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E-Commerce Guru Launches His Own E-Service Biz

Shanthi Shankarkumar

From towels to tissues, soaps to shampoos -- everything that a hotel room needs is now just a click away through hsupply.com, an Atlanta-based business to-business e-service company that promises to re-engineer the procurement process for the $ 10 billion hospitality supplies industry.

The company had a low-key opening in March last year, but was officially launched early this month at the annual convention of the Asian American Hotel Owners Association in Las Vegas.

"You have seen the transition from e-commerce to e-business, now you will see the transition from e-business to e-service. hsupply.com is a great example of the next generation e-service company, because we are telling the customer, 'you can fire and forget'," said Dr Ravi Kalakota, founder and CEO of hsupply.com.

"The hsupply.com e-procurement solution is ideal for industries that have many buyers and suppliers," said Dr Kalakota.

He is the author of the first book on e-commerce, Frontiers of Electronic Commerce. The book, along with his subsequent work, Readings in Electronic Commerce, is used as text books for e-commerce at over 75 universities.

"The hospitality industry is the perfect sector to implement hsupply.com's solution because the market is highly fragmented, is experiencing frequent merger and acquisition activity and has no ties to legacy e-commerce systems," he said.

Forrester Research expects business-to-business e-commerce to grow to $ 1.3 trillion by 2003. On the other hand, business-to-consumer e-commerce is expected to grow to $ 108 billion during the same time.

The hospitality industry spends a big chunk on purchasing supplies. According to Dr Kalakota, the industry spends $ 10 billion each year on reorder supplies such as linen, towels and soap. Hotels spend another $ 30 million to $ 40 million on one-time expenses such as furniture, television sets and other equipment.

Dr Kalakota brings years of rich experience in e-commerce as a teacher, writer and consultant. A native of Hyderabad, he came to the US in 1989 with a bachelor of technology degree in computer science from Osmania University. He earned a master's degree in computer science from the University of Hawaii and a doctorate in information systems from the University of Texas in Austin. He taught at UT in Austin from 1991 to 1993 and was awarded the Texas Excellence in Teaching Award in 1992 and the Fred Moore Best Assistant Instructor Award in the College of Business in 1993.

Before moving to Atlanta, he was the Xerox Chair in Information Systems at the William E Simon School of Business Administration, University of Rochester. He moved to Atlanta to be director of the Center for Digital Commerce and professor of information systems at Georgia State University. He continues to be associated with the school and offers executive teaching.

Dr Kalalota is consulted by such major companies as Microsoft, AT & T, IBM, Sun, and Peoplesoft.

A prolific writer whose works have been published in major journals, he began writing research papers when he was a business Ph D student at the University of Texas, Austin. He has written four books, numerous research articles, presentations and executive seminars in the field of e-commerce.

His new book, E-business: Roadmap for Success is also the first book ever written on the emerging area of e-business. He is now working on another book about e-service.

Dr Kalakota sees hsupply.com as an extension of his research. He is excited about the prospect of putting into practice all that he had preached over the years. Over the past three years he has been advising big corporations on different aspects of e-business, but was often disappointed that companies did not implement them fast enough.

"The one who executes fastest wins in the e-commerce world," he said. "I have been increasingly fascinated by how can you create a company that can go from say 0 to 100 people in a very, very short time and still be a market leader. The next generation of companies will move exceptionally fast and I wanted to be part of that. Hsupply.com is a labor of love."

Backed by $ 5 million in venture capital from two Atlanta-based venture capital firms, hsupply.com hopes to revolutionize the hospitality supplies industry. It has already built a hotel portal with over 7,000 suppliers and 5,000 products. Repetitive ordering in the hospitality supplies industry has made it a perfect process to automate.

The site will streamline the procurement process to reduce the time, money and effort being spent on purchasing and fulfillment of hospitality supplies. "We are a solution developed by the industry for the industry," he says.

Elaborating, Dr Kalakota says the existing hospitality sites do not manage the delivery of the product or the invoicing for the customer. Besides, hsupply.com serves what are called "management companies" -- that is companies which own a number of hotels.

"What we do is create private portals for them to go and shop and procure," he said. "We do service single hotels, but they are not our focus."

Currently, the hospitality procurement process is time-consuming and involves a lot of costly paperwork. Each purchase order can cost as much as $ 100 to process. Hotels order supplies on a weekly basis and often have to issue an individual purchase order for each type of supply. This can add up to thousands of dollars wasted. hsupply.com's procurement process will eliminate all those overheads, promises Dr Kalakota.

"Currently, each copy of a requisition for an order is sent to five different departments," he explained. "We eliminate the paper part of the process and the cost of sending it to different people by automating the process. Often people do not think of this, but if a person spends three hours on something, there is the time value. It is really the 3 Ps -- saving paper, reducing people-cost (the time people spend on a job) and process-cost."

Meanwhile, though hsupply.com had a very understated opening, the response has been quite exciting. "We have been inundated with customers. There is a tremendous demand for what we are offering. You can say, we are in the right place at the right time and the customer acceptance has been phenomenal," said an excited Dr Kalakota.

To date, hsupply.com has signed up key strategic partners and charter members. Among its partners is Marietta Corp, one of America's largest suppliers of guest amenities. hsupply.com's charter members include leading hotel management companies such as Stonebridge Companies, Noble Investment Group and US Franchise Systems, which is also the fastest-growing franchise company in the US hospitality industry.

Dr Kalakota has built an executive team to match his expertise. hsupply.com's product was developed by Nagesh Vempaty, the company's chief technology officer and formerly one of the lead architects of Healtheon Corp, the pioneer healthcare e-commerce company.

Explaining why a large number of start-ups do not do as well as expected, Dr Kalakota cites lack of focus as the culprit.

"People try to do too many things. Pick one thing and do it well. It is easy to get distracted by some new thing," he said.

"So startups have to create a direction and stick to it. They also should not lose their focus on the customer. You have to constantly ask yourself, 'Am I doing what the customer cares about?' This is something amazon.com has done very well."

Dr Kalakota, in an interview with dbusiness.com, has said he would like to be the 'amazon.com of the hospitality industry.'

And he seems to be on track. Once he gets his model right, he believes it will become a model for other industries using high-weight, low-cost products. Not for anything, is he known as a visionary in e-commerce circles. He envisions the possibilities for expanding the model to other vertical markets. Hospitals, nursing homes, resorts all need to purchase the same kind of inventory as hotels. From there, he is considering offering supplies to home-supplies such as monogrammed towels or miniature shampoo bottles. "Once we perfect the model, it is like flicking a switch," he said.

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