There is a new, quiet evolution going on, as organisations adopt new e-business models to drive up productivity and reduce costs.
Given all the hype surrounding the new economy, it was easy to forget that e-business is a word of two halves: e and business. Forget the business at your peril, as the demise of the dotcoms confirms. They could not survive because their underlying business model was not viable. Simply put, the e stands for the transformation of business processes using internet technologies; it is an enabler, not a panacea.
Unlike the 1990s – the heyday of big ticket IT projects, as organisations implemented ERP systems to streamline their internal operations and achieve cost savings – we will see an evolution to e-business until the e fades away and we wonder what all the fuss was about. Moreover, the focus on internal streamlining overlooked the fact that business processes extend beyond the boundaries of the organisation.
Business involves buying and selling and collaborating with partners, so it’s no surprise that the areas of e-procurement and customer relationship management have been the first to apply e-business techniques.
Of course, collaboration is not new. It is vital to a well-managed supply chain, as organisations like Halifax demonstrate. Halifax already has well-developed relationships with strategic suppliers, and an active policy to reduce the number of suppliers they do business with to achieve cost savings.
What is new is the internet, a technology enabling collaboration at a much deeper level. Halifax is using the internet, not just to streamline its own processes, but also to streamline the end-to-end procurement process in collaboration with its suppliers.
You can’t achieve this sort of ‘joined-up’ extended enterprise without a clear vision of what the changed business landscape will look like.
Vision is critical, because we are building to an unknown future where the technology is constantly changing.
Ian Taylor, head of procurement at Halifax Group headquarters, explains the Halifax vision as follows: ‘the business goals for the e-procurement project are to have one group-wide procurement website from which we anticipate significant cost reductions through focusing on fewer suppliers and an improved ability to negotiate with them. At the same time, our employees will receive deliveries of supplies far more quickly and efficiently than before.’
Equally, you can’t get to where you want to be with one mega e-procurement project. The days of big IT budgets are gone; instead businesses are looking for investment in IT to produce a rapid return on investment, incremental investment in standardised component-based technology, not large one-off investment replacing redundant or obsolete technology.
This is recognised in the evolutionary approach taken by the Halifax.
The start point was a ‘proof of concept’ pilot, consisting of an e-procurement website hosting a limited catalogue of products from a small number of suppliers, that enables users to raise requisitions against approved contracts. (There are obvious benefits in this alone – for example maximising the use of purchase contracts. When users were given the URL for their intranet e-procurement website, they were able to raise requisitions against contracts immediately without training because browser-based requisitioning was so intuitive.)
But e-procurement is more than just requisitioning and presenting a web-based catalogue to the users. The e-procurement website is integrated to the Halifax core procurement system to provide integrated end-to-end, req-to-cheque functionality that handles invoice matching and payment.
The system is already delivering benefits in terms of streamlining internal processes, but the way to achieve genuine savings in the cost of goods and services procured is to drive costs out of the supply chain, which can only be done in collaboration with suppliers.
In building symbiotic relationships with suppliers, Halifax recognises that one size probably does not fit all because the ‘rules of engagement’ and information requirements are different for each supplier.
What is needed is an engagement with each supplier to determine how costs can be eliminated at the sell side as well as the buy side. XML is a much talked-about document standard that promises to reduce costs by enabling documents to be transmitted across the internet, but supplier enablement is key to driving this process forward.
In the short-term you must provide the flexibility to transmit orders to suppliers in whatever way best suits their current operations, while working with suppliers and e-technology providers to develop a holistic approach to the procurement process.
This is exactly the incremental approach being taken by Halifax. Together with suppliers and Walker (the e-procurement provider) they are jointly developing a set of collaborative commerce portlets to address the specific procurement requirements of each supplier. These will enable users to specify online requests for items as diverse as business cards and temporary staff, collaborate with suppliers to agree and finalise the request, and then transmit XML documents for input directly into the suppliers’ sales order process.
This is what the networked economy of the extended enterprise is about.
The point is, there are as many discrete solutions as business partners, but just like Newton’s pebbles, many point solutions add up to a transformed business landscape.
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