In E-Business, No One Can Hear You Scream

Massive increases in infrastructure spending, new intermediaries in business partner and customer relationships, and fierce competition mark the challenges of IT management in the near future.

E-marketplaces are making a big splash, and will help accelerate companies' movement into the B2B commerce arena. But many obstacles remain, as explored at the recent GartnerGroup Internet E-Commerce conference. The biggest problem is, in e-business, "there are no examples to emulate within a given market," says Carol Rozwell, analyst with GartnerGroup. "Competitive advantage is obviously not achieved by simply emulating competitors."

The pressure on traditional brick-and-mortar companies from the dot-coms will be relentless over the next two years, Rozwell and other analysts predict. "Market-share threats posed by 'pure' e-business will force brick-and-mortar companies into a new wave of business process reengineering to get competitive and reduce costs," says Rozwell. After the blood-letting, new hybrid companies -- those with both strong bricks-and-mortar and Internet channels -- will seize the market. However, most Global 2000 enterprises will not have achieved this hybrid state in the near future, she warns.

While much business will move online, the pendulum is swinging away from direct interaction over the Web between companies and customers and toward the re-emergence of a middleman, says Michael Bernstein, analyst with GartnerGroup. "Such 'disintermediation' has completely reshaped a variety of industries. During the next three years, electronic market makers will begin to attract large numbers of buyers and sellers and manage the relationships between them."

This new 're-intermediation' may be inefficient at first, but will introduce enormous efficiencies to business processes, Bernstein states. "E-market makers will help sellers increase the size of their markets by investing heavily in branding, and helping buyers attract large numbers of sellers." But the real ace in the hole for e-market makers is information, he notes.

These dot-com intermediaries "will manage massive quantities of supply and demand data and help foster the distribution of near-perfect information to buyers and sellers," Bernstein says.

But the rise of electronic marketplaces will complicate CRM initiatives, Bernstein warns. As more companies rely on third-party Web sites as sources of external customer data, they will "be challenged to integrate this data with the internal data they have collected from their own Web sites." This will make data warehouse-building a very complex process, Bernstein notes.

With systems such as CRM and data warehousing, the emphasis of IT applications is shifting from a cost-reduction role to that of revenue-generation. CRM applications will displace more commonplace transactional and operational systems, says Gartner analyst Rob DeSisto. "Areas such as sales-force automation, supply-chain planning and scheduling, and customer service will become hot," he says.

Supplier relationships are also dramatically evolving, says Bernstein. To keep on top of these changes, Bernstein advises that companies "choose 10 to 20 of their most valuable customers, supplier and partner relationships, analyze their duration, degree of dependency and likeliness of change, and make recommendations on how to improve responsiveness to these firms during the next two years."

A key part of maintaining these relationships involves being able to share internal supply chain and order status data with trading partners, he states. "These trading partners will drive and facilitate an increasing amount of business." Real-time data is required to allow accurate promises to end customers.

Increasingly, trading partners will realize that their ability to satisfy a customers is significantly constrained by their suppliers' ability to share data. Increasingly, companies will need to develop a data-sharing strategy.

Consumer acceptance of certain dot-com initiatives are also slow to progress, a recent GartnerGroup study finds. In 1999, only 3 million U.S. households were paying their bills online compared with 7 million households who view their accounts online, and 20 million stock portfolios that were tracked online in 1999. However, when it comes to giving up their checkbooks, consumers are looking for savings as an incentive -- and saving time is not enough.

In GartnerGroup's survey of consumers who were already using online banking or online trading services, 60 percent said they are not willing to pay a fee at all for online bill payment. Today, four out of five banks charge customers $6 a month or more for paying bills online. "Market pressures to recoup investments and show growth eventually will force Internet bill payment service providers to offer financial incentives to attract a critical mass of consumers," says Avivah Litan, research director with GartnerGroup. "As with many Internet offerings, the consumers will have their way when it comes to fees in the bill payment marketplace."