Bill Mauk, owner of two thoroughbred horse brokerages in Georgetown, Kentucky, recently discovered the joys of online procurement. Like most small-business owners, he cites the time and money saved, even with the relatively simple act of purchasing office and computer supplies through an online storefront. Mauk estimates he has saved 15 to 20 percent on purchases with his new setup. The more complex e-procurement optionsmarketplace exchanges, reverse auctions and specially configured buyer-supplier networkssound even more promising to him, especially as more equine breeders go online, providing brokers such as Mauk a broader market than ever before.
In fact, after seeing firsthand how efficient e-procurement can be, Mauk wants to reach out to potential buyers by establishing an interactive Web site offering short videos of his horses, among other features. Within a year I believe we could increase our annual sales by at least a couple million dollars, he says.
That's assuming he can get around to it. Mauk typically works 14-hour days. Not that he's complainingan owner of several horses himself, his job is more avocation than vocation. But as is the case for many small business owners, his time is at a premium.
Field Full of Contenders
Mauk is fortunate in at least one way: His schedule may be tight, but he has his choice of more than a few companies eager to help him get automated. To be sure, B2B e-commerce is a rapidly growing industry, with new entrants providing ever more specialized e-procurement products and services. But until recently, the bulk of these products and services have focused on Fortune 500 and mid-market companies, which could afford to be early adopters of technology that may or may not work out. After all, it was only four years ago that General Electric switched to online purchasing, saving a great deal of time, not to mention 5 to 20 percent of material costs.
Smaller companies are now following suit in droves. A Dun & Bradstreet survey found that procurement is the only online activity that small businesses consistently implement. Access Media International (AMI), a New York-based consultancy, reports that online spending by small businesses rose from $2 billion in 1998 to $25 billion in 1999. That figure is projected to rise to $60 billion by the end of this year and to $118 billion by 2002. According to AMI, 670,000 small businesses participated in online auctions last year, and another 1 million are expected to do so this year. Furthermore, 1.3 million small businesses are seriously exploring group buying online in collaboration with other small businesses.
The number of online marketplaces targeting small businesses has risen from 300 in November 1999 to more than 1,000 today, reports PricewaterhouseCoopers. (One recent example is the Small Business Buying Portal established by BellSouth. Companies can order products through contracts the telecom carrier negotiated, as well as participate in reverse auctions.)
Finally, Forrester Research predicts that small businesses will account for a major portion of B2B e-commerce by 2004. No wonder providers of e-procurement solutions are moving rapidly to service this market.
After checking out the marketplace, Mauk decided to go with Handtech.com, in part because he found a consultant who could work around his hectic schedule.
IT Department for Hire
Based in Austin, Texas, 4-year-old Handtech has made a name for itself by helping small businesses choose computers and system solutions through its nationwide network of some 12,000 tech consultants. Handtech also has an online catalog of more than 15,000 office and computer supplies and services, including its own line of desktop and notebook computers. One feature of the storefront is a proprietary system called SuppliesGenie, which allows users to build their own personalized supply catalogs.
Basically, we act as an IT department for small companies, says Handtech CEO Andrew Harris. We are starting to move into business solutions for small-business owners. Procurement, for example, is a massive issue for many of these companies. Handtech is exploring the application service provider model as one possible solution. But where we see our strength as a company is in our sales and service channels, Harris says, referring to the network of consultants. Handtech literature refers to them as self-employed. Others would call them independent contractors. Either way, it's clear that the quality of service is largely dependent on the expertise of the local tech consultant. On the other hand, the business model Handtech has established allows it to set fees within a small business' budget. A typical consultant might charge $45 an hour, Harris says. But perhaps even more important, many small businesses prefer dealing with a local company that understands their city or region. When Mauk first began automating his operation, he worked with local technology consultant Tim Kincaid in choosing his computers and software systems and setting up a personal catalog for further purchases from Handtech's storefront.
I've found that small businesses in the Appalachian region do not have any sort of cheap technology source to go to, Kincaid says. My contribution to our local economy is to put affordable technology in the hands of small business owners. Kincaid in fact has made it his personal mission to help local people switch to e-business careers, teaching computer classes at local community centers. I call it taking technology to the hills, he says.
Meanwhile, Kincaid has big plans for Mauk Equine Brokerage. He already has helped the company set up a basic e-procurement operation, connecting Mauk to Handtech's online storefront. Purchasing office supplies online eliminates a lot of time right there, Mauk says.
More elaborate possibilities might include helping Mauk e-source other supplies that are unavailable in the storefront and perhaps setting up a system connecting the brokerage directly to a particular supplier. If a supplier has their end already automated, I can set up the client's end, Kincaid says.
Mauk is eager to go online as a supplier in his own right, which Kincaid is also helping facilitate. Mauk had a number of concerns about establishing an interactive Web site for potential buyers. Primarily he needed safeguards to protect the exact pedigrees and locations of particular horses so prospective buyers couldn't circumvent him. I'm a broker of horses. I've got to protect what we sell, he says. After they've been pre-qualified through the Web site, then we will meet in person to discuss the sale and to see the horse, of course. No matter how clever e-procurement systems become, some things just can't be automated.
