Published In January 2002
SmartElectrical.com—the only operational site of the SmartContractor.com “stable”—has changed dramatically since its founding. What’s impressive is SmartElectrical.com’s adaptation to the prevailing environment. Three major developments are worth noting, based on an October interview with President Carl Albrecht. Big backer Most impressive is that Eaton’s Cutler-Hammer (C-H) operation is backing SmartElectrical.com. This information is actually one year old, but was never made public. For this reporter, it was incredible that SmartElectrical had to “sit on” the C-H news. A press release would have, it was thought, instantly increased the web company’s credibility. While there still has been no official announcement, SmartElectrical acknowledges C-H’s involvement. SmartElectrical’s “NECA Show” booth had—on its flip (unseen) side—C-H logos. And there was a C-H logo on the press release. Other backers include CED and WESCO Distribution. SmartElectrical provides electrical contractors with access to 1,200 distributor branches. NECA involvement SmartElectrical’s big news at “The NECA Show” was an endorsement of a new company service by NECA itself. SmartElectrical initially focused on providing online services to help users become “smart” contractors. As of early 2000, contractors with one to 50 employees were targeted. SmartElectrical has developed services designed to make it easy for the union electrical contractor segment to track contributions to various funds—under labor agreements, and the law—on every union electrician they employ. Here are relevant facts: • More than 98 percent of NECA members are union contractors. • A prime responsibility of NECA’s 119 local chapters is administering various funds into which contractors contribute. • These include national and local retirement plans, health and welfare plans, and labor-management cooperative organizations. • Contributions—to a person-specific plan or an industry fund—are based on an individual’s labor hours. There are “caps” for contributions to some funds for large contractors. It is very difficult to keep straight which contribution was made on which employee into which fund. Some contractors work in several jurisdictions, under different labor agreements. A given employee’s five-day workweek might involve contributions in different areas to different funds . . . on the same worker, in the same week, from the same contractor. Albrecht claimed that combined, NECA chapters and NECA contractors are spending 15 cents per man-hour to administer these funds. Well over 350 million man-hours were worked last year by International Brotherhood of Electrical Workers (IBEW) construction electricians. When information is keyed by the contractor, re-keyed by the chapter, and perhaps re-keyed later, it involves a lot of typing. A service that could cut those costs by just two cents per man-hour (less than 20 percent) would free $7 million or more in profit for contractors. How can you do that? Capture the initial keystrokes; make the information available on secure Web sites. A SmartElectrical “case study” on Prime Electric (Bellevue, Wash.) shows the contractor cuts its time to process monthly payroll reports to half an hour from an original 5.8 hours. Albrecht claimed his company had signed up five NECA chapters with another 20 in serious discussions. The SmartElectrical concept is to get its foot in the door with the chapters, and then provide to NECA contractors all of its already-developed services. Strategy shift Focusing initially on small contractors cast this Web company’s lot mostly with the nonunion electrical contractor. Most potential volume in the 50-employees-and-under landscape would have come from small, nonunion contractors. Today’s focus on NECA chapters and their more than 4,200 members takes SmartElectrical into a different playing field. The company now targets independent local chapters of NECA; note that an “okay” from national NECA does not mandate adoption by a single chapter. Furthermore, NECA-member contractors are, for the most part, anything but “small.” On electrical construction’s union side, a company with 50 field electricians might well average $6 to $8 million in annual sales. The fact that many NECA contractors are much larger than that is one reason that, by one estimate, the 4,200 members of the organization account for as much as 25 to 30 percent of annual sales in an industry with 70,000 members. In summary, SmartElectrical.com has mutated into another type of creature. It’s something that would even make Charles Darwin sit up and take notice. SALIMANDO (firstname.lastname@example.org) is a Vienna, Va.-based freelance writer. He writes a monthly e-commerce column for www.tedmag.com.