So where is the investment flowing?

In the next hot thing, B2B. We are witnessing enormous amounts of money pouring into this segment. Again it is going to be the same story. The money is going in with the assumption that these small little companies, which started early and have already assembled their management team, will gain great value in the next five years. The basic premise is that they will be absolutely world dominant in the coming future, they would not have made a single mistake and encountered any competition. This is just not realistic specially when you have low entry barriers.

What are the key dynamics of the dotcom business model?

In the B2C segment, we are witnessing the removal of middlemen in the supply chain. So people who acted as intermediates, had information and kept it to themselves are being thrown out in the online world. However, the high threat can also translate into high business opportunities.

Do you see a similar scenario in the B2B segment?

In the B2B world, we are seeing not the removal but introduction of new intermediaries, or cybermediaries—people who only exist in the virtual world and make possible a dynamic net marketplace. The net is helping buyers and sellers in various industries to come together at one place, irrespective of the geographies, to trade. They can gather in the online world in a way that they just cannot do in the physical world and exchange information. It is interesting dynamics. Within the last 2-3 years, about 500 such exchanges around the world have emerged, about 80 being in the Asia-Pacific, and we predict that by 2003-04, there could be as many as 10,000 sites across the globe.

Considering the numbers you are predicting, do you see consolidation in this segment?

Instead of numbers, look at it from the potential aspect. For example, we could have a global steel site, then there could be a site for Indian or US steel and then there could be sub-sectors within the steel segment. So there could be multiple sites within the same segment. We have to see how this shakes out and the winners will be those who can gather the hearts and minds of the buyers and the sellers and do a good job of acting as a conduit to trade. It could be an interesting shakeout but for the moment, we are going to see it multiply dramatically. Probably by 2003-04, there could be a slight consolidation but it is going to take some 3-4 years before the shakeout takes place.

What about consolidation and shakeout in B2C?

The shakeout is already happening.

Is it true that in B2C, there is a high inverse correlation between spending and rates of return on investments made on the web strategy?

That’s true. Site owners need to spend more money than ever before and incur more expense in media in an effort to have their brand heard above the cacophony of thousands of sites. Compounding the problem is the ever-increasing number of people going online and spending more and more to create the brand. But the ratio doesn’t fit because with so many websites, your ability to grab a piece of the growing pie is becoming harder. So you are spending more money and even if you do get clients to come to your site, there is no guarantee that they will stay. It does not take much but a click to switch over to another site.

The segment is becoming price driven and this is fast eroding margins. People are discovering that even though you are spending a small fortune to create an online presence your pricing is absolutely low margin. This is a sure recipe for disaster.

Is this the same case with the B2B segment?

In B2B there is lot more loyalty. In this segment online capabilities of the supply chain become embedded in the business processes. These are much harder to reengineer to change than in the consumer space. If a company has invested in a supply chain solution, it is quite unlikely that they are going to change it easily. There has been a lot of investment and training involved. This is the reason why B2B is attracting much more attention and investments.