By Lisa Plendl for Office

[Business Development]

Case Study: Clockwork Software Associates

Hed: Shrinking the Global Village

Deck: zBart lets local businesses barter online

Summary: Why barter with businesses across the country, or even the world, when you can barter with businesses down the block? ZBart helps connect small businesses with others in their own communities.

Pull quote: "As soon as you leave the U.S. and Western Europe, something like 5 billion people in the world still conduct commerce the way they did in biblical times." Ben Boverman, president, Clockwork Software Associates.

"Think globally, act locally," could be the perfect slogan for zBart, an outfitoffering a new twist in online bartering. The idea is simple: Rather than inviting small businesses to barter across the nation, or the world, as with other online bartering sites, why not keep the exchanges inside the same community, or limited to a few miles? Using the power of the Internet to shrink the global village to manageable size could be a welcome development in countries like Ukraine, where locals already barter more than they buy.

"You look at the rest of the world, which never got infected by the dot-com bug. As soon as you leave the U.S. and Western Europe, something like 5 billion people still conduct commerce the way they did in biblical times," says Ukrainian native Boverman, who founded Clockwork Software Associates, in Ashland, Mass., in 1999. The company will launch zBart Barter Club sites in America and the Ukraine this spring. "We're going to give people who are already doing this an easier, more efficient way to barter," says Boverman.

And who knows? ZBart's online system might someday provide the model to help businesses in other parts of the former Soviet Union, South America and other emerging economies.

Hot Market

Over the last several years, online bartering – trading goods and services rather than paying with cash -- has become a hot prospect, with numerous players grabbing for slices of a potentially huge pie. In 1998, roughly $10 billion worth of goods and services were bartered in North America, according to International Reciprocal Trade Association. And Forrester Research predicts online business trading in the U.S. will soar to $2.7 trillion by 2004.

But in much of the world, especially in emerging economies with unstable national currencies, the age-old practice of bartering is more than a novel option, it's the dominant form of commerce. Nowhere is that more apparent than in Boverman's native Ukraine, where farm goods are traded for car parts, tractors exchanged for construction work, and cameras bartered for couches. Boverman says things are so rough these days that some workers are paid with bottles of vodka, or even coffins.

"People I know in Ukraine tell me the amount of commerce done with bartering is in the high 90 percents," says Boverman, who held senior positions at American computer companies like Gerber Scientific, Computervision, Abbot Corp., New World Technologies and the Boston Computer Exchange since emigrating in 1977. He says the global approach taken by Bigvine.com and other major online bartering outlets overlooks the trust engendered when the people trading actually know each other.

What if small businesses could get online and see what other small business owners in their immediate area had to trade? The concept already works in places like Ukraine, and taking it online will make it easier. Boverman's privately funded company is banking it could take off in America, as well.

"In American society, we tend to conduct most or all of our business close to home," says Boverman, "because we have a higher measure of control over the situation. It's easy to return something if we don't like it. If we are dealing with a neighbor, we get a fairer shake because people don't want to dirty their names."

Trading Up

Typically, conventional online bartering outlets let parties showcase their wares, or at least list a description. Once two parties agree on a price via e-mail, the goods are exchanged for other goods and services. Alternatively, either of the parties can ask the bartering site to set a "trade" value on their goods using a sort of Monopoly money or scrip.

This system closely mirrors the way people barter in the former Soviet countries. There, on nearly every corner, residents can have their barter items valued by a private currency-exchange official in dollars or other strong currencies. Once barterers know how much their auto parts are worth compared with the cabinet repair services they need they can trade confidently.

Clockwork, which also has a software development office in Kiev, Ukraine, plans to sell zBart franchises inexpensively. Franchise owners would get their own Web site where local businesses can showcase their wares via Clockwork's software. After the items are valued by the franchise holder, the business owner can browse other online storefronts. The franchisee referees the transaction, insuring that both sides have made a solid trade before approving it. Merchants then exchange the goods in person or by mail. Clockwork will skim a few percent from each trade price. The franchisee will also take a cut.

The concept will probably play well in a country like Ukraine, where despite economic hardships and a crumbling infrastructure, most people still have access to a computer and the Web. "They might be living in an apartment you wouldn't want for your worst enemy," Boverman says, "but they have computers and they are all connected to the Internet. They want access to information, to know what's going on in the world."

Currently, Clockwork is beta-testing a site in Ukraine. The company has partnered with Tekna, a software company that is helping Clockwork work out the bugs, and fine-tuning software features for local needs.

"Tekna brings a reality check to the product definition process," Boverman says. "They operate in an economy where barter is much more prevalent. Thus, their people have an instinctive reaction to various proposed features and functions."

Clockwork believes the Ukraine can support about a dozen zBart franchises. Additionally, Boverman thinks zBart could ease the exchange of goods and services in many emerging economies as they get wired into the Web. In the United States, he estimates enough action to sustain one franchise for every 500,000 people, or 1,000 small businesses.

Making It Pay Off

ZBart will have plenty of challenges, however, at home and abroad, such as relying heavily on franchise owners to facilitate between barterers. Finding people who won't pinch all the best stuff for themselves is an issue all bartering operations face.

The challenges of making zBart work in the U.S. are potentially even greater.

Boverman admits that "because people here are blessed with a strong currency and a strong sense of existing business framework, they will say 'Why do we need an organized outlet to exchange goods and services in this format?' But when we started doing informal presentations in the past three or four months, people had an instant identification with the concept of trading with others within a five- to 10-mile area."

Derrick Dominique, an analyst with the Hurwitz Group, an independent research firm in Framingham, Mass., agrees that bartering, especially when kept very local, should appeal to small businesses. "Clearly, they don't have the access to capital resources, and using a method of exchange – bartering -- could be an advantage."

Still, zBart faces the same hurdles encountered by more conventional online bartering outfits in the U.S. "In a sense," says Dominique, "you're trying to change the whole mindset of the way people do business. And while a lot of individuals like the (online bartering) concept, U.S. businesses are typically slower about embracing this type of online technology."

Even if some local businesses are persuaded to join the local bartering franchise the total traded remains the key issue, both here and abroad. After all, zBart's only source of income will be a percentage of completed transactions.

"I would be concerned that even if you have 1,000 companies (using the site)," Dominique says, "how frequently do they use it? When these transactions go on, it's usually a one-time thing for a unique item." Still, he adds, transforming a good idea into a successful business will be difficult. "But it's feasible."

Have a Cow

Then there's the question of getting paid. Since cash is scarce in the former Soviet Union, getting paid in real money could be an issue for Clockwork. Boverman says franchise owners will be carefully hand-picked. In addition to being entrepreneurial and a good motivator and facilitator, the person must be financially solvent.

Kirk Whistler, author of 101 Ways to Grow Your Business With Barter (WPR Publishers, 1997), says despite challenges, keeping online bartering local is smart business.

"Everybody who has been in barter for more than a year or two has been burned," Whistler says. A lot of times businesses try to sell something for two or three times what it would sell for in the cash market, or attempt to unload something that even Goodwill wouldn't take.

"There's an extra level of trust when you can look the person in the eye," says Whistler. He believes the number of small businesses bartering goods and services will quadruple from the current estimate of 5 percent over the next 20 years.

In Ukraine, the basic principal has proven popular for centuries. "Right now, I could sell as many franchises as I have in the Ukraine," Boverman says. The U.S. will likely be a much tougher sell." For now, it's a challenge Boverman wouldn't trade.

At a Glance

Name: Clockwork Software Associates/zBart Online Bartering Club

URL:

Location: Ashland, Mass.; Kiev, Ukraine

Founder: Ben Boverman

Founded: 1999

Industry: Online bartering

Employees: Nine (three in the U.S., six in Ukraine)