By Julie Bort
Network World, 02/18/02

Inside, outside and   e-payments   Collaboration   elaboration   E-marketplaces: Not   dead after all   Downloadable   list of research (PDF)

"Truth is generally the best vindication against slander," Abraham Lincoln said in dismissing demands that he fire the nation's scandal-ridden postmaster-general. And so it is with e-commerce. Everyone's darling in 1999 became a naughty word by 2001, and neither status was justified. Today, some three years after reaching critical mass, the truth is that e-commerce is living up to its promise.

E-commerce reduces costs, particularly when automating any paper-based or manual process. E-commerce can lower a corporation's order-entry costs by up to 30%, according to the Gartner report "E-Commerce 2002: The Search for Real ROI."

E-commerce cements customer loyalty. ABF Freight System, recipient of Network World's 2001 E-comm Innovator Award, typifies the point. Even with shipping volume down thanks to the slower economy, registered users accessed ABF.com applications nearly 70% more in 2001 than in the previous year, says Michael Newcity, e-commerce manager at the Fort Smith, Ark., company.

"We look at our e-commerce site as a product that we sell for 'free' for customer loyalty," he says. "Our e-commerce applications keep paying for themselves. One out of four customers still say the primary reason [they use us] is a strong technology background."

Another example is Honeywell's Business and General Aviation unit in Morristown, N.J., a 2002 E-comm Innovator Award honorable mention. Through its e-commerce site, Honeywell creates customer loyalty with its ultimate end users, pilots, without jeopardizing relations with its dealers. Pilots submit requests for quotes, which Honeywell passes to dealers for bidding in a process that generates more than $30 million in sales for the manufacturer.

E-commerce enables new lines of business and generates incremental revenue from established businesses. ABF branched into the truck rental business - a market it couldn't afford to advertise to before it had an e-commerce site.

Granted, younger areas of e-commerce, such as e-marketplaces, are not as proven. But overall, e-commerce continues to be a necessary tool for conducting business in 2002, network executives say.

"The role of e-commerce has changed the way we do business," says Peter Cortapasso, MIS director for Monarch Financial in New York. Thanks to pressure in 1999 and 2000 by no-frills consumer-oriented online brokerages, this full-service brokerage built an e-business infrastructure of remote access VPNs and Web-based applications for customers.

Brokers can place trades remotely and have faster access to customer information whether at the office or not. Customers can access account information 24-7. "E-commerce is now just as much a part of our society as brick-and-mortar businesses," Cortapasso says.

And corporations have only begun to explore the opportunities their e-business infrastructures afford. While e-commerce does not top the priority list for increases in 2002 IT budgets, according to Network World's 2001 IT spending survey, it remains an area of continued investment. The survey found that 69% of 598 readers will have the same budget for e-commerce software in 2002 as they did in 2001, while 19% will increase spending.

Worthwhile targets of that spending are internal process management, supplier-side e-commerce, e-payment systems and collaboration. Evidence is mounting that these four areas enable significant, immediate opportunities for typical corporations. The first two are business processes and the latter two, enabling technologies.

Inside, outside and e-payments

Until now, e-business was for the most part synonymous with Web applications for customers, according to research on how companies spent their e-business dollars. And selling to customers remains a top priority. Last October, in its quarterly survey of 100 large corporations, AMR Research found that 41% of respondents plan on increasing their budgets for customer applications.

But 2002 will be known more as the year that e-commerce infrastructures take on internal processes and suppliers. Respondents to the AMR study indicated that Web applications for internal processes were gaining in importance. These include employee self-service, finance, knowledge portals and risk management.

Respondents ranked internal initiatives 6.2 in importance, on a scale of 1 to 10, with 10 representing "extremely important." Likewise, supplier management projects rated 6.0, with customer applications still highest at 7.6. In the previous quarter, respondents rated internal initiatives 5.7, supplier management 6.1 and customer projects 7.4.

"In 2001, electronic procurement grew slower than our projections and sell-side grew faster as companies built out post-sales types of support. The shift in 2002 is that many more corporations are now planning internal processes projects," says Louis Columbus, senior analyst for AMR.

This is not to say that supplier management is out of favor - quite the contrary: About one-third of respondents told AMR they plan to dedicate more of their e-business budgets to supplier management. One-third also will increase spending for internal processes.

Research from Cutter Consortium shows that in North America especially, companies have been investing in supplier systems. In a November 2001 survey of 200 companies worldwide, 69% of respondents in North America were developing customer e-business applications, 62% internal applications and 50% supplier management. This compares with about 30% developing supplier management systems in Europe and other regions.

One effect of the holistic supply-chain approach, in which customers are not the sole focus, is that e-payment technologies - now considered consumer technologies - will gain respect in corporations this year. "Electronic bill payment is interesting to watch. It's one area that is poised for strong growth in the second or third quarter, definitely," Columbus says.

E-payment platforms from vendors such as Avolent, Bottomline Technologies and eScout automate bill presentment and payment, among other related processes. These are often the paper-process holdouts in most companies. While Jupiter Communications finds that the return on investment for adding e-payments to online procurement applications "remains foggy," others see enormous value. EMarketer estimates that between 84% and 98% of business-to-business invoicing involves paper processes. That makes the cost-savings potential of e-payment technology significant, it contends.

Interstate Bakeries Corp. (IBC), a $3.6 billion commercial bakery in Kansas City, Mo., with brands such as Wonder, Hostess and Dolly Madison, knows that firsthand.

In July 2001, IBC implemented an online order system for maintenance, repair and operation (MRO) materials that relies on eScout catalog and e-payment software. EScout handles payments through its membership in the Automated Clearing House Network, an association that electronically clears transactions between financial institutions.

IBC is a rather decentralized company, with business units responsible for most of their purchasing needs. The new system allows IBC to collect data on corporatewide MRO purchases and, consequently, negotiate better rates with suppliers. IBC expects to reduce prices from 5% to 10%, saving "several million dollars on our MRO purchases by implementing this system," says Dan Engdahl, project leader of e-procurement for IBC.

These millions don't include the soft costs saved by electronically paying vendors, he adds. "IBC processes about 70,000 paper checks each month. We plan to eliminate at least half of these checks with the [Automated Clearing House] process we have put in place," he says.

Specifically, the IBC application receives an electronic invoice from a supplier over the Internet. The application helps to automate payment approval when the product is received. It then authorizes a transfer of funds to the vendor via the clearing house network. "E-payments have really been the most painless part of this project," Engdahl says.

Collaboration elaboration

Like e-payment, collaboration is poised to enter many companies this year, researchers say. The Yankee Group says that once companies automate their internal business processes, such as invoice approval routing, collaboration with suppliers will be the next urgent task. Yankee says that spending on such projects will nearly double between 2002 and 2003.

Gartner's take on the importance of collaboration platforms is even broader. It named collaboration as among three technologies it says will become "a matter of survival" in 2002, the other two being the internal process technologies knowledge management and e-learning.

True, collaboration is a vague term that covers free instant-messaging services, high-end document sharing, videoconferencing systems and automated, asynchronous applications - such as forums and e-mail routing. Still, some projects offer more immediate opportunities than others. As Yankee notes, collaboration applications with suppliers is an obvious choice. By automating routine exchanges on items such as inventory predictions, a company can save significantly.

DaimlerChrysler's Mopar Parts, a 2002 E-comm Innovator Award honorable mention, saved about $7 million by reducing inventory stock via a supplier-management application from SeeCommerce implemented in 2000. In 2001, it added collaboration to enable real-time communications and alerts for 3,000 Mopar suppliers. This helped it to fine-tune order, delivery and inventory processes, and resulted in more-efficient worldwide shipping.

Besides supplier management, collaboration could be a boon to any project that involves a paper process and multiple parties, such as the creation of engineering drawings or assembly instructions. Companies will increase their purchases of such CAD collaboration software by almost 40% per year, spending $2.3 billion dollars by 2005, says market research firm Jon Peddie Associates.

These examples and countless others show the face of e-commerce has changed, but not withdrawn. Since 1999, its expression has shifted from delirious to practical. In 2002, look for it to shine with confidence.

Related links

EScout

SeeCommerce

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