E-Business Still Experiencing Growing Pains

E-business is still in its earliest stages both in the US and Europe, according to surveys of executives on both sides of the Atlantic. In the US, inadequate staffing and funding are keeping companies from taking e-business beyond customer-facing applications, according to META Group. In Europe, 90 percent of firms have finally gotten to the point where they even have a Web site, according to a study by UPS.

A report issued by META Group has found that despite significant investments in electronic marketing, sales, and customer service, corporate America has still not adopted e-business as a central part of its business strategy. According to META Group’s study “E-Reality Sets In,” the greatest penetration of e-business is focused on customer-facing areas of the business.

Comparing levels of investment in 14 e-business categories, META Group found the three customer-related e-business spending areas far outrank those involving supply chain and business process aspects. Customer-linked investment priorities include marketing (77 percent), customer service and support (69 percent), and direct sales (65 percent). By contrast, seven supply chain and business process categories ranked much lower, ranging from finance/accounting (42 percent) down to supplier management (28 percent).

“Corporate America is not tapping the true potential of the e-business revolution,” said Kirk Reiss, senior vice president with META Group Consulting and co-author of the report. “A fully realized e-business strategy can lay the foundation for new business models, but few corporations have demonstrated the vision and devoted the resources to make this happen.”

The META Group study also found that inadequate staffing, funding, and strategic focus are curtailing the potential to reap the full competitive benefit of e-business. When asked which e-business areas stand in greatest need of investment, respondents rank people/staff/dedicated personnel (24 percent) as their top investment priority, followed by infrastructure (17 percent) and development (12 percent).

The majority of META Group’s respondents report relatively low levels of e-business investments to date, with only about 10 percent claiming to spend more than $5 million per year and 65 percent of companies spending less than $1 million per year. Investments in e-business do not necessarily correlate with company size. The majority of companies surveyed with more than $2 billion in annual revenues are spending less than $5 million on e-business initiatives.

“Low dollar investments and limited numbers of dedicated personnel are the rule,” Reiss said. “This paucity of resources is indicative of stopgap measures. What’s more, the lack of correlation between company size and e-business spending shows that small and mid-sized firms are moving more quickly to exploit e-business than their larger competitors.”

Despite the lack of resources, respondents told META Group the focus of their e-business investments will shift away from customer-facing functions toward such business-process areas as distribution/logistics management and supplier management. Respondents report that each of this year’s top three e-business investment categories will attract fewer resources next year. Marketing will decline from 77 percent to 41 percent as a prime investment focus, while customer service and support will drop from 69 percent to 54 percent. The emphasis on e-business direct sales will decline to 44 percent from 65 percent.

Only four categories are expected to attract greater investment focus, and three relate to the supply chain: distribution and logistics management (from 39 percent to 43 percent), inventory management (from 32 percent to 34 percent), and supplier management (from 28 percent to 34 percent).

Meanwhile, across the Atlantic in Europe, where Internet use by both consumers and businesses alike has trailed the US, European executives expect the “e-capabilities” of their businesses to match those of the US within five years, according to the UPS Europe Business Monitor.

Ninety percent of European businesses now have a Web site, according to the UPS survey, a 17-percent increase from 1997. But only 35 percent of executives polled say their businesses currently use the Internet for e-commerce purposes and only 30 percent believe their Web site is a useful advertising and marketing tool.

Businesses in the UK lead the pack with 55 percent actively engaging in e-commerce; the French and Italians bring up the rear among European countries with only 21 percent and 23 percent, respectively, using the Internet for e-commerce purposes. Germans (55 percent) are most likely to say their Web site plays an important marketing and advertising role. Forty-one percent of UK executives agree, but only 20 percent of the French and Italian see the commercial value of corporate Web sites.

The UPS survey also found that email is underused by European executives, with 57 percent of Italians, 51 percent of Spanish, and 50 percent of Germans receiving fewer than 10 emails a day. UK business leaders receive the most email a day (an average of 29, compared to the European average 20).

The UPS Europe Business Monitor surveyed 1,466 business leaders from Europe’s top 15,000 companies in the Fall of 1999. Respondents were at the director level or above. For its study, META Group analyzed survey results from 357 established US companies with more then $100 million in annual revenues.

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