CIO Reiner says GE doesn't track how much new business is coming in online. He says it's something the company will start evaluating in 2001. But for many of GE's manufacturing units, the Web is unlikely to provide a huge boost in revenue. "Who's going to buy from GE who doesn't already buy from GE?" asks a Wall Street analyst who covers the company, but requests anonymity. "I'm not sure the Internet really brings much in incremental sales." (GE Capital has a better shot at using the Web to sell more. See "GE's Capital Idea.")
Aren't there benefits to moving existing customers to the Web? If you believe consultants, software vendors and many business magazines, yes. The argument is that a company saves plenty because it doesn't have to pay a platoon of operators to take orders by phone, and there are fewer errors because the information doesn't have to be typed into the company's own computer systems.
Sounds logical, but GE hasn't reduced costs much by taking orders on the Web because it hasn't moved enough business online to close call centers or even sharply reduce staff working the phones. Says David Overbeeke, former general manager of e-business for GE Aircraft Engines, who has moved to NBC: "We haven't eliminated the parallel process, so we still have to have people to handle calls."
It's still early in the game, of course, and CIO Reiner sees huge savings down the road as GE customers order products and request information online rather than call the company. He points out that every time a customer goes online to get information about a GE appliance, it costs the company just 20 cents, compared to about $5 to answer a phone call. Since GE Appliances fields more than 20 million calls from customers each year, the implication is that GE Appliances alone could cut $96 million in overhead annually by getting customers to log on for information and customer service instead of picking up the phone.
Don't count on it. GE Appliances says it has cut costs, but won't say whether it has reduced staff in its call centers, citing competitive issues. GE Capital Fleet Services, which handles 60 percent of vehicle orders online, says it has not reduced its call-center staff. Other companies report similar experiences. IBM sold $14.6 billion worth of goods online through the third quarter of 2000 - double what GE will for the entire year - and handled more than 66 million customer self-service transactions via IBM.com. An IBM representative says the head count in the call centers has remained flat. Even UPS, which handles more than 3 million requests per day for package tracking information online, hasn't substantially reduced the size of its call centers. Staffers are simply given new tasks to handle to improve customer service, which bolsters customer loyalty and helps companies avoid losing business.
Some say true savings won't come until a company gets a critical mass of business from the Web. Andrew Whinston, director of the Center for Research in Electronic Commerce at the University of Texas, recently surveyed 1,200 companies in the U.S. and Europe and found that they begin to see financial benefits when they do at least 40 percent of their business online. About 5.6 percent of GE's total sales for 2000 were achieved online. It may be several years before it has moved enough sales to the Web to begin reaping a profit.
There's also a chance that providing sales and customer service online will actually increase costs, for GE and other companies. To understand why, consider the case of banks. As ATMs gained widespread acceptance in the late 1970s, banks said the machines would save them a ton of money. The argument might sound familiar: Processing an ATM transaction costs a fraction of what it costs for a teller to serve the customer. (Today's estimates are 27 cents for an ATM transaction versus up to $3 for a transaction handled by a teller.)
But self-service technology hardly turned the banks into growth stocks or dramatically reshaped the competitive landscape. Banking costs have gone up. Even with the proliferation of ATMs and telephone and online banking, the number of bank tellers in the United States went up slightly from 554,550 in 1990 to 556,230 in 1998, the last year for which the U.S. Bureau of Labor Statistics has figures on the profession. There are more bank branches now than ever before, and the new technologies require their own support staff. So although banks have had to make this investment to remain competitive and improve customer service, they haven't always saved money: In many cases they've merely caused consumers to perform more transactions, grabbing $40 in pocket money from the machine whenever they need it.
Even without cutting staff, GE should be able to show an increase in productivity. At least, it should be able to sell more goods and services without adding more staff at its call centers. And customer service will continue to improve. But any savings that come from improvements in productivity are likely to be passed on to customers. Why? Because many of GE's competitors are quietly doing the same things GE is doing.
