The internet is speeding up business and putting pressure on existing partnerships. What's the upside?
The internet is firmly established as the current must factor for businesses to progress. Businesses are told e-commerce will enable them to respond more efficiently to a wider base of customers. A growing range of technology solutions makes it easier and easier to implement complex websites quickly.
But the very success of the internet medium generates expectations from customers of a quicker response time from the business as a whole. This, e-business companies and commentators agree, puts significant pressure on core business processes. At the same time, the fluidity of changing relationships on the internet – the ease with which a company can link into partners in its supply chain, its internet service provider or its software development resource, and delink from them and tie up with a rival firm – could mean these relationships become less certain.
On the software and service-provider side the risk is even higher, owing to the relative newness to the market of many such firms. This brings fears of possible collapse, leading to a rapid need to search for a new partner.
“The internet particularly speeds business for us and [our subsidiary] Product Sourcing International, because it’s our total means of trade,” says Bill Farmer, chief executive of multi-faceted internet trader Eforce.
“Using email and digital cameras, we can log on from anywhere and put [images of] products in front of our buyers anywhere. Previously this took far more time by conventional channels like physical mail.”
Not only is business speeded, but it is broadened, he says. “[Internet trading] enables us to do business in a broader range of countries.”
Of course, increased speed presents its difficulties, he says. “You have to have the applications to ensure you don’t trip yourself up; that you manage your supply-chain properly” to satisfy the high rate of transactions, he says. That’s why Eforce bought PSI – a supply-chain specialist.
The broadening of commercial relationships internationally also creates new problems of confidence in a business’s remote partners. Controls have to be in place to ensure the quality of what it produced for the company offshore, Farmer says.
E-business development intensifies the demand on software production too, he agrees. “I don’t know if software development has had to get faster, but the demands that people put on it are much greater.”
In an e-business, more than a computer-aided bricks-and-mortar business, software is relied on to take on a lot of mundane but complex tasks “from finances to shipping, product management, quotation; in the past, some of these jobs wouldn’t have been considered as able to be computerised.”
Electronic links facilitate partnerships, so well run partnerships have become more important to business. “You’re relying on your partners more to do their part. There has to be trust there that they’re doing it properly.”
And that they know how to use the computer systems now at the root of business.
“Computer systems [handled wrongly] can foul things up in a major way. This brings out the requirement for ongoing training.”
Partnerships may break and dissolve more easily as the internet increases the rate of change, he says. “Partners need to be more accepting of change and more trusting [of the other parties in the arrangement].”
A long-term vision
The general business environment is a large part of the requirement on businesses to speed up, with faster service and shorter time to market for new products, says TAB IT manager Stuart Cashen. “There is more demand [from the customer] for new products, and services and more competition.” In the TAB’s case, this stems from the increase of new channels for betting, from Lotto to casinos.
“The internet has only been responsible for part of the speeding effect,” he says, “but it’s all about thinking quickly; you can no longer take a year to develop a new product” and the IT facilities to back it.
“You still have to have a [long-term] vision,” he says – “ours goes out for two years. But you have to get there in small chunks,” providing some deliverables for the business and the ever-hungry customer at reasonably frequent intervals.
“The other thing e-business has done is to make us take advantage of alliances so as to be able to respond in a hurry.” Partners provide the “security and market knowledge” that the TAB may lack in the e-commerce area.
TAB partners include consultants KPMG, web-design firm Zivo and ebet in Australia, which provides some of the vital components of the TAB’s internet betting service.
Zivo is an object lesson in the fluidity of the internet business. Its parent, Australian-based Liberty One, was recently dismembered after a very bad financial performance in the quarter to June.
At the time Computerworld interviewed Cashen, the future ownership of Zivo was still in flux. “But the trouble is with Liberty,” Cashen says. “Zivo themselves we see as stable. There’s a lot of continuity from the old Clearview, whom we’ve been working with for many years.
“We have always tried to select partners that will last,” he says; “though we’re reasonably secure. We have ownership of our source-code, and we are upskilling our own staff.”
The high-tech stocks in the US are still on a roller-coaster ride, there always seems to be a recovery to follow any dips, says Cashen. But he is sure a shakeout of such companies is looming. “I’ve no doubt there will be a reduction in the amount of [companies] providing internet services.”
No middle, all end-result
“Most commentators agree e-commerce itself is moving quite rapidly, but I’m not sure if it’s speeding business,” says Phil Parnell of consultancy PricewaterhouseCoopers. Rather, competition is tending to increase the speed of business. “But ultimately, in most cases, the speed is still based on physical delivery of goods.
“The greatest impact is a change in the business model,” he suggests, “with a dumping of intermediary layers.” He points to direct booking of travel online as a classic example. That is making it increasingly hard to be a travel agent, he says. “But is [the internet] making business faster? I’m not sure.”
In business-to-business transactions, there might be some influence on speed, but it comes within a general concept of “trying to improve business performance.” With that goal, “a business would ask if increasing speed is necessarily an ingredient.”
“The big thing is fulfilment,” says Alan Mayo, project manager for The Warehouse’s developing e-commerce project. “If you order something on the phone and we say we’ll get it to you in a few days, you’ll usually think that’s fine. But the expectations of the internet customer are sky-high; they want to see your fulfilment work as quickly as the internet works and get the goods to them in a couple of hours.”
The answer is either to put massively more effort into fulfilment, or, more realistically, to “position your service well; to create a reasonable expectation of delivery time and tell the customer what it’s going to cost them if they want it delivered very quickly.
“Some [e-commerce merchants] have fallen into the trap of promising the world, and then they have to put up their prices to hide the actual delivery costs.”
A business’s customer interactions also become faster, “the workflow has to be speeded up”, which means the company might have to adopt new facilities like call centres. The decision whether to have these in-house or contract them out is dependent not only on relative costs but on technology, he says. If a company wants the information from the call centre to flow directly into an in-house CRM system, there will be compatibility issues.
“If you jump in and promise superb customer service, you have to understand the head-count you’ll require.” If the business sets up an email channel for customer inquiries, for example, it has to be able to staff that competently to give replies at what the customer has come to recognise as email speed.
(This reporter had a striking example of this recently; I was querying a subscription payment to a US-based information service that seemed not to have gone through, resulting in cessation of service. When my email to the subscription department went unanswered for three days, I mailed the CEO. He replied that owing to an unrelated customer service problem in another part of the organisation, there were 100,000 emails backed up in ‘subscriptions’; they’d get to mine in about another week. Many of these emails, he said, were repeats; customers mailing twice a day or more asking why there had been no reply. Eventually I reached the head of the queue and was told I should have emailed the company’s payment agent, not its own subscriptions department).
One solution to shortening the email or phone-call queue, Mayo says, is to make the website more informative, so the customer gets the answer from there. (This the organisation I was dealing with conspicuously failed to do; the website doesn’t even say who their payment-processing agent is).
Rough waters ahead
A venture into e-commerce usually requires a company to pull in “a whole gamut of external services, to do web advertising, run your servers for you and so forth,” Mayo says. While not wanting to talk in detail about The Warehouse’s own plans – due to emerge next month – he confirms it is dealing with several such external partners. “I would hope the relationships will be long-term,” but e-commerce service provision is a very young industry, where companies “drift in and out and change their spots.
“It’s not an ideal situation,” he says, but it’s one of the necessary concomitants of an innovative marketplace. “If you’re selling tyres, you know who your suppliers are, and they tend to stay the same, but there’s not much scope for innovation and new entrants in a market like that.
“I don’t expect [the fluidity of e-commerce partners] to settle down for a few years yet,” Mayo says. “There are a lot of new interactive technologies coming out that we’re not even sure how to use yet.”
Sue Cammell, business development manager at eVentures, agrees with Phil Parnell that there are other factors behind the speeding up of business. “It’s not the internet per se [that is speeding up commerce], but the whole change of business conditions.”
Improved production technology has brought formerly expensive commodities like cars within the reach of many more people, consumer demand has accelerated, “people’s attention span has shortened,” and competition has increased.
“The life-cycle of a product is getting shorter; you need to keep bringing out new products to keep the spend up.”
The internet is a facilitator of that increased speed rather than a cause, by allowing businesses to communicate with suppliers and customers more rapidly, she says.
It also means those customers and suppliers can be sought and found more quickly and over a wider geographical area. “It was hard to set up a supplier overseas, you used to have to go to where they were; now you can do it all on the internet.”
Business is undoubtedly speeding up, says Don Hollander, general manager of information systems at Computerland – the amount of time people take to make a decision, and the amount of time they are prepared to wait for a decision are decreasing.
“That’s because you can get more information more quickly; but the electronic side of this goes much wider than ‘e-commerce’,” he says.
Email has speeded up basic information channels. The informational use of the internet, as distinct from its transactional use, allows a company or individual, for example, to investigate an organisation they are proposing to do business with far more quickly – the performance of the company, the reputability of its executives – or to check on the background of a car, for example, that you are considering buying.
A change of plan
Of course, the internet also increases the speed of the decision to buy. Rather than trudging round shops, a purchaser can go to a portal, or send out a programmed “agent” to find the best buy. “You spend the same time buying, but less time shopping,” says Hollander; “and a business buying from another business is in a similar position to a consumer where that’s concerned.”
Even the physical delivery process need not be an irreducible critical path, he notes. There are information systems – none of which would be called “e-business” – which speed the task of picking the right goods, organising them into appropriate batches for efficient delivery routing, and providing the couriers with better information so they can make their deliveries more quickly.
An important aspect of this is eliminating rekeying by electronic transmission of information from one computer system to another, he says.
This may have a negative effect on businesses at first. “During the transition between doing things the old way and the new way, any flaws in your business processes will show up like a sore thumb,” he says. The elimination of those people at keyboards may also eliminate the human skills which see a typed lower-case "l" among a string of numbers and realise that it was intended to be a figure 1. New processes will have to be developed for picking up such errors.
The businesses that did some kind of quality assurance process in the pre-e-business days will probably make it through the transition more smoothly, he suggests.
The need for software to conduct business at greater speed is driving businesses into a more component-oriented attitude to software development, with many of those components provided from outside, or perhaps rented from an applications service provider, says Hollander. Microsoft’s .NET is advocating an intensive form of this where a subroutine for inclusion in a program may be called up as needed from a remote site for a fraction of a cent, “so the internet becomes one huge computer.”
This, as Cashen at the TAB points out, leads to a more complex web of alliances. Or, conversely, Hollander says, no stable alliances at all. Every component, whether a “hard” item for building into the company’s stock-in-trade or a piece of software, may be obtained on-the-fly at the day’s best price, from anyone. The company may send out a broadcast message for the attention of all diskette suppliers; “I want 50 blue diskettes; you have 18 seconds to respond.”
But Hollander suggests business will not go to that extreme. Businesses are composed of people, with whom your people establish relationships. The element of trust, as well as the sheer efficiency of reducing the “shopping” factor, will mean in practice continuing to deal with relatively few trusted suppliers.