Later this month the inside track will be revealed on how one of the most celebrated dotcom failures of the Internet bubble blew £70m of investors’ money in less than 18 months.
One of the co-founders of online retailer Boo is publishing a book hoping to set the record straight. The hype got so out of hand that the company’s estimated paper worth in May 1999 of US$65m was quoted in the media as US$125m and by the end of the day – thanks to a mix up over dollars and pounds – was boosted to US$200m.
The Swedish entrepreneur Ernst Malmesten, famed for his love of private jets and a retinue of Gurkha bodyguards, still insists the business he led as chief executive was a good idea. ‘It was a good business idea. We achieved a lot, but we were too ambitious. It is easy in hindsight to say this wasn’t going to happen.’
Another Internet entrepreneur formerly involved in forestry and paper, Colin Carroll, said: ‘There were just too many companies and too much capital. People had thought of it as a sprint and the winner would be very profitable.
‘Then the funding dried up and they realised it was a marathon and they needed to do something new. But there were all these competing solutions and they were not doing anything that different.’
There is evidence that both men’s beliefs have some validity. Last month a new online retailer was set up by another colourful new media entrepreneur using the same Boo technology. In fact, he bought up all the Boo equipment earlier this year for £250,000, a fraction of the reported £35m development costs.
However, the dotcom experience is one of several reasons business analysts fear spending on information technology may now slow. The other is difficult business conditions and recession. The temptation to postpone spending on information technology is strong, along with cutting costs that are not directly related to the core of the business.
Many companies, especially SMEs, might also question whether they can justify spending more money on online activities – be it sales driven or streamlining administration, such as stock and invoicing – when there might not be any business there to be had in times of a slow economy.
Three years ago when pressure on business to get online was beginning to mount, it was the prospect of recession that financial analysts believed was helping to drive up dotcom values. They said it would be the cost savings of the Internet and not the factory closures of the 1980s or the downsizing of staff in the 1990s that would be the saving factor next time around.
Speaking at a summit of business leaders in London in 1998, Bill Gates said that in a few years the focus would be on businesses that were not Internet-enabled. He said: ‘We’ll talk about a few people who still use paperwork to do transactions and send invoices around, and wonder why they can’t change.’
He spoke of a digital nervous system of the Internet, telecoms and computing that would restructure many industries. Two years later the business guru and then boss of General Electric, Jack Welch, admitted to shareholders: ‘We thought the creation and operation of websites was mysterious Nobel Prize stuff, the province of the wild-eyed and purple-haired. Any company – old or new – that does not see this technology as important as breathing, could be on its last breath.’
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“The temptation to postpone spending on information technology is strong, along with cutting costs that are not directly related to the core of the business” |
However, a new survey by business information specialists Dun & Bradstreet found that at the end of 2001, one-third of SMEs have no e-mail. The results as presented sound better: 80% of small companies have at least one computer and two-thirds have Internet access, of which about half also have a website.
Regardless of how slow the take up or how long the recession, the application of computing will go on and IT companies are providing the products.
Messaging software company Tobit is now getting dealers to include its software on any software sale they make to SMEs, be it for accounting, contact management or networking.
MyBusiness is a service that claims to provide everything a company needs to run back office functions in an easy-to-use computer program. The latest version includes automatic chasing of invoices with pre-written follow-up letters and alerts to when to send them. It also tracks costs associated with billing and can therefore reveal the precise profit made on every individual sale.
There is also a payroll product due for release in which employee details are stored and accessed over the Internet. It is updated with any changes to tax and employee law, before running the next payroll.
Some insurance companies have a similar system for managing stakeholder pensions, in which payroll and pension deductions are sent to the pension provider and the updates viewed by the company on the Internet.
A new survey by Dragnet E-Business, which monitors SMEs’ use of technology, showed that the small businesses that do go into new technologies are eager to run them in-house.
It found 71% of managers wanted to maintain their own web presence rather than use consultants and designers, who they believe are too costly.
One technology company is looking to become involved in this area. Alcatel is entering the small business market with its OmniPCX Office product. The voice, data and e-communications system is a pre-configured server that handles telephony, Internet access, e-mail and security, as well as a local area network.
Alcatel plays down any criticism of having so many key functions on one box, but those fears have led businesses down the ASP route.
Application Service Providers handle a company’s IT requirements ranging from software rental to full kit, software and maintenance, in a secure location. That way a business just pays for the capability and leaves the worry to someone else.
