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The Energy Empire Strikes Back

Traditional energy companies, after initially losing ground to dot com competitors, are beginning to fight back online with top management involvement and heavy resource commitments, says a new industry study.

The survey by energy industry advisory firm Cap Gemini Ernst & Young (CGE&Y) predicts that the industry "will begin to drift apart in 2002" with companies that have aggressively invested in e-business moving ahead of others by reducing their cost structures and creating new revenue growth opportunities.

Proving that big, asset-intensive energy companies can be sensitive to their markets, the majors are being innovative, flexing their muscles and accelerating to Internet speed, the report says.

"In the e-business world, legacy business models are prime targets for the fast and nimble," said Thomas Yacko, vice president of CGE&Y. "New entrants are attacking the majors from all directions. Some laggard companies are dying, but the majors are fighting back and creating new business models. Companies like BP, Shell and Chevron understand that e-business is more than the Internet."

Nearly 100 percent of energy companies surveyed offer a basic Web page with company information, financial information, and products/services information. Several industry leaders, including Chevron, Texaco, Citgo, Petro-Canada, Exxon, Mobil and Shell, are now aggressively moving into the e-commerce stage, with two-way communication and the execution of commerce transactions between a company and customers/suppliers.

And they've had to, in order to keep up with new entrants, such as networkoil.com, priceline.com, wellbid.com petroleumplace.com, and tradeout.com that have been inserting themselves between the energy companies and their suppliers and customers.

CGE&Y also predicts that energy industry e-procurement portals will be populated and in production by the beginning of 2001. Not all companies will ramp up as quickly as the major oil companies, however.. Successful companies will use portals for less than 75 percent of their purchasing.

Employee portals (employee self-service) will dramatically increase by the end of 2001, the survey says. Executives will reduce their travel and human resources expenditures and will more quickly enable their people and culture to accelerate to the new e-business model.

Cap Gemini Ernst & Young offers energy industry management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities and is publicly traded on the Paris Bourse (12533) .