Computers Today June 1998 Master File

While some blame the high cost of implementation, others worry about lack of security. The systems needed to transact over the Net are in the early stages of development and are still costly and complicated for Indian business to use, pundits grumble. But it's clear that e-commerce is in, and the combination of the Internet and EDI is the next step in building competitive advantage. Computers Today analyses the state of the global e-biz mart, talks of tools needed for Master File

secure electronic transactions, and takes a peek into India's scheme for online commerce.

A recent report by the Organisation for Economic Cooperation and Development (OECD) predicts Internet trading will grow from today's estimated $500 million to $5 billion by 2001. In keeping with the trend worldwide, India has entered into over 50 tax treaties to follow the flow of the increasingly seamless worldwide electronic trade.

While the transformational effects of the Internet on business in general are percolating down, and tax accountants start figuring out how to track trading over the Internet, a new mantra is gaining increasing currency in the specific area of the impact of this phenomenon on commerce (the actual exchange of goods and services between two businesses, or between a business and a customer). The mantra, following coinages such as "E-mail" and "e-zines", is, predictably, "e-commerce". IBM has gone one step further and added an all-encompassing new term to the already-overflowing IT lexicon: e-business!

Even before Indian businesses have had a chance to join the e-commerce chant, there is talk of "second-generation" e-commerce, worldwide. With emerging payment standards, such as the Secure Electronic Transaction (SET) protocol, first-generation e-commerce practices are reportedly reaching the end of usefulness rapidly.

Thankfully for laggards in the jet-age Web-speed race, what many "first-gen" adapters now call their e-commerce system is proving to be little more than a glorified extension of paper-based processing, with few (if any) linkages into back-office order entry and fulfilment systems. More often than not, Web form-based capture of input from a customer is received via E-mail, printed off, and rekeyed into a data-entry terminal. Even today's giants in online sales admit these shortcomings, as they anticipate a revolution in online transaction processing in the next generation of e-commerce. But there are plenty of success stories already.

For example, a combination of intranets and extranets (internal private networks linked to the public Internet) enables Asea Brown Boveri (ABB) to integrate over 60,000 users in a worldwide corporate network spanning more than 80 countries, and to connect over 100 external companies—either customers or business partners. Notable among ABB's e-commerce benefits are improved quality and more efficient project management.

Ideally implemented, e-commerce should save Indian companies veritable fortunes in operating costs by eliminating human intervention in order-processing. Tight Web-to-legacy system integration would help. There is certainly a colossal load of effort required to get legacy integration, and those who pull it off stand to lead the marketplace. The challenge is to manage the integration, and to upgrade outmoded terrestrial networks into powerful VSAT-based systems that can easily handle data, voice, video and image-processing loads.

E-commerce is profoundly influencing the structure of business supply chains. For example, Chrysler Corp., by linking to its suppliers through a Web-based network, reportedly saved more than $1 billion in cost of materials in 1997. By 2000, Chrysler's estimated annual average savings will amount to $2 billion.

In the process of integrating suppliers more closely for efficiency and cost savings, companies are giving rise to virtual enterprises in which it is difficult to tell where one organisation begins and the other ends. Moreover, new Web-based value networks are emerging that permit new competitors with very clearly focused core competencies to enter established industries. They can do so by developing Internet-enabled partnerships that complement their core operations.

E-commerce-based integration of the supply chain is also subjecting intermediaries to pressure now that producers have a direct channel to the buyer. The Internet is a tempting channel for a bank which can conduct an online transaction for five paise versus Rs 1.50 through a teller. Likewise, as Indian companies begin to operate in a global trading mode, local distributors will feel more and more competitive pressure from online brokers who can operate independently of time and place.

One of the most exciting developments springing from e-commerce is the higher degree of personalisation that is made possible. In the past, business designed a product with the mass market as a target. Now, using the reach, the information and processing power available to a business and with their customers' approval, suppliers can gain a more comprehensive knowledge of their clientele.

They can use this knowledge to customise their products/services. Further, the relationship with the buyer can span a lifetime. As customisation grows, suppliers will begin to differentiate their brands as much on an understanding of the customer as on price and quality.

E-commerce is a round-the-clock advantage for the customer. A differentiator today, it will eventually become standard. What's more, e-commerce allows fast and flexible execution and response to market opportunities. The Web enables a company to introduce a new product, get immediate customer reaction, refine and perfect it, all without incurring huge investments in a physical distribution infrastructure. It can then be launched via traditional channels with much greater assurance of success.

Like any other technology, there's good and bad news. The good news is that companies betting on e-commerce have begun to learn about their customer's online buying habits. The bad news is that customer relations may actually be in jeopardy. Led to believe they're transacting in realtime, they could become disillusioned and take their business to competitors or back to the offline world if their order is not fulfilled quickly. Obviously, changes must be made before the promise of e-commerce can be fulfilled.

Meanwhile, it would be helpful to know how much sales tax one would be liable to pay in India to order a book from, say www.amazon.com , the biggest e-bookshop.

T.A. Balasubramanian is former senior manager (systems), Hindustan Petroleum Corp., Ltd., Mumbai

Browsing Books Online

As you log into the Web from your computer, and begin surfing the Web, you may come across amazon.com, an online bookstore that offers Web surfers a range of books to chose from, at prices that are lower than those at retail book stores. As you browse through the site, you may come across a book you wish to purchase. How do you do that?

All you do is to select the books you want to buy, and place an order for them. You could then either pay for them through your credit card, or pay for the books when you receive them. Buying books from Amazon.com is thus much like buying items from a catalogue. What's more you can view the book, and maybe read part or whole of it.

This online bookstore has become so popular, that not only is it the number one bookseller on the Web, but the number three bookseller overall, claims George Aposporos, vice president of business development at Amazon.com. As many as 2,260,000 surfers who visited the Web site bought books this quarter, an increase of nearly 50 percent from 1,510,000 customer accounts at the end of the fourth quarter 1997, and an increase of 564 percent from 340,000 customer accounts at the end of the year ago first quarter.

Net sales for the quarter were $87.4 million, a 32 percent increase over net sales of $66 million for the fourth quarter ended December 31, 1997. Further, net sales increased a whopping 446 percent over net sales of $16 million reported for the first quarter of 1997.

Lucent in a Concerto

Lucent Technologies, the $22-billion network communications company, has six major factories and shipping centres, all of which need to coordinate product shipments amongst themselves, in order to fulfil customers' orders. Finding the process tedious and time-consuming, Lucent decided to use Skyway Freight Systems' Concerto service.

Skyway is a third-party logistics company and subsidiary of Union Pacific. In Concerto, Skyway provides a suite of services that coordinate sourcing, manufacturing and distribution of products from raw materials through consumer goods. As per the contract, Skyway will manage Lucent's whole order delivery process. This service includes managing and tracking products from Lucent's Global Provisioning Centers, which handle manufacturing and distribution, to customers' locations. Before using the Skyway service, Lucent factories shipped their own output point-to-point.

Skyway's technology will now give Lucent's tranportation network much-needed instant and complete visibility, the company feels.

According to Skyway, the biggest challenge for companies involved in electronic commerce isn't the technology—it's changing the corporate culture. "It requires an organisation to be bold."