Where Do We Stand

With internet taking over the

computing world, a new way of commerce is beckon- ing the business world-ecommerce. A

complete reinvention of how one does business, ecommerce makes communication, information

gathering and trade between the companies and between companies and consumers easier and

faster. Business houses which initially started using internet as a sales medium are now

moving toward a more sophisticated approach including activities like sales, marketing,

reserach, procurement and communication. However, ecommerce is not just about new

customers and new markets, though they remain the prime objectives. It is an

enterprise-wide undertaking that requires the re-design of a company's business processes.

KPMG India in 1998 conducted a

survey to evaluate the status and the general perceptions about the use of ecommerce in

India. The survey outlines the ecommerce-related developments as well as highlights the

obstacles that are being encountered alongwith the benefits realized. Responses were

received from 116 Indian companies. Sixty-nine of these have a minimum annual turnover of

Rs1 billion and 17 with an annual turnover above Rs10 billion. The decision to include

large companies in the survey was guided by the idea that these organisations have more

resources to commit to ecommerce and potentially largest benefits to reap.

Respondents were asked to classify

themselves under one of the following categories:

Manufacturing and distribution



Computers and communications


Financial services


Retail and wholesale trade


Other industries


Some of the questions were analysed by industry to highlight the variations peculiar to
those industries.

Use of ecommerce can be classified

into two broad areas:

BUSINESS TO CONSUMER OR B2C:

Interfacing and selling to the end consumer BUSINESS TO BUSINESS OR B2B: Interfacing and

trading with other businesses

The annual IT spending of the

organizations also varied over a wide range. While some organizations spend less than

Rs10,0000 on IT per annum, there are others who spend more than Rs10 crore.

Strategic importance of ecommerce

Over half of the respondents said

that ecommerce constituted either a substantial part of, or was crucial to their

organization's strategy. Only 4% felt that it was of no importance to their organization's

strategy. This makes it clear that ecommerce is increasingly being seen as a strategic

tool to gain business advantage and competitive edge.

Potential barriers

The respondents rated lack of

standard payment infrastructure and trading partner's technology as the major potential

barriers to effective adoption of ecommerce in their organizations. Infrastructure cost

and security issues also figured as important concern areas, although not as crucial as

the first two. The survey showed that organizations are willing to make the necessary

investments in the technology as long as they can manage it efficiently and get a

satisfactory return on investment. KPMG research in the European market has indicated

security as an overhyped concern. The tools for overcoming security risk are available,

but it remains subject to media hype. Those companies which are most advanced in their use

of ecommerce, recognize this and so are likely to regard it as a less significant barrier

than those that have not.

Integration

Almost half of the total respondent

companies had support at board level and had allocated resources for ecommerce

integration. Forty percent of the organizations are taking measures to integrate ecommerce

technologies with their current operating processes and technologies. However, adapting

ecommerce will not simply mean redesigning internal processes and customer interfaces.

Instead, companies will have to think of it as a new channel and not just a replacement

for existing channels. This in turn means that they may have to start offering new

services in order to maintain their market image and position. Others will find that

ecommerce provides them with the opportunity to offer new services.

Implementation of ecommerce

technologies

The internet emerged as the most

favored technology, with almost half the respondent using it for news and

information-based uses. Internal and internet email, web sites and internet access are

popular in all major industry segments. Almost everyone uses internal email and most

organizations allow their employees access to the Web. In the next two years, respondents

from manufacturing and distribution companies favored implementation of extranet, intranet

and EDI technologies while financial service companies expected to have installed EDI,

extranet and IVR systems. Computers and communication companies are planning EDI

implementations.

Summarizes the most predominant

Ecommerce technologies that are currently implemented and that will be implemented over a

period of time in different industrial segments.

Transaction Volumes

Less than half of the respondents

were able to provide details of the volume of transactions done electronically. Of these

nearly half said that the volume of transactions in their organizations is zero. Hence

most organizations surveyed are not able to determine the number of transactions completed

through electronic channels and many are yet to use these channels.

Governance

The sponsors within a company

determine the scope and success of an ecommerce project. The IT departments usually take

lead in ecommerce projects within their organizations. Executive committee support in the

form of board approvals and intervention to ensure that the necessary business

reengineering takes place to ensure that ecommerce is integrated with business processes

is critical to ensure that these projects deliver on promises. The surveyed companies were

also asked about which part of the company is the principal sponsor of current or future

ecommerce projects. In nearly two-third of the companies it was the executive committee.

It was also observed that the IT department champions, develops and maintains these

projects in a majority of the organizations.

Security of Ecommerce Transactions

The respondents were asked to rate

the importance of features in establishing and maintaining the level of trust required for

employing ecommerce technologies effectively. It is interesting to note that all the

features have received very high ratings. A minimum of 67% of respondents said that a

particular feature is important/very important/critical). The highest ratings have been

given to Network access controls and Through-the-system tests and audits.

Trading partners

About 30% of respondents had more

than 5% of their trading partners trading electronically and about half of these had more

than 50% of their trading partners trading electronically.

Procedure used by organizations to

ensure security and proper use of computer resources

The following chart details the

procedures used by organisations to ensure confidentiality, security and appropriate use

of computer resources.

Miles to go...

From the survey it is evident that

the potential offered by ecommerce is far from realized. The perception that trading on

electronic channels cannot make money is being challenged as incorrect, at least in the

business sector. There is also some expectation that, although the trading on electronic

channels may take longer in the consumer sector due to the trading barriers on the

internet this too will soon follow. Electronic channels are forcing companies to re-think

major aspects of the way they are organised and do business. Ecommerce raises major

strategic issues and is accelerating developments in areas such as globalisation,

branding, customer service and supply chain.

Markets are being transformed as

barriers to entry are torn down. This survey shows that the applications of ecommerce, and

the internet in particular, extend beyond marketing to all aspects of the supply chain. It

also shows that the technical aspects are no longer as important as the integration of

business processes and the resulting need to reengineer them across the organization.

Companies are however approaching these developments piecemeal.

If companies are to make profitable

use of ecommerce, then their champions must make their cases heard at the highest levels.

This is an opportunity for the IT and marketing departments to make their board aware of

the effect of ecommerce not just from the technical view, but also in terms of its impact

on the bottomline. In our opinion, only those companies with an organization-wide

initiative, funded from the center or, at least on a joint venture basis between

functions, with board approval will emerge as leaders in what is a rapidly changing

environment.

Senior management members who have

earlier been responsible for the ecommerce initiative in their organizations need to

prepare a compelling business case, detailing the likely returns on investment, and submit

it to the board. The rewards, both for the company and for the individual involved in

shaping its adaptation to the information age, promise to be worth the effort.

Courtesy: KPMG India.