Integration Issues Hamper True E-Business

• 10/11/2000

So these issues will slow down the rate of e-business growth, right? Notlikely, according to a survey sponsored by Sterling Commerce Inc. (www.sterlingcommerce.com). These are the challenges that are keepingCIOs and IT professionals up at night, the study of 152 companies reveals. Thesurvey finds that 52 percent of IT executives do not consider their internalsystems to be adequately integrated. About 68 percent listed "integratinginternal business processes" as the most pressing e-business need, whileintegrating processes with external trading partners followed at 60 percent.

"We see a lot of need for e-marketplace process integration,"says Matthias Zeller, product manager of business process integration atSterling Commerce. "Only about 2 percent of the current e-marketplaceprojects are really integrated with back-end systems. The other 98 percent arenot integrated, requiring some manual tasks on the company side that areconnected to a marketplace."

Zeller observes that "there's definitely a need to have a commoninfrastructure in place, instead of buying the proprietary software from thee-marketplaces." Other e-business needs that are listed include buildinge-business communities, which received 33 percent, and joining ane-marketplace. About 28 percent of companies surveyed currently participate inan e-marketplace, with an additional 25 percent planning e-marketplaceparticipation in the next year.

Adoption of XML will increase substantially, while ERP applications,e-marketplace integration, and business-rules-based transactions are alsolikely to play substantial roles as companies strive for higher levels ofprocess integration.

Technology needs to address ways to handle the process, Zeller says."You send something to an e-marketplace, and you expect anothertransaction back," he explains. "You need to have some processmodeling capabilities, and even manual workflow integration. That's typicallyfunctionality which is not in your typical ERP package."

The study also revealed that65 percent of companies studied have beenperforming electronic transactions with trading partners for at least fiveyears, while business-to-business e-commerce has only recently attracted theattention of the public at large. But only 12 percent of organizations arecurrently conducting more than 75 percent of transactions electronically; 40percent conduct less than 25 percent of transactions electronically.

Those numbers are expected to increase significantly. More than half ofthose studied anticipate that electronic transactions will comprise better than50 percent of their total business transactions two years from now. Currentactivity is focused primarily in invoicing/payment, sales, and logistics. About85 percent of companies are conducting invoicing and payment transactionselectronically. The majority are also conducting sales, logistics, and shippingfunctions electronically.

The survey indicates the trend over the next two years will be anincrease in the volume of electronic transactions for all business functions.The greatest increases in electronic activity are likely to be in the areas ofmarketing and promotions, procurement of goods and services, electroniccatalogs, and customer relationship management.

"We have seen a recent shift in companies' strategic motivationsfrom one of 'reluctant acceptance' to that of 'opportunistic challenge,'"says Joseph Blumberg, CEO of Specifics Inc. (www.specifics.com), the research firmthat conducted the study. Companies are beginning to realize a positivereturn-on-investment from their e-business initiatives. The challenge now is toachieve the level of integration required to maximize those returns."

Better than 60 percent of companies rated reducing costs and streamliningoperations as the most important results expected from e-business. Anotherquarter view the opening of new sales channels or increasing or protectingmarket share as most important. In addition, 46 percent of participants saidtheir e-business objectives have changed over the past two years, reinforcingthe impression that e-business is increasingly being viewed as a way to buildbusiness, rather than just reduce costs.

CHART: E-Business Challenges

Integrating internal business processes 68%

Integrating processes with external trading partners 60

Dollar investment required 38

Internal knowledge of e-business 33

Building e-business communities 33

Project complexity/scope 32

Joining e-marketplaces 25

Outsourcing to an ASP 15

Source: Sterling Commerce

CHART: Projected Growth of E-Business Volume

(Companies handling majority of transactions via e-business)

Current 12%

2002 29%

Source: Sterling Commerce

CHART: Killer Business Apps (current and future)