Chris Stowers for Asiaweek. Peter Tang is transforming Berjaya Group, one of the many old-line companies going online.

It's no surprise that the reinvention of Berjaya Group as an e-business was the idea of a young man. After all, the icons of the Internet are 20-something hotshots who made millions during the dotcom frenzy. So when Robin Tan, 27, told his dad, Berjaya chairman Vincent Tan, that the family hotel-and-gaming conglomerate — one of Malaysia's biggest old-line companies — needed to change, the older man asked him to oversee the initiative. Robin asked another yuppie, 28-year-old Peter Tang, to help. The two of them drafted a plan for online procurement. The young are at the fore in Manila's JG Summit Holdings too. Lance Gokongwei, 33, persuaded his father, chairman John Gokongwei, that the property-and-food group must turn to e-commerce. Given the go-ahead, Lance hired his 29-year-old best friend, Christopher Po, to work on online purchases.

So what are we to make of Seguchi Ryuichi? The president of Hitachi Construction Machinery is a 66-year-old non-engineer who bought his first computer and started using e-mail just five years ago. But it was during his watch that the hydraulic excavator maker, which was founded in 1970, transformed itself into an Internet player. "Times have changed," he says. Buyers were asking for customized features — a certain foot mechanism, a longer mechanical arm — and shorter shipping times. Hitachi delivered by migrating to the Net. In the process, Seguchi cut 600 jobs and restructured the top-down hierarchy into a flatter organization in which everyone has real-time access to company information.

If you think the bursting of the dotcom bubble has killed the Internet, you're wrong. The e-revolution lives — and this time, the rebels are Asia's biggest companies. They may not mean to be, but the region's top corporations are actually a key force in the emergence of a New Asia. When they complete the integration of their internal and external operations with the Internet, Asia's companies will help change the way we live and work. For the better? Possibly, if the reinvention promotes corporate transparency and empowers workers. U.S. investment bank Goldman Sachs estimates that e-commerce can add nearly one percentage point to annual GDP in Singapore and Taiwan, and more than half a percent to growth in Hong Kong, Malaysia and South Korea.

There is a downside, too. The poorer countries could end up on the wrong side of the digital divide, hampering the global competitiveness of their enterprises. Slow-moving companies could collapse. Others could bungle their Internet strategy. Those that do get it right could be victimized by cyber-crime, as Microsoft learned to its dismay last week when a hacker got into its systems. Jobs could be lost. Asia's traditional relationships-based business ethos could prove a liability. "How do you transfer the existing business model [based on family, ethnic and personal ties] to the new one without losing market share?" wonders Ali Farhoomand of the University of Hong Kong's School of Business. "Can this entrenched way of doing business adapt to the open nature of the Internet?"

Nobody knows the answers — yet. Asia's e-business transformation is just beginning and will take years to complete. At this point, the rising profits at many companies in The Asiaweek 1000 (the main tables start on page 74) come primarily from restructuring. But most of the giants, from No. 1 Mitsui to No. 417 Hitachi Construction to No. 577 Berjaya, are also putting Internet strategies in place. In a June study of 70 of the region's biggest corporations, Goldman Sachs discovered that more than half are starting or have completed the implementation of their e-commerce plans (see chart, page 44). Another 27% are talking with consultants. The rest say they are still conducting internal studies (read: endless memos and meetings.)

The strategies differ depending on the company, industry and country. But two reasons are often cited for becoming an e-business: cost savings and revenue enhancement. The first comes from squeezing inefficiencies out of the supply chain, from the purchase of materials to the processing of those materials into finished products to the delivery of those products to customers. Some companies target savings of as much as 30% of total costs. Many have high hopes for the Internet as a sales enhancer, too. While retailers do not expect droves of individual Asian consumers to buy online, companies that sell directly to businesses believe they will be able to broaden their customer base locally and abroad.

Hitachi Construction is a case in point. The arrival of powerful computers and software in the last three years has allowed the company to link its internal systems and various branches through the Internet. The results have been dramatic. Company president Seguchi says inventory costs have been halved as real-time tracking of procurement and stored materials prevented wastage, duplication and maverick buying. The new efficiencies made the company more competitive, helping it secure a 30% share of the Japanese market for earthmoving equipment, up from 23% three years ago. Seguchi estimates total spending on information technology over 10 years at $138.8 million — and savings and new sales in the past three years at twice that amount.

That's all thanks to the Internet. Armed with a portable PC, a Hitachi salesman is now able to customize any product depending on a customer's needs. For a hydraulic excavator, for example, he can offer 280 different combinations. Once the customer has made a decision, the salesman calls up a three-dimensional image on his computer screen. Software from American developer Fire Bond instantly presents a list of parts that would be needed. The system will also generate an estimated price.

It gets better. The salesman's PC is connected via the Internet to Hitachi's manufacturing plants. The system checks the warehouses for availability of the needed parts and the production schedule. Then it tells the salesman when the excavator can be made and shipped directly from the factory to the customer. The average order-to-delivery time: four days. It used to be 15 days. And if the machine is an "e-excavator" from the latest ZAXIS series, Hitachi's website can track its operating hours, fuel consumption, location and performance history for the customer. The e-excavator transmits the data via satellite to Hitachi's Internet system.

It will take years for Berjaya and JG Summit to get this far. Both are newcomers to the e-revolution. The Malaysian hotel-and-gaming company bought Internet enabler My2020.com this year from young Peter Tang — then named him executive director in charge of Berjaya's e-business initiative. A $2.6-million pilot procurement project is due to roll out this month. Three of Berjaya's 300 companies will link up with 30 suppliers of computers, office equipment and stationery via a new website that can generate product quotations and receive orders. At present, each purchase manager negotiates on his own and must contend with red tape as he goes through requisition requests and seeks approval for big-ticket items.

JG Summit, the Philippine property-and-food group, is focusing on procurement too. Po, who is CEO of Summit Internet Investments, wants all JG companies to use the Internet to source $326-million-worth of goods and services the conglomerate as a whole buys every year. To further cut costs, JG Summit has also partnered with five other Philippine conglomerates to form business-to-business e-procurement site BayanTrade. Po has so far spent $2 million to put Universal Robina online. The snacks subsidiary asks local suppliers to participate in a reverse auction, with the bidder offering the lowest price winning the contract. Universal Robina says it has cut procurement costs by 7% to 18%, depending on the product line.

Both Berjaya and JG Summit have had to contend with resistance. Some Berjaya managers whose relationships with suppliers go back decades worried that the Internet could unravel those cozy ties. Newcomers might offer more competitive pricing, which everyone could see over the Net. "We have to get about it in a very diplomatic way," says Tang. "We told them these relationships could be maintained. We asked them to keep an open mind. People have a fear of change." JG Summit has had more success persuading its purchase managers to use the Internet. But Po had to work on its suppliers. "Some did not even own PCs, let alone have I.T. departments," he says. "We had to provide a lot of training and support."

Other constraints can bedevil an Asian e-business initiative. Take Indian telecom company Videsh Sanchar Nigam Limited (No. 701), known by its initials VSNL. "We have built the necessary firewalls [to keep out computer hackers] and secured the area where e-business will take place," says development director Vinoo Goyal. The problem: as a state-owned company, VSNL must go through the bureaucratic mill to get things done. "Our actions are scrutinized by Parliament and the Comptroller and Auditor-General, and so we have to follow certain rules for procuring hardware," says Goyal. VSNL employees, who as civil servants cannot be fired, are resisting the Internet because they think they will lose their jobs. As to the idea that e-business will promote transparency, Goyal has this to say: "Government confidentiality laws govern everything [in VSNL]."

To win the race, it seems you must be a private company in a place with excellent Internet facilities, skilled knowledge workers and liberal online policies. "You really have only five economies in Asia that have stable [physical and legal] infrastructure and strategic investments in the Internet, and these are Japan, Korea, Singapore, Hong Kong and Taiwan," says Greg Pelling, a partner with PricewaterhouseCoopers, which does consulting work for e-businesses. Even then, few companies have followed Japan's Hitachi Construction and Ricoh (see story page 50) in exploiting these advantages. "A lot of Asian businessmen are very pragmatic," explains Pelling. "They will proceed carefully because relationships are so important. If I tell my suppliers and customers that I can take better care of them over the Internet and I couldn't, I'd be in big trouble."

Hong Kong's Dairy Farm (No. 193) learned that the hard way. It launched a business-to-consumer online shopping site for its Wellcome supermarkets last year. But the response was so overwhelming that the system could not cope, disappointing many customers. "The timing could not have been worse," recalls Vijay Yajnik, Dairy Farm's chief information officer. "We had just finished testing when a price war [with old rival Park 'N Shop and newcomer @adMart] broke out and order volumes went through the roof." The glitches have been repaired, but Hong Kong's flirtation with Internet shopping has cooled. Maverick businessman Jimmy Lai, who started @adMart to break the Park 'N Shop and Wellcome virtual duopoly, now wants to sell the money-losing venture.

Most online shoppers simply do not buy enough to justify the business. "If customers order only $10 worth of goods, the company isn't even breaking even," says Angela Moh, a consumer analyst with Morgan Stanley in Hong Kong. "It's just as easy for people to dash into a real store in Hong Kong as it is to actually order something online." Dairy Farm is keeping the website open because the competitors are doing the same, but Yajnik is testing other models — cautiously. He hopes to hold Dairy Farm's first business-to-business Internet auction by the end of the year. He is ready for the inevitable bumps. "There are a lot of nuances and quirks [in business-to-business] that you can't always account for," says Yajnik. "You have to be comfortable with failure [in e-business]."

Not everyone has given up on business-to-consumers, though. "Over 90% of our passengers use the Internet," says Tim Fitzsimmons, general manager of the e-business program at Hong Kong's Cathay Pacific Airways (No. 322). The airline offers online ticketing on its website. But Cathay's B2C program is complemented by a business-to-business initiative: it will spend more than $256 million on a top-to-bottom e-business reinvention that will include systems maintenance and electronic procurement. Airlines have one of the most complex supply chains in the world, so streamlining the process can bring big dividends. Fitzsimmons estimates that Cathay will save some $64 million a year by 2003. Says he: "Our corporate strategy is to have e-business as part of our corporate DNA."

Singapore Airlines (No. 208) is also on the move. It recently signed a $57.1-million deal with German e-business solutions provider SAP for a complete overhaul of its internal business processes — even if it means chucking existing systems. "Singapore Air wants to integrate all operations, but some equipment and software used by its subsidiaries are not compatible with each other," says Sun Whye Mun, SAP's business development director in Singapore. It is not clear whether the carrier will also offer online ticketing, but that seems only a matter of time given the high Internet usage of international passengers.

Korea's Samsung Electronics (No. 28) is in both B2C and B2B, too. Its all-in-one enterprise portal, which went live in May, sells electronic products to consumers and components to businesses. "We are just in the first stage, covering the basic management decision-making and e-commerce infrastructure," says Lee Kwang Seong, who oversees the chipmaker's e-business reinvention. But Samsung can now dispense with the tojang, the business chop used by Korean companies. "Somebody actually counted 32 chops for one decision that Samsung made a few years ago," recalls Lee. "It took five years for the final chop to be stamped." Under the new system, an employee can receive electronic approval for an overseas trip in four steps, doing away with the previous 16-chop paper process.

Cathay, Singapore Airlines and Samsung aim to change themselves inside and out. Hong Kong property-and-telecom group Hutchison Whampoa (No. 168) is following a different tack. "Our emphasis is on 'commerce,' not on the 'e'," says managing director Canning Fok. By most accounts, the company is lean, decentralized and well-managed, so Fok does not see the need to "reinvent the wheel," as he puts it. Hutchison sees the Internet more as a way to create new revenue streams. At the height of the dotcom mania, for example, chairman Li Ka-shing rushed the listing of Chinese-language news-and- entertainment portal tom.com, even though the website practically had no content at that point. Hong Kong punters queued for the scrip anyway.

Now that the bubble has burst, Hutchison is focusing on a number of B2B ventures. One is bigboXX.com, a subsidiary that sells office supplies and equipment over the Internet. "We're their first customer," says Fok. He estimates that Hutchison is spending 30% less on stationery, printer ink and other items because bigboXX is able to negotiate lower prices with suppliers. That's a bonus. The real aim is to make money, so bigboXX, which now just serves Hong Kong, will go regional next year.

Hutchison is an example of an Asian company that wants to keep some traditional ways — such as the supremacy of personal ties. "Staring at a cold computer screen can never replace relationships with customers," says Dominic Lai, who heads the group's e-commerce division. Gerard Boey understands that attitude. "We Asians rely on long-standing relationships," says the senior business manager at Malaysian e-business solutions provider Globetronics Technology. "People worry that the Internet will break them off." But he argues that, if used properly, the Internet will enhance and not destroy these ties. Surely an order filled in four days instead of 15, as is now the norm at Hitachi Construction, is a big positive in a business relationship? Of course, but all this means nothing if the relationship being talked about is more about what personal favors the suppliers can give, rather than the advantageous deal they can arrange for the company.

The next step for Asia's e-businesses is to integrate their electronic internal systems with their suppliers, at one end, and with buyers at the other. They will face resistance along the way from secretive suppliers and needy customers. But in the long run, joining a web will reap them significant cost benefits: they will no longer need to tie up working capital in inventory. Linked to a company's supply chain, suppliers will know when their products are needed and make them available at that time. Similarly, the company through its electronic links will know how many items a customer wants and when to deliver them, which means it need not stockpile finished products. But all this assumes that suppliers and buyers also have e-business capabilities.

Suppliers are easier to persuade because their big clients have leverage over them. "There was a lot of resistance from our vendors," concedes Samsung's Lee. "But we used our buying power to require end-to-end compatibility from them." He estimates savings of $1.3 billion in the next two years in part because of leaner inventories. Buyers are another matter. But many are also suppliers to other companies, including foreign ones. So is it possible that Asian corporations will eventually become e-businesses anyway? "They need to adopt the Internet because U.S. companies, their customers, want them to do it," says John-Paul Ho, managing partner of U.S.-based investment group Crimson Ventures.

These changes could mean readjustments in the way Asia does business. "Asia has a long tradition of vertically integrated corporate families such as Korea's chaebol," notes Philip Anderson, director of the Center for Digital Strategies at Tuck School of Business in the U.S. They need not change, but he suggests partnerships with Internet start-ups, as Hutchison is doing. "Dotcoms have the great virtue of speed and focus," says Anderson. "Incumbents have the guanxi [influence] and network to get them off the ground. In order to learn how to operate in Internet time, incumbents must work shoulder-to-shoulder with their dotcoms, such as rotating people through them."

But what the Internet really requires is a whole new outlook — in which transparency, meritocracy and efficiency are paramount. "I'm worried about the Asian way of thinking," says Hong Kong University's Farhoomand. A traditional Asian company is run like a hierarchy, with the top people privy to knowledge that their underlings do not have. This is the source of their authority. But in the Age of the Internet, says Farhoomand, "information is not power. Shared information is power. And you have to share information not only with your own people but also with those outside the organization." Farhoomand says the issue goes beyond business: "It has cultural underpinnings — Confucius, Lao Tzu, respect for authority — and these are very difficult to shake off."

Everyone in the workplace will be affected. Don't think that the jobs made redundant by internal integration will be the end of it. As a node in networks of suppliers and buyers, an e-business will find that keeping its place requires a laser-like focus on what it does best. For that reason and also to save costs, it will outsource functions like accounting and phone call centers to others in the network or outside of it. So tomorrow's call-center assistant may handle customer complaints and inquiries for 10 companies, not just his own, as is the case today. The transition could be painful. When a company turns over call-center responsibilities to an outsider, it may have to fire its old staff if it cannot find new responsibilities for them.

This is where the state steps in. Governments should offer retraining courses and encourage the private sector to do the same. Computer knowledge will obviously be important, says PricewaterhouseCoopers' Pelling. But so will people skills. "You will see a big push toward knowing the customer better," he says. "That ability is really enabled by the Internet. But that does not mean the disappearance of the sales force because you still need human interaction." Sun, the business development director with SAP, sees another upside: "You can unlock a lot of local skills and make them available globally. A lot of foreign companies are setting up call centers [for their customers at home] in the Philippines to tap the ability of the people to speak English."

Clearly there will be losers. "It would be a lie if someone tells you that ordinary workers will not be affected," says Farhoomand. "In any transformation, some people will lose their jobs. Others will have better jobs." This is what happened when machines took over some forms of manual labor in the Industrial Revolution. Knowing now how badly that transition affected many lives — and also the incalculable progress that the new technology promoted — perhaps governments and corporations will manage the current e-revolution better.

— With reporting by Alejandro Reyes, Yulanda Chung/Hong Kong, Alexandra A. Seno/Hong Kong, Arjuna Ranawana/Kuala Lumpur, Antonio Lopez/Manila, Sanjay Kapoor/New Delhi, Laxmi Nakarmi/Seoul and Murakami Mutsuko/Tokyo