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Independent hubs' fall proves pundits wrong

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It's an irresistible story: The spinout of dot-coms and the vendors that support them. Just last week, for example, integration and consulting firm MarchFirst Inc. told a group of investors and analysts it would end its dependence on new economy start-ups and focus instead on traditional companies expanding their reach into electronic commerce.

During a call with analysts, MarchFirst Chairman-CEO Robert F. Bernard noted his company's difficulty in getting paid by many of its smaller dot-com clients. The upshot? MarchFirst will end its relationship with more than 1,000 clients to focus on its best 500 accounts. Earlier this month, the Chicago-based company said it would cut 1,000 employees, or 10% of its work force, because of the slowdown in the new economy. Our story on MarchFirst's latest maneuvers appears on Page 2. We also look at the company's questionable branding campaign, on Page 14.

Watching the sinking, tech-heavy Nasdaq, or the scrambling of once high-flying b-to-b companies, the pundits will now tell you-with perfect, 20/20 hindsight-that all this turmoil was inevitable, predictable. Right.

The landscape is littered with prognostications that failed to pan out. Here are a few:

• First-mover advantage. The idea here was that the first e-commerce entrant into a market segment would win, all things being equal. First, this view isn't supported by the facts-America Online Inc. was not the first Internet service provider, Amazon.com Inc. wasn't the first Web-based bookseller and Palm Inc. didn't invent the personal digital assistant. (Anyone remember the before-its-time Apple Newton?) Second, it turns out that "all things" are rarely equal. Technologies, financing and marketing vary considerably, even among players who target the same industry.

• Public e-marketplaces will dominate. An admirably democratic prediction, based on the belief that open exchanges, where prices and services are "transparent" to all buyers, would lure participants, while closed marketplaces, run by just one or a handful of suppliers, would cause buyers to fret they weren't seeing the best available price. But private exchanges are going strong. In the mind of procurement managers, cost savings take a back seat to supply-chain efficiencies and deep relationships when it comes to vital, bet-the-business direct goods.

• Bigger is always better. Despite the well-publicized faltering of big-name Internet companies, many others are doing well because they properly targeted their customers, effectively developed products and services to meet the needs of this audience, and implemented effective marketing and advertising campaigns.

• Established brick-and-mortar companies don't get it. The dragons have awakened and are threatening, through their coalition marketplaces, the pioneers who started it all.

The one prediction I feel confident about making is this: Marketing is the third leg of success, along with technology and financing. For the hottest sector of the new economy, electronic marketplaces, marketing and advertising are even more important, because they must communicate the specific benefits of why suppliers and buyers should abandon traditional practices and use exchanges in the first place.

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