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Net-Oriented Services May Soon Be Feasible for Small Business

Trends: Technology is bringing efficiency, speed to firms that until now have been daunted by the huge costs of electronic commerce.

June 24, 1996|From Bloomberg Business News

TANEYTOWN, Md. — Taney Corp., a family-run staircase maker nestled in the Blue Ridge Mountains, is looking forward to the day when it can electronically exchange invoices and purchase orders with its trading partners as easily as big businesses do today.

Thanks to the rising popularity of the Internet, that day may be close at hand.

The small business based here is carving out a private virtual-trading community with its distributors on the global computer network. With the help of a new service from AT&T Corp. called EasyCommerce, Taney has set up a site on the World Wide Web that acts as a gateway to its private network.

Taney sends its distributors electronic mail, product updates and design specifications. Soon it will give its distributors the software needed to exchange purchase orders and invoices as well.

"This has accelerated the speed we can do business at," said Jeffrey Goschen, chief information officer at Taney. "Since it's all documented, we are able to handle it and work off of it easier. Phone calls are good only to a point."

When an industry association recently changed the building codes for staircases, Taney was able to notify its distributors immediately. "We cranked the notices out within a day," Goschen said. "Through the Net, people knew instantly."

Most business-to-business electronic commerce today is done over so-called value-added networks, or VANs, based on electronic data interchange, or EDI, a decade-old communication protocol that lets businesses exchange purchase orders, invoices, payments and other standard forms electronically.

These private online trading communities are essentially exclusive clubs. Members tend to be large corporations, particularly in the retail, transportation and insurance industries, which can typically afford to spend $300,000 or $400,000 a year for access to a private network, the EDI software and the staff to run the operation. That's more than many small businesses make in a year.

About 90% of the 2 million companies suited to business-to-business electronic commerce don't bother because of the cost, estimates General Electric Information Services, a unit of General Electric Co. and, with a third of the market, the world's largest EDI provider. GEIS intends to target the remaining 1.9 million companies with online trading services that combine portions of the inexpensive Internet with GEIS' own private online trading network of 40,000 companies.

One service, called GE TradeWeb, will let small businesses trade with members of GEIS' online trading community without having to buy proprietary software--the first service to do so, according to GEIS. All a small business needs is a computer, Internet browser software and the OK from at least one of the EDI trading partners in GEIS' online community.

The service is scheduled to be available in July in the U.S. and later this year in other countries. GEIS is aiming to keep the average annual subscriber cost at about $1,000 a year.

"Our traditional client base has been large Fortune 1,000 companies," said Douglas Wolford, general manager of small-business initiatives at GEIS' 6-month-old Internet unit. "The cost of the technology and the sophistication required to run [EDI] was so intensive that we couldn't offer it to small business. The Internet has removed some of those barriers."

Other large companies are developing services that will allow small businesses to trade electronically on the Web--services that go beyond connecting to the Internet or setting up a Web site. But few products are available yet.

Sterling Commerce Inc. and International Business Machines Corp.'s Advantis unit, the No. 2 and No. 3 EDI providers, respectively, are working to develop similar services. AT&T is also planning on pairing the Internet with EDI for small business.

Software companies Harbinger Corp. in Atlanta and Premenos Technology Corp. in Concord, Calif., are looking at offering Internet-based programs that let small businesses exchange documents.

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