E-COMMERCE - Dotcom's Dilemma

As 2001 dawns, which dotcom companies will survive and prosper?

BY CAROLINE MILLER

It has been an interesting ride to say the least. In 1999, the graphic arts industry saw the dawn of the dotcoms. The industry was inundated with a variety of Web-based solutions that offered new efficiencies and time savings.

However, the adoption of dotcom solutions—whether it be e-procurement or e-production—has been slow. The hesitant adoption rate, coupled with the devaluation of technology stocks last April, has left many in the industry wondering if the dotcoms will survive in 2001.

Already we've begun to see some consolidation with the purchase of printconnect.com by httprint.com, as well as the movement of some companies to restructure their business models such as Impresse.com, which recently launched its Marketing Resource Management solution.

Part of Impresse's restructuring process has been to move away from a transaction-based pricing model in favor of a software licensing price structure, says Lisa Cleary, vice president of marketing for Impresse.

"The transaction-based pricing model—although, as a business model, it seems like the way to go for an ASP—required people to change a lot of their business processes. It was a much more of an investment on their side and on our side in training all the people using the product, as well as their suppliers. It was much more amenable for us to move to a software licensing model," Cleary reports.

Model Movements
This movement away from the transaction-based model to licensed software was the result of feedback Impresse received from its Fortune 1,000 clients. While the companies were happy with its print e-procurement solution, they were asking Impresse to develop solutions that brought efficiencies further up the creative process, she explains.

So, for the past year, Impresse has been building a collaborative execution engine which complements the existing collaborative procurement engine that now handles all of the upfront processes from the creative process to the spend process. This makes sure that marketing dollars are well spent while introducing process efficiencies that help lower overall costs and decrease the amount of time required to manage marketing programs. Impresse will continue to offer print buyers and printers e-procurement offerings, but it will be combined into its overall MRM offering. "It's not just about printed materials, but all of the marketing services involved in a marketing campaign" states Cleary. "We will be managing the whole breadth of a marketing campaign."

Impresse's move toward a new business model is an example of what dotcoms will need to do in order to survive and prosper, according to Cleary. Those companies that don't expand their offerings and listen to clients will find it difficult. "It's going to be tough to survive as a transaction dotcom just doing print because there are so many of them out there," she says.

So, which companies will remain in the dotcom game? Printnation.com's new CEO, Robert Locke, believes the dotcoms that will outlast their competitors will be those that have money in the bank, can lower their burn rates and can build a solution that solves problems for customers.

It's a formula on which Locke, a former co-founder of Kelmscott Communications who recently replaced Printnation founders Freddie and Tony Seba, is personally betting. Printnation is yet another company currently undergoing a reorganization. The initiative included a 47 percent reduction in staff, trimming the number of employees from 75 to 40. "Our company is in excellent financial condition, but we couldn't justify keeping staffing at the current levels," he states.

Locke has also initiated a strategic assessment on how best to enhance Printnation's position in the market. "We are committed to understanding the needs of printers, and to building technology-based solutions to meet those needs. With that purpose in mind, we will be reaching out to printers through focus groups, round tables, surveys and interviews to better understand their problems and concerns."

One of the main problems many of the dotcoms have encountered has been building solutions that truly solve the problems printers deal with every day, says Printable Vice President of Strategic Development Brad Giles. Printable bills itself as a printer-centric solution that provides tools to help e-enable printers' Websites and workflows.

"Is your technology easy enough to use and simple to understand so that someone can see the technology and say, 'This will solve a problem that I have today.' That's really what it's about," he reveals.

Giles predicts the dotcoms that will endure will be those that can provide printers with tools such as online templates for business cards, digital asset management, file transfers and soft proofing—all billable services that mean something to their clients.

While the right technology solution has certainly been a stumbling block when it comes to adoption rates, it's not the only barrier, he adds. A lack of education has also become an obstacle for the dotcom companies. "What's holding people back is just a lack of understanding. All they've heard is people with $10 million marketing budgets beating their chests. Once people can understand what it can do, they say, 'Oh, I can actually use that. I see the value. And yes, I'll pay money for it,' " Giles contends. "But they need to be educated, not barked at. That's probably the biggest reason people haven't stepped forward."

While adoption rates have been slow, Giles does not subscribe to the notion that all of the dotcoms are going away any time soon. "We will probably see some consolidation. We are going to see that all over the Internet. There will be consolidation, not only between Internet companies, but also between brick-and-mortar and Internet companies.

"Chances are, you'll see some large printers do mergers and acquisitions with some dotcom companies so that they can completely fold them in and not have outside investments in these companies," he claims.

Waiting Out the Storm
But Giles is not the only person in the dotcom world predicting consolidation and more restructuring in the months to come. Mark Osborn, vice president of marketing for four51—an e-procurement solution for print distributors—agrees.

"The highest profile folks are so well funded that they can probably afford to hunker down and wait out the storm, but given the current market conditions most are likely considering some kind of restructuring," notes Osborn. "Some of the players are going to run into problems. Unless they can consolidate or merge, some are not going to make it. There is such a focus now on profitability; we are definitely headed for some interesting times."

So which dotcom companies will remain strong while others falter?

Yehuda Messinger, vice president of marketing, graphic arts division, for RealTimeImage, believes those applications that do not provide a true added value to the production workflow will disappear. However, applications that are able to deliver value will dramatically improve a printer's workflow. "The market is in the process of maturing. The Internet hype is behind us and products that do not generate true value to their target market segments will just disappear," says Messinger.

While there are certainly growing pains ahead for the dotcom world, it is important to note that this doesn't mean that all Internet-based solutions will disappear. "There are tremendous efficiencies to be gained by leveraging these technologies," reveals Osborn. "We are not necessarily going to see broad, sweeping changes to the structure of the industry, but we will see increasing pressure to bring more and more value to the relationships that already exist. The Internet is a very efficient and effective way in which to do this."