Companies Have a Lot to Learn About E-Business

Despite the hype, most companies are still in the earliest stages of e-business deployment and lack effective e-business strategies, according to research by META Group.

According to the research, e-business efforts to date have focused on consumer-geared e-commerce applications and do not represent a fundamental redesign of business models or enterprisewide thinking. META Group also found that investment in e-business is low, with 65 percent of the companies surveyed spending less than $1 million a year on e-business initiatives.

“E-business has not yet become part of larger companies culture and strategy,” said Kirk Reiss, senior VP of META Group Consulting. “The low-dollar investment in e-business is indicative of stopgap measures and patch-up thinking — a ‘me-too’ strategy, where companies are doing e-business because they see other companies in their industry are.”

META Group’s research took an industry-by-industry look at the nature and extent of e-business demand, the amount of money being spent, and the impact of e-business. The research focused on the financial services, retail, transportation, utilities, and telecommunications industries; companies sized ranged from $100 million to $10 billion.

According to the research, company size has little to do with e-business spending. Almost one-third (28 percent) of the companies surveyed are larger than $1 billion (annual revenue); at the same time, only 3 percent of those companies categorize their total annual e-business investment as being greater than $20 million; and only 14 percent of companies have e-business investments over $5 million.

“A few years ago, companies were routinely spending $100 million to $400 million to retool their ERP/ERM backbones,” Reiss said. “We would expect e-business initiatives to be, at least, at the same level of investment. Instead, we’re seeing low levels of spending on e-business, with a primary focus on increasing revenues rather than targeting the business processes that e-business methods are best at improving. Most companies are viewing e-business as an additional channel to the customer rather than as a way to re-engineer the business. While slightly more than 80 percent of companies reported using e-business with customers, far fewer are using e-business with their partners (43 percent), suppliers (52 percent), and internal systems (57 percent).”

According to Reiss, the first wave of e-business development is known as “brochureware,” where companies merely published information on their Web sites. In the second (current) wave of development, the focus shifts to include the sales channel. The next wave will address supply chain issues, and because of the complex business-to-business issues that must be resolved to enable supply chains, Reiss says he expects a significant new investment of dollars and resources during the next three years.

Overall, only half of the companies interviewed by META Group perceive e-business as having had a significant impact on their respective industries to date. The top three impact issues for five of six industry groups are 1) shift in delivery channels, 2) access to data/information, and 3) buying and selling power.