The Asia-Pacific region lags behind the US in electronic commerce, despite a significant increase in the number of companies that have set up Internet sites in the past year, observers said here this week.
"Asia-Pacific is 18 months to three years behind in electronic-commerce adoption," said John Simon, regional director of electronic-commerce services at GE Information Services (GEIS).
"The proportion of Asia's top 1000 companies with a Web presence has risen from 58 per cent to 78 per cent in the past 18 months, but none of them allow business transactions," said Dennis Philbin, managing director of International Data Corp (IDC) Asia-Pacific.
Asia-Pacific spends about one-third of what US companies invest in information technology overall. With the added impact of the 1997 financial crises, it is not surprising that implementing e-commerce is a low priority on Asia-Pacific firms' IT budget expenditure the analysts said.
According to Joe Sweeney, research director at GartnerGroup, the development of e-business in the region faces a number of challenges, principally cost and awareness.
"Networking costs are between three and five times as high as those in the US," Sweeney said. "And putting in regional networks can be 10 times as expensive as building a US-based network. This makes the return-on-investment model in Asia very different to that of the United States."
Sweeney said other hurdles to the adoption of e-commerce in Asia are poor awareness, poor management skills, uncertain legal and security environments, and the lingering Asian financial crisis. In addition, government support for e-commerce remains crucial for boosting e-commerce development in Asia, he said.
Asian companies also need to first set up back-office systems before considering e-commerce programs, said GEIS' Simon. "Many companies say that they can't do e-commerce until their enterprise resource planning (ERP) system is in place. There are many examples of companies who implement these strategies in parallel," he said.
He noted that e-commerce-related technologies are becoming increasingly affordable, and "these lowered rates could bring alternative options to traditional business", he said.
All electronic commerce before the rise of the Internet was measured by electronic data interchange (EDI), a specification aimed at the procurement needs of Fortune 500 companies. EDI is implemented via proprietary leased lines and generally more expensive software and hardware.
Standards bodies, such as the Open Buying on the Internet (OBI) Consortium, hope to make e-commerce widespread and inexpensive by remedying EDI's problems with new specifications. EDI systems are also being transformed to conform to the Internet environment.
Culturally, many Asians still believe there are inherent security risks associated with new technologies for running e-commerce. Also, a lot of local e-commerce vendors are also holding back adoption of the technology, said IDC's Philbin.
However, the e-commerce tide may be rising.
"Some developing countries in Asia are maturing quickly. They realise that delivering competitive advantage is not necessarily done from a low-cost perspective, but also by providing customer satisfaction and service. These issues see Asian companies wanting to get more into e-commerce," noted Simon.
In order for the companies considering e-commerce to avert failure, Simon advised that a collective corporate vision is needed to focus on e-commerce. Besides just looking at the interface between the company and the Internet, successful e-commerce strategies require strong business drivers. "E-commerce is a business strategy, it is about changing business and culture and it needs to be driven by the CEO," said Simon.