Small-Business Portals Think Big

Despite a huge market, a service provider shakeout is likely

In the first few years, the biggest challenge for any small business is simply to survive. The same can be said about the rapidly proliferating number of online portals that are competing to serve small businesses.

Theres little doubt that the potential market is huge. International Data Corp., of Framingham, Mass., estimates the number of businesses with up to 20 employees will reach 37.7 million by 2002. Their online spending will grow from $25 billion in 1999 to $106 billion in 2002.

As they turn to the Web, many small businesses, strapped for technical talent and time, are looking for help with the kinds of e-business services small-business portals promise: site development, site hosting and a long list of online applications, from human resources management to payment services.

While the opportunity is big, competition among small-business portals is stiff. The 30 or so portals serving small businesses are about three times more than existed a year ago, according to IDC. Consolidation among small-business portals, experts say, is inevitable. In fact, its already begun. The result will be fewer portals for small businesses to choose from. But portals that survive will offer richer, broader-based service options. In the meantime, some small-business operators are casting a wary eye on portals, hoping to avoid the kind of disruption that could come from using a nonsurvivor.

"Will I get the same service level, and what impact on price will there be?" asked Gary Krueger, president of Houston-based Krueger uses Corp., which will be acquired next week by B2SB Technologies Corp. for inclusion in its small-business portal. "This happened with my phone service provider, and the service was terrible during the transition," he said.

Players in the small-business portals market include names such as Microsoft Corp.s bCentral, Yahoo Inc.s Small Business portal and Netbusiness from Netscape Communications Corp., a unit of AOL Time Warner Inc., as well as pure players like BizLand Inc. and Inc.

Generally, users of these portals can expect to get free content, including general and business news; communications such as e-mail, contact lists, calendaring, and chat and message boards; Web site building tools, hosting and storage space; and online product catalogs. However, Microsoft, of Redmond, Wash., and Yahoo, of Santa Clara, Calif., charge for Web site hosting.

Free stuff and more

On top of the free stuff, many portals offer fee-based services that include additional storage space; search engine management tools; a merchant account or shopping cart to accept credit card orders; fax, bill payment, human resources and payroll services; and the purchase of offline supplies.

"I wanted to create an online classroom ... and a communications place," said Paula Robinson, founder and CEO of the Institute for the Integration of Technology and Education, in Boston. Robinson will use vJungle Inc.s portal to teach a Web design class this summer in which students will set up their own vJungle Web site.

Robinson originally used Netscapes Netbusiness but dropped it because it offered only 25MB of free storage and flashed banner advertisements on the Web site she created.

vJungle, of Redmond, offered twice as much free storage and didnt have banner ads.

"With vJungle, I can prove to my students that you dont have to spend a lot of money to set up a storefront," Robinson said.

Other small businesses find that the portals save time handling routine tasks such as bill payment and critical processes such as identifying customers. For these users, time is money.

Through bCentral, Camtec Industries Inc. got its first Web presence about a year ago. The portal hosts the Colts Neck, N.J., companys site and provides an HTML template, an e-mail account, placement on an ad banner network and submission to search engines.

Anthony Mauro, president of the maker of socket set screws, said one of the two orders he identified through the site has paid a years worth of fees. "Its given me a chance to sell to people outside of my state," Mauro said. "When I communicate with them, I send them my Web site [URL], and it gives me credibility."

Mauro had some problems when he first put up the site, however, because he had written the HTML code himself, and bCentral requires the use of Microsofts FrontPage authoring tool to upload that code. He managed to post his site but plans to license FrontPage for updates. Other small-business users, though generally pleased with portals such as bCentral, are running into different limitations in its online services.

Patching and filling

Portals are partnering like mad to fill holes by adding more products and services. Microsoft, for one, is adding more sophisticated business services through a deal with Rivio Inc., announced late last month. Through the partnership, bCentral will offer small businesses Rivios human resource management, payroll processing, purchase requisition, expense report processing, insurance procurement and personal benefits services.

Microsoft is looking to enhance bCentral further by releasing this quarter or early next quarter an updated platform that will enable small businesses to run their applications with a common data model.

Microsoft officials would not comment on what role Great Plains Software Inc., which Microsoft announced plans to acquire in December, will play in bCentral. However, statements by the company indicate that the Great Plains business applications will eventually be a part of the bCentral offering, running in Microsofts .Net environment.

In coming months, Yahoo officials, too, said they will broaden Yahoo Small Business and make it easier for users to come to the portal through links with other portals and by advertising on sites to which it refers users.

While consolidation may bring more products and services to surviving portals, it wont necessarily do so without disruptions to small-business users.

Sue Schwartz, owner of, said she has seen the quality of the portal she uses,, decline since it was acquired last year by a company now known as Network Commerce Inc., of Seattle. New fees have been instituted, no new services have been added, and customer service has declined, she said.

"Before the acquisition, FreeMerchant had customer service and personalization; it was the finest product out there because of the software and degree of customer service it offered to merchants," said Schwartz, in West Milford, N.J. "I dont understand whats happening now. ... Consolidation has changed the heart of the original company."

Others worry that consolidation could mean less innovation. "You end up doing business with three ... behemoths, and a small business outside of the mainstream cant find what [its] looking for, which, in my mind, could translate into mediocrity," said Katherine Carol, president of Tango Consulting Inc., a Denver-based career placement company. "Innovation doesnt necessarily happen in the middle. Niche or small, innovative players create the technology."

If a larger company swallow the portal that Tango uses,, Carol said she is confident her business data will be adequately preserved and transferred to the new company. But she will examine other options.

"The whole thing is promise and delivery," Carol said. "Promise is greater than actual delivery, so the greater that gap is, the less interested Id be."

Small-business users of portals generally agree that Microsoft, Yahoo and AOL/Netscape will be the top three small-business portals left after the coming shakeout.

"With the dot-com fallout, people will tend to go with who they know, as opposed to a fly-by-night service," said Liz Schultz, CEO of Northeast Corporate Consulting. The Attleboro, Mass., staffing company uses Netscapes Netbusiness portal. "Microsoft, Netscape and Yahoo will probably scout and acquire other small-business portals that [can offer] a unique service or technology."

One thing the big-name small-business portals have going for them is the ability to bring in content from well-known general-purpose portals within their corporations. bCentrals affiliation with Microsofts general-interest portal is one example of a successful pairing of corporate properties, said Lindsay Fairhurst, an analyst with market researcher NetRatings Inc., in Milpitas, Calif.

Yahoos and Netscapes Netbusiness both could benefit from closer associations with their respective general-interest portals, Yahoo and AOL, Fairhurst said.

But bigger is not better if it means sacrificing the human touch, users of small-business portals said. Mauro was frustrated by bCentrals e-mail-only customer service. After waiting three days to get one issue cleared up, he had to call bCentrals Redmond headquarters to get assistance. He isnt alone.

"For some reason, the people component is no longer there," Schwartz said, referring to since it was bought. "The minute you remove the people component, you lose your competitive edge.