E-business Report Card - Industry Trend or Event

E-BUSINESS IS MATURING. Where once it seemed enough to put an "e" in front of a product or a company name or to append a ".com" to just about anything, now it is recognized that e-business success requires something more. At the most fundamental level, successful e-businesses recognize that e-business is a business issue. Business strategies lead to e-business strategies. Once an e-business strategy has been developed, business practices and supporting technology must be defined and implemented. And e-business requires a long-term commitment to a perpetual process of market awareness, product and strategy development, implementation, and execution.

Inflated market capitalizations might happen overnight, but c-business success does not. E-business, it turns out, is just as subject to economic laws as any other industry.

Another sign of e-business's increasing maturity is the growing promise of e-business. Early e-business opportunities were fairly discrete: a Web store front, an intranet human resources application, or a utility function like e-billing, for example. These days we're talking about fully integrated e-businesses, with customers, suppliers, and internal operations linked seamlessly through the power of the Web. In this fully integrated world, the opportunities--and the challenges--often affect the entire business, making c-business that much more compelling--and more dangerous.

No one who follows e-business news can be unaware of the collapse of many dot-coins during 2000. Nor of increasing doubt that a Web-only business model leads to, much less maximizes, profitability. Nor of growing concerns over privacy and security. Nor a hundred and one other issues that have beset e-business. These growing pains are a natural part of e-business's maturation. Nonetheless, they present a red flag to many considering the state of e-business today.

Against this backdrop, there is always the question of what is really going on with e-business. Is everybody jumping on the bandwagon? What are the true benefits and costs? What are the essential technologies? Does c-business require Java? XML? And what about the relationship between the business and IT? Who owns e-business projects? Who manages them? And how are they funded?

As part of my work with Cutter Consortium, I conducted a survey to answer these and other questions. Cutter has published the complete survey results under the title E-Business: Trends, Strategies, and Technologies (see www.cutter.com/itgroup/reports/ebustrend.html for more information). This article draws on survey findings to present an e-business report card, a summary of the state of e-business today. Existing e-businesses can use the report card to see how their experience stacks up to that of others and to identify the next steps in their e-business efforts. Companies that have yet to take the e-business plunge--yes, there are still plenty of these--can use the report card to better understand if, when, and how they should embrace e-business.

Taking Over the World?

One persistent theme with almost any new trend is that of a tsunami, swamping everything in its path. This claim is usually followed by a corollary claim: If you don't adopt the trend now, you're going to end up as fish food. Considering these claims against reality, however, paints a different picture.

Certainly this is the case with e-business. Depending on how you define it, e-business began in 1994 or 1995. Right from the beginning, e-business pundits lost no time in repeating the age-old refrain about taking over everything and relegating non-adopters to the dustbin of history. But here we are five or six years later, and we're still a long way from total adoption of e-business.

Only 42% of our survey respondents (drawn from an international sample) are currently doing e-business. U.S. firms are almost twice as likely to be doing e-business as non-U.S. firms: 56% of U.S. respondents are doing e-business versus 29% of non-U.S. firms. It is interesting that almost everyone (87%) has investigated e-business, so it is on most companies' radar screens.

The original e-business applications were generally customer-facing: brochureware, Web store fronts, online customer service, etc. The momentum from these early applications still colors industry's attitude toward e-business. When asked to rank potential e-business benefits, respondents gave much more weight to customer-facing possibilities than they did to supplier-facing and employee-facing options. The highest-ranked benefit is as a new channel for existing business; second is to improve customer service; third is to enable a new line of business. Efficiency-enhancing benefits--improving cycle time, reducing operating costs, and reducing cost of sales, for example--were judged to be far less promising.

Customer-facing applications take top billing among applications deployed, too. Among respondents doing e business, 43% are using customer-facing applications, 36% are using employee-facing applications, and 30% are using supplier-facing applications. Brochureware (publishing marketing information on the Web) is far and away the most commonly used customer-facing application, followed by self-service sales, integrated call centers, and e-billing (sending bills over the Internet). Virtual office functions, self-service human resources (over an intranet), and electronic time-and-expense (T&E) reporting are the most commonly used employee-facing applications. Purchase-order entry, c-payment (making payments over the Internet), and e-billing (receiving bills over the Internet) are the most commonly used supplier-facing functions.

Most companies doing e-business today have focused on one aspect. Very few companies are using applications in all categories, and few of these have fully integrated their legacy applications. The fully integrated e-business is far more the exception than the rule.

A Business Issue

Since the growth of the Web--a technology--was the catalyst for e-business, it has been particularly easy to focus on technology when thinking about e-business, even to the point of thinking that the technology is e-business. But it is obvious by now that being on the Web, using Java, XML (extensible markup language), or WAP (wireless application protocol), or having a sophisticated e- CRM (electronic customer relationship management) application means nothing unless it supports business objectives.

Cisco, Dell, Amazon, Charles Schwab--the names that consistently appear on any list of leading e-businesses--are not successful because they use cool technology. Rather, they are successful because they use technology to achieve business objectives and they have integrated e-business with their businesses--so much so that it probably makes more sense to call them "e-businesses" rather than "businesses.

Such commitment is not common, however, in industry-at-large. Only 29% of survey respondents consider e-business a major weapon in overall business strategy. The largest segment of respondents (37%) is doing e-business in response to competition, and 4% are doing it in response to trading partners. The remaining 30% see e-business as peripheral to business strategy or as experimental, or in some other way.

On the IT side, 51% of respondents see e-business as a necessary component of their IT strategies, while 26% see it as the driving force of their IT strategies, and 23% see it as peripheral or experimental to their IT strategies.

At the operational level, business has taken the lead with e-business initiatives. In terms of both ownership and funding, the business side of the house is most often responsible. Almost half (49%) of survey respondents say that business owns their e-business initiatives, and 32% say that ownership is shared between business and IT. Only 19% say that IT owns e-business in their companies. The funding story is even more dramatic, with business funding e-business for 59% of respondents, and business and IT sharing the burden for 30% of respondents. Only 11% of respondents say that IT has sole responsibility for funding e-business.

Reading between the lines shows that business is taking e-business seriously, even if the average e-business doesn't have the commitment of a Schwab or a Cisco. Business is willing to take responsibility for e-business and to put its money where its mouth is. For most e-businesses, e-business is a business issue.

Business and Technical Excellence

Business is the driver, but technology is still important to e-business, of course. E-business success requires business excellence and technical excellence. The fact that the degree of excellence will be judged in the court of (Internet) public opinion puts that much more pressure on IT to deliver a superior technical product. E-business applications must be stable, reliable, secure, fast, extensible, and usable, at a minimum. Those that aren't will be judged harshly. Using the right technology and using it well is the only way to deliver market-pleasing e-business applications.

The technical foundation of e-business technologies is composed of the basic Internet technologies: TCP/IP, HTTP(S), HTML, and Web browsers. Resting on that foundation, we have development technologies like Java, Perl, and XML, and then the applications built with them. For our purposes, we will assume the use of the foundation technologies and focus our attention on the higher-level technologies.

In the development technologies, a technology triumvirate has emerged: Java, XML, and application servers are the signal technologies of the e-business era. Over half (51%) of survey respondents use Java; 53% use an application server; and 21% use XML.

Java is used by more survey respondents than other e-business-friendly programming languages. Some other languages arc nipping at Java's heels, however. Visual Basic and C++, in particular, are also widely used for e-business applications. Beyond the 51% of respondents already using Java, another 12% plan to use it and 14% are reviewing it for possible use.

Application servers are naturals for a Web-based architecture. The nominally "thin-client" browser interface dictates that the heavy processing of business logic be separated from display formatting and presentation--which is precisely the point of application servers. Application server use is poised to grow beyond the 53% of respondents currently using the technology: 16% plan to use it and 18% are currently reviewing it.

Despite XML's early billing as the next step in markup languages after HTML, XML really caught on because of its middleware functionality. Using XML to enable communication between disparate systems is what catapulted XML into the mainstream. In addition to the 21% of respondents already using XML, 25% plan to use it and 28% are in the process of reviewing it.

Another technical issue, and one of the more daunting tasks facing established companies as they embrace e-business, is that of bringing core systems into the e-business world. The difficulty of doing so is reflected in the fact that only 15% of survey respondents have e-business enabled their core systems. The most common method used to do so is application servers: 54% of those who have e-business enabled their core systems have used application servers for at least part of the solution. Surprisingly, the second most commonly used technique is to use native e-business applications for core functions. Middleware in various forms--screen scrapers, ORBs, wrappering, etc.--is also commonly used.

The most-used e-business technology, in terms of industry penetration anyway, is intranets. With 72% of respondents using intranets, they are used by more companies than their cousin extranets at 42%, portals at 11%, and automated testing tools at 30%. Just as the Internet grew quickly--once it escaped from academia--because it improved communication, so have intranets grown, because they enhance communication within a company. And, also like the Internet, once intranets are installed they provide the foundation for an increasing number of efficiency-enhancing applications: self-service HR, electronic T&E, internal Web sites, electronic purchase requisitions, and so on.

It should be mentioned that no technology, with the exception of the Internet, is used by all companies. This speaks to two aspects of technology usage. First, no technology has proved so valuable that everyone feels compelled to adopt it. Second, technologies are tools, suitable for some jobs but not for others. Part of e-business success is matching the right tool to the job.

Organizing for E-business

To support its company's e-business efforts, IT must collaborate with the business side of the house. This collaboration should occur at various levels--from strategic planning through implementation and execution. Collaboration should also occur in various ways--reporting structures, joint development teams, and so on.

Two-thirds of respondents are organized so the CIO reports to senior business management: for 57% the CIO reports to the CEO and for 10% the CIO reports to the COO; for another 6% of respondents the CEO is the CIO; and 9% of respondents say that the CIO reports to the CFO. Given the emphasis during the last 20 years on raising IT to the boardroom, it would be surprising if few CIOs reported to CEOs and COOs. What is surprising, however, is that 9% still report to the top financial officer. This structure harkens back to the early days of data processing, when computers were used primarily to support back-room accounting functions. Since one of the consequences of such a reporting structure is often an extreme cost focus with minimal concern for responsiveness and adaptability, it is unlikely that companies organized this way are prepared to respond to the constantly changing demands of e-business.

Consistent with most CIOs' positions in their organizations, the CIO is a member of the strategic planning group for 85% of respondents. Where this is the case, several other senior IT executives (usually five to seven) are also typically part of the strategic planning effort.

E-business often requires significant organizational change, and many companies establish special groups to promote e-business success amidst the turmoil. Among survey respondents, 69% of those doing e-business have a group dedicated to promoting e-business. Most of these groups are small to medium-size: 56% have one to five people; 10% have six to 10; 23% have 11 to 25; and only 8% have more than 50 people.

Up and Down the Supply Chain

With 42% of respondents doing e-business, 51% of respondents using Java, and similar figures for many other e-business technologies, it seems that e-business is well on its way to broad adoption. This is true at the level of point solutions (Web-based ordering, self-service HR, etc.), but when more complex e-business functions like e-SCM (electronic supply chain management) are considered, the picture changes considerably. A much smaller segment of the industry is using complex applications.

In early 2000, 2% of industry was using e-SCM. By late summer 2000, that figure had grown to 16%. This was the time period when e-SCM really began to catch on. Where it goes from here remains to be seen. Early projects have had mixed results, and much of industry is only marginally prepared to take advantage of e-SCM. With applications like e-SCM that require the cooperation of other companies, it is obvious that a company's trading partners--both customers and suppliers--must be ready for e-business if the company is to have much success using the application. As things stand now, both customer readiness and supplier readiness stand in the way of the rapid adoption of e-SCM and other complex, intercompany e-business functions.

Eighty percent of survey respondents rated their customers' readiness for e-business in general as average, unprepared, or totally unprepared. And 79% rated their suppliers' readiness as average or less.

First-generation e-business was simply about using the Web in business, primarily in the form of brochureware. Second-generation e-business was primarily about e-commerce (selling things over the Web). Third-generation e-business is about integrating business partners through the Internet. The first two can be implemented independently while others come up to speed. The third cannot. Lack of readiness in industry at large will limit the adoption of complex e-business applications like e-SCM.

Still Time to Get Onboard

The picture of e-business that emerges from considering the data shows that e-business is still young--it is, perhaps, just now entering adolescence. Most companies doing e-business have focused on implementing point solutions and installing the necessary technologies. They have not established integrated e-business environments where all applications are linked together and they, their customers, and their suppliers communicate seamlessly over an Internet backbone.

This leads to two ways to consider e-business, depending on where your company is today.

If you are already doing e-business, the key issue is how to do it better, whether that means improving existing e-business efforts or launching new ones. The beacon pulling you forward should be the vision of the totally integrated e-business. You should work to get there by taking a step at a time. Leverage what you are already doing well, repair or replace problem areas, and launch new initiatives as business needs emerge.

If you are not doing e-business, the first thing to take away from this article is that there is still time. E-business is, at best, in its adolescence. When considering whether to begin doing e-business, the place to start is to talk with the business folks, and ask these questions:

* What are the top business priorities today?

* Is it driving down supply chain costs?

* Is it improving recruiting and retention of talent?

* Is it competitive advantage--staying ahead of the competition or catching up to it?

The answers to these questions point the way toward your first e-business direction. Take incremental steps down that path, keep the business involved, and make sure that business and technology evolution work hand-in-glove--and you will greatly increase your chances of e-business success.

It goes without saying that e-business is here to stay and that it has already made a mark on industry. But there is still a long way to go. Its potential outstrips the reality that has been achieved. That's the final report on e-business today--the best is yet to come.

Chris Pickering is a senior consultant on Arlington, Mass.-based Cutter Consortium's Business-IT Strategies Service and the president of Systems Development Inc., a research and consulting firm. He is the author of Cutter's recent E-Business: Trends, Strategies, and Technologies (www.cutter.com/itgroup/reports/ebustrend.html), as well as the periodic Survey of Advanced Technology.

                         Are You Doing E-business?
         Yes No
U.S.     56% 44%
Non-U.S. 29% 71%
Source: Cutter Consortium
There's still time to get onboard. Only 42% of survey respondents are
currently doing e-business. U.S. firms are almost twice as likely to be
doing e-business as non-U.S. firms.
                         Who Owns Your E-business?
Shared   32%
Business 49%
IT       19%
Source: Cutter Consortium
Business has taken the e-business lead, in terms of both ownership and
funding. Almost half of survey respondents says that business
owns their e-business initiatives.
                               XML's Status
Not Aware   14%
In Use      21%
Plan to Use 25%
Revewing    28%
Reviewed     6%
Not Using    5%
No Longer    1%
Source: Cutter Consortium XML caught on because of its middleware
functionality. Enabling communication between disparate systems
is what catapulted XML into the mainstream.

COPYRIGHT 2000 Wiesner Publications, Inc.
COPYRIGHT 2001 Gale Group