2.7 The Irish Situation
Given the above statistics, it would be fair to say that B2B e-commerce offers numerous opportunities to businesses, but are Irish SME?s taking advantage of the opportunities afforded to them by e-commerce, specifically in the business to business context.
The Annual Competitiveness Report 1998 points out that in general IT applications are used less by SME?s than by larger businesses. The main reasons for this are the high costs associated with the applications, their poor suitability to the needs of the small business and the SME?s own lack of IT knowledge. The report also points out that SME?s are also at a disadvantage with regard to telecommunication costs. Unlike larger enterprises they are not they are not in a position to negotiate bulk discounts. Given these barriers it would appear unlikely that Irish SME?s are seizing the opportunities offered by ecommerce.
A recent report by the Information Society Commission also had some worrying statistics regarding the use of information technology by SME?s. While 62% of large companies in Ireland see new technologies as essential, only 22% of small companies do. A worrying 25% of SME?s feel that new technologies will have little or no impact on their competitiveness. These are issues of importance.
2.8 the Southeast situation
Mary Harney T.D., An T?naiste and Minister for Enterprise, Trade and Employment officially launched the Wales & Ireland e-Commerce (WIRECOM) initiative in Ireland. WIRECOM is an Interreg supported initiative designed to help SMEs in the South East of Ireland and West Wales identify how e-Commerce can assist in the development of their business. It is envisaged that, with the assistance of WIRECOM, Southeast SMEs will be better prepared and resourced to compete in the e-commerce world of the future.
Speaking at the launch the T?naiste said “The global nature of modern communication technologies will shrink the planet and do away with the obstacle of distance. This presents many opportunities for small business. Small business has the quality of flexibility, quickly adapting to a rapidly changing environment and responding to new market conditions and changes arising from such things as economic restructuring, technological change and new production methods. Today’s launch of an innovative new e-Commerce initiative, will facilitate forward-looking SMEs in successfully competing in the global marketplace.”
Initial research by the WIRECOM project team has revealed that the adoption of e-Commerce by SMEs in the South East of Ireland is lagging behind that of the National average.
“We have found that although there is strong general awareness of e-Commerce amongst the business community in the South East, there is still a reluctance or slowness to implement e-Commerce tools such as e-mail and on-line selling which is at variance with National trends. ” said Patrick Munden Project Manger WIRECOM.
“Only 35% of manufacturing companies in the South East use e-mail and an even lower figure (12%) have implemented web sites or electronic catalogues”, he continued.
These statistics when viewed against the recent findings of the Information Society commission, which stated that the National average for e-mail usage is 80% and Website implementation at 55%, indicate that business in the Southeast is lagging behind.
The WIRECOM project will address these issues and is offering free e-Commerce evaluations to selected SMEs in the Southeast which will be undertaken by experienced business consultants from the South East Business Innovation Centre, in association with research assistants from the Waterford Institute of Technology.
Consultants will visit the SME, learn its processes, discuss its business issues and identify how e-Commerce can improve business efficiencies. Research will then establish how e-commerce is impacting on that SME?s particular Industry and identify what suppliers, competitors and customers are doing on-line. A report is then presented to the SME detailing the options available and recommending potential strategies for the best way forward.
If an SME has already implemented e-Commerce tools, such as a Website, the project consultants can give a non-biased view of its effectiveness and will identify marketing techniques to increase the site?s productiveness and the overall benefit of the site to the SME.
The project is open to all small and medium sized companies in manufacturing or Internationally Traded Services in the Southeast region and is being operated in conjunction with several agencies in West Wales where a similar programme for Welsh SMEs is currently in operation.
The project is funded by the EU Interreg II Programme and will be running until March 2001.
Chapter 3
B2B: The Challenges and Potential Benefits for the SME Sector.
3.1 Introduction: B2B E-commerce Potential Benefits and Challenges
A 3 Com technical paper Anon 2000: ?Business to Business Electronic Commerce. Market Landscapes and Solutions? States there is a wide range of potential benefits motivating today?s SME?s to undertake B2B e-commerce initiatives, including the following:
a) Cost reduction via improved logistics and management. The opportunities range from basic electronic information delivery to facilitating transactional exchanges of information. Such applications can create tighter links among business partners, improving the efficiency of the various support functions involved in bringing products to market.
b) Improved competitive posture. Rapid growth, efficient reduction of product time-to-market, and optimisation of product distribution channels contribute to a superior competitive position.
c) Improved internal information access. Quantitative and qualitative improvements to information access for personnel can yield big payoffs for the SME. Business areas such as the development of business opportunities and business strategy are particularly rich in this respect.
In the emerging networked economy, established companies are finding that they must adopt B2B e-commerce in order to fend off competition. Newer, smaller, and/or other-market companies are entering new markets as traditional barriers fall. Unless existing SME?s prepare to meet this competitive challenge, these new players may be better positioned to enhance their supply chains, get to market more quickly, or leverage technology to realise process efficiencies.
3.2 Challenges to Implement Operations Models Enabled by the Internet
?Realising those huge possibilities the Internet offers is not an easy task. Implementing a new operations model is difficult. The companies must agree on principles, specifications, responsibilities and cost sharing. This task is expensive and time-consuming.? Lee, Whang, (1999)
Also the whole industry may have to be restructured. ?A Company must be able to transform itself to compete effectively in the new situation. It is difficult to change established business practices. This situation attracts new innovative companies, because they don?t have old structures and methods? Prahalad, Ramasvamy (2000).
?Material handling may become a hurdle for implementing a new business model. Many writers propose, that outsourcing transportation or warehousing or configuration is a solution? Wilson (1999) Requirements are high for such middlemen. Implementing a cost-effective delivery solution that is fast, accurate and flexible and is able to customise products may be a difficult equation to solve.
3 Com further adds that ?Businesses successful with B2B e-commerce are those that have learned to address several fundamental challenges?
a) Identify/measure quantifiable business objectives Businesses must accurately measure the impact an e-business initiative has on a business process in order to ensure that initiatives are delivering on their promises. A common reason for not doing this is a lack of understanding of the relevant technologies and their e-business implications.
b) Define business processes. To support measurement, business processes must be well defined. Companies should create models of existing processes and interactions, determining the relevant events, time frames, resources, and costs associated with the business process. This model is then used to help streamline and evaluate new electronic processes, and serves as a benchmark for determining return on investment.
c) Identify distinct value-propositions of peer value-chain entities. Each business entity in the value chain must clearly understand the value propositions of each other entity. An e-commerce-enabled application may represent value to one participant but have neutral or even negative value to others. Initiatives with such imbalances can erode the business alliance they were intended to support.
d) Align business organisations with IT architecture. The business must be organised to allow the needs of lines-of-business (LOBs) to be reconciled with the common architectural framework developed by IT. IT may act as a catalyst within the enterprise to organise various LOB initiatives within the scope of an e-business committee. A LOB may also champion e-business initiatives, while the IT group functions as liaison, ensuring architectural integrity across the LOB initiatives.
e) Understand security issues. Even the most demanding security considerations can be addressed cost-effectively for the vast majority of businesses. The core security issue is unchanged. Security demands must be accurately identified and matched with appropriate mechanisms.
f) Ensure organisational/operational flexibility. Business transaction growth, expanded markets, and increased information accessibility can become irresistible change agents. However well organised the business was before deployment of e-business initiatives, the situation will necessarily change as the result of the initiatives. Organisations must preposition themselves in their structure as well as in execution to flourish in a significantly more dynamic environment. Businesses must set achievable goals and parameters and operate within them. ?Do not promise next day delivery if this is unachievable.?
SMEs have challenges similar to that of big businesses but they do not have the benefits of economics of scale, which make it riskier for SMEs to invest in E-business technology. The Challenges are often the same for SMEs whether they practice conventional or virtual business.
A major challenge for the SME is whether they have the financial resources to invest in technology and other related costs for developing an E-business, or including E-business as a strategy to their existing operations.
Human resources need to be in place to meet the demands, so having staff to develop a new type of business, having the appropriate skill base within the organisation, attracting and retaining employees with applicable skills are all critical for the SME. This may be very difficult in today?s business climate but it is essential to operate E-business properly.
Finding sufficient time to invest in the development and implementation of an E-business package is also a critical factor. Risk taking can be daunting for an SME compared to larger organisations, particularly in ventures that are still relatively new, unfamiliar and uncertain.
3.3 B2B E-Commerce Quality Challenges
Speer (2000) in an article: ?Requirements in E-Commerce Testing? states that ?The importance of quality assurance and testing mechanisms is supported by the well-publicised crashes of prominent e-commerce sites, and persistent concerns about bandwidth, security, and privacy. In an intensely competitive marketplace, stringent quality standards are associated with businesses that survive. With the competition only a click away, quality must be an active strategy instead of merely a slogan.?
If, during peak buying seasons a sizeable fraction of attempted Web purchases fail, or if users complain of dropped connections, then the economic and public relations consequences can be severe. The same is also true when inaccurate records are generated about transactions or customers cannot determine at the time of ordering if the desired items are in stock or when delivery can be expected, or if the purchased goods never arrive. Fundamental questions about whether it is safe to shop online and, if safe, then if really cheaper, faster and more convenient than on Main Street, are asked and answered in each potential customer’s site visitation experience. If the visitor experience is negative due to slow response times, outright crashes, or violations of privacy, consumer confidence can be undermined.
Chapter 4
B2B Strategy and the Future
4.1 Syndication
4.1.1 Syndication an Introduction
Werbach (1999) opens in an article from the Harvard Business Review entitled ?Syndication: The Emerging Model for Business in the Internet Era? that ?There?s no question that the Internet is overturning the old rules about competition and strategy. But what are the new rules? Many of them can be found in the concept of syndication, a way of doing business that has its origins in the entertainment world but is now expanding to define the structure of e-business. As companies enter syndication networks, they will need to rethink their products, relationships, and even their core capabilities.?
The shape of content and business relationships on the Web is tied to an old concept, and that concept is syndication. Traditionally based on the closed world of the media, it may be the model that allows the Web to remain open as it grows. As with most new mediums, the Internet incorporates elements of media that existed in the past. Syndication deals are the lifeblood of today’s broadcasting, cable and newspaper industries, an example of this is the cartoon epic ?The Simpson?s?, which at any given time on NTL?s network in operation in Ireland they may appear on three different channels simultaneously. In such arrangements, entities that create content (Gracie Films) license it out to distributors (NTL), who integrate it with their own and other offerings (Network 2, BBC 2 and Sky One). Several major Web-based companies adopted the syndication approach early on, though the market has remained fairly limited.
Werbach (1999) suggests. ?Online syndication is now poised to explode, but even as it changes the Internet, the Internet will change syndication. On the Web, the concept applies to commerce as well as content, and soon it will extend to dynamic applications. Syndication will evolve into the core model for the Internet economy, allowing businesses and individuals to retain control over their online personae while enjoying the benefits of massive scale and scope. The Internet is a communications medium, a platform for commerce and a distributed computing environment, all at once.?
Syndication uniquely cuts across the language of content, commerce and computing. Though usually seen as an artefact of traditional passive media, syndication fits perfectly with the Web’s fluidity and interactivity. The foundations for pervasive Web-based syndication are now being laid, but everyone is still trying to figure out just what the structures on top will look like. Software vendors, service bureau?s, content creators, interactive agencies and merchants are jockeying to define the models for syndication networks. Competitive battles are being fought in both standards bodies and discrete marketplaces. Whether they realise it or not, all the players are competing around a deep but under-appreciated Internet challenge: distributed information management.
4.1.2 Why should Syndication Work?
Werbach (1999) explains ?Up to now Web syndication technologies and practices haven’t generated much attention outside narrow communities of interest. But soon, syndication will be absolutely central to the development of most Net businesses. At the same time, it’s the future model for the millions of independent and personal Web-sites that give the Internet its vitality. The Internet is getting so big that no one can be everywhere. Syndication allows sites to extend their presence out to their customers, and gives those customers tools to aggregate the information and functions they wish to see.
Syndication works so well online because everything takes the form of information. In the physical world, syndication involves a lot of printing, assembling and driving video reels around. On the Web, as the transfer of content becomes simpler, the relationships can become more complex. Add to that the ability to assemble information dynamically or even to execute applications with rights and privileges assigned among various parties, and things start to get interesting. Syndication has been traditionally rare in the business environment for three reasons. First syndication works only with information goods; this is because information is not a consumable
Product, it remains available and infinite amount of people can use the same information. Secondly, syndication requires modularity. Syndicated goods are not usually products in themselves, despite having considerable value. Shane Ross?s business section in ?The Sunday Independent? is very popular, however, would it be purchased as a single entity? Finally, to ensure the success of syndication many distributors are required. There would be little point of creating many different combinations and configurations of content if there is only one distributor or the content creator controls distribution. This would place a stranglehold or monopolise the situation, as was the case in the early days of cinema in the US, with Warner Bros. refusing to show MGM films in their theatres and visa versa.