Analysis: e-commerce - Enabling the e-handshake

The enormous potential of e-business is no secret but success depends on much more than technology: it’s the old-fashioned business relationships between suppliers, customers and business partners that make or break e-business initiatives.

That simple truth was somewhat overshadowed in recent years, as businesses and service providers scrambled to keep up with the e-business technology buzzword bandwagon.

Now, a great deal of industry attention has turned back to where it should have been all along – developing business relationships and expanding them into e-business ones. E-community development isn’t a new concept; it’s been a standard practice for more than 20 years for businesses that have developed successful EDI-based e-business communities. Now, providers and users of Internet-based technologies are refocusing on making that technology work for business, instead of the other way around.

Community development focuses on people and business relationships. Companies that establish e-business hubs need to assist and encourage their networks of suppliers and/or partners to participate in the network, and to help ensure that all parties see the maximum return on investments. It encompasses business relationships, industry knowledge and expertise in a wide range of e-business and IT technologies. Most often, businesses will need to turn to outside consulting experts with the right combination of knowledge.

And the payoff – a fully electronic, largely automated supply chain – can result in dramatic savings for both hub companies and community members.

Planning the community

Companies need to consider:

RETURN ON INVESTMENT. What are the hub company’s expectations for supplier/trading partner adoption and bottom line results?

TRADING PARTNER ADOPTION. How can the hub company work with its suppliers/partners to encourage adoption? How will the hub company resolve the issues associated with supporting different technologies and e-business capabilities among businesses within its community?

PERFORMANCE. How will the hub company measure the success of its community development efforts, and of its e-business efforts as a whole?

BUSINESS RELATIONSHIP ENHANCEMENT. How can the hub company use e-business to improve overall relations with its supplier network?

Building the electronic community

Once a plan is in place, it’s time to get to work on implementation. Remember, hub companies are in a position where they’re asking trading partners to implement new technology and change their way of doing business. That proposition is much more likely to be well-received if it is accompanied with quantifiable benefits for the community members and assistance in getting their side of the e-business community up and running.

While online tools can assist with some aspects of implementation, often this work will be completed by experts, working hand-in-hand with trading partners. This can help to build overall business relationships and help suppliers and partners realise the value of participation in e-business. It also allows hub companies to ensure that suppliers/partners adopt all necessary specifications and standards.

Most hub companies will need to turn to third-party e-business consultants for help on:

RECRUITING AND ENROLMENT. Working with suppliers/partners to demonstrate the value of the e-business community and to help them join is the first step in boosting adoption.

ENABLEMENT. Assisting suppliers/partners to connect to the e-business community and helping them to integrate their internal software and systems to effectively communicate with it.

TESTING, TRAINING AND CERTIFICATION. Working with suppliers/partners to test links to the e-business community and train employees to ensure that both supplier and hub are utilising the community to maximum advantage.

ONGOING SUPPORT. Providing suppliers/partners with access to a dedicated help desk.

Reaping the rewards

Analysts estimate that companies can reduce processing costs for incoming transactions by up to 95% by utilising e-business, and outbound transaction costs can be cut by more than half on average. These savings directly impact the bottom line, and benefit both buyers and sellers.

Today’s technology allows nearly any business to cost-effectively participate in e-business. Those that use this technology to extend and strengthen business relationships will be the biggest winners.

E-BUSINESS: THE HIGHS AND THE LOWS

US e-commerce sales in the second quarter of 2001 dropped 1.8% from the previous quarter, according to the Census Bureau of the US Department of Commerce. However, not all news from the online sector is discouraging. Year-over-year e-commerce sales actually grew 24.7%, according to the Commerce Department.

Only 16% of US companies will use web services technology – software that allows application-to-application collaboration over the Internet – in the next year to discover and interact with new business partners online, according to research released by Jupiter Media Metrix.

Visa USA is ramping up the roll-out of Verified by Visa to help make Internet-based credit card payments as trusted and secure as face-to-face transactions. The security system is designed to authenticate cardholder identities, in real time, at the point of purchase, prior to the acceptance of the card as payment.

A study of the online retail sector found that customer acquisition costs – or the average amount spent on marketing and advertising to attract a customer – which have long been benchmarks of online retailers’ operating efficiency, fell 65% in the second quarter compared with a 12 months ago.