Where Will E-Business Take You?

SAN MATEO (04/03/2000) - There's a lot of hype out there concerning hot trends and new technologies that are reshaping the Internet industry, probably too much for any one company to sift through. But how is the Internet actually affecting the business decisions that enterprise-level executives are making?

In other words, what steps are companies realistically taking to integrate the Internet into their business model?

InfoWorld conducted its second e-business survey to get a more definite answer to this question. We interviewed 105 readers engaged in e-business, I-commerce, or both at their company, representing enterprise-level companies and averaging 9,490 employees companywide and 1,784 people at their individual location or business unit.

What we discovered supports the contention that business-to-business commerce will have the greatest impact on the enterprise. Over the course of the last year, more companies have developed I-commerce systems -- compared to our May 1999 survey, business-to-consumer models increased from 49 percent to 64 percent (see "The state of I-commerce," www.infoworld.com/printlinks). But we also saw an equally impressive rise from 57 percent to 73 percent in business-to-business commerce. Although enterprise companies are still in a state of flux regarding e-business strategy and implementation, they are definitely making headway, and the business-to-business space is where they are going. Here's an overview of our conclusions.

The outsourcing question. According to our survey, the most popular function to be outsourced was Web site hosting -- not too surprising given the maturity of the Web-hosting industry. While 20 percent outsourced site hosting, 17 percent outsourced payment processing, credit card transactions, and security systems.

In the next 12 months, 62 percent indicated they'd be deploying Web-based customer support and service systems, 57 percent indicated that security would be the next likely outsourcing candidate, and 52 percent and 51 percent pointed to business-to-business transactions and participation in business-to-business exchanges, respectively.

But although ASPs (application service providers) are promising the world, companies remain skeptical. Despite the hype swirling around ASPs and outsourcers, we found a strong tendency toward in-house development among our respondents. Less than 4 percent were outsourcing all their e-business or I-commerce systems. In fact, the most likely scenario was an even split between in-house systems and outsourced applications and services.

Even more interesting, almost 65 percent indicated they would be doing more in-house development in the future. If ASPs and outsourcers want to capture e-business, they will have to demonstrate their value.

Driving the bottom line. Most of our respondents now perceive the Internet as an extension of their business. Sixty-one percent said their primary effort was to enhance existing relationships, as opposed to creating new relationships, and 42 percent said the biggest benefit of their Web initiatives was to service existing customers. Forty percent of the respondents indicated that the biggest benefit was increased revenues.

Online identity crisis. Although a third of the survey respondents described themselves as leaders and a fifth considered themselves lagging behind, the bulk of companies are still evolving their Web site presence. One quarter of respondents said they were revamping earlier Web efforts, and 22 percent said they'd launched a core offering and were adding components. However, another 20 percent described their presence as simply "testing the waters." Finally, 17 percent said they were on the cutting edge of technology, with 15 percent claiming market leadership. In addition, most companies felt their Web offerings were competitive -- 43.8 percent said their efforts were on par with competitors, and 40 percent said they had a significant advantage or were the leader in their market. Thirteen percent of the respondents admitted to being behind the competition.

E-business troubles. Time to market and understaffing are still the dominant problem areas for companies trying to get online. Forty-six percent of respondents cited "insufficient time" as a major culprit, and 34 percent said their people were too busy. However, 29 percent cited a business-unit conflict as a dominant difficulty, and 21 percent said that management lacked direction.

Clearly, management indecision as to how the Internet fits into the business model is a critical issue for some companies.

So, how does the business model fit in? What does the Internet mean to business? The most common answer came from 63 percent of respondents, who said the Internet added a new channel to their existing business -- nothing unexpected. However, 46 percent said they were becoming more customer-focused as a business and 27.6 percent said they were partnering with companies they never expected to work with.

Overall, the impact of the Internet was underplayed by the companies surveyed.

Twenty-four percent claimed the Internet's impact on their business was minimal, while 38 percent said it was changing some of how they did business.

But 14.3 percent said their entire business was being fundamentally reshaped.

In other words, for some, the Internet represents a shift -- for others, it's an earthquake. By virtue of industry, product lines, and just plain foresight, some companies are taking the lead in e-business while others seem to be slipping behind. The trick is to figure out which kind of company you are.

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