NZ Post has, almost overnight, become a major player in the electronic commerce market by purchasing 50% of online network provider Electronic Commerce Network.
The unexpected bonus in the deal was ECN subsequently being named preferred supplier at NZ Customs for electronic data interchange (EDI), chipping out the incumbent Telecom and AT & T EasyLink Services. It's a massive win for ECN because Customs was Telecom's biggest customer in the EDI space. Some estimates put it at five times the transaction level of any other Telecom EDI customer.
NZ Post business development leader Paul Robinson says ECN's win at Customs was "fairly unexpected by us".
"ECN were understating and over-performing there."
For Customs, the investment by NZ Post in ECN was not the key factor in the deal but, says Massimo Banfi, manager information systems group, it was a welcome event. "It makes ECN much more robust from a financial perspective and we may now envisage a number of other opportunities for business development thanks to that."
Robinson says NZ Post will boost the paid-up capital of ECN from $10,000 to $500,000, making ECN a more attractive partner potentially as well as giving a considerable comfort level.
The company was set up in 1995 by a group of former ASB Bank employees. Its first major win was at TranzRail.
Robinson says NZ Post was attracted by the existing customer base and the excellent site references ECN was given.
That's been important, too, for Customs.
"ECN definitely displayed the best advantage in terms of cost, but not only that there was also the ability to deploy services under those conditions that were important for our business. Telecom has a number of strong advantages but relative to business-to-business we perceive them as weaker than ECN," Banfi says. He says Telecom's strengths lie more in business-to-consumer e-commerce.
Banfi expects Customs to achieve savings of 30% to 50% by switching to ECN.
NZ Post began talking to ECN late in January. Computerworld understands there had been an earlier approach from services firm EDS but that fell through as EDS was in the process of bidding for the outsoucing of Telecom's information technology. "Potentially, ECN is very complementary with the physical distribution of goods and messages," says Robinson.
"We were keen in terms of developing new revenue outside of NZ Post. They're a small, agile business that can grow more easily." The short-term plan, he says, is to let ECN cement the contract with Customs then seek new opportunities of similar value over the next 12 to 18 months. ECN has a strategic partnership with IBM, which facilities and manages the ECN switches on two RS/6000s in Auckland and Wellington.
Wayne McLaughlin was recently named chief executive of ECN, having been recruited by NZ Post. McLaughlin has considerable experience in e-commerce, having spent two years with Netway — the now defunct e-commerce arm of Telecom — and more recently consulting in the field.