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SL3046_frame_C01 Page 1 Friday, July 13, 2001 3:59 PM 1 INTRODUCTION TO E-BUSINESS “Slumber not in the tents of your fathers. The world is advancing. Advance with it.” Giuseppe Mazzini TECHNOLOGY REVOLUTION The Internet has dramatically changed the role of technology in busi- nesses today. A survey conducted by A.T. Kearney of 251 global CEOs identified technology as the number one CEO concern. Not long ago, technology and information systems were seen by many as a necessary evil of the organization to report financial results but only providing minimal return on investment. Times have definitely changed As the A.T. Kearney 2000 CEO survey shows, technology has become a fundamental driver of the business strategy and 97% of the CEOs surveyed felt that technology will have an extremely or moderately important role in the future success of their companies. In fact, 78% of the North American executives surveyed stated that the Internet has already changed how they do business. Technology is no longer just an enabler; it has become a vital part of business. The Internet has been adopted faster than any previous technology. As shown in Figure 1.1, it took 38 years for the radio to reach 50 million users, 16 years for the PC, 13 years for television, and only 4 years for A.T. Kearney (an EDS company), “Strategic Information Technology and the CEO Agenda,” www.atkearney.com, 2000. 1 SL3046_frame_C01 Page 2 Friday, July 13, 2001 3:59 PM 2  A Practical Guide to Planning for E-Business Success Figure 1.1 Years for Technologies to Reach 50 Million Users the Internet. The Internet has transformed the information industry in much the same ways as the automobile and airplane transformed travel. The key to future success is not merely using the Internet, but re-inventing business models and business processes using this new technology. In early 1998, forecasters suggested that business-to-business e-business might rise to 300B by 2002. Most forecasters now consider that estimate to be too low. As Figure 1.2, shows Forester Research estimates that business-to-business e-business will rise to 1.823 trillion by 2003. Gartner Group predicts that business-to-business transactions will reach 7.3 trillion by 2004. According to Uunet (an Internet backbone provider), traffic on the Internet continues to double every 100 days. Approximately 235,000 sites are added each month, or one new domain every 9 minutes. Most historians and forecasters consider this incredible explosion the largest revolution in history, even more significant than the Industrial Revolution. Economic models are shifting overnight and industry leaders are challenged in new and unpredictable ways every day. The Internet and e-business are described as a disruptive technology, rather than an adaptive technol- ogy, because they change the way that businesses operate and interact with business partners. Economic models are shifting overnight. Industry leaders are challenged in new and unpredictable ways every day. Entire industries are being reshaped. Norris, Grant, Hurley, James R., Hartley, Kenneth M., Dunleavy, John R., and Balls, John D., E-Business and ERP, Wiley, 2000, p. 10. Also stated by U.S. Department of Commerce, Spring 1998. Forrester Research, in “E-commerce revenues set to explode,” InfoWorld, May 8, 2000. Kao, Chuck, “Enterprise Application Portals,” eAI Journal, February 2001, p. 49. SL3046_frame_C01 Page 3 Friday, July 13, 2001 3:59 PM Introduction to E-Business  3 Figure 1.2 E-Commerce Projected Revenues (Forrester Research) E-BUSINESS OVERVIEW As the Internet has rapidly become a critical component of our lives, it is important to take a step back and understand the meaning of e-business and the various overused labels. Some people confuse the Internet, e-commerce, and e-business to mean the same thing. The Internet is the tool or vehicle. E-commerce is merely transacting (buying or selling) over the Internet or other electronic means. E-business uses Internet technologies to improve all business processes and activities within a business as well as processes that reach out to the stakeholders of the company. E-business is the integration of people, processes, and technology to conduct business. It uses technology to build global business processes, relationships, and com- merce. Some may refer to this as e-enabling the enterprise or e-enterprise. To simplify matters, I will refer to the entire Internet integration of an enterprise as e-business. A company’s e-business environment may include an Internet that is accessible to the general public, an Extranet that is accessible only to certain individuals with proper security, or an Intranet that is accessible to employees and internal individuals. E-business is not just putting out a Web page. E-business encompasses the entire business model of a company (business to employees, customers, suppliers, partners, and value chain), as shown in Figure 1.3. SL3046_frame_C01 Page 4 Friday, July 13, 2001 3:59 PM 4  A Practical Guide to Planning for E-Business Success Figure 1.3 E-Business Encompasses the Entire Business Model E-business impacts the relationships between customers, manufactur- ers, and suppliers. Common acronyms include:  B2B: Business-to-business, or automating the transactions between businesses. For example, inventory is checked automatically or even by the supplier to ensure enough parts are on hand to meet forecasted needs. If there are not enough parts, an automated order for the necessary parts is sent to the approved suppliers. The parts are shipped in time to meet the demand. Later, invoices and payments are transacted electronically. The business result is an event-driven environment driven by demand. B2B processing has many benefits. Reductions in inventory, manufacturing cycle time, and overhead costs can be realized. Defects and quality issues can be reacted to quickly, before building costly inventory. B2B allows a business to expand its reach globally. Customer and partner loyalty can also be increased through ease of use, greater efficiency of transactions, and personalization.  B2C: Business-to-consumer, or automating the consumer purchasing process. For example, the process may begin with an online campaign to interest the consumer. Customers visit the Web site, research the products, place their orders online, provide online payment via credit card, and receive electronic order confirmation. Customers can check SL3046_frame_C01 Page 5 Friday, July 13, 2001 3:59 PM Introduction to E-Business  5 the status of their orders online as well as address any order issues or questions. Customers receive their orders, can handle returns online, register the products, receive maintenance notifications, and obtain support through an online support center. There are many benefits to a B2C process such as increased customer satisfaction, increased speed of transaction from order to ship, decreased cost of sales, and decreased customer support costs. In the consumer banking industry, the costs of completing a transaction have gone from 1.05/trans- action just a few years ago to under 0.02/transaction using the Internet. Popular B2C models include e-tailing (www.amazon.com), consumer portals (www.autoconnect.com), bidding and auctioning (www.ebay.com, www.onsale.com), consumer care, customer man- agement, invoicing, and electronic bill payment.  B2E: Business-to-employee, or providing necessary information to internal employees via an Intranet. Examples include company infor- mation, self-management of benefits, and internal process and pro- cedure documentation and forms. B2E is a critical component for B2B to work properly. If this is not in place, B2B does not reap the full benefits.  A2A: Anyone-to-anyone, allows any entity to be able to do busi- ness with any other entity. A2A includes business-to-business and business-to-consumer, as well as consumer-to-consumer, business- to-exchange, and many other relationships. Chat boards or con- sumer bidding sites are examples of anyone-to-anyone interactions. E-business enables businesses to re-invent themselves and do business in entirely new ways. E-business changes the competitive landscape and distribution channels. It expands the marketplace, extends market reach, and increases revenue. E-business streamlines interactions, increases the speed of business, and increases the expectations of customers. As Figure 1.4 shows, e-business can impact market share, make successful companies, and kill companies that are slow to adjust. Successful companies of the future will be entirely e-enabled so that the Internet initiatives are inseparable from the rest of the company and tightly integrated in all their core business processes. These companies will not assume that the business model that made them successful in the past will carry them into the future. To successfully make the transition from e-business to a truly e-enabled enterprise, a company must begin by understanding its customers and anticipating trends in business, busi- ness applications, and technology. Klasson, Kirk, “Business Models for the New Economy,” Cambridge Technology Partners White Paper, Cambridge, MA, 2000, p. 12, www.ctp.com/wwt. SL3046_frame_C01 Page 6 Friday, July 13, 2001 3:59 PM 6  A Practical Guide to Planning for E-Business Success Figure 1.4 E-Business Is Not… Figure 1.5 E-Business Requirements BUSINESS TRENDS The Internet revolution is having a major impact on businesses and infor- mation systems today. The changes require businesses to operate very differently than in the past. As Figure 1.5 shows, these changes place new requirements and expectations on information systems. Businesses must be SL3046_frame_C01 Page 7 Wednesday, August 8, 2001 11:43 AM Introduction to E-Business  7 Figure 1.6 Paradigm Shift in Business Trends flexible, quick, customer-focused, innovative, collaborative, and global, and allow self-service. In fact, the A.T. Kearney CEO survey identified customer orientation, flexibility, and using technology well to be the top three critical success factors for the future. Technology and systems must be easy to use, integrated, reliable, responsive, flexible, easy to maintain, accurate, scaleable, global, and secure. In a sense, e-business is a cultural revolution. Critical business trends impacted by this paradigm shift, as shown in Figure 1.6, include:  Shift from a cost reduction strategy to a business growth strategy: In the past, most companies focused on cost reduction. Many of their projects focused on improving business efficiencies. The previous technology focus of implementing new Enterprise Requirements Planning (ERP) systems was largely seen as a way for companies to reduce costs and improve efficiencies. These efforts were effective because they typically used technology to replace manual efforts with computer processes that reduced manpower, thus lowering overhead costs. With the changing competitive land- scape and changing distribution channels, companies are using the Internet to capture market share, expand geographical coverage, and increase sales growth. Projects are shifting from cost-reduction A.T. Kearney (an EDS company), “Strategic Information Technology and the CEO Agenda,” www.atkearney.com, 2000. SL3046_frame_C01 Page 8 Friday, July 13, 2001 3:59 PM 8  A Practical Guide to Planning for E-Business Success efforts to investments for growth. Many dot com companies rose to popularity and quickly failed in the 1999–2000 time frame because they focused solely on growth rather than costs. If traditional management fundamentals prove true, to be successful over the long term, the focus must be on a balanced approach of cost reduction as well as revenue growth.  Increased speed of doing business: Companies are moving from fast to faster. There is an increased speed of doing everything. With technology changes and the Internet, customer expectations are changing. Customers want everything faster. Increased customer demands place new demands on businesses to be faster. Customer expectations are reshaping operational requirements for businesses. Business agility is a key to success in the new era. In the past, change and speed caused turmoil and chaos. Now, change and speed spell opportunity The speed of processes in companies is changing from calendar time to Internet time. Companies are shifting from a focus on long-range planning to shorter planning cycles with quick exe- cution. Rather than predicting the future, companies are learning to react to the future using technology.  Shift from self-containment to globalization: With the Internet, companies are becoming global overnight. Small companies have the same opportunities as large companies to capture global markets. In the past, functional departments, plants, sales territories, or countries would operate as individual independent self-contained silos. They could operate with different information, definitions, languages, cultures, and objectives. Now, there are no boundaries and separate entities must function as a single global organization to be effective.  Increased collaboration: The Internet is causing companies to be more collaborative among themselves, and even with competi- tors, to deliver a complete solution to the customer. Rather than linear and sequential supply chains, the markets are changing to networked webs of value. This new market is shown in Figure 1.7. In the new market, it is critical to have integrated information across an enterprise (even throughout the supply chain). No longer can companies have separate systems, platforms, and information silos. Rather than self-contained information, there is supply chain infor- mation sharing. It is critical that a company identify what it does best, or the core business value proposition, and select partners to outsource what it does not do best. A virtual organization of collaborative partners is created that can change if needed. There is an increase in the number of alliances and partnerships that a company needs to be successful in the marketplace. Supply chains are changing from being strictly linear to webs of common interest. SL3046_frame_C01 Page 9 Friday, July 13, 2001 3:59 PM Introduction to E-Business  9 Figure 1.7 Traditional vs. New Market Companies are combining goods and services into new bundles for a one-stop source. Some examples of various collaboration or exchanges include: — www.autoconnect.com tries to handle everything car-related — www.quicken.com tries to handle all financial needs for bank- ing, mortgage, retirement, investment, and insurance — www.altranet.com facilitates trade for the utilities industry — www.ratexchange.com facilitates public carriers and private com- panies to trade telecommunications capacity — www.commerxplasticsnet.com facilitates trade for the plastics industry — www.necx.com is a online exchange site for electronics — www.rosettanet.org is for electronic components and IT indus- tries — www.vics.org is for the retail industry — www.fmi.org is for the grocery industry — www.ehcr.org is for the healthcare products industry — www.efr-central.com is for the food service industry — www.seafood.com is for buying and selling of seafood As this list shows, there are many different types of exchanges, including storefronts, infomediaries, brokers, communities of inter- est or commerce, portals, and intermediaries. A strength of the online grocers (such as www.simondelivers.com) is that they can provide products from multiple companies; Bruggers Bagels and SL3046_frame_C01 Page 10 Friday, July 13, 2001 3:59 PM 10  A Practical Guide to Planning for E-Business Success HoneyBaked Ham can be delivered at the same time with milk and cereal from the grocery store, all in one stop. Companies are even collaborating with their customers. Microsoft distributed the beta version of Windows 2000 to more than 650,000 software engineers who tested the product and provided feedback.  Move from economies of scale to one-to-one relationships: In the past, to reduce costs companies would produce large quan- tities of the same item. In the new era, custom-tailoring products to the individual needs of each customer is important. Make-to-order rather than mass make-to-stock is increasing in importance. Tailoring communications to the individual needs of each customer is critical. Mass marketing is changing to mass customization. Companies such as Amazon (www.amazon.com) and Drugstore.com (www.drug- store.com) collect and analyze customer buying patterns so that they can tailor the marketing of products to the needs and desires of individual customers. For example, if Amazon sees a customer likes books on e-business, it notifies the customer when new e-business books are published. If a customer typically purchases Vitamin C from www.drugstore.com, the company notifies the customer when it has a sale on the product. Ritz Carlton hotels implemented a global computerized service based on specific customer profiles of key customers. Guests can specify preferences such as a room away from the elevator, foam pillow, a glass of White Zinfandel at night, and the Wall Street Journal in the morning. Although companies may have front-end business applications with customized one-to-one delivery, many have common back-end systems for efficiencies pro- vided through outsourcing or centralization. The Internet makes location less important and connectivity both cost effective and reli- able. For example, many different companies may outsource to the same call center provider. The script is customized by company, and personalized e-mails may be sent. The operations process is more standardized while the service to the customer is more customized.  Shift from internal focus to external focus: Companies are looking outside the walls of the corporation and reaching out to the customers. Companies today are giving the customers what they want rather than telling them what they can have, as in the past. With the assistance of tools such as Customer Relationship Management (CRM), companies are becoming customer-focused. Rather than building to inventory, some companies are shifting to build to a specific customer order. For example, Dell (www.dell.com) is focusing its strategy less on the actual hardware and placing more emphasis on the ability to configure to exact needs and deliver the hardware to the customer’s SL3046_frame_C01 Page 11 Friday, July 13, 2001 3:59 PM Introduction to E-Business  11 door. In addition to wanting products faster, customers want every- thing better and cheaper. Customers are more knowledgeable and empowered. More than 70% of automobile sales in 1999 were made to consumers who researched their purchases on the Internet. A survey by Deloitte Research of 900 executives in 35 countries con- cluded that manufacturers would be 60% more profitable if they became customer-centered.  Shift to customer self-service: Consumers are more educated and computer literate than ever before. Rather than an attitude of “let the customer beware,” the customer is becoming the most powerful force. Customers are willing to help themselves and obtain informa- tion directly, and companies are providing facilities to encourage self-service. Providing self-service can make better use of everyone’s time such as checking and ordering flights and hotels on-line rather than through a travel agent or making price comparisons. A good example of a company providing self-service through the Internet is Whirlpool (www.whirlpool.com). The consumers can assist them- selves by trouble-shooting and diagnosing issues with appliances and receive recommended solutions or replacement parts. The cus- tomers can complete the repairs themselves. Cisco Systems provides an online service database that enables customers to solve problems encountered by other customers.  Increased importance of processes: As the need to react faster while maintaining quality continues to be critical, companies are realizing the importance of having integrated, efficient, and effec- tive processes. A company’s customer satisfaction is only as good as its internal processes. Rather than having large structured pro- cesses, flexibility and adaptability are key to designing processes. In July 2000, the Federal Trade Commission fined seven Internet companies a total of 1.5M because they did not have proper business processes in place to handle orders and notify customers of problems during the 1999 Christmas season. Under federal law (the Mail and Telephone Order Rule), Internet merchants must deliver items by the time they specify or within 30 days of the order if no delivery time is stated. If they cannot deliver, they must have processes in place to notify customers and give them a chance to Prahalad, C.K., Ramaswamy, Venkatram, and Krishnan, M.S., “Consumer Centricity,” Information Week, April 10, 2000, p. 74, www.informationweek.com. “Making Customer Loyalty Real: Lessons from Leading Manufacturers,” CIO Maga- zine, Section 1, October 1, 1999, Deloitte Research (www.dc.com/research). Bacheldor, Beth and Konicki, Steve, “Long Arm of the Law,” Information Week, August 7, 2000, p. 24. SL3046_frame_C01 Page 12 Friday, July 13, 2001 3:59 PM 12  A Practical Guide to Planning for E-Business Success cancel their orders. With e-business, businesses are finding they are exposing their key processes beyond the boundaries of the corpo- ration’s four walls to global customers, suppliers, stakeholders, part- ners, and competitors.  Shift to virtual office: Although labor markets have been volatile since the NASDAQ crash, forecasts for experienced resources are tight. Companies are doing what they can to keep employees sat- isfied. Virtual offices are increasing as technology enables business any time and anywhere. This shift demands that companies have not only the technology, but also well-defined business processes in place. Someone who works out of the home needs to have the appearance of being at work to customers. Virtual offices have the power to support most business functions today, except for the manufacture of products. Eliminating large offices reduces overhead and provides a savings to the customer. It reduces travel on busy highways, reduces the number of parking spaces required, reduces the fuel and energy required for transportation and heating of offices, and enables a higher quality of life for employees. The future is using limited resources wisely, providing the best service possible to customers, and operating with the highest return to stakeholders.  Changing organizational structures: To remain competitive, companies are merging, acquiring, and divesting more than ever in the past. Organizations and organizational structures are changing overnight. Dot com companies are emerging and dissolving, and companies are spinning off Internet-based initiatives. The pendulum will continue to swing and organizations must be flexible. Companies are changing their organization structures to focus on groups of customers rather than on products.  Information systems and technology is a critical enabler to business rather than an afterthought: Information systems are an increasingly important component to the production and value delivery process. Companies are using technology to reinvent the business and maximize customer value. E-business is a critical enabler of business to provide a competitive edge in the market. Rather than just processing data and transactions, companies are truly using information to create knowledge. Rather than just using technology to create and document products as they flow through the process, technology is controlling the flow of information and products. Rather than just finding value in tangible assets such as building and products, value is found in relationships, branding, integration, and information. For example, FedEx (www.fedex.com) has a global network for moving shipments. However, its business strategy and actions emphasize that information about each shipment SL3046_frame_C01 Page 13 Friday, July 13, 2001 3:59 PM Introduction to E-Business  13 is as valuable as the shipment itself. Wal-Mart (www.walmart.com) is another example of a company that has placed as much value on sharing and moving information to secure a competitive advantage as it has on the products themselves. With technology improvements (cheaper, more powerful, higher bandwidth, higher reliability), tech- nology is everywhere in an enterprise. In addition to enabling new business, the Internet and technology are enabling a reinvention of the business mindset. Today’s commerce has evolved from the industrial revolution of the early 1900s when mass transportation, mass communication, and mass production were the name of the game. As the population grew, bigger was better. Tomorrow’s success takes a different road. Intangibles are becoming more important. Although the creation and consumption of goods are key to today’s economic growth, in the future, consumption will need to be tempered with the limitation of natural resources and a continued thirst for a balanced lifestyle. The computer and the Internet are the foundations for reinventing how we do business and how we communicate. E-business is expanding and breaking down walls for enlightened communication. It is important for companies to recognize how these general business trends impact their e-business strategies and plans, but the trends will also impact how their customers in a business-to-business environment may be changing. These changes may impact the business success of a company that has a strategy based on old paradigms. Cambridge Technology Partners (www.ctp.com) identified how the business model is morphing: We are going from a period marked by large hierarchies that were self-contained value-producing and value-exchanging entities whose economies of scope lowered transaction and coor- dination costs …to a period marked by narrowly focused value-creating enti- ties networked together based on well understood boundaries of complementary skills sets …to a community of hyper-competitive value-creating entities networked together by specialized value-exchanging entities, or e-markets, serving highly informed and empowered customers. It is indeed an exciting time Klasson, Kirk, “Business Models for the New Economy,” Cambridge Technology Partners White Paper, Cambridge, MA, 2000, p. 6, www.ctp.com/wwt. SL3046_frame_C01 Page 14 Friday, July 13, 2001 3:59 PM 14  A Practical Guide to Planning for E-Business Success BUSINESS APPLICATION TRENDS As Figure 1.8 shows, many business applications are enabled or enhanced by Internet technologies. These trends include:  Enterprise Requirements Planning (ERP): Although ERP is not getting the press and hype that it received in the late 1990s, ERP continues to be of utmost importance and has become a basic assumption to doing business. For a truly e-enabled enterprise, quality information must be available anywhere it is needed in real time. Information scattered in various islands of information hinders the development of e-business as it: — Increases costs — Decreases accuracy — Increases processing and development time — Reduces flexibility As companies are Internet enabling (or e-enabling) applications, it is becoming painfully clear how important it is to have an integrated and fully functioning ERP or back-end systems. If applications and business processes are not integrated, the customer will just see bad information more quickly. Interoperability across the enterprise is critical. Companies are synchronizing the front-office, back-office, supply chain, and customer-touching applications. Rather than need- ing ERP just for automating applications and business processes, ERP will be required to support a company’s e-business strategy. AMR research predicts ERP vendors will continue to grow at a rate of about 30% per year from 2000 through 2005 by addressing the needs Figure 1.8 Business Application Trends SL3046_frame_C01 Page 15 Friday, July 13, 2001 3:59 PM Introduction to E-Business  15 of those companies that have work to do in this area. Although this is half of their growth rate from 1995 to 2000, it is still a healthy growth rate. Examples of common ERP vendors include Oracle, SAP, PeopleSoft, and JDEdwards.  Customer Relationship Management (CRM): CRM software is used to optimize the efficiency of many areas of the enterprise by integrating areas such as sales, customer service, marketing, field support and service, and other customer-touching functions. CRM integrates people, process, and technology to maximize rela- tionships with all customers including e-customers, distribution channel members, internal customers, and suppliers. CRM function- ality includes: — Sales contact management, activity history — Proposal generation — Order entry and configuration — Sales management, forecasting, sales cycle analysis, sales met- rics, territory alignment — Time management, calendar, scheduling, e-mail, task management — Telemarketing, telesales, call list development, auto dialing, script- ing, call tracking — Customer service and support, incident assignment, escalation, tracking, reporting, problem resolution, warranty management — Field service, work-order dispatching, part management, pre- ventive maintenance — Marketing, lead generation, lead tracking, campaign manage- ment, data mining — Executive information, business intelligence, reporting, balanced scorecards  CRM is enabled by the Internet, which allows: — Self servicing to reduce costs and increase service to the customer — Providing information any time anywhere, multi-modal access — Personalized services with one-to-one marketing — Automated lead generation and follow-up — Data synchronization for distributed processing — Enterprise portals  CRM had grown to a 50B industry by 1999, and is expected to grow to 125B by 2003 (Computer Economics). Industry analysts claim that the industry grew over 40% per year from 1995 to 2000 and Norris, Grant, Hurley, James R., Hartley, Kenneth M., Dunleavy, John R., and Balls, John, D., E-Business and EPR, John Wiley & Sons, New York, 2000, p. 182. SL3046_frame_C01 Page 16 Friday, July 13, 2001 3:59 PM 16  A Practical Guide to Planning for E-Business Success will continue that growth during the next 5 years. Many top CRM vendors (such as Siebel, SalesLogix, Saratoga, Clarify, Vantive, Pivotal, and Firstwave Technologies) are substantially increasing revenues each year. Major ERP vendors, such as Oracle, SAP Baan (who purchased Aurum), and PeopleSoft (who purchased Vantive), are beginning to push into the CRM market and also experience tremen- dous growth.  Supply Chain Management (SCM): Today, the majority of e-business transactions are business-to-business sales. Purchases for maintenance, repair, and operating (MRO) activities range from buying office furniture to consumable supplies. Organizations typ- ically pay more than they realize to process these purchases with their paper-based systems. Computer Economics identified the typical cost for each of the paper-based orders in 1999 was 116, while the same purchase made on the Web cost less than 25. Furthermore, the cost of paper-based processing will continue to increase while Web procurement costs will decrease. Even more significant is the time wasted in processing purchases. The average organization required about 7 days in 1999 and 7.4 days in 2000 to move a purchase from request through approval. The same process done electronically took 2 days and 1.5 days in 1999 and 2000, respectively.  Enterprise Application Integration (EAI): It is becoming critical to synchronize front-office, back-office, and supply chain activities to attract and retain customers, fulfill demand, and improve cycle times and profits. Processes and information must be integrated worldwide. This integration can be difficult with different ERP systems within a company or for companies with an acquisition strategy, continually acquiring entities with differing ERP systems. A vendor’s lack of integration is evident when it is unable to immediately provide an available-to-promise date for delivery of an item. EAI technology makes the integration of differing systems possible.  Changing Technical Infrastructure: Security, continuous avail- ability, and scalability requirements are driving a new technical archi- tecture. The new architecture includes business component architecture, object orientation, smaller footprints, and interoperabil- ity (with defined Application Program Interfaces). Technical trends such as hand-held devices and remote devices provide any time anywhere access. Application Service Providers (ASPs) are also uti- lized when it may be more feasible to obtain external services.  Knowledge Management (KM): Analytical applications with canned data marts, data warehouses, data mining (looking for patterns and relationships in data), and artificial intelligence are increasing in SL3046_frame_C01 Page 17 Friday, July 13, 2001 3:59 PM Introduction to E-Business  17 acceptance and utilization as means to obtain more value from the increasing volumes of data that are collected. Tools to analyze the content and context of documents and generate visual maps to navigate through the data are valuable. Push technologies that auto- matically deliver information to a user based on a profile help manage a distributed environment.  Return on Investment (ROI) Applications: Companies are devel- oping applications on both the Internet and Intranet to increase sales and improve the return on investment. Photo-based organization charts, departmental news, company procedures, and office maps are nice but they do not help pay for the company Intranet. Companies are starting to look outside company bounds to establish a return on their Intranets. Other companies may be willing to pay a significant amount of money (or discounts) to be positioned on a company Intranet. These relationships can be beneficial to all the companies as well as to the employees. In an Intranet promotional partnership, the company receives discounts or payment in exchange for the ability to market goods and services to employees through the Intranet, for example, money management services, financial and housing programs, health and wellness programs, travel services, banking services, office supplies, products, or books. Companies are also looking at how they can obtain a profit from their Internet sites. Some companies are charging for content and information by selling information and reports or charging a monthly fee for providing access to certain information.  Communication Applications: Web conferencing, Web broad- casting, Web-based training, and groupware enable one-to-one, one-to-many, and many-to-many communication. Companies are integrating this powerful two-way communication vehicle into their Internet functionality. It is critical to acknowledge these business application trends and deter- mine their possible impact on enabling a business strategy of the future. TECHNOLOGY TRENDS There are many advances in technology that enable the e-business era and application changes discussed above. There are technology changes in all areas of the infrastructure, including the network communications and servers as well as the desktop and peripherals:  Network communications: Connectivity is increasing. Everything is electronically connected to everything else. An example is the CadillacSL3046_frame_C01 Page 18 Friday, July 13, 2001 3:59 PM 18  A Practical Guide to Planning for E-Business Success On-Star program (www.cadillac.com) that relays an electronic mes- sage to a control center to dispatch assistance when an airbag is inflated. Numerous telecommunications advances, such as satellite communications and improved fiber optics, enable increased con- nectivity. There has been a melding of voice, data, and video. New communications architecture alternatives include point-to-point tun- nel protocols (PPTP) and layer two tunneling protocol (L2TP) that allows entrance to the corporate network through firewalls via the Internet or semi-private networks. There is an increased use and reliance on the Internet as a backbone.  Servers: With improved efficiencies in servers, the total cost of processing a business transaction continues to decrease. Throughout server architecture, there is increased interoperability and communi- cation among diverse platforms. Object-oriented programming (OOP) continues to improve. Although object programming may not have come on as strong or successful as many predicted, with interoper- ability increasing, solutions can be integrated more so than in the past. Also with increased interoperability, there is a convergence of the infrastructure and an increased importance and availability of middleware. Distributed computing is enabled by improved data synchronization ability and enterprise synchronization with personal database and multiple database servers. There has also been an increased use of Java, HTML, XML, and other Web development and thin-client technologies to support n-tier architecture. Graphics, video, and sound capabilities have improved due to compression algorithms, larger storage devices, and improved multimedia technology. Exec- utive information systems provide users with increased power to obtain information. Application service providers are increasing in popularity to support the growing requirements.  Desktop and peripherals: Computer chips are becoming smaller and more powerful. They are embedded into nearly everything, making processing ubiquitous. Wireless technology provides infor- mation everywhere. Cellular and other mobile technologies allow sending and receiving of data anywhere. Natural and easy-to-use interfaces enable more people to use technology, with features such as voice recognition. There is an increase in multi-modal access, hand-held, and personal digital assistant (PDA) devices to provide the ability to access information any time and anywhere. Computer and telephone integration, pen-based computers, and other mobile devices such as bar coding and smart cards improve the entry and transmission of information. Security is improving through the use of encryption, biometric, and other measures such as iris, retina, and fingerprint recognition.SL3046_frame_C01 Page 19 Friday, July 13, 2001 3:59 PM Introduction to E-Business  19 The challenge for an organization is understanding what the various trends in business, business applications, and technology mean to the business and identifying emerging opportunities due to the changes and trends. Companies must also learn to react quickly and take advantage of opportunities before the environment changes. BARRIERS TO E-BUSINESS Many companies experience barriers to moving to an e-business model. This is not as simple as building a Web site or installing packaged software applications. It means fundamentally changing how the business processes function. Some of the barriers are shown in Figure 1.9. They may include:  Channel market conflict: One large manufacturer went quickly into the e-business era and launched the capability for consumers to purchase its product over the Internet. Its previous channel had been solely through distributors. When the distributors were informed of the company’s new endeavor, they were very unhappy and threatened to stop distributing the company’s product. The company almost lost its entire core business by failing to understand the full impact of its new Internet endeavor. It quickly removed its newfound Internet functionality. Barriers to E-Business Failure to utilize technology Channel market conflict Inadequate architecture Business process inefficiencies Failure to manage change IS process inefficiencies Failure to analyze impact to business Lack of application plan integration Lack of clear ownership Lack of training Lack of investment Duplicated efforts Inefficient design Figure 1.9 Barriers to E-Business

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