From hype to hard work

Opinions differ as to the readiness of South African business to start trading in a paperless, virtual marketplace.

South Africa has the necessary infrastructure and enabling technologies for electronic commerce, believes Grant Brewer, Ernst & Young ISAAS (Information Security Services) and e-commerce national manager. What is lacking is trust.

"The lack of security, trust and reliability are viewed as the main obstacles in pursuing e-commerce as a business strategy," he says.

Hundreds of stories about security breaches hit the news daily and all major IT authorities have research findings to justify users' distrust. US-based IT research company, Forrester Research, estimates that for every $1 000 of transactions which occur on the Internet, $1 is lost to fraud as a result of security violations.

Ernst & Young `s Second Annual Global Information Security Survey asked the question: "Would your organisation increase or begin to use the Internet for important business information or transactions if its security was enhanced?" Some 74% said they would be willing to take the leap into e-commerce if lack of security was no longer such an inhibiting factor.

The survey also found that almost 50% of South African organisations believe their information security risks have increased over the past year.

Capitalising on its expertise in providing business solutions and security procedures, Ernst & Young has come up with CyberProcess Certification - a methodology developed by Ernst & Young in the US and South Africa - which guarantees authentication, transaction security and the maintenance of online customer privacy.

"In the same way as an auditor signs off a company`s accounts, ISAAS will sign off the components of the electronic business processes, ensuring that the claims made by the company are indeed valid," explains Brewer.

Baltimore, the world`s largest supplier of e-business security solutions, recently launched its offering in South Africa through its local representative, USKO Communications.

David Pinnell, a Baltimore director, believes that end-to-end e-commerce security systems have come of age. "With Web technology accepted as an inexpensive way of communicating and conducting transactions, the only factor preventing companies from completely embracing e-commerce has been the lack of security. Given that in 1997, 75% of organisations surveyed in the UK reported financial losses due to security breaches, it is hardly surprising that business has been slow to embrace the e-business concept.

"Cryptography will change this," states Pinnell.

Increasingly more global players are offering their wares to the fledgling South African e-business industry. Prism has formed a partnership with Dublin-based Trintech, which has an Internet payment gateway, an Internet merchant payment solution and a consumer electronic wallet.

Obviously, there is no dearth of leading-edge technology and trust seems to be slowly building up.

However, some warn that the Internet has a long way to go before it can meet business demands.

Ermano Quartero, director of e-commerce at LoyalLink, says: "Business-to-business e-commerce requires an infrastructure with quality of service (QOS) guarantees and 24 x 7 x 365 customer support. This is simply not possible with the public Internet and the complexities around IPSec, the IP-based secure protocol."

LoyalLink, the e-commerce and loyalty subsidiary of Linx Holdings, which is joint venture between Dimension Data, Nedcor and Old Mutual, is marketing QOS ATM-based virtual private networks (VPNs) as an e-commerce infrastructure.

"The QOS VPN can become an organisation`s intranet, hosting vital business applications, including human resources, tax, financial planning, sales management and even ERP systems," says Quartero.

Auto-mate recently switched to a VPN, supplied by OmniLink, to ensure communications with around 250 of its motor dealer customers. "This is the reality of the business-to-business e-commerce vision," he adds. "In the US, General Motors, Ford and Chrysler have also embarked on a similar initiative. There, the Automotive Network Exchange aims to provide a secure network service to link automotive suppliers and vehicle manufacturers."

Technology is so pervasive in the banking business that GartnerGroup considers banks to be IT companies rather than merely financial institutions. Globally, Internet banking applications are booming. IDC found that sales of these applications topped $93 million in 1998 and will jump to over $326 million in 1999.

IDC attributes the growth to "widening acceptance of the Internet and seismic changes in the financial services industry that leave banks, insurers and brokerages competing for customers in a free-for-all environment".

The competition for companies that provide online banking applications comes from in-house development efforts. "Conservative financial institutions have long considered internal technology development a sacred part of their operations because of its strategic importance," says Albert Pang, research manager with IDC`s e-commerce software applications program.

In this respect, South African banks, which have been at the cutting-edge of technology, also appear to be conservative, as all the major banks rely on in-house developed applications.

David Parratt, senior manager of Customer Electronic Delivery at Standard Bank, says the bank has developed BEST 2000, a Java-based application that aims to convert 17 000 Beltel clients from using video-text to an Internet environment. The bank has finalised the pilot stage and is about to start the roll-out of Best 2000.

Standard Bank's corporate dial-up system, Corporate Access Terminal System (CATS), will be upgraded to an Internet-based environment by the end of the year. CATS is also being developed in-house.

"A company with a streamlined process for customers or suppliers to access their inventory data has a competitive advantage over the company that still has to warehouse tons of stuff," says Jim Balderston, an analyst with Zona Research.

The IT channel should be an ideal environment for the realisation of such a competitive-edge. But those who make their living by selling computer hardware and software have been slow to embrace the online business model. Although all the leading distributors have dealer-only Web site areas, where dealers can check stock availability and pricing and do online ordering, most of them are not ready to perform online transactions. Even if they were, their suppliers aren't offering the functionality yet.

Datatec Distribution's Lauren Canavan says Datatec's dealer site currently offers product price lists and online ordering. SDD's Gregory Makwapa, technical marketing, database administration, says SDD's dealers can check their credit status and place orders online, but there is no payment facility yet.

Steve Kramer, sales and marketing director, First Technology Group (formed through a merger of the Hi-Tech Group and Epsidon Distribution) believes people are still very apprehensive about paying on the Web. He estimates that only 35% to 45% of First Technology's 3 200 dealers have Internet access and only a small percentage of those are ordering online - the bulk of sales are made via fax or e-mail.

The healthcare industry was faster to offer online medical information services. Discovery Health (formerly Momentum Health) has worked with the Internet Solution to develop WebEDI, a system that allows members to submit claims online and brokers to submit new business over the Internet.

In online business, customer support is as vital as in the offline world. Discovery Health runs a 24-hour help desk and uses dual redundant connections to ensure high speed and reliable access to the system.

The boundaries between business-to-business and business-to-consumer are becoming blurred in online business. Companies that sold primarily to businesses can easily start selling to consumers and vice versa. An IDC study identified this crossover effect. "Merchants must recognise and adapt to this new business-to-business/consumer customer, which is very different from their traditional customer base," says an IDC analyst.

There are pressing issues to be taken care of. Due to the pervasive nature of the Internet, online merchants must be prepared to handle international commerce and taxation issues, which are extremely complicated.

Inevitably, electronic business hype is quickly followed by electronic business hard work: database integration, Web-to-ERP integration, putting up electronic payment and security infrastructure, taking care of fulfillment - and above all, getting ready for a 24-hour economy. All of this takes time, people and money.

The industry visionaries seem to be unanimous: After the year 2000 problem is solved, e-business is where the most significant process improvements will be made and where all the competitive advantage opportunities will be. Those who wish to capitalise will have to start the hard work of ramping up e-business while the hype is still rife.

PREDICTIONS

Ernst & Young: After the year 2000, South Africa will see an unprecedented proliferation of e-commerce applications and increasing commercialisation of e-commerce capabilities, resulting in a complete re-engineering of commerce.

GartnerGroup: By 2002, 25% of consumer spending and 70% of business-to-business commerce (in developed countries) will be Web-involved.

IDC: Business-to-consumer commerce on the Internet will reach more than $400 billion by 2002, reflecting a 1997-2002 compound annual growth rate of 103%.

Forrester Research: US business-to-business Internet commerce will grow from $43 billion in 1998 to $1.3 trillion by 2003, or more than 9% of all US business trade.