Compaq looks to invest in B2B enterprises

CHINA (SCMP.com) - These investments will target such Internet B2B endeavours as electronic marketplace makers, storage service providers (SSPs), Internet data centres (IDCs) and application service providers (ASPs).

Philip Yu, president of Compaq Greater China, said those investments would not only involve helping establish and acquire stakes in such enterprises but also forming alliances with existing service providers.

"We plan to spend from US$20 million to US$30 million in new B2B investments in this region," said Mr Yu, who also disclosed that Compaq aimed to help launch a mainland-based e-market maker "by the second half of next year".

The amount of investment is supposed represent Compaq's current funding template, which involves sharing the start-up cost for these activities with large companies who will also use the facilities to be established, major online application providers like CommerceOne, and some professional venture capital participation.

According to research firm Gartner, e-market makers are third-party intermediaries providing value-added services for buyers and sellers that are trading on the Web. On the Internet, these e-market makers are supposed to help speed up the exchange of products, services or information between businesses.

An SSP provides computer storage space and related management to other companies over the Internet. It also offers periodic backup and archiving, and the ability to consolidate data from multiple company locations so that the data can be shared effectively.

IDCs offer specialised facilities that house Web sites and provide data serving and other services for other companies. This kind of data centre may contain a network operations centre, which is a restricted access area containing automated systems that constantly monitor server activity, Web traffic and network performance and report even slight irregularities to engineers so that they can spot potential problems before they happen.

The services that ASPs provide are sometimes referred to as "apps on tap". Today, ASPs can offer enterprises access over the Internet to applications and related services that would otherwise have to be located in the enterprises' computers.

Mr Yu said Compaq's planned investments were not tied to any immediate profit aspirations from these activities' potential share offer to the public, but they were intended to leverage the computer maker's strengths in server platforms, professional services and strategic technology alliances involved "in building businesss-critical infrastructure for B2B".

According to Gartner, non-financial goods and services sold through B2B e-commerce worldwide will exceed US$7 trillion worldwide by 2004. Of that figure, 37 per cent of transactions - worth about US$2.7 trillion - will be captured by e-marketplaces, which are also known as exchanges.

"It is becoming quite clear that proprietary electronic data interchange-based systems operating within manufacturing industries and regional transportation communities will not satisfy the need for Internet-based exchange platforms serving the world's US$800 billion freight transportation industry," said Lane Leskela, research director at Gartner in Hong Kong.

"As collaborative Internet commerce for B2B supply chain participants develops, most enterprises in this space will attempt to form their own private marketplaces and/or participate in the most relevant vertical e-market communities."

Considering the various dotcom failures in Asia in recent months, Compaq might limit the number of its new B2B-related infrastructure investments in Hong Kong, the mainland and Taiwan.

"We want to act prudently in this regard to ensure that the activities we invest in will be the survivors in the B2B services market in the next three to five years," Mr Yu said.

One major e-commerce initiative of Compaq in Greater China this year is Com2B in Taiwan. Launched in July this year, Com2B claims that it is on track to building the largest multi-industry e-market in Greater China.

Compaq is supposed to control just under 20 per cent of Com2B, while partner CommerceOne has a stake of less than 10 per cent, according to Mike Lee Hau-Chen, president and chief operating officer at Com2B.

Other shareholders include Taiwanese industrial giants Far Eastern Group, Lite-On Group, NetPacific, SeSoda, Shin Kong Securities, Systex Group, Wal-Sin Lih-Hwa Group and Yulon Group.

"Com2B is an important e-commerce investment project for Compaq. Not only does it indicate the strategic partnership between Compaq, CommerceOne and local Taiwan partners, but also reflects Compaq's commitment to the Greater China region through investment in e-marketplaces specifically tailored for local environments," Mr Yu said.

Compaq and CommerceOne, which runs a global B2B community, have a two-year global agreement to support a select number of e-marketplace activities.

Joan Jacobs, Compaq's global alliance manager for e-commerce, said the B2B organisation template they used on Com2B followed the same strategy used with e-marketplaces developed in Europe and the United States.

To support the Greater China operations of its own shareholders, the Com2B portal covers nine so-called vertical industries: telecommunications, automobiles, computer parts, semiconductors, retail, cable, machinery, securities and chemicals.

Mr Yu pointed out that Com2B in Taiwan was ensured of a captive market that made up billions of dollars in transactions. As an example, Compaq's contract manufacturing projects with Taiwanese electronics manufacturers will already total US$9.5 billion in 2000 alone.

The e-marketplaces that Com2B would develop could even include the suppliers of Compaq's Taiwanese suppliers, Mr Yu said.

Com2B's first vertical portal, Shin Kong Security Portal, was launched in September and another one, DigitSmart.Com, was rolled out this October.

"Looking forward, while we work hard on laying the foundations for the largest multi-industry e-marketplace in Greater China, we will continue to roll out vertical portals every month this year," Mr Hau-Chen said.

He added that Compaq was also helping develop the necessary applications and delivery services to support direct material business processes for Com2B.