Sept. 11, 2000

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Enron's Cyberspace Future Is Just Beginning

By Jeff Sweat

nergy and utility companies have always been tied to the ground, to resources such as oil, gas, coal, and water. Enron Corp. may be both an energy and a utility company, but its future appears to be in cyberspace.

Of course, that future is already beginning. The Houston company has created what may be the largest E-commerce marketplace in the energy industry in EnronOnline, where Enron and other companies buy energy-related commodities such as natural gas, power, and oil, as well as new products such as bandwidth and weather derivatives.

The site has exceeded anyone's expectations. EnronOnline has generated more than $100 billion in transactions since Enron launched it at the end of November. During the first quarter of 2000, Enron saw its wholesale volumes shoot up 43%--much of that because of EnronOnline, which handled 33% of Enron's commodity trading volume.

Enron says EnronOnline links it to thousands of partners, selling nearly 1,000 products and supporting 13 currencies. Enron has built a user interface, powered by Java and Macromedia Inc.'s Shockwave technology, which links to Enron's back-end transaction systems. The setup gives trading partners real-time estimates on fuel and power prices, a critical capability in an industry where prices can fluctuate wildly within a single day. "If you want to buy gas or sell gas, you need to do it immediately," says Philippe Bibi, Enron's chief technology officer. "By the time you put the phone down, the market may have changed."

The energy company has been building a foundation for the marketplace for years. Enron had established itself as a commodities trader. But it has also made the IT investments to support a marketplace. The company has spent hundreds of millions of dollars on its IT infrastructure, including a messaging layer powered by enterprise application integration vendor Tibco Inc. Its transaction system ties directly into back-office apps, so transactions appear almost immediately on Enron's general ledger.

More importantly, the marketplace feeds into logistics and order-fulfillment systems, which is critical when the goods sold include natural gas and voltage that needs to be moved across the country. "You have not only the sexy part of the Internet, you also need to fulfill your purchases," Bibi says. But Enron's not trying to provide a technology infrastructure for the energy industry--at least not for its competitors. Bibi says EnronOnline isn't an exchange. Every transaction is with Enron as a partner.

That doesn't help participants build relationships with other companies, but it does remove transaction fees that would be present in an exchange. "Enron doesn't have to take a fee for the transaction because they're providing the product anyway," says Bob Gustafson, a utilities industry analyst at AMR Research. The fact that it owns the product clearly benefits Enron, too.

Enron thinks there's room for more E-business in its business. It followed up EnronOnline with three other sites: Dealbench.com, which helps people collaborate across company and geographic boundaries with capabilities such as document sharing; EnronCredit.com, which helps businesses mitigate credit risk; and Clickpaper.com, an exchange for pulp and paper for the financial-services industry.

The company is looking at further opportunities to provide services that other energy companies don't have the resources or the initiative to build themselves, although Bibi declined to say what's coming next. For the moment, he says, Enron has a lead over other energy companies that are pushing into E-business with their own marketplaces. Adds Bibi, "There's a difference between planning to do something and having it done."

Return to main story, "Information: The Most Valuable Asset"

Illustration by Jeffrey Fisher

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