E-business is alive and well in most organizations across the land, albeit tempered by economic uncertainty and a certain hardheaded sobriety about what it costs and what's required to manage it.

"There's some retrenchment at a lot of companies," says Rick Wise, vice president at Mercer Management Consulting Inc. in Boston. "There's a lot more dispassionate reviewing of what are we doing here, how critical it is, what the priority is."

That's the case at Fort Wayne Plastics Inc., a manufacturer of injection-molded plastics in Fort Wayne, Ind., where Michael Durant, director of information services, is constantly reviewing potential e-business add-ons to his general business software system. As a third-tier supplier in the automotive industry, he sees e-business on the horizon. "I suspect there won't be many people who will be able to get by without it in the next few years," he says.

But right now, for him, cost is the issue. "Some scheduling packages are getting pretty sophisticated," Durant says. "But it's tough to justify the expense of a system like that for a business our size. You might spend $300,000 on hardware and software, and then have to hire 16 guys to maintain the database. The support issues are really the big hang-up. If we were at 95 percent of capacity, we might be more interested, but not at 75 percent to 85 percent capacity."

Costs, labor requirements and the economy may explain why slightly more than one quarter of our survey respondents indicated that they had no e-business system in place and no plans to install one.

"In general, most small businesses have less ability to fund and administer e-business solutions, so they tend to be more sparing about it," Mercer's Wise says. "They tend to have customers who are less e-business enabled and suppliers who are less e-business enabled. If folks on either end of you aren't digital, there's no reason for you to be digital."

Our survey reveals a strong bias toward investing in e-business to support customers: 81 percent of the respondents said customer service enhancement was a goal of their e-commerce investments, while 62 percent have or plan to have a consumer-focused e-business system. Fifty-one percent have or plan to have a B2B customer system. Only 23 percent are supplier-focused.

The focus on the customer side is channels, says Jean-Gabriel Henry, a senior analyst at the Internet research firm Jupiter Media Metrix Inc. "Everyone said the Internet would disintermediate the channel, because now you can sell direct," he says. "That hasn't been the case at all. If anything, the channel has become more powerful. You can't cut these guys out. So let's think about how we can arm them so they will sell more of our stuff than someone else's stuff. We've really shifted from disintermediation to empowerment. That's the big story in e-business."

Henry says that partner activity is occurring in two main areas: managing and enabling. Managing means tracking how well channels are performing, in which markets and why, and detecting where training is needed. Enabling means helping partners sell better, giving them the tools they need to be as skilled and competent as you are.

Customer satisfaction is the number- one objective of companies deploying an e-commerce system, our survey found. Henry defines this goal as "making it easier for our partners or our customers to do business with us. It's not making them 'happier' after the fact. It's making it easy for them."

This is the case at Airgas Inc., an industrial gas company in Radnor, Pa., which recently launched a new B2B Web site. "We'd ultimately like to see 5 percent of our sales go through the site," says Kelly Justice, vice president of e-business. "If they place orders there, great. But that's not its main purpose. It's primarily a customer service tool, which they can use to get product information, check their invoice history and the like. It's just another way in which we're trying to make it as easy as possible for our customers to do business with us."

The Airgas experience is not unusual, according to our survey. Respondents indicated that they were receiving, and expected to receive in the future, a very low level of revenues through the Web.

Customer service is also important to Donald Jewell, a director at General Dynamics Decision Systems (a subsidiary of General Dynamics Corp.), which sells advanced computer and communications systems to the government. Although most of our survey participants have not ventured into wireless initiatives, Jewell wonders how he ever lived without his wireless pager. It's a real help when he's with a customer. "While sitting in a meeting with a client, I can pull out my pager and send an e-mail to someone in my company who knows the answer to a client question, and I can get an answer in two or three minutes," he says. "Nobody's even aware I'm doing it."

Although our survey showed a low level of interest, several companies we talked to are hooking into various B2B exchanges. For example, National Welders Supply Co. Inc., in Charlotte, N.C., is moving into a utilities and energy services exchange called Pantellos, where some of its existing customers, like Duke Energy Corp., will place orders. Previously, the company dealt with Duke by EDI, phone or fax, says Rick Smith, vice president of planning and technology.

"Our system uses XML and Java," Smith says, "and it can talk to other sites and computers. Our goal is to build a bridge so that we can do all this electronically. I hope one day we can just push a button to make these connections without re-entering the data."

But Smith is also building a Web site where customers who aren't already in exchanges can place orders, track orders and check pricing.

It is nearly impossible to estimate ROI on e-business initiatives, survey participants told us. Some of the larger firms have hired consultants to help estimate the return, but others just know how many people they would have to hire to replace an automated system.

Nevertheless, there is a renewed focus on ROI, says Mercer's Wise. "In general, folks tend to discount a technical organization's ROI assessments. A large percentage of technology initiatives end in failure or don't reach stated goals, and that breeds skepticism. One big issue we focus on with our clients is that a lot of initiatives are launched from the technology world and not from the business end. The initiatives are not always strategic to what the business needs to achieve."

Most of the CIOs we spoke to say their e-business plans were either hatched in the corner office or had top management's full support. "If you want to do e-business now," says Justice at Airgas, "you've got to have executive sponsorship, and our leaders heavily support us. We're having a lot of fun here." —Terry A. Kirkpatrick

This article was originally published on 12-01-2001
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