Energy firms meet to discuss e-business needs

Oil and gas companies slow to realize the speed at which e-commerce applications are changing business-to-business transactions are in store for a grueling uphill climb�if they survive at all.


Steven Poruban
Oil & Gas Journal

HOUSTON�Oil and gas companies slow to realize the speed at which e-commerce applications are changing business-to-business (B2B) transactions are in store for a grueling uphill climb�if they survive at all.

The rapid improvements made to such applications�such as their increasing ease of use and their time and money-saving features�have brought the cost of conducting B2B transactions down substantially over the last decade, and most significantly over the last few years. Many energy industry segments have honed in on B2B niches that will save both time and money.

These were a few of the prevailing themes that resonated at Zeus Development Corp.�s recent e-commerce conference in Houston. Meeting presenters showcased several B2B solutions and various applications for the energy industry.

By definition, the e-business supply chain can be divided into two basic segments. The first, called e-procurement, can be defined as the B2B buying of goods and services through electronic systems, including the internet and private networks, explained Dan Quinn, senior manager, national energy, with Ernst & Young. The second segment of the chain, which is called e-commerce, is transacting or enabling the marketing, buying, and selling of goods and services through electronic networks, including the internet and private networks, Quinn said (Fig 1).

Most e-commerce companies can be grouped into one of nine categories, explained Jeff Livesay, chairman and CEO of WellBid Inc., Denver. These are: operating resource management services; enterprise resource planning services; producer marketplaces; content and information portals; multi-vendor catalogs; property/prospect listings; exchanges, hubs, and marketplaces; online auctions; and application service providers.

B2B market growth
Industry analysts speculate widely about just how rapidly the B2B market will grow over the next 5 years or so. In one forecast�based on data from Yankee Group, Boston, as presented by Stephen Martin, CEO of NetworkOil, Houston�the worth of the worldwide B2B market is estimated to soar to $1.33 trillion in 2003 compared with the $43 billion market reached in 1998. Another outlook by technology advisor GartnerGroup Inc., Stamford, Conn., predicts the B2B market will skyrocket to $7.29 trillion in 2004. This would represent about 7% of the forecast $105 trillion total global sales transactions, it said.

Regardless of how large the B2B market grows, however, countless speculations see eye-to-eye on at least one aspect: Those businesses choosing not to react to the rapid implementation of B2B applications will soon disappear. Implementation is viewed as imminent.

�It�s not whether, but when,� said Miles Quinton, director of e-procurement, Europe, the Middle East, and Africa, for PriceWaterhouseCoopers. But, in pointing out that misery likes company, Mark Toon, cofounder of SourceNet Solutions Inc., Houston, said, �If you feel you�re struggling to keep up with everything, please don�t feel alone, because everybody is.�

One forceful driver behind the rapid progression and development of the B2B market is the reduction of costs, especially in transaction charges. Using the banking industry as an example, Ernst & Young�s Quinn compared the per transaction cost of $1.07 for using the branch of a bank vs. the use of the internet to transact business, which costs only $0.01/transaction.

Many conference delegates expressed concern about the virtual daily onslaught of e-commerce portal launchings and other e-business solution announcements. They are worried that the continuing saturation of participants in the e-business market will only serve to confuse the customer.

Barry Sowervine, director of sales for Clarus Corp., Suwanee, Ga., said that the various announcements are just that�announcements. NetworkOil�s Martin noted that the marketing of an e-business is the easy part, whereas the proof of staying power comes in the project�s more-difficult execution.

A shake-out of the top companies will likely occur over the next few years, said David Lisle, director of business development for pennNET, an internet affiliate of Oil & Gas Journal's and OGJ Online's parent company, PennWell Publishing Co. Working in favor of many oil and gas-related e-businesses right now, Lisle said, are higher oil prices and "dot-com" mania. The important thing to remember, Lisle said, is that decisions about e-business are made based on the motives of fear, greed, or prudence. �Make sure you don�t make you final decision based on fear and greed,� he said.

More in General Interest