The disastrous financial results turned in recently by Metropolis, and the increased activity on Wall Street, with bargain-hunters snapping up rock-bottom IT stocks points to the inevitable rationalisation of the dotcom market. The bottom line to e-commerce, claims , will be determined by the bricks and mortar e-commerce service providers.
Datacentrix, who launched its own e-business services company Commerce Centre in a joint venture with Sterling Commerce and Pararede at the beginning of the year, points out that any e-commerce service can only expect to be profitable in its second or even third year of operation. "This is a new business space, a high risk area, and companies that are going to offer an e-commerce service must have a strong asset base and a good core revenue stream in order to fund their e-commerce startup," says Datacentrix executive director Klaas Lammers. "Further than this, companies must have the stability and the capital to fund the operating costs until profitability. E-business is no different to any other product in that a company must be around in five years` time to upgrade its product, bring out enhancements and support its client base."
The failure of the dotcoms can be attributed to high opportunity costs and the failure to recognise that profitability is further down the line than expected. "Established companies such as IBM, Southern Bell subsidiary Sterling Commerce and e-commerce service providers that grow organically out of larger organisations will prevail in South Africa."
Lammers points out that the Dotcom shakeout follows the pattern of past technology trends. "From the advent of the PC in the mid-eighties to the Internet, to the cell-phone and now the Dotcoms, the trend has always been a proliferation of players when the technology first goes commercial. Some drop out, some merge and some are bought out by larger players. This process in the e-space has been more painful because of the hype around e-commerce and, quite frankly, the greed of opportunists and the short-sightedness of investors.
"In then end, however, a few will dominate, and I can`t see South Africa having room for more than three or four e-commerce community players. These companies will drive e-commerce and will link up with a network of value-added suppliers of services and products to offer business an end-to-end e-commerce solution."
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