Which comes first: the chicken and the egg of e-commerce

Lejla Vrazalic and Robert MacGregor E-commerce is not just another mechanism to sustain and enhance existing business practices. It is a paradigm shift that is radically changing the way we do business. Not only has the adoption and use of e-commerce changed the business processes within a company, it has also fundamentally altered the structure of many organizations.

These changes to the processes and structure of organizations have given rise to different approaches to e-commerce adoption which can be loosely categorised into two methods.

The first of these suggests a stepwise process to e-commerce adoption, termed a linear or ladder approach. This is aimed particularly at smaller businesses and suggests the organization starts with e-mail, moves through Web site development, and then develops e-commerce with customers and businesses.

The final step in this process is the development of an enterprise-wide system that integrates all existing information systems together with e-commerce, giving birth to an e-integrated business. Proponents of this approach argue that since most small businesses do not understand organization-wide strategies and have in the past, been driven by technical concerns, it is easier to take this tack when adopting e-commerce. The approach appears to be systemic and sequential, culminating in an integration of all the organization’s systems in a single structure. Critics, on the other hand, describe it as naïve, and based on an over-simplistic understanding of e-commerce.

The alternative way, termed the integrated approach, places the development of an enterprise-wide business system as the first step in the process of adopting e-commerce. The choice and use of e-commerce is then ‘housed’ within the enterprise-wide business system so that changes brought about by e-commerce are disseminated across the entire organization. Proponents here have argued that the failure to develop an enterprise-wide system reduces the benefits of e-commerce, particularly in the area of supply chain management because the infrastructure necessary to implement e-commerce effectively is missing. Furthermore, the final integration of legacy and online systems that can be a problematic undertaking is avoided. Instead, e-commerce is developed within the enterprise-wide system as a strategic implementation.

As part of a larger study of e-commerce we compared the ratings of e-commerce adoption benefits between those small businesses that had developed an enterprise-wide business system and those that had not.

Of the small businesses surveyed, 54.4 percent had adopted e-commerce, and 59.2 percent had developed an enterprise-wide business system prior to e-commerce adoption. In the industrial sector 85.7 percent of the respondents had an enterprise-wide business system, while this figure fell to 43 percent for those respondents in the service sector. The data also showed a significant association between the organizations that had an enterprise-wide business system and the average level of computer knowledge in the organization.

The results also showed small businesses that had an enterprise-wide business system maximised two benefits of e-commerce in particular: increased sales and improved organizational control. To explore this further, the survey respondents were split into different categories, depending on their size, length of time in business and market focus. While business size did not appear to have an impact, the age of the business did. Those small businesses that had been operating for six to 10 years and had an enterprise-wide business system, reported that improved quality of organizational information is a benefit. The same benefit was reported by those small businesses with a local market focus reported, in addition to improved relations with business partners.

The findings of the study suggest that small businesses do benefit from the integrated approach to e-commerce adoption. By having an enterprise-wide business system in place, before implementing e-commerce, small businesses stand to gain advantages such as increased sales, improved organizational control, better quality of organizational information and improved relations with business partners.

However, the study also implies that these benefits are not achieved by all small businesses, but are localised to specific sections of the population. Furthermore, when considering an integrated approach to e-commerce adoption, small businesses should take into account the costs and planning associated with this approach, both of which are high.

The decision about which approach to use is not a simple one, and ultimately, a small business should take into account its needs, resources and development plans before choosing one approach over the other.

Rob MacGregor is head of, and Lejla Vrazalic is a lecturer at, the Department of Information Systems at the University of Wollongong

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