Web business booms

David Knott
London
[email protected]

U.K. entrepreneur Charles Cohen has launched a currency, called Beenz, that he hopes to make valid for trading on the worldwide web.

Cohen's intention is to unify shopping online and, of course, to make a few bucks in the process. His Beenz is just the latest-if perhaps eccentric-attempt to find a way of doing business on the web.

PA Consulting Services Ltd., London, reckons the potential for 'e-commerce' is huge: "It is a potential marketplace of 1 billion customers who can be accessed anywhere and at any time.

"It allows organizations to work with business partners 24 hr/day and 7 days/week, and the onset of Web TV will allow the opening of previously closed organizational networks to customers, suppliers, and partners."

PA worked with BP Amoco plc to create Oyster, an Internet-based data storage system for smarter sharing of procurement knowledge. PA claims it enabled savings of $15 million-five times the development cost-in 1 year.

Differentiation

While BP Amoco and PA worked out how to save money through the Internet, many companies are pondering how to actually make money.

One man who has come up with an answer is Oliver Crabtree, liability underwriter at Hiscox plc, London, which insures the energy industry worldwide through the Lloyd's market.

Crabtree's clients range from small U.S. independents through global independent exploration and production companies to multinational integrated petroleum majors.

In insurance, said Crabtree, there is rarely a new idea or offering. Insurers differentiate themselves to clients mainly on price, and those that get their math wrong make a loss.

"Because it's difficult to produce anything new in insurance," said Crabtree, "I began to look for a niche where it is relatively easy to make money."

Crabtree hit upon the U.S. "mom and pop" producers who run small leaseholds in states such as Oklahoma, Kansas, Michigan, and Montana, where legislation is not so prohibitive as in California, Texas, and Louisiana.

Standard product

"This market is not very sexy," said Crabtree, "and premiums for insurers are extremely small, so lots of companies in the insurance business pass it by. Yet, with enough clients, it can be profitable.

"I had been trying to find a way to get this business into the London market cheaply and had done some business over the Internet with a broker in Houston, who had to do this type of insurance through a complex chain."

Because the insurance needs of small U.S. producers are relatively homogeneous, Crabtree reckoned the process could be simplified and standardized and sold at a lower cost to clients through the Houston broker.

"A turnaround of less than 24 hr is our selling point," said Crabtree. "Because of the Internet, the margins of our business have improved, and we see this as the way forward for many business sectors, but only those that have a straightforward, standard product to sell.

"We couldn't do this for a major or international independent, but in insurance terms, one small lease operator is much the same as another. We're now looking to take these ideas to Europe."