Altra Energy Technologies Inc. in Houston has pulled off what seems to be a minor miracle: It's the first public e-marketplace to become profitable. More than 240 companies use Altra's online services to buy, sell, and transport energy products such as natural gas, fuels, and electricity. Chief Executive Officer Paul Bourke recently spoke with BusinessWeek Internet Correspondent Spencer Ante. Here are edited excerpts of that conversation:
Q: How did Altra become the leading independent energy exchange?
A: We had first-mover advantage and launched in December, 1996. Then we consolidated quickly. In January, 1999, we bought our primary competitor in the exchange world, QuickTrade. And in July, 1999, we acquired our biggest competitor in the software world, TransEnergy. We created critical mass on the revenue side [and] that's what pushed us toward profitability.
Q: You were president of the BYSIS group, a financial-services company, for six years. What's an important lesson you've brought over to Altra from your past experience?
A: It's almost impossible to grow a company without a passion for the customers. That's the core of our business. We've put a whole process in place to keep customers happy. Senior managers have assigned account responsibilities. And senior managers have 25% to 40% of compensation tied to customer satisfaction performance.
Client retention is more important than netting new clients. Then you can upsell new services to the same clients. You can grow your business 5% to 10% a year from existing customers.
Q: How do you keep employees motivated in this difficult environment when there's little to no prospect of turning stock options into real equity?
A: You need to get managers [motivated] around company performance. You need to educate workers that equity markets are cyclical. You also need to modify compensation when equity markets are out to lunch. We've increased performance bonuses.
Q: What are the some of the lesson you've learned about e-marketplaces?
A: Some degree of diversification is absolutely important. In 2001, 30% of our revenues will come from the exchange, 35% from transaction-management software, and 35% from consulting services.
Q: What do you see happening in this market for the rest of the year?
A: I see three things. The pace of the markets moving online will accelerate. I see more competition. And I see more consolidation in next 12 to 36 months. Over all, the 7 to 10 e-marketplaces in energy will move to 2 to 3. Clearly, our challenge is to grow our liquidity and our volume.
Q: Will there be an Amazon of the business-to-business market that dominates the field?
A: I don't see one powerhouse. I don't see a huge franchise dominating the B2B space.