The impact of Internet commerce is being felt by IT managers in all industries in very different ways. More efficient supply chains, a new distribution method, or new ways to interact with customers are all part of the I-commerce revolution.
Information technology professionals are finding themselves at the centre of a business revolution - the Internet-commerce revolution. Market research company International Data Corporation (IDC) predicts that the total amount of commerce transacted via the Internet by business and consumers will top $1 trillion by 2003 - a truly staggering figure. It is hard to imagine any business not being affected by a number of this magnitude. So, how do you get a slice of the $1 trillion I-commerce pie?
To find out the state of I-commerce, IDG conducted a survey of 98 I-commerce experts - our readers. The survey found that almost 81 per cent of respondents were already players in the great I-commerce game, with the most common commerce applications centred on a company's core business, those goods and services that are the lifeblood of the organisation.
Fifty seven per cent of respondents indicated they were currently engaged in the direct sale of their company's core product to another business, the classic business-to-business I-commerce scenario. Fifty three per cent indicated they were buyers, having set up a commerce system for purchasing the raw materials and goods needed to create their company's sellable product.
Just shy of half of all respondents indicated they were selling goods and services directly to consumers via the Web, that great frontier of the global market.
As numbers show, by being able to compete on the Internet, time has become vital to business survival.
"Today [in the financial-services industry] the rules say trades must be completely settled within three days, down from five just a few years ago," says Frances Lapinski, senior product manager for Internet services at The Depository Trust Company, in the US. Lapinski's I-commerce focus is on delivering customer-oriented information, up-to-date product and service data, and a transaction-processing infrastructure.
"[Regulators] are now working toward trade, plus one day for processing and settlement," Lapinski says. "Therefore, doing business, period, must have an e-commerce foundation."
As predicted, business-to-business I-commerce cuts across all industries and is only now building up steam. Forty eight per cent of respondents said they are using I-commerce to smooth their day-to-day business operations with procurement systems for buying goods that are not put directly into a finished product, including staplers, office supplies, and the PCs that make up the infrastructure by which business is done in the '90s.
Even as a large number of companies have already invested in I-commerce, 61 per cent of those surveyed indicated that they planned to upgrade or implement a new commerce system within the next 18 months.
Interestingly, these are not companies that are on the farthest frontiers of technology. They are relatively conservative corporations that are the backbone of the economy. Only 8 per cent consider themselves bleeding-edge adopters of technology. The largest segment, almost 47 per cent, consider themselves cutting-edge, while 39 per cent indicated that they adopted a technology once it had stabilised and proven itself. In that vein, respondents lamented technology standards, or the lack thereof, with half of all surveyed saying a lack of standards was a significant roadblock to their commerce projects.
Commerce building blocks. Commerce solutions have to draw on a variety of technologies to get the job done. Despite what you might have heard, Java is not dead; it is living inside commerce applications. Fifty three per cent of respondents indicated that Java is being used in their initiatives. Similarly, electronic data interchange (EDI) is still breathing - 49 per cent said traditional value-added network (VAN)-based EDI had a place in their systems. This is not too surprising when you consider that 56 per cent indicated their electronic-commerce systems were augmenting current systems, not replacing them. Only 16 per cent said they were wholesale replacing their company's current e-commerce systems. But 63 per cent said they planned to use EDI technologies over the Internet. According to Bob Levy, applications development manager at California-based VLSI Technologies, "Internet commerce is really the next phase of EDI".
Nearly 41 per cent also said that Extensible Markup Language (XML) would have a place at the table. Only Open Buying on the Internet was left in the cold, as only 11 per cent said they planned to use it. The top priorities in a commerce project were not too surprising, with security as the No. 1 concern. And as the difficulties of eBay have underscored, reliability and fault tolerance scored quite high.
An indicator of how serious companies are about I-commerce is the bottom line: companies are spending millions of dollars on their commerce solutions, not to mention an extraordinary number of staff hours. When we asked about one particular type of commerce activity, procuring non-production goods, those involved in it had invested on average of $419,000 for that piece of the I-commerce puzzle. When asked about their total spending plans for the next 18 months, respondents said they had budgeted on average $2.38 million for commerce solutions. Five per cent of respondents indicated they had allocated $10 million or more for commerce systems in the next 18 months. By any metric, this is some serious money.
This is also a serious investment in IT time. The people we talked to said that they expected to invest 12 months of IT time to get their company's commerce project up and running.
This significant investment in IT hours is also part of the most serious challenges to commerce implementation. When respondents were asked about the big roadblocks to implementing commerce initiatives, the No. 1 response was that skilled personnel simply have too much to do.
Even having able IT hands does not ensure smooth implementation. In addition to technology concerns, such as standards and the unique requirements of an individual solution, there are broader people issues.
Who's in the driver's seat? Commerce projects are being driven by departments outside IT - departments that might not fully understand the technology issues behind a solution. These departments simply want the project to work. More than two-thirds of those surveyed indicated that commerce plans were being driven by the business units within a company rather than the IT department. The needs of the customer-service, marketing and sales departments were most frequently cited as being the driving force for I-commerce. As you might expect, this can lead to challenges. A third of all respondents said a lack of consensus between business units was a significant barrier to project completion. Still, more than a quarter said management had not really bought into the whole I-commerce idea.
Although the needs of the non-IT departments might be the impetus for the adoption of commerce systems, it is the IT department that has to deliver the goods.
"We're the integrators, empowering the end users and encouraging them to use the system," says Kevin Nobles, manager of client systems at the US-based Trinity Industries. Nobles will spend the next six to 12 months building an I-commerce solution for his company to compete effectively in the global market.
"We use the resources we have available to us to pick the best solution for our business, then present our findings to the business units," Nobles says.
When asked to identify the single person who is most responsible for driving their company's commerce project, about 40 per cent of our respondents said it was an IT person, most often the CIO. If it was not an IT person driving the project, then it was most likely either the CEO or CFO. Clearly, a commerce project requires the involvement of people from the highest level of an organisation. It also requires IT people who are comfortable discussing technical issues, as well as sitting in boardroom meetings speaking fluently in business terminology. One interesting note: only 1 per cent indicated that an outside consultant was brought in to drive the project. This is understandable considering that an I-commerce project is intimately tied to a company's fundamental business, which an outsider cannot readily understand.
So, what about the expected payoff in the end? Well, money of course. But despite everything you have heard about I-commerce providing access to the global market, the No. 1 cited benefit was reduced operating costs after the initial technology investment. Companies are looking for ways to streamline expenses by using technology. But making money factors into the mix as well, with the No. 2 response being an increase in profits.
"We're in manufacturing, a low-tech kind of business - we bend metal," Trinity's Nobles says. "But we're looking to use high-tech solutions to push our market into new regions. We want to expand our market and reach."
So, in looking at the state of e-commerce, IT professionals find themselves at the centre of their business's core concerns. Truly, Internet commerce has become a part of business, and millions of dollars are at stake. But to the IT pro who delivers a solution - one that makes the boss and business departments happy - will go the Internet spoils.
Top factors in choosing a commerce product or technologySecuritySystem reliability and fault toleranceIntegration with other systemsCompliance with specific technology requirementTotal cost of ownershipScalability of systemProcessing and transaction speedProven and mature technologyVendor reputationLicensing and implementation costsMarket-leading productTop significant barriers to implementing e-commerceCapable employees already overworkedLack of technology standardsLack of employees with proper skill setUnique set of system requirementsLack of consensus between business units regarding system goalsInability to identify cost savingsPlatform incompatibilitiesLack of management commitment to e-commerceHigh start-up costs