Paul Whalley, General Manager of business applications vendor, Industrial & Financial Systems (IFS), discusses some of the major fallacies surrounding e-commerce and the need to develop a sound eBusiness backbone on which to build a viable Web-enabled business.
In the rush to Web-enabled commerce, companies are forgetting about the importance of the structural backbone. What works in the physical world might not in the electronic world, which is why the eBusiness backbone has become key to e-commerce success.
The Gartner Group has made no bones about the fact that companies that want to sell physical goods over the Internet should first craft a strategy for efficient back-end fulfilment.
Enterprises that fail to do this will have lower profitability and may permanently damage customer relationships, it says in a report last year on the importance of the eBusiness backbone.
It is no good having thousands of orders coming in electronically a day, if core systems are not totally integrated with the eBusiness and, for example, e-orders have to be re-keyed before being progressed in the physical world and the requested goods found to be out of stock with a four week lead time before replenishment.
CRM vs ERP
There is a fallacy being promoted in the industry currently that successful e-commerce is dependent on front-end CRM (Customer Relationship Management) solutions rather than ERP (Enterprise Resource Planning). It is not a simple `either/or` choice, however much both sides of the argument would like to believe.
Web commerce involves end-to-end business processes. Companies need to place just as much focus on the back-end processes as on the front-end processes.
The scope of ERP solutions has been growing constantly over the years and ERP products are clearly becoming the backbone for business computing in most organisations. Growing in scope means extending the traditional ERP business process to support a larger area of an organisation`s operations.
But the widespread use of the Internet is forcing the development of mass-customisation and spelling the end of the One-Size-Fits-All concept of business solutions.
This will result in almost as many different products making up a solution, as there are customers and will be based on open, standards-based Best-of-Breed products able to be integrated easily with the rest of the solution.
IT requirements are very different in such a world. Solutions have to meet today`s end-to-end needs, yet be flexible enough for organisations to differentiate themselves and achieve their own competitive advantage. Solutions flexibility is key to the future as well, as businesses ready themselves to meet the challenge of ever- and rapidly- changing business environments.
Component technology has a track record of successful implementations, meeting time schedules and budgets and ensuring systems perform as they are supposed to, with the added advantage that they can be extended, modified and changed as required.
Apart from the ERP vs CRM argument, other fallacies are emerging in the headlong rush to e-commerce.
A Low-cost Sales Solution
Many companies believe that because they are selling via a low-cost medium with no bricks and mortar overhead, they must be making money over the Web. But most aren`t as current research is showing only too clearly.
Although we know Internet transactions, per se, are inexpensive, the total costs of doing business on the Web carries a heavy price. Most companies fail to capture the true costs of order fulfilment and delude themselves into thinking that their e-commerce activities are profitable.
It is essential that companies are able to capture and measure the true costs of Web fulfilment on an on-going basis so they can be analysed and a plan put in place to lower them.
The Web Site Differentiates
Another fallacy is that the front-end of a Web site - the Web page and how potential customers interface with the company - is what differentiates e-commerce companies. But the fact is anyone - from a home-based operation up to a global enterprise - can post product information on a Web site and take electronic orders.
What really differentiates e-commerce players is their relationships they develop with suppliers and how they optimise the physical flow of goods. That way they not only get orders through the front end, but ensure they keep them through good back-end practices.
To differentiate the strategy e-commerce companies need to deploy is one that ensures they can provide guaranteed delivery, mass customisation and on-line order status information - the eBusiness backbone again.
Integrate Later
A fourth fallacy is that companies believe they can do back-end integration later and simply relay data from the Web ordering system into a traditional order management systems.
It can be done. But it will be at a cost not only in terms of the amount of the numbers of temporary workers that have to be recruited, but in terms of lost customer relationships through Web orders for out of stock products. It needs the best tools available to map the processes between web-related and internal activities and to integrate between the front and back-end quickly and easily.
The Global Carrot
The fifth fallacy - but by no means the final one as scores of them exist in the e-commerce world - is the global carrot. Companies believe that a Web presence is a global presence. And it is. But that does not mean that they are equipped to trade globally.
Suddenly, such companies have become exporters, but know nothing about the different import policies of different countries; how they are going to be paid; and who they are going to use to ship the goods.
Companies cannot afford to ignore the international trading opportunities offered by the Web, but they need to decide whether it is going to be a major focus and plan accordingly. Solutions need to be able to support multiple currencies, languages and International procedures.
At the end of the day it all boils down to getting that eBusiness backbone right so that the Internet can be used to its full extent to increase the performance of business processes and business relations, and improve competitiveness.
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