt the Basic Rules of

Competition Manufacturing and Supply Chain Companies

with E-Business ½ the overhead of median competitors 40% to 60% lower working capital per unit of

sales 5% - 10% lower costs of goods & services Corresponding levels of productivity & efficiency

E-business a waste of money. Not!!! IBM and Cisco savings of $500 to $750

Million a year. Dell Computer, Intel & dozen other

leaders are selling well over $1 billion a year.

Enterprises that have implemented e-business solutions saw their client base increase by 8%

Financial Services & Securities Trading Online trading a danger to US economic

health Within a year, it became an online

player 1/3 of all trades now occur online 70% of all Charles Schwab trade online World wide explosion of online trading

Car Dealer Market

Relatively small numbers of cars directly bought online

> ½ buyers research online before hand Dealers facing 10% to 15% price cuts as

a result

II. How does e-business fit with current business? “Must do” list for companies

1. Perfect you long-term customer relationships

2. Harmonize all your channels on behalf of the customer

3. Perfect your logistics

4. Position yourself to be a power brand

5. Seek to become a value-adding intermediary Why is it important?

Customers, channels, logistics, brands and differentiation

1. Customer Relationships

Death of transaction economy Cutting price for online and offline

enterprises by 10% to 15% Key to success is repeat business

Amazon 70% repeat business Spends 20% on customer acquisition

Established business is at an advantage ~ $200 for services ~ $30 to $50 for products

2. Channel Harmony

Original premise: “channel conflict” Channels must complement and mesh

with existing channels Now it’s “clicks and bricks” or “click and

mortar” instead of “clicks vs. bricks and mortar”

Compaq having problems trying to bypass distributors

3. Logistics

Critical to the competitive game Amazon spending millions on

infrastructure Dell and WalMart won through logistics

4. Branding

Erosion of product brand equity to relationship brand equity Amazon, AOL, Yahoo!

Established brands have advantage Walmart, Dell, Toys R Us

Create a brand on the Internet – how much?

Took AOL $??? Million to create it’s brand

5. Value-Adding Intermediaries IT traditionally been disintermidiation

I.e. Touch tone phone and cash machine B2B supply chain mgmt hubs

Ariba handled $70 B supply chain transaction within 6 weeks, $120 B in a year

Well defined vertical hubs reducing supply chain costs by 20% Chemdex charges 5% to 10% vs 40% to 80%

commissions

III. What are the New Economics of E-business Today’s accounting rules are distorting

real economics of e-business Marketing / Customer acquisition costs

should be depreciated. It’s really R&D. Repeat business generate much higher

margins. Yahoo!, eBay & Amazon generate 70%

to 85% margins on digital services

IV. What are the Risks?

Business model risks Many don’t appear to have a real business

model just Internet “strategy” and web-site plan Industry boundary risks

Autobytel – locate, negotiate, arrange financing and insurance, and deliver car

Is it a car dealer? A banker? A shipper? Economic risks

Many costs – cust. acq, technology, mktg Organizational risks

How to think like an ebusiness? Speed? Talent?

V. How to prepare for E-Business Spinoff

Mix results thus far for BN.com, P&G (reflect.com)

Spinoff is appropriate if: Unrelated business Requires different value discipline Address new and different market Will deliver a different product range

V. How to prepare for E-Business (continue) Build an e-business culture within the

enterprise – best results mandated by upper mgmt led by marketing department Schwab, Wells Fargo, Dell & Cisco

successful Speed – must move quickly, tolerance

for risks If e-business team cannot than must

move aside

B2B Versus B2C

B2C Consumer focus Substitute for retail Low value added

“Wham bam give me your credit card man” B2B

Business-to-business focus Extending existing relationships with customers,

employees, suppliers and partners About increasing revenue, and reducing costs

Small vs Mid vs EnterpriseEnterprise 1-to-1

Complex

Integration

Custom Built

BroadVision, Vignette, Ariba, CommerceOneMarchFirst

Mid Market 1-to-1

Complex

Integration

Foci, Allaire, Xuma, Webridge

Small 1-to-Many

Simple

No Integration

One Size Fits All

YahooStore, iCAT, zShops

Enterprise Market Challenge

Complex products Complex pricing Legacy systems integration 1-to-1 relationships Unified commerce interface

Foci Well Positioned as E-business Solutions Provider Focus on mid market businesses In business since 1996 Proven methodology Established client base Validated solutions

Summary

E-business is about extending business on line Empowering your customers

E-business is about increasing revenue & reducing costs

It’s about survival!

Question & Answer

Contact Information

Jamesw@focitech.com To learn more visit www.focitech.com Address: 1808 Bellevue Avenue, Suite

200, Seattle, WA 98122 Phone: 206.320.9868 Fax: 206.320.9866