234 Challenges for Deploying Web Services-Based E-Business Systems in SMEs PXVWEHWWHUDUWLFXODWHWKHEXVLQHVVEHQH¿WVRIWKHLU technologies to bridge this gap. For instance, if SMEs can back up their products’ claims using real case studies and metrics that drive home their points and provide industry-relevant details. Problems are encountered when WS use a dif- ferent platform than the client application. This leaves the developers building a client application unable to understand and appreciate the strengths and limitations of services their applications call. Typically, WS are developed and maintained by groups other than those building the application. Application developers working with WS lack insight into the application details, and even the platform upon which the service is built. Provid- ing customer support would facilitate technical appreciation of how the Web service does its chores. This may assist with issues surrounding how to make calls to that service or help devel- opers resolve problems that are inherent within the service itself. Hence, SMEs should allocate enough resources to help developers analyze and diagnose problems they encounter with the Web service. Web service developers have a good under- standing of what the Web service should do, and how to implement those requirements. However, they lack the real-world experience of designing an application directly in support of end users. Developers of client applications can assist WS providers by providing real-world feedback on their performance and reliability. This enables application developers to better understand Web service strengths and limitations, while providing service developers with invaluable information on service use. This type of information is es- sential to SMEs when architecting and building Q H Z V H U Y L F H V6HU Y LFHFRQ V X PHU V F D Q¿HOG W H VWW KH work of service providers, which may provide the only true test of the Web service. Demand Management $JUHDWEHQH¿WRI:6LVWKDWLWFDQEHUHXVHG This may have unintended consequences. For example, many different consumers can reuse these services that the provider did not anticipate. Since Web service providers are loosely coupled from their consumers, a service can experience an unexpected demand as consumers increase their usage. The risk that an SME service pro- YLGHUIDFHVDVLWVVHUYLFHV¿QGQHZXVHUVLVDQ increased risk of downtime or lower performance for critical users. The application servers used by the SMEs can address some of the risks of downtime that results from unexpected WS traf- ¿FEXWQRWDOORIWKHULVNV7KXVDQ60(KDVWR create an active WS management solution that provides dynamic routing, load balancing, and prioritized messages. CONCLUDING REMARKS E-business adoption and use in organizations LQFOXGLQJ 60(V KDYH UHVXOWHG LQ VLJQL¿FDQW ¿QDQFLDOEHQH¿WVWRWKHPZRUOGZLGH,QUHFHQW years WS have generated considerable excitement in the global computing industry because of its SURPLVHRIIXOOÀHGJHGDSSOLFDWLRQVRIWZDUHWKDW needn’t be installed on ones local computer, but that allow systems running in different environ- ments to interoperate via XML and other Web standards. The integration of WS in e-business, consequently offers an enterprise considerable opportunities for integration within the enterprise, either with legacy applications or new business processes that span organizational silos. +RZHYHU :6 FRPSXWLQJ RIIHUV VLJQL¿FDQW technical and managerial challenges to its stake- holders — suppliers, consumers and standards organizations — as they determine how to help le- verage the emerging technologies to create service 235 Challenges for Deploying Web Services-Based E-Business Systems in SMEs components and automate individual applications. WS technologies are maturing and industry ana- lysts predict that the market for WS components is either about to take off or has already arrived. This study investigated the challenges that ex- ist for each of the stakeholders and presented a framework that organized and interrelated these challenges in an easily understandable manner to help study the factors that impact the deployment of WS. SMEs were studied and then analyzed using the framework to provide insights into the managerial challenges they need to overcome to deploy WS-based e-business systems. It was suggested that SMEs should start deployment of these technologies now, but they should start ZLWKLQWKH¿UHZDOOLQVLGHWKHHQWHUSULVHDQGZRUN outwards as they gain experience and knowledge along the way. The challenges framework presented in this paper is by no means exhaustive; however, it does provide a useful insight into the factors that im- pact the deployment of WS. The next stage of our research is to investigate some of these factors in more detail. We expect this article to shed some light for researchers and practitioners to better understand the important issues and future trends of Web services-based e-business systems. REFERENCES Arsanjani, A., Hailpern, B., Martin, J., & Tarr, P. (2003). Web services: Promises and compromises. ACM Queue, 1(1), 48-58. Auger, P. & Gallaugher, J. M. (1997). 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Jeckle & L. J. Zhang (Eds.), International Conference on Web Services, ICWS-Europe 2003, LNCS 2853 (pp. 123-136), Berlin. 237 Challenges for Deploying Web Services-Based E-Business Systems in SMEs Stal, M. (2002). Web services: Beyond compo- nent-based computing. Communications of the ACM, 45(10), 71-76. Tetteh, E. & Burn, J. (2001). Global strategies for SME-business: Applying the SMALL framework. Logistics Information Management, 14(1-2), 171-180. Tilley, S., Gerdes, J., Hamilton, T., Huang, S., Mill- er, H., Smith, D., & Wong, K. (2004). On business value and technical challenges of adopting Web services. Journal of Software Maintenance and Evolution: Research and Practice, 16, 31-50. This work was previously published in the International Journal of E-Business Research, edited by I. Lee, Volume 2, Issue 1, pp. 1-18, copyright 2006 by IGI Publishing (an imprint of IGI Global). 238 Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. Chapter 1.16 B2B E-Business Robert J. Mockler St. John’s University, USA Dorothy G. Dologite Baruch College, USA Marc E. Gartenfeld St. John’s University, USA INTRODUCTION Every organization can be viewed from two perspectives. There are external processes such as procurement and sales, and internal processes VXFKDVPDQDJHPHQWDQGRSHUDWLRQV¿QDQFH marketing, and human resources. This article primarily focuses on external, commercial e-business processes. B2B (business- to-business) e-business is the sale of products or services, or information exchange, among two or more businesses through electronic technology, usually involving the Internet, through a public or private exchange. The following background section gives a very brief general overview of B2B e-business history. In the main thrust of this article, we discuss making the B2B decision by examining key B2B business requirements and EHQH¿WV as well as describing basic approaches to B2B e-business implementation. In the subsequent section, the article provides a future outlook for e-business. BACKGROUND During the technological explosion of the late 1990s, virtually every company in the world was talking about B2B. The concept was sound and the possibilities were endless, so many companies rushed into implementing something, anything that would make them part of this new business revolution. As often happens when concepts are implemented, many unforeseen problems arise during the early stages of their application. Although the development of B2B e-business has provided opportunities for organizations to improve their purchasing systems and so enhance SHUIRUPDQFHDQGSUR¿WDELOLW\LWLVQRWWKHPDJLF solution once believed, but rather just another 239 B2B E-Business useful business tool when implemented under the right circumstances. Despite the burst of the dot.com bubble and the global recession, online B2B trading exchanges continue to expand. Online B2B e-marketplaces have remained resilient by providing valuable advantages over off-line transactions, including lower costs for buyers, greater access to customers for suppliers, and increased transparency through- out the supply chain for all participants (Krell, 2002). For example, members of the WorldWide Retail Exchange, an online B2B exchange, have saved over $1 billion since 2000 when the exchange ZDVIRXQGHG³6XUYH\´ Internet-based B2B e-business tools help companies master a multitude of objectives, ranging from reducing raw material, process, and transaction costs as well as cycle times, error rates, and inventory, and it improves transparency (Hartman, Salehi, & Vallerien, 2003). In 2001, B2B e-business represented about one third of all e-business volume on the Inter- net, but it was expected to grow at an accelerated rate and eventually become the largest segment of e-business. MAIN THRUST OF THE ARTICLE Before the appropriate B2B e-business implemen- tation approach can be determined, a company needs to identify key business requirements and EHQH¿WV2QFHWKLVKDVEHHQHVWDEOLVKHGWKHFRP- pany can then choose from various implementa- WLRQDSSURDFKHVWKHRQHWKDW¿WVWKHGHWHUPLQHG UHTXLUHPHQWVDQGEHQH¿WV7KH%%LPSOHPHQWD- tion approaches discussed in this article have been derived from researching thoroughly company experiences as well as theoretical studies. Based on these experiences and studies, the ways companies have targeted their B2B implementation endeavors can be grouped into four basic approaches, which will be discussed later in this section. Identifying Key Business 5HTXLUHPHQWVDQG%HQH¿WV 3ODQQLQJ LV WKH ¿UVW VWHSWR WKH VXFFHVVIXO DS- plication of any e-business strategy. A company needs to identify key or core business processes LQLWVVSHFL¿FFRPSDQ\VLWXDWLRQDQGWKHEHQH¿WV to be derived from e-business B2B applications within these key processes. A well-designed B2B e-business system can be extremely valuable in achieving basic strategic management objec- WLYHVLQPDQ\GLIIHUHQWDUHDVRISUR¿WJHQHUDWLQJ HQWHUSULVHVLQFOXGLQJ LQFUHDVLQJ HI¿FLHQF\DQG reducing costs, improving management control, and expanding revenues. Improve 3XUFKDVLQJ(I¿FLHQF\DQG Reduce Procurement Costs This was initially and continues to be a major application area for B2B. Procurement in its conventional form is a costly, labor-intensive, paper-based process. Purchasing personnel often complain that a high percentage of their time is spent on non-value-added activities such as data entry, correcting paperwork errors, expediting delivery, or solving quality problems. Managing supply chains through public or private online B2B exchanges enables companies to (a) directly LPSURYHWKHLURUGHUWRIXO¿OOPHQWF\FOHE\VWUHDP- OLQLQJZRUNÀRZDQGEXVLQHVVSURFHVVHVVRDVWR achieve better order processing and tracking, (b) better leverage company spending and increase return on investment, and (c) ultimately optimize RYHUDOOSURFXUHPHQWHI¿FLHQF\7KLVFDQOLWHUDOO\ save a company millions of dollars. For example, Unilever, a major consumer- products company, was able to cut $902 million in procurement costs over a 2-year period, and by the end of 2002, was expected to have achieved more than $1.58 billion in total savings from procure- PHQWHI ¿FLH QFLH VZLW KLWVQHZ %%V\VWHP7 KHVH improvements were achieved through Unilever’s 240 B2B E-Business replacement of a hodgepodge of procurement systems in use across dozens of product divisions with standardized e-procurement, online-auction purchasing management, and demand-planning systems (Hicks, 2002). Improve Overall Controls The information exchanged among companies and their suppliers through B2B portals creates a stra- WHJLFSDUWQHUVKLSHQYLURQPHQWWKDWLGHQWL¿HVDQG builds partnerships with new suppliers worldwide, strengthens relationships and streamlines sourc- ing processes with current business partners, and U D S L G O\ G LVW U LEXW H V L Q IRU PDW L R Q D Q G VSH F L ¿ F D W LRQV to business partners. Internet-based buy sites en- able companies to manage inventory levels more HI¿FLHQWO\E\SURYLGLQJDFFHVVWRGHPDQGOHYHOV through B2B portals. Through B2B exchanges, companies can receive rapid responses, shorten IXO¿OOPHQW F\FOHV DQG LPSOHPHQW MXVWLQWLPH procurement strategies, which help reduce lag times and allow companies to more effectively control inventory levels and so carry less inven- tory reserves on hand. A good example of this is Cisco Systems. The sharing of information between Cisco Systems, a large Internet product provider company, and its suppliers on customer demand, product defect rates, and engineering reportedly enabled them to substantially reduce manufacturing recycle times and build better products (Corbitt, 2002). Expand Revenues The public exchange of information provided through B2B exchanges has allowed many compa- nies that sell to other companies to reach a greater number of potential commercial buyers of their products, which has lead to increased sales. It also provides greater visibility between customers and suppliers. Web exchanges enable customers and suppliers to peer into one another’s operations via a secure Internet connection, and decrease the suppliers’ time to market with new products. Also, sellers gain instant access to global buyers, with over $1 billion in purchasing power. B2B E-Business Implementation Approaches There are four general B2B implementation ap- SURDFKHVLQXVH7KH¿UVWLVindependent B2B marketplaces, such as Commerce One, Ariba, and Freemarkets. The second approach discussed is the private B2B approach, such as the one found at Unilever and Cisco. A third commonly en- countered B2B implementation approach involves consortiums, as have been formed in the auto, aviation, chemical and petroleum, building-ma- terials, aerospace, and retailing industries. There is a fourth, transitional approach that was imple- mented by GE (General Electric), for example. Independent B2B Marketplaces 7KH¿UVWDSSURDFKGLVFXVVHGZKLFKLQYROYHVDQ H[LVWLQJFRPSDQ\¿QGLQJDQLQGHSHQGHQW%% marketplace (e-marketplace), is a commonly en- countered one. Many companies begin the B2B integration process by focusing on the purchas- ing cycle. Obtaining goods from suppliers using independent B2B marketplaces very often is the fastest and most economical way to acquire B2B capabilities. This is done by selecting an inde- pendent B2B provider, such as Commerce One, Ariba, or Freemarkets, to come in and integrate the company’s internal systems with the selected independent market exchanges (e-marketplace). An independent B2B marketplace or e-market- place is an Internet destination where businesses from around the world can come together to buy and sell goods and services in an auction format. The destination and the auction are controlled and managed by the independent B2B provider. Buyers prepare bidding-project information and 241 B2B E-Business post them on the site. Suppliers then download the project information and submit their bids. Buyers evaluate the suppliers’ bids and may negotiate electronically to achieve the best deal. The buyer then accepts the bid of the supplier that best meets their requirements, and the sale is ¿ Q DOL]HG 3 X UFKDVH U V D QGVX SSO LHUVF D QHLW KHUS D\ a general fee, a per-transaction fee, or a combi- nation of the two to the B2B provider, otherwise known as the Web host. Each one of these B2B providers has its own software applications and host Web sites. For example, Commerce One uses its trade- marked Enterprise Buyer proprietary software to link companies to all e-marketplaces of the Global Trading Web community on its Web site Com- merceOne.net. Commerce One’s Global Trading Web is the world’s largest B2B trading community and provides unprecedented economies of scale for buyer organizations (http://www.commer- ceone.com/company/global_trading.html). This software can be purchased and installed by an existing company in order to obtain access to the Global Trading Web community that enables commercial transactions to take place between e-marketplaces. Private B2B Exchanges The second approach discussed is private B2B exchanges. A private B2B exchange is an e-mar- ketplace created by a single company to provide e-business capabilities to its business units and preferred trading partners (http://www.com- merceone.com/company/global_trading.html). In 2000, in the early stages of e-business devel- opment, many companies trying to be ahead of the curve jumped into public B2B marketplaces usually run by third parties. They soon discovered that there were many inherent problems. Although at times they were obtaining better prices, many times the diminished quality and increased rate of defects in the products were hurting their bottom- line gain. There were also problems in returning defective items, receiving orders when promised, and maintaining continuity in the supply chain (Prince, 2001). Today, more and more businesses with the necessary resources are developing their own private exchanges. The e-market focus of some companies, such as Wal-Mart, has turned away IURPSXEOLFH[FKDQJHVEHFDXVH¿QDQFHVXSSO\ chain, purchasing, and IT managers realized that, in many cases, their systems and employees were ill-equipped to handle the technical and procedural requirements of large public exchanges (Krell, 2002). Wal-Mart has invested in middleware or enterprise application integration (EAI) technol- ogy to link its internal applications together and to a few (up to 12) critical suppliers in the supply- chain process. The real value of e-procurement, e-billing, and electronic supply-chain initiatives is realized through real-time, hard-coded integra- tion (Krell). Other companies, such as Siemens AG, have turned to private exchanges in order to limit ac- cess to procurement information (Konicki, 2001). Siemens prefers a private exchange because it does not want its competitors to have access to its production plans. Private exchanges are gain- ing momentum because, for those companies that have the resources to develop them, they are able to deliver the capabilities many public e-marketplaces promised but have not delivered: the ability to centrally manage procurement across many business units, the ability to enable real- time design collaboration and integration with back-end systems, and the linkage of production-, inventory-, warehouse-, and order-management systems. Consortium The third B2B implementation approach discussed is a consortium: a quasipublic online marketplace approach. A consortium is a group of compa- nies within a particular industry establishing an exchange connecting each of them and their 242 B2B E-Business suppliers. Today, there is a consortium exchange in almost every industry. Consortium members fund most of these exchanges. One example of a consortium is found in the auto industry. Ford, General Motors, and Daim- lerChrysler together established Covisint.com as a global, independent e-business exchange. Covisint is the central hub where original equipment manu- facturers (OEMs) and suppliers come together to do business in a single business environment using the same tools and interface. Covisint enables companies to compress planning cycles and enhance supply-chain planning (http://www. covisint.com/about/). In February 2002, Covisint was handling 100 million supply-chain procure- ment transactions per month. These transactions take place between the exchange’s members and more than 2,000 of their suppliers (Krell, 2002). In 2004, however, Covisint experienced some major problems that led to the acquisition of the FRPSDQ\E\WZRRWKHU¿UPV&RPSXZDUH&RUS and Freemarkets, Inc. (Sullivan & Dunn, 2004). Transitional The fourth approach involves an existing com- pany moving from a private B2B exchange to an independent, external marketplace venture. A good example of this would be General Electric (http://www.gegxs.com/gxs/about). General Elec- tric, given its vast capital resources and diversity across many industries, decided to develop and establish its own B2B software and private B2B operations. Subsequently, it used this experience to set up its own external, independent B2B exchange (called GE Global eXchange Services) to compete with the likes of Commerce One and Ariba in the B2B provider market. This type of approach would require a large amount of resources and is therefore not practical for many smaller busi- nesses. Even for businesses the size of GE, the resources necessary to maintain such an exchange can become cost prohibitive (Barlas, 2002). FUTURE TRENDS B2B e-business experienced an initial boom based on unrealistic projections and expecta- tions, followed by a few years of gloom based on the process of a new technology outgrowing its adolescent phase of development. Recent projections by Standard & Poor’s, however, indicate that the future of B2B e-busi- ness looks bright. The growth of B2B e-business is forecasted to reach $3.6 trillion in 2005, $4.9 trillion in 2006, and $6.4 trillion in 2007 (Kes- sler, 2004). One of the more successful B2B implementa- tion approaches for the future seems to be that of large, private exchanges, such as Ariba and Freemarkets. According to Ordanini, Micelli, and Di Maria (2004), large, private B2B exchanges especially represent a promising phenomenon and offer superior capabilities of generating higher turnovers than smaller niche exchanges. Electronic B2B transactions, as shown earlier, are already improving the competitiveness of enterprises through sinking costs, faster informa- WLRQDQGHQKDQFHGÀH[LELOLW\DPRQJRWKHUEHQ- H¿WV,QWKHIXW XUHKRZHYHU%%ZLOOEHQRWRQ O\ the application of technologies, but also a motor of change for economic processes and industry structures: B2B applications have an enormous potential for the alteration of economic processes in the direction of the knowledge society (Schedl & Sülzle, 2004). In the B2B e-business arena, increased activity through mergers and acquisitions is expected to continue into the future, not only in the middle market among small- and medium-sized competi- tors, but also among the larger B2B exchanges ³0$2XWORRN´ In the near future, more and more companies, HVSHFLDOO\¿QDQFHDQGLQYHVWPHQW¿UPVZLOOEH adding multilingual dimensions to their B2B e- EXVLQHVVVWUDWHJLHV³,QG\0DF%DQN´ Manoj Nigam, president of Micro-D, predicts that in 2005, we will see leading retailers and 243 B2B E-Business PDQXIDFWXUHUV³FRPSOHWLQJWKHLPSOHPHQWDWLRQ RIZKDWZHGH¿QHDVDµIXOOFLUFOH¶%%´&DU- roll, 2004). Nigam describes this as a sales and transaction process that begins with accurate and standardized electronic catalogs from manufac- WXUHUVDQGÀRZVWKURXJKWRSXUFKDVHRUGHUVDQG PO acknowledgments. Because of these and other trends not men- tioned here, B2B e-business seems to be on the SDWKWRDKHDOWK\UHFRYHU\HQVXULQJDSUR¿WDEOH marketplace for its many competitors. CONCLUSION The recent economic downturn has forced com- panies, with reduced budgets and shrinking bot- tom lines, to perform internal analysis in order to determine which B2B implementation approach, if any, to select and integrate in order to achieve WKHPD[LPXPEHQH¿WVRIHEXVLQHVV(VSHFLDOO\ in light of the upcoming B2B e-business recovery and the positive future trends in this industry, as indicated above, a company should carefully select and integrate B2B e-business into their existing business in a way that is most appropriate for the company’s current situation, which makes this process a situational, contingency-based one. Organizations should be aware that although HEXVLQHVVPD\SURYLGHPDQ\EHQH¿WVDQGWKH future looks bright, it is not the magic solution it was once assumed to be but rather just another potential business tool to be implemented under the right circumstances. REFERENCES Barlas, D. (2002, June 24). GE sells B2B arm. Line 56 Magazine. 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M&A outlook (part II): Even as deal volume soars, are B2Bs becoming benchwarmers on their own ¿HOG"MIN’s B2B, 8(4), 1. Ordanini, A., Micelli, S., & Di Maria, E. (2004). Failure and success of B-to-B exchange busi- ness models: A contingent analysis of their performance. European Management Journal, 22, 281-289. Prince, C. J. (2001). To B2B or not to B2B. The Chief Executive, (168), 48. Retrieved January 31, 2004, from http://www.findarticles.com/ cf_0/m4070/2001_June/75919275/p3/article. jhtml?term=business+to+ business+problems+ with+public+ market+exchanges Schedl, H., & Sülzle, K. (2004). Welche ent- wicklungen zeichnen sich im elektronischen geschäftsverkehr zwischen unternehmen ab? Ifo Schnelldienst, 57(41/42), 10-18. . client application unable to understand and appreciate the strengths and limitations of services their applications call. Typically, WS are developed and maintained by groups other than those. and sell goods and services in an auction format. 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