19 May 2000 (Asia Pulse) - The Gartner group warned at a Hong Kong press conference that as many as 85 percent of today's pure Internet companies in the Asia Pacific region will fail or be acquired by 2003.
Many of these firms have been described as lacking in agility and other management capabilities.
They need to survive in a market that has become even more competitive since last month's stock market correction, the group said.
The problem had not affected the US significantly, since the recent drop in the market had prevented more speculative investing in companies that could not survive.
In the case of the US, the firm said the US started earlier in the dot-com frenzy and went on longer before the recent fall in technology stocks on both the Nasdaq and Asian exchanges.
Because of this, the Gartner group said the percentage of shaky US-based start ups have had a chance to get off the ground. But it warned that the drop in the Asian markets was going to make investors more cautious.
The firm also said that a willingness to develop new business models, re-engineer business processes and join with new types of partners, in addition to innovation and financial commitment, would be critical to e-business in Asia.
However, many dot-com companies in the region lacked these capabilities.
Most of these would be acquired very quickly or face bankruptcy, it warned.
The firm explained that unless a company had real business plans that didn't rely entirely on advertising revenue, it would collapse.
The most successful would be established companies that are willing to embrace new ways of doing business and those that focus on business-to-business international trade services, it added.
It would be the hybrid businesses that would emerge on top, it said.
Those that aim to break a high-margin industry through slashing costs and undercutting prices would also have an edge.
Even as Internet companies fell out across Asia, he Gartner group said western companies would begin expanding their businesses to the region.
The consulting firm warned that a flood of very highly-financed, very experienced businesses were coming into the Asia Pacific region.
The competition, it said, would benefit customers by driving up the quality of services.
Analysts expect the Philippines to also play a lead role as it strengthens its pure Internet companies within the next five years.