The Buzz About E-Business | Article

international outsourcingOver the past two years, the state of e-business has evolved from lightly regarded to a hot topic among senior executives. That’s been the experience of Neil Isford, vice president, e-business services, IBM Global Services.

“It’s interesting. When I talked with CEOs and other senior executives a couple of years ago, not many of them were knowledgeable about this, and they somewhat discounted it,” said Isford, “but I haven’t met a CEO in the last six months who doesn’t have some appreciation of e-business and probably two or three examples in their specific industry of somebody using this technology.

The reason for that sudden burst of interest is understandable. According to Isford, using internet technology to communicate to suppliers or customers or sell products and services is becoming a critical success factor for businesses to survive. That fact, he said, is reshaping today’s marketplace.

Beyond E-Commerce

IBM uses the phrase e-business, rather than e-commerce, because the technology is used in ways other than buying and selling, Isford said. He defined e-business as helping the customer do one or more of three things: 1) connect their enterprise, 2) extend the value chain, or 3) extend the business market. Extending the value could be something like linking suppliers or customers or business partners to improve cycle time and communication.

“Extending the business market — helping customers buy and sell goods and services over the internet — is what I tend to talk about as pure e-commerce,” said Isford.

“There’s really two flavors of that,” he added. “There’s the business-to-consumer one, which most of us relate to easier, but increasingly the big opportunity is in business to business, where we help companies sell to other companies using internet technology.”

Dipping a Toe in the Water…

IBM conducted a study in the fourth quarter of 1997 on the use of the internet. Findings revealed that while 90 percent of the companies using the internet were doing web publishing in the form of putting up a web site or using e-mail, the number of companies using the internet to extend business value was much lower. Only 10-26 percent of the companies offered customer self-service, and only 5-14 percent conducted internet transactions.

“The reason it goes from 90 percent to these low numbers is as companies start to get into customer self-service or pure electronic commerce, a lot of the issues that have been around the IT industry as long as it’s existed — scalability, security, systems management, knowledge of application become very important,” said Isford. Customers making those moves, he said, need to link back into their legacy systems, and they have to consider how their decisions will impact such areas as inventory systems, the replenishment process, back orders and shipping.

“It’s a much more complex environment,” said Isford, “and it’s created a tremendous opportunity for services. Included in that is a very major opportunity for outsourcing.”

Responding to Opportunity

One way IBM has responded to that opportunity is by packaging services they have developed over the past two years. “This isn’t new,” said Isford. “What is new is that we packaged what we had learned and put it into something that could be replicated easily and priced within a range for a customer.”

That move, he said, was in response to market data that indicated customers were looking to service providers for not only capabilities but targeted offerings that could be tailored or customized to their particular need.

Many of those customers are small businesses who are finding new opportunities in e-commerce.

“Some of the most innovative things are going on in small businesses,” said Isford. “The internet is wonderful because it allows you to put up a very attractive, very functional website, and you look like a big player. Little businesses can get access to customers all over the world.”

Speaking the Same Language

Key to this activity is the common language of the internet. IBM, for example, has a web version of their EDI service that large companies use for business-to-business communication of such items as invoices and purchase orders. The development of the web version means that small companies with just a browser now can easily do business with a big company.

As companies approach e-business, Isford said they should consider three things. They should develop a strategy up front and be very certain that they build from a business perspective. They should be sure they have the right infrastructure. Finally, they should consider the integration of the e-commerce applications with their legacy systems and business processes.

As companies consider their needs and opportunities, they also should look at outsourcing, said Isford.

“They need to look at the cost/benefit trade-off,” said Isford. “Is it easier and quicker for me to do it on my site, or shall I have somebody like an IBM do it? That’s an issue of having skills in some cases. In many cases, it’s the time to market. The pace is moving so quickly. When you’re trying to sell goods against somebody else, speed is really important.”

Isford sees the e-business market continuing to thrive. “We see it clearly as a major growth driver for our services business,” he said. “We now have over 10,000 people in IBM Global Services dedicated, in some part, to this whole area of helping customers become e-businesses. It’s becoming a very big part of our business.”

Lessons from the Outsourcing Primer

  • E-commerce is becoming a critical factor for success.
  • Internet technology can move beyond e-commerce to e-business.
  • Old IT issues must be addressed, as the move into e-commerce continues.
  • A common language opens doors for small businesses.

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