There is more to e-business than just creating a Web site. Yes, e-business includes transferring funds electronically and disseminating information, but it is also far more. Building a proper strategy for e-business is vital to the continued success of your company. Businesses that do not expand their information services to the Internet very well may shrink into oblivion. With this in mind, it behooves you to understand the importance of e- business. You can then explain to your boss that your company must have more than a mere presence on the Internet; it must have a well-thought-out tactical plan that will result in an immediate return on investment.
What is e-business, anyway? Why is everyone is talking about it? Does it really work? How can you tell fact from fiction? What about the AS/400e?
E-business is, in fact, just business. Items of value are exchanged between two parties for payments made in a mutually agreeable form and currency. The kernel of what makes -business different is that the need for geographic proximity is reduced or eliminated by use of electronic mechanisms. Buyers no longer have to be in the same location as sellers to inspect, select, and acquire merchandise. Images (the word images here is used in the broadest possible sense to include video and audio representations along with descriptive text) of merchandise sufficient for buyers to make a commitment to purchase are available independent of time and space constraints. Purchasing mechanisms that commit funds from one party to another permit money to “change hands” electronically, rather than literally. This representation of goods, services, and money by electronic proxies is a reasonable and inevitable progression from the days of paper catalogs, paper checks, and credit cards (all somewhat clumsy proxies for their real equivalents) to a medium that offers more advantages and fewer problems.
A Bad Word
Unfortunately, management at many companies doesn’t get it, and maybe that’s not management's fault. Making payroll, building and shipping product, satisfying customers, and the other primal responsibilities assigned to managers often prevent them from
focusing on information technology (IT) to the degree that we technical types think they should. For managers at those companies, I have a word. I don’t like the word, even though it’s a good word and it’s in popular business usage today. The reason I don’t like the word has nothing to do with the word intrinsically, but rather the widespread use and abuse of the word by (mostly) consultants. Anyway, the word is disintermediation!
Oooh, sounds bad. And it is. That’s what will happen to your company if you don’t get with the e-business program now. Not next year; not after you fix the Y2K problems; not after you finish your enterprise resource planning (ERP) implementation; now!
What is it? Disintermediation is the removal by the most ruthless and the most efficient mechanism on the planet— the free market—of worthless added value from the commerce value chain. What did I just say? I said that, in a free market, customers will pay only for actual added value.
Let’s pick apart the word disintermediation to illustrate the concept. Intermediate is the middle English root word from the Latin intermedius. To intermediate means to act as an intermediary or to intervene. Today, dis can be thought of as the definitive and abbreviated version of disrespect/dismissal (i.e., “don’t dis me”) or as a prefix that changes a word to mean the opposite. Either definition works. In business terms, disintermediation means the establishment of new buyer/seller relationships that don’t use the existing intermediate channels. In street talk, disintermediation is “a major dis” to middlemen.
Guess what! Your order entry process may not add value for your customers. They may actually view it as a pain in the kazoo. Ditto for your customer service personnel. Triple, pluperfect dittos for some of your sales force. Just ask yourself: Would you rather call a person to track an air bill or go to the shipping company’s Web site and get an answer instantly? Do you really like talking to telephone long-distance sales people, or would you rather have controllable access to understandable information that lets you pick the rate that’s right for you?
Disintermediation removes worthless added value by eliminating the layer, interface, person, service, or business that doesn’t add value. Generally, worthless added value is removed by allowing it, via the wonderful free-market mechanism of simply not purchasing, to die a natural economic death.
Examples of this mechanism abound today. From procuring books and airline tickets to purchasing groceries to buying cooking implements to replenishing manufacturer shop-floor inventories, we have distribution capabilities that will disintermediate many traditional links in the supply value chains. This phenomenon is most pronounced in businesses in which the value of the goods or services is high in relation to the physical size of the goods or services. It’s worth it to ship PCs individually because the transaction is high in value (to both parties) relative to the cost of shipping. Shipping costs are based on cubic size and, to a lesser extent, on weight. It’s not worth it to ship individual packages of grits because they are not valuable (except in the south, where I live) relative to their dimensions.
What should you do if management doesn’t get it? You should educate managers by explaining disintermediation and e-business technology to them in business terms. That means using plain language and limiting the explanation to what is required. For example, you can explain that a Web server transfers information from a computer on the network to other computers that request the information. Or you can say that a Web server uses the HTTP to send files containing HTML across a TCP/IP network. Which explanation do you think makes more sense to a nontechnical business person?
Of course, you must help management understand the importance of standards. Understanding that a standard is important, and using that standard is, importantly, different from being an expert on that standard. For example, light bulb bases are made to a standard diameter and thread pitch. Not one person in 10,000 can tell you what the
diameter and thread pitch are. Nor do they need to know. So don’t expect your management team to learn the standard diameters and thread pitches of e-business technology. Knowing the standards is your job as a systems professional. The standards will prove themselves to management as your company’s systems start to interoperate with other companies’ systems.
In fact, interoperability is the most important attribute of standards. Standards let your systems interoperate with other systems. Interoperability occurs at many levels—from electrons at the bottom to business components at the top—but, at every level, interoperability is possible because systems conform to a predefined behavior—a standard. Of course, the downside of standards is that systems interoperate best at the level of the highest common set of standards.
Another aspect of educating management on e-business technology is tying the technology and its usage to the real language of business: money. Business people think in monetary terms. To a business person, IT infrastructure is a capital asset and an ongoing expense. If the black hole of that asset and expense doesn’t somehow contribute to producing revenue and profits, the elegance of the technology is a moot point. All IT projects (indeed all IT activities) should be justifiable in real currency.
Is E-business Justifiable?
Justification for IT expenditures can be categorized as either an operational improvement or a complete change in business processes. Operational improvements are improvements made on the margin and are frequently incremental. A faster processor that reduces batch cycle times is an operational improvement. So is a new data entry screen that supports faster, but unchanged, data entry. A complete change in a business process is using e-business technology to get your customer to enter the data so that you get more- accurate data entry faster and at a greatly reduced cost. Both justifications can be significant and should be expressed in currency. It’s just multiplication to convert time savings, equipment savings, or any other unit of savings to dollars. Run the numbers! Then, use the numbers when you talk to management.
At this point, readers with financial training (or sales training) might expect me to tell you to whip out your favorite spreadsheet so I can take you through some financial project justification method or technique. I’m not going to do that, and I think that it would be a mistake for you to do that now. Most companies have a method that is prescribed from above (often by the CFO or comptroller) for analyzing an investment. After you determine the value of your investment (as discussed in the previous paragraph) and you understand the costs, use the analysis models and methods that your company’s financial personnel use. You’ll save time and effort, and they will appreciate that the numbers are presented to them in the required form and in a way they can understand.
Technology justification in this Web-crazy world should be tactical rather than strategic. If your project doesn’t pay back inside of your company’s tactical time frame, look for another project. Today’s spin rate (the pace of innovation) for technology exceeds what most companies regard as a strategic time frame. That fact means that most strategic technology projects are outmoded before they are finished. Adopt, with management’s understanding and approval, an iterative design, development, and deployment approach that delivers projects more quickly in smaller, more manageable chunks. This approach works well for e-business projects.
The payoff for e-business can be huge. New markets, new products, new product cycles, and reengineered business operations can add up to new profits for your company. New markets result from the worldwide access to your products that e-business offers. New products result from the ability to incorporate information content into your existing products. New product cycles result from the nearly real-time feedback that customers provide via the Web. Reengineering business operations to use Web technology can help you reduce your costs dramatically, access new customers, and provide customers with far more meaningful information. Compare the costs of staffing a customer service center to
provide routine information about orders and shipping to the costs of providing that information over the Web. And most customers would rather use the Web for routine inquiries like tracking an air bill. Think about it. What value is really added to the transaction when a person reads information from a computer screen over the phone?
Making the move to e-business does mean more dependence than ever on technology. In fact, many of the best new business practices are inseparable from the supporting electronic technologies. For example, Web access to customer service information would not be possible without the effective, pragmatic use of TCP/IP networks, HTTP servers, firewalls, browsers, and database access technology like IBM’s net.Data. This combination of technology lets customers reach inside corporate computers and access, without human intervention, information that is important to them when it is convenient for them. The scope of the change is mind boggling.
Making the move to e-business also means distinguishing technology that is ready for prime time from technology that isn’t.
This high-stakes evaluation is complicated by sophisticated technology, vendor claims, competing standards, and existing infrastructures (capital assets). And the front edge of the technology is a constantly moving target. As it moves, so does the technological sweet spot where you can make money and gain competitive advantage without undue risk or cost. That sweet spot is different for every organization.
Some technologies have been proven by usage and testing in the demanding free market. Internet e-business technologies like TCP/IP, HTTP, HTML, FTP and many others are reliable, stable (though evolving) technologies that are ready for use. Most companies can use these technologies with no more worries about the underlying technology than they have about telephone technology.
Evaluating New Technology
Evaluating genuinely new technologies means rolling up your sleeves and learning the technology, its application in the space where you want to use it, and the risks associated with it. There is, for better or worse, no substitute for doing your homework. When evaluating new technologies, consider the following factors:
• Does the technology offer your organization a competitive advantage? If not, don’t use it. Technology is not an end in itself, no matter how much fun it is.
• Is the underlying theoretical basis for the technology sound? This can be difficult to evaluate directly. Usually, there are publicly available sources that can affirm or repudiate the basis for a new technology. Vendors can provide some of this information. A well-equipped university library and the Internet can usually provide whatever else is necessary. Consultants, of course, can provide a host of opinions on the soundness of various technologies.
Consultant opinions can be invaluable, but always remember that the consultant is not making the decision.
• Does the new technology conform to an established or de facto standard? Standards conformance is desirable. IT innovation frequently outruns the establishment of standards. The issue of standards compliance is frequently very controversial with most promising new technologies.
• Is the technology scalable enough to suit the intended application? Lots of things work well in a test tube. Not so many things work well when scaled globally.
• Are the security aspects of the technology acceptable? Different organizations have different security requirements. Less security isn’t necessarily bad, but you must take it into account. For example, oral communication has an inherent security flaw (anyone in earshot can hear you), but it would be difficult to live without it.
• Is the implementation of the technology reliable? It takes more than a great theoretical basis to bring technology to market in a usable form, as many providers of new technology have found to their dismay. Implementing technology in a market-ready, reliable package can be a difficult endeavor that requires tradeoffs. Some tradeoffs (often
cost/price) affect reliability. Make sure that you understand the technology’s reliability characteristics and that the product designer made decisions that you consider judicious.
• Has the technology proven itself in the market? If it has, your decision will be easier. If it hasn’t, the technology may still be great. Or it may not. Someone always has to go first. Those who go first with the right technology reap great rewards. Those who go first with the wrong technology don’t do quite as well.
• Does the technology leverage or at least coexist with your existing capital assets? Lack of compatibility can be a paralyzing disqualifier for many organizations. When possible, your new information systems should integrate with your old systems. Today, most e-business technology is compatible with existing enterprise IT resources.
• Is the payback from the use of the technology sufficient to warrant the risk? As with the first factor—competitive advantage—payback is a must. Again, technology is not an end in itself.
What About AS/400e?
What about AS/400e? IBM is committed to providing state-of-the-market, reliable, scalable, secure e-business technologies for AS/400e. Figure 1 shows some of the important e-business technologies included. A complete explanation of all these technologies is beyond the scope of this article, but a couple of them merit some attention in this article because of their newness and their far-reaching impact. You can get more information about the other technologies on the AS/400e Web site at http://www.as400.ibm.com.
Java is the application development tool of e-business and the Web. It is also the application development future of AS/400e.
If you are not looking at Java as an application development technology, you are not fulfilling a due diligence requirement. You may decide that Java is not the right answer for your organization, but you must at least evaluate it.
Application servers, such as WebLogic’s Tengah (http://www.weblogic.com), are an extremely important emerging information technology. Application servers simplify the creation of complete, deployable, maintainable business applications on the Web. They do this by providing services (like access to enterprise databases, network connection pooling, and session management) to programs, by linking program execution across heterogeneous platforms (e.g., client Java programs, servlets, and existing enterprise program resources), and by implementing standard interfaces to resources (like enterprise JavaBeans). Application servers are a major development in our industry in that they implement a new programming model that exploits the Web’s cross-enterprise structure.
Selling Management on E-business
When you sell management, explain how e-business technology will improve the business. Explain in business terms, using the descriptions of technology (in plain language, please) as support for a clear explanation of the change in the business. Use financial benefits to explain why the organization must move to e-business. Explain disintermediation. Remember: The organization changes behavior, and the technology supports the behavioral change—not the other way around. Where necessary, provide management with background education on new technology, again in plain language.
Do your homework when you evaluate new technologies like e-business, and be honest with management about your findings. Don’t use technology for the sake of technology. Use technology to make things better and to improve the behavior (business practices) of your organization.
Follow these time-tested principles, and more of your projects will be approved. Will they all be approved? Not likely, but more is better than fewer.
HTTP Server for AS/400e File Transfer Protocol (FTP) Mail Server Firewalls/Proxies/Virtual Private Networks (VPNs)/Certificates Dynamic Web Pages with net.Data Java Virtual Machine (JVM) with Java Transformer Tengah Application Server and Enterprise JavaBeans IBM WebSphere Application Server Object-oriented Software Development Technology Object Request Brokers (ORBs)
AS/400e Toolbox for Java Domino Domino.Merchant net.Commerce Secure Electronic Transactions (SETs) Dynamic Host Configuration Protocol (DHCP)/ Domain Name System (DNS) Transaction Support
Figure 1: A list of e-business technologies that are important for AS/400 e-business