An easy way to soothe Wall Streeters and venture capitalists, after all, is to let them know that profits should come quicker without those pricey London offices or fancy Japanese joint ventures. Doing so is a temptation that some b-to-b executives, wisely, have avoided. Certainly there are short-term financial gains to be had from staying stateside. But the opportunity costs of not going global-especially in the Internet age-are incalculable.
VerticalNet Inc., Internet Capital Group Inc. and FreeMarkets Inc. have long been among the b-to-b sector's most aggressive international expansionists. And, more admirably, despite their companies' battered share prices and the overall gloomier outlook for b-to-b, they still are.
Their executives began planning global rollouts back when their companies' business models were being touted by nearly all as visionary, and when their share prices were stratospheric. It was an easy time to announce plans for London, Tokyo and SÃ£o Paulo. Venture capitalists were always available with more money; investment bankers were lining up to do just about any b-to-b deal.
Yet the advent of tougher times has not stopped the executives at these and other b-to-b companies from moving forward globally. FreeMarkets is a particularly good example, for its international model has expanded while its Wall Street fortunes have deteriorated.
Last week, the Pittsburgh-based company's share prices were hovering in the low $40s, off a 52-week high of $370. And competition in its business, handling b-to-b auctions, is fiercer than ever. Yet it continues to enter international deals at a torrid pace. Only last week it reached an agreement with Mitsubishi Corp. to market FreeMarket's trading platforms to Japanese companies; only a few days before that, it announced it was helping run NestlÃ© Thailand Ltd.'s e-procurement operations. These follow Indian, South Korean, Singaporean and Chinese deals, which were entered into in good times and in bad.
Internet Capital Group's executives have had equal foresight. Last week the company's shares were trading below $10, off a 52-week high of $212. The company recently announced it would cut 50 jobs, or 35% of its workforce. Yet it is accelerating its European and Asian plans. None of the job cuts will come outside the U.S.
VerticalNet's leaders have displayed similar mettle. While their company's share prices have been gutted, and its model justifiably questioned, it has continued to solidify itself as perhaps the leading international b-to-b player. Certainly if a b-to-b company's global prospects can be measured by the quality of its partners, VerticalNet is a good bet; among the partners are Sumitomo Corp., Softbank Corp. and British Telecom plc.
Keys to success
The collective global foresight and patience of the executives at these companies are important because such characteristics are precisely what many European and Asian companies value most. And U.S. companies that display them now will likely be the biggest beneficiaries when international b-to-b marketplaces take off.
Swooping into a market because it looks promising and cutting out if it doesn't produce profits within a quarter or two is a common practice among new economy companies. Partnerships are easily entered into and just as easily discarded. Such tactics have often worked well and are accepted stateside. But they are anathema to Asian and European executives, who generally enter agreements-sometimes to their detriment-more slowly but see them through better. This is especially so in Asia, where family business ties and loyalty are among the biggest factors in business.
Having little patience and being quick and nimble above all else are strategies that are accepted in the U.S., but mean much less overseas. Some b-to-b executives have wisely understood this. What remains to be seen is if they will show as much resolve if their companies' fortunes do not improve.