chapter 1 what is electronic commerce

Chapter 1: What Is Electronic Commerce? “It is impossible for ideas to compete in the marketplace if no forum for their presentation is provided or available.” —Thomas Mann (1875–1955) Overview Electronic commerce is doing business online It is about using the power of digital information to understand the needs and preferences of each customer and each partner to customize products and services for them, and then to deliver the products and services as quickly as possible Personalized, automated services offer businesses the potential to increase revenues, lower costs, and establish and strengthen customer and partner relationships To achieve these benefits, many companies today engage in electronic commerce for direct marketing, selling, and customer service; online banking and billing; secure distribution of information; value chain trading; and corporate purchasing Although the benefits of electronic commerce systems are enticing, developing, deploying, and managing these systems is not always easy In addition to adopting new technology, many companies will need to reengineer their business processes to maximize the benefits of electronic commerce An electronic commerce strategy should help deliver a technology platform, a portal for online services, and a professional expertise that companies can leverage to adopt new ways of doing business Platforms are the foundation of any computer system An e-commerce platform should be the foundation of technologies and products that enable and support electronic commerce With it, businesses can develop low-cost, high-value commerce systems that are easy to grow as business grows An e-commerce platform’s breadth should also be unmatched, ranging from operating systems to application servers, to an application infrastructure and development tools, and to a development system Portals are the crossroads of the Internet, where consumers gather and where businesses can connect with them Companies normally provide customers with a wide range of choices for professional implementation services and tightly integrated software for commerce solutions Independent software vendors (ISVs) have created specialized commerce software components that extend the platform This chapter details introductory strategies and priorities for electronic commerce, which sets the stage for the rest of the book It also describes how the platform, portal, and partners are critical to solving business problems in the four most common areas of electronic commerce: direct marketing, selling, and service; value chain integration; corporate purchasing; and financial and information services E-Commerce: Doing Business on the Internet Businesses communicate with customers and partners through channels The Internet is one of the newest and, for many purposes, best business communications channels It is fast, reasonably reliable, inexpensive, and universally accessible—it reaches virtually every business and more than 200 million consumers Doing business online is electronic commerce, and there are four main areas in which companies conduct business online today: direct marketing, selling, and service; online banking and billing; secure distribution of information; and value chain trading and corporate purchasing Direct Marketing, Selling, and Service Today, more Web sites focus on direct marketing, selling, and service than on any other type of electronic commerce Direct selling was the earliest type of electronic commerce, and has proven to be a stepping-stone to more complex commerce operations for many companies Successes such as Amazon.com, Barnes & Noble, Dell Computer, and the introduction of e-tickets by major airlines, have catalyzed the growth of this segment, proving the reach and customer acceptance of the Internet Across consumer-targeted commerce sites, there are several keys to success:  Marketing that creates site visibility and demand, targets customer segments with personalized offers, and generates qualified sales leads through observation and analysis of customer behavior  Sales-enhancing site design that allows personalized content and adaptive selling processes that more than just list catalog items  Integrated sales-processing capabilities that provide secure credit card authorization and payment, automated tax calculation, flexible fulfillment, and tight integration with existing backend systems, such as inventory, billing, and distribution  Automated customer service features that generate responsive feedback to consumer inquiries, capture and track information about consumer requests, and automatically provide customized services based on personal needs and interests [3]  This business-to-consumer (B2C) electronic commerce increases revenue by reaching the right customers more often Targeted and automated up-selling and cross-selling are the new fundamentals of online retailing Sites that most frequently provide the best and most appropriate products and services are rewarded with stronger customer relationships, resulting in improved loyalty and increased value Financial and Information Services A broad range of financial and information services are performed over the Internet today, and sites that offer them are enjoying rapid growth These sites are popular because they help consumers, businesses of all sizes, and financial institutions distribute some of their most important information over the Internet with greater convenience and richness than is available using other channels For example, you have:   Online banking Online billing  Secure information distribution Online Banking Consumers and small businesses can save time and money by doing their banking on the Internet Paying bills, making transfers between accounts, and trading stocks, bonds, and mutual funds can all be performed electronically by using the Internet to connect consumers and small businesses with their financial institutions Online Billing Companies that bill can achieve significant cost savings and marketing benefits through the use of Internet-based bill-delivery and receiving systems Today, consumers receive an average of 23 bills per month by mail from retailers, credit card companies, and utilities Secure Information Distribution To many businesses, information is their most valuable asset Although the Internet can enable businesses to reach huge new markets for that information, businesses must also safeguard that information to protect their assets Digital Rights Management provides protection for intellectual and information property, and is a key technology for secure information distribution Maintenance, Repair, and Operations (MRO) The Internet also offers tremendous time and cost savings for corporate purchasing of low-cost, high-volume goods for maintenance, repair, and operations (MRO) activities Typical MRO goods include office supplies (such as pens and paper), office equipment and furniture, computers, and replacement parts The Internet can transform corporate purchasing from a labor- and paperwork-intensive process into a self-service application Company employees can order equipment on Web sites, company officials can automatically enforce purchase approval and policies through automated business rules, and suppliers can keep their catalog information centralized and up-to-date Purchase order applications can then use the Internet to transfer the order to suppliers In response, suppliers can ship the requested goods and invoice the company over the Internet In addition to reduced administrative costs, Internet-based corporate purchasing can improve order-tracking accuracy, better enforce purchasing policies, provide better customer and supplier service, reduce inventories, and give companies more power in negotiating exclusive or volume-discount contracts In other words, the Internet and e-business have changed the way enterprises serve customers and compete with each other, and have heightened awareness for competing supply chains (see sidebar, “Supply Chain Management”) Supply Chain Management Supply chain management (SCM) is changing as companies continue to look for ways to respond faster, improve service for customers, and maximize sales while decreasing costs SCM solutions must support highly configurable products, such as computers and automobiles, global markets with local specifications, and widely dispersed suppliers and partners Yet most companies’ SCM solutions are linear, sequential, and designed for controlled conditions They rely on accurate forecasting of demand, but are disconnected from the actual demand Decisions are made centrally, and changes typically take days, weeks, or even months However, companies increasingly need to respond to changes in hours and minutes Supply chains in this century must be adaptive and provide greater visibility, velocity, flexibility, and responsiveness to enable enterprise value networks to adapt to changes in supply and demand in real time Management Shift As supply chain networks extend across organizational and geographic boundaries, companies must find ways to manage the unmanageable The future of supply chain management lies in the ability of the enterprise to respond instantaneously to shifts in global supply and demand, and to major events that occur across extended supply chain processes The faster a supply network can adapt to these events, the more value that will be created For example, with Walldorf, Germany-based SAP® mySAP™ Supply Chain Management (mySAP(tm) SCM), enterprise systems supplier SAP is delivering what it believes is the most adaptive supply chain management solution available on the market In addition, SAP is developing adaptive-agent technology and repair-based optimization that is expected to enable the next generation of adaptive solutions and services Supply chain management is now the key to increasing and sustaining profitability In fact, Stamford, Connecticut-based Gartner Group recently predicted that 91 percent of leading companies that fail to leverage supply chain management would forfeit their status as preferred vendors According to SAP, mySAP SCM has demonstrated bottom-line benefits for its users For example, New York, N.Y.-based Colgate-Palmolive increased forecast accuracy to 98 percent, reduced inventory by 13 percent, and improved cash flow by 13 percent The reason: mySAP SCM enables end-to-end integration of supply chain planning, execution, networking, and coordination The Profits of Adaptive Proponents of adaptive supply chain networks say that by sharing information about customer demand with all partners simultaneously—rather than in the traditional, sequential fashion, with its inherent delays—network partners can act more like a single entity to stay in-sync with customer needs The adaptive supply chain network puts the customer at the center of all activities in the supply chain, which allows companies to improve overall costs and profits across the network, instead of just shifting costs to other parts of the supply chain Given the dynamics of today’s markets, manufacturers need to rethink their business model on an almost continuous basis, keep redefining markets and pricing, serve ever-smaller customer niches, and provide increasingly customized products Internal integration helps enterprises break down functional silos and share actionable information The adaptive supply chain network relies upon real-time integration of all supply chain systems, including networking, planning, execution, coordination, and performance-management systems But, it also requires integration across systems that support a variety of functions beyond the traditional supply chain Customer relationship management (CRM) is about capturing customer requirements, building life-long customer relationships and brand value, and influencing demand through promotions This information must be fed back into the supply chain network to improve planning Although this flow of information generally does not occur now, it represents the key to customer-segmentation strategies and effective demand management, which will lead to increasing overall profitability Customer feedback and trends must also drive product development to ensure that products are designed according to customer requirements In addition, integration between a product life-cycle management (PLM) system and an SCM solution reduces time-to-market for new products and ensures that engineering changes are seamlessly integrated back into manufacturing Last but not least, aligning a company’s business model with operational capability requires engineering and sourcing products differently To support mass customization and postponement strategies, products tend to be designed in a modular fashion and sourced from fewer strategic suppliers Close collaboration with these suppliers on product design is essential to reduce time-to-market, increase product quality, and ensure that products are designed for supply With that kind of integration, a superior understanding of the customer drives everything—CRM, product design, supply chain operations, and even the value proposition of the entire network In an adaptive supply chain network, SCM, CRM, and PLM must all work together That is the hallmark of a truly customer-centric organization—and the key to profitability Competitive Advantage Making adaptive supply chains a reality means fundamental changes in a company’s internal operations, starting with the integration of processes and systems across organizational boundaries Then, companies can leverage the increased visibility within and across organizations to achieve change in their supply chain processes, including functionality for the following Adaptive Planning Today, most supply chain planning and scheduling systems rely primarily upon historical data collected from enterprise resource planning (ERP) and legacy systems However, as companies aim to create virtually “inventory-less” supply chains, they require the ability to realign demand and supply almost continuously to consider the latest demand situation and supply status Adaptive planning replaces batch-oriented, period planning with an event-driven, real-time response to demand signals and changing supply situations Dynamic Collaboration Traditional supply chains rely mostly upon inventory and assets, but the adaptive supply chain network is information-based—it uses shared data for planning and execution processes By incorporating data garnered from collaborative processes (such as vendor-managed inventory [VMI]; collaborative planning, forecasting, and replenishment [CPFR]; collaborative supply management; and collaborative transportation management), these networks replace inventory and capacity buffers (long used to make up for a lack of supply chain visibility) with information Distributed Execution Most execution systems are ill-prepared to support the emerging virtual supply network Distributed execution considers the distributed nature of processes in a world of outsourcing, in which multiple partners in the extended network might manage a single process Distributed execution allows the management of processes across different ERP systems by supporting cross-system integration and collaboration Event-Driven Coordination Today, even small disruptions in supply chains initiate a wave of e-mails, faxes, and phone calls just to keep pace with the problem Adaptive supply chain networks address the challenge of managing the virtual enterprise through up-to-the minute monitoring and control of business processes and the rapid, intelligent resolution of exceptions Event-driven coordination complements adaptive planning by trying to solve supply chain exceptions locally to support existing, optimized plans The result? Faster response to market changes and instantaneous adaptation to customer needs across the enterprise and the network Continuous Performance Management Most executives would agree that consistent performance metrics are the key to steering the behavior of individuals and reconciling conflicting goals across functional areas However, key performance indicators (KPIs) also play a major role in managing collaborative processes and in providing decision makers with actionable information to increase the quality and speed of decisions Continuous performance management enables closed-loop learning processes by allowing the company to measure the quality of processes constantly, and by feeding this information back into supply chain planning Besides addressing the need for consistent performance metrics, companies are increasingly complementing supply chain KPIs with balanced scorecards to get a level view of the state of the organization, and to align operational targets with strategic objectives across functional silos Combined, these elements enable companies to implement closed-loop learning processes across the supply network In business, the ability to adapt to change is increasingly important For those who it right, the adaptive supply chain network will be an important competitive weapon Those who don’t may well become the dinosaurs of their industries [4] Value Chain Integration No other business model highlights the need for tight integration across suppliers, manufacturers (see sidebar, “The Manufacturing E-Commerce Bottom Line”), and distributors quite like the value chain Delays in inventory tracking and management can ripple from the cash register all the way back to raw material production, creating inventory shortages at any stage of the value chain The resulting out-of-stock events can mean lost business The Internet promises to increase business efficiency by reducing reporting delays and increasing reporting accuracy Speed is clearly the business imperative for the value chain The Manufacturing E-Commerce Bottom Line The economic downturn in the United States has played havoc with the country’s manufacturing and engineering sectors for more than three years, leading to the longest continual month-over-month decline in industrial production since World War II But, if there is a bright spot in what economists are predicting for manufacturers in 2004, it is a trend toward increasing e-commerce revenues and initiatives within the industrial sectors The Federal Reserve recently reported that production in American factories fell 3.3 percent The September 11 terrorist attacks created additional uncertainty in all markets, but particularly in manufacturing, where inventory levels among retailers and suppliers were already high Consumer spending for durable goods took a drop in the wake of the attacks and as a result of the developing war on terrorism Analysts also say they not expect an uptick in manufacturing production until consumers begin spending with confidence Still, companies like General Electric and General Motors were reporting increases in online sales and predicting gains in e-commerce by the end of 2003 Officials at GE indicate they expect to increase the amount of online revenue calendar-year-over-calendar-year from $9 billion to $24 billion Historically, online revenue figures in manufacturing, engineering, and supply sectors have been difficult to determine, because most companies in those sectors not separate online revenue from other income Economic statistics compiled by the U.S Department of Commerce and others have consistently noted that although e-commerce activities have continued to grow despite unfavorable economic conditions, determining the exact portion of the national economy they represent is difficult A recent study by the National Association of Manufacturers (the leading industry group of industrial producers) saw dramatic increases in the number of companies developing Web-based activities to reach both new customers and suppliers Despite the intense hype surrounding e-commerce, right now it’s still just a small fraction of most business and manufacturing operations But, nearly three quarters of the companies surveyed reported they were developing e-commerce initiatives to grow their revenues, a harbinger of dramatic change down the road As capital spending rebounds, there should be a significant increase in networking and businessto-business software investments In another recent study of e-business activities within the manufacturing sector (commissioned by Interbiz, a division of Computer Associates International), a significant increase in focus was shown on e-commerce activities in 2002 within manufacturing and related industrial areas According to the survey, 56 percent of manufacturing concerns indicated they were actively involved in e-commerce, with 89 percent reporting effectiveness within their e-business strategies; 22 percent reported those activities as “highly effective.” Unfortunately, speed can be costly Today, approximately 60,000 businesses exchange business documents such as orders and invoices with their trading partners through a standard communication and content protocol called Electronic Data Interchange (EDI) Most EDI implementations use leased lines or value added networks (VANs) that require significant integration for each trading partner Network design, installation, and administration can be costly in terms of hardware, software, and staff In fact, these costs are the key reason that EDI is most widely deployed only in larger companies Moving forward, all companies will be able to take advantage of value chain integration through the low cost of the Internet Open standards for electronic document exchange will allow all companies to become Internet trading partners and function as suppliers, consumers, or both in this business-to-business electronic commerce This integrated trading will tighten relationships between businesses while offering them greater choices in supplier selection Issues in Implementing Electronic Commerce Although it is simple to describe their benefits, it is not nearly as easy to develop and deploy commerce systems Companies can face significant implementation issues:   Cost  Security  Leveraging existing systems  Interoperability Value Cost Electronic commerce requires significant investments in new technologies that can touch many of a company’s core business processes As with all major business systems, electronic commerce systems require significant investments in hardware, software, staffing, and training Businesses need comprehensive solutions with greater ease-of-use to help foster cost-effective deployment Value Businesses want to know that their investments in electronic commerce systems will produce a return Business objectives such as lead generation, business-process automation, and cost reduction must be met Systems used to reach these goals need to be flexible enough to change when the business changes Security The Internet provides universal access, but companies must protect their assets against accidental or malicious misuse System security, however, must not create prohibitive complexity or reduce flexibility Customer information also needs to be protected from internal and external misuse Privacy systems should safeguard the personal information critical to building sites that satisfy customer and business needs [6] Leveraging Existing Systems Most companies already use information technology (IT) to conduct business in non-Internet environments, such as marketing, order management, billing, inventory, distribution, and customer service The Internet represents an alternative and complementary way to business, but it is imperative that electronic commerce systems integrate existing systems in a manner that avoids duplicating functionality and maintains usability, performance, and reliability Interoperability When systems from two or more businesses are able to exchange documents without manual intervention, businesses achieve cost reduction, improved performance, and more dynamic value chains Failing to address any of these issues can spell failure for a system’s implementation effort Therefore, your company’s commerce strategy should be designed to address all of these issues to help customers achieve the benefits of electronic commerce Your company’s vision for electronic commerce should also be to help businesses establish stronger relationships with customers and industry partners For example, a successful strategy for delivering this vision is described by three workflow elements (platform, portal, and industry partners), each backed by comprehensive technology, product, and service offerings From self-service portals to transaction processing, a successful workflow strategy can be the underlying engine delivering state-based, processed-focused control services for e-business applications Human labor is expensive, and workflow technology allows e-businesses to supplement, and in some cases eliminate, reliance on human supervision and intervention Workflow Technology Creating e-business processes without a vision for workflow is shortsighted and expensive Workflow addresses business needs, streamlines transactions, and is the glue for process coordination and consistency Self-service applications are perfect examples of how workflow can be employed to automatically coordinate requests and track fulfillment, thereby allowing corporations to relocate human resources to more difficult tasks E-business flexibility can be realized through workflow’s logic encapsulation that isolates the logic of the business process from the Web server middleware and associated Web pages Every Web page click is an opportunity to invoke workflow-based interaction, guidance, and fulfillment E-businesses need workflow technology to react rapidly to process changes For example, an instant change to the workflow process can be accomplished with a simple change to the workflow map by a nonprogrammer, to effect temporary or continuous changes in the business process, thus accommodating short-term business needs or long-term process improvements A workflow driven e-business will see immediate shifts that allow it to process more efficiently under high volume circumstances The bottom line? Workflow design tools should be a core requirement for e-business applications A detailed discussion of workflow technology is presented in Chapter 2, “Types of E-Commerce Technology.” Now, let’s take a look at the transformation of the scope of the Internet and the Web The discussion centers around the Session Initiation Protocol’s (SIP) effect on multimedia-enabled e-commerce [3] Microsoft Corporation, “Electronic Commerce Explained,” ©2003 Microsoft Corporation All rights reserved The Business Forum 9297 Burton Way, Suite 100, Beverly Hills, CA 90212, (August 2002): pp 1–19 [4] Runge, Wolfgang and Renz, Alexander, “Adaptive Networks Broaden Relationships,” © Copyright 2003 SAP AG All rights reserved, SAP America Inc., Strategic Planning & Support Office, 3999 West Chester Pike, Newtown Square, PA 19073,USA, [Advertising supplement in June, 2002 edition of MSI, Reed Business Information, 2500 Clearwater Drive, Oak Brook, IL 60523 (June 2002)] [6] Vacca, John R., Net Privacy: A Guide to Developing & Implementing an Ironclad ebusiness Privacy Plan, McGraw-Hill Trade, 2001 The Scope of the Internet and the Web The renaissance of the Internet age launched an entirely new set of communication technologies and methods As multiple technologies evolve and interoperate, so complementary standards, such as those for multimedia applications The advancement of multimedia applications for the Web has resulted in a wave of new technologies to enhance the Internet experience From voice to video, the latest developments have resulted in the requisite standards to allow for the full maturation of the technology Voice over IP (VoIP) has gained acceptance within the last few years, with older standards enabling the technology As more advanced standards mature and enhanced capabilities and features become available, the adoption of VoIP has begun to take off For example, H.323 is currently the dominant standard for initiating a voice session But, as more multimedia services, such as unified messaging, video conferencing, instant chat, and presence, gain acceptance in an Internet Protocol (IP) environment, more robust standards are needed Hence, the creation of an HTTP-based protocol—Session Initiation Protocol (SIP) SIP’s main functions are signaling and call control for IP-based communications It defines the desired service for the user, such as point-to-point calls, multipoint conferencing, text, voice, or video Using the protocol, SIP servers perform a routing service that puts the caller in contact with the called party, taking into account the desired service and user preferences Because SIP has its foundation in HTTP, it eases the integration of voice with other Web services The Benefits of SIP As the new voice-ready IP standard, SIP enables the initiation of an interactive Internet experience involving multimedia elements, such as video, voice, chat, gaming, and virtual reality The main advantages of SIP for the VoIP market include enhanced scalability, easy implementation, and dramatically reduced call setup time Another key benefit of SIP for VoIP is the easy integration with many other IP services Through SIP, service providers can easily add services and applications for VoIP customers while minimizing interoperability issues SIP is flexible and extensible, easily supporting a wide array of endpoint devices and configurations More importantly, SIP runs over IP networks, regardless of the underlying networking technology—asynchronous transfer mode (ATM) By taking advantage of the Internet, SIP technology provides new service capabilities while supporting the use of key services from the circuit-switched telephone network IP-based communications can use SIP Uniform Resource Locators (URLs) for addressing, similar to the World Wide Web, in which the form of the URL resembles an e-mail address The support of both telephony and Web-type addressing enables IP communication to seamlessly bridge a telephone network and the Internet Users on either network can reach any point on the Public Switched Telephone Network (PSTN) or the Internet without giving up the existing devices or advantages of either Enabling Multimedia E-Commerce with SIP The emergence of SIP has opened up new doors of innovation, enabling the next generation of e-commerce through the use of VoIP and multimedia applications The simplicity of SIP technology is facilitating the spread of VoIP around the world SIP’s straightforward approach has encouraged developers of e-commerce applications and telecommunications providers to implement it into their customer relationship management (CRM) systems Traditional voice call centers for customer support are migrating to Web support centers where the focus is shifting from pure voice (800 numbers) to e-mail support, text chat, voice, and video with click-to-connect service The integration of these applications brings a fresh dimension of communication to customer-facing Web sites As customers experience the benefit of multiple touch points, enterprises are compelled to integrate these new Global Reach A small organization no longer has to be a local organization Anyone with Web access (in a living room in Chicago, in a log cabin in Alaska, or in a café in Bordeaux) can spend their time, and their money, at any online business Higher Profile A company can have a significant Web presence and profile, even with relatively modest depth and breadth to its inventory On the Internet, a small but very efficient company can have the profile of a much larger, deeppocketed competitor 24 × Availability E-businesses not have to close at the end of the day Information and services can be available any time, any day, allowing revenue to be earned without interruption Targeted Focus and Cost Savings Companies not have to be all things to all consumers Through the Internet, individual customers can get goods and services tailored to their needs Significant savings from, among other things, streamlining inventory and distribution channels are possible in effective e-businesses New Medium and New Expectations Internet consumers expect e-business to be faster and more extensive, with more options and services, than brick-and-mortar alternatives They expect their experience online to be easy, as uncomplicated as buying a newspaper or filling the car with gas And, if they encounter any problems with the site, or have difficulty understanding how it works, or are otherwise frustrated, they know they can go somewhere else, to another Web site, and be there in no time Speed Wins Speed is crucial for successful e-businesses Consumers expect Web sites to be fast A useful starting point is the eight-second rule of thumb The rule says that a significant number of users are unwilling to wait longer than eight seconds for a page to load or an action to be executed, and as technology improves and speeds increase, the time users will wait before leaving the site is likely to decrease Many factors, from fundamental site architecture to network traffic at certain times of the day, affect how fast a site will function Vital for success in any e-business is ongoing monitoring of the performance of its site, identifying cycles of usage and ranges of performance, and making necessary modifications and upgrades to ensure speed There have been attempts to quantify the economic loss due to unacceptably slow Web page download speeds, which is one aspect of e-business customer churn It is estimated that as much as $473 million is lost per month from customer bailout from impatience If It Isn’t Broken Key to the user’s experience and level of comfort in e-business is consistency Whereas a brick-and-mortar business could not redesign the store every month, e-businesses can, and some The relative cost for changing the look and feel of an e-business is low, and the appeal of adding new features is a strong temptation There is a fine line, however, between a “sticky” site, one that attracts new customers and urges old ones to return, and a site that changes so often and in such ways that customers must relearn the site Instead of spending the extra time to deal with the hassle, they will go to the competition, the one that is fundamentally consistent in its presentation and functionality, and they will stay there No Experience Required Many new e-business consumers are novices not only with online transactions, but also with the Internet in general, and this complicates the issue of glitches and raises the ante for Web sites to function smoothly A computer neophyte is less likely to understand, or have patience with, technical difficulties A recent survey conducted by ICL, an e-business services company, indicates relatively high levels of stress and anxiety caused by computer problems for “typical” users  Forty-nine percent found computer problems more stressful than being stuck or delayed on public transportation  Seventy-nine percent found computer problems more stressful than having to spend a weekend with a spouse’s parents  Twenty-three percent found computer problems more stressful than being left by a partner or spouse [1] No Web site runs perfectly 100 percent of the time, but those that are close to 100 percent (Web sites that minimize outages and are able very quickly to detect and correct problems when they occur) have a significant advantage Web sites that frustrate users scare them away; Web sites that consistently offer pleasant, easy experiences keep their customers The Often Missing Piece A less tangible but equally vital aspect to customer loyalty in e-business is trust For consumers, participation in a typical Internet business model requires divulging personal information for registration purposes, often including sending credit card numbers to the site Increasingly, customers are cautious when sending such information and wary about sites that they suspect may not adequately guard the privacy of their demographic and financial information Web sites that have prolonged outages or frequent transaction failures break the chain of trust with their consumers, pushing them to other providers that instill stronger confidence and, therefore, loyalty, in their customers To be successful, an e-business has to be: Sophisticated and fast Easy and consistent Extremely reliable [1] Without these, customers will click away, going to the sites that give consumers the interaction with e-business that they expect and require Acquisition, Retention, and Referrals Customer acquisition costs range wildly from one company to the next, but everyone understands that once a company has acquired customers, the key to maximizing revenue is keeping them   It is to 11 times cheaper to keep a current customer than to add a new one A Xerox study showed that their totally satisfied customers were times more likely to make additional Xerox purchases in the subsequent 29 months than the merely satisfied  Companies can increase profits by almost 100% if 6% more of their customers were retained  Estimates show up to 91–96% of a brand’s profits come from loyal customers  A study by McKinsey & Co calculates that an 11% increase in repeat customers translates to a 10.6% increase in company value  Bain & Co./Mainspring research shows that online grocers must keep customers for 29 months just to break even [1] The preceding are potentially frightening data to e-business, which lives, or dies, in a medium where jumping from one Web site to another, changing brands and loyalties, is easier and faster than ever In the realm of ebusiness, high rates of retention are imperative for success and even survival Loyal customers are the best customers People who are committed to Buick and who will not buy a car from any other manufacturer are the ideal consumers for Buick They not require further acquisition expenses, they will buy Buick cars for their children and recommend Buick to their friends, and they are statistically much more likely to buy up, getting newer models loaded with optional equipment The recent boom in online loyalty reward programs demonstrates that e-business understands the lifetime value of loyal customers and is starting to shift resources to retention efforts Many of these incentives are financial, offering repeat buyers the opportunity to earn points that can be redeemed for goods or services Although low prices and points programs are a strong draw initially for consumers, e-consumers will, as in traditional business, grant their loyalties ultimately to those businesses that offer them the best experience, of which price is just one of several considerations Low prices are the carrot on the stick for acquisition, but user experience and customer service are the tools of retention Of special interest to e-business are customers gained through referrals from existing customers, as well as customers lost due to negative reactions about a particular Web site According to a recent Bain & Co./Mainspring survey, online apparel customers referred people after the initial purchase and people after 11 purchases The global reach of the Internet becomes a handicap when a consumer brings up a list of dozens of online retailers in a given industry E-business consumers are generally anxious for referrals from people they trust to help guide them through the ever-growing sea of Web sites Standard barriers to following through on a referral are absent in e-business If a friend recommends a music store that is 45 minutes away, you might decide not to go because of the distance Even a local store may not tempt you if you know that the parking is a nightmare or if the skies just dropped two feet of snow outside your window When a friend recommends a Web site, you get cozy at your desk and go there Consumer trust, discussed earlier, is a unique challenge facing e-business Going to a brick-and-mortar store lends a sense of confidence and implicit trust that has to be earned in other ways in the context of the Internet and of doing business through a computer screen A referral from a trusted friend or colleague is invaluable to establishing a relationship between consumers and e-businesses Referrals also provide an exception to the high cost of acquiring new customers Every customer who is referred to a company is “free,” or is at least a significant offset to the marketing and sales budgets for customer acquisition Though somewhat more difficult to measure, word-of-mouth advertising is extremely important and can have a remarkable impact on a company’s bottom line Poor Performance and Failure E-businesses tread a thinner line than traditional businesses in efforts to attract and keep consumers Someone who drives to a store will extend greater latitude to that shop (in terms of what the consumer likes or dislikes about the store, its selection, its layout, its service) than to a Web site Online consumers expect speed, reliability, and broad selection When they not get it, they leave All it takes to leave is typing a new Web address or following a link For e-business, there is no dress rehearsal and often no second chance Internet users are increasingly barraged by new sites, new services, all competing for their eyes and their dollars When consumers find a site they like, they add a bookmark and stop hunting And when a site does not satisfy consumers, they don’t return and they tell their friends not to go At issue for consumers is the tension between knowing they have more control with e-business and feeling overwhelmed by the choices, and this tension can spell disaster for an e-business that does not adequately mind its store Often a single negative experience for a consumer means he or she will not return to that site to give that company another chance If someone tries to buy a puzzle online and the transaction fails, there are enough other online toy retailers that this consumer need never return to the one that failed A recent study of online shopping by the Boston Consulting Group for a 12-month period reveals unsettling statistics for e-commerce companies battling to attract and keep consumers  Consumers who are satisfied with their first-time online purchase spent, on average, $600 in 13 transactions; dissatisfied first-time purchasers spent $250 in transactions  Five out of six e-consumers experienced a failed purchase; 29% of all online purchases failed  Twenty-four percent of online shoppers who experienced a failure stopped shopping at that site; 7% also stopped shopping at that company’s brick-and-mortar store[1] In e-business, there are no humans to counter a negative experience A failed transaction or a site crash is extremely difficult to qualify or explain online, leaving the consumer alone at the computer to decide if it makes more sense to try again or go elsewhere The message is clear for any company that wants to succeed in the Internet economy: make sure the site works extremely well, and when something goes wrong, which it inevitably will, find out about it and fix it fast When a popular Web service had a nearly-24-hour outage, the company’s CEO recognized that such an event could be disastrous, even fatal, for the company, and she or he effectively lived in the IT operations center during the crisis and the following weeks The new and rapidly expanding business of online securities trading offers a vivid example of the best and the worst for e-businesses Online trading has offered unprecedented access for thousands of users to securities markets The reach of brokerage houses has extended into demographic sectors that previously had neither the time for nor the access to securities trading, while securities markets have extended their hours, with talk of 24hour trading on the horizon Thousands of consumers place millions of trades at relatively low commission, filling the coffers of online trading firms Moving the apparatus for trading to the desktop, however, has resulted in a wealth of information passing to the customer, with a corresponding shift in power away from the brokerage company With the Internet, customers are more aware of stock prices, of transactions, and of failures When a glitch prevents online traders from selling stock or canceling orders when the price falls, those traders lose money and can very accurately identify how much they have lost Most of the leading Internet brokerages have suffered outages, ranging from a few minutes to several hours, and the costs to these businesses go far beyond the defection of angry customers Online brokerages are having to compensate customers for losses suffered when trades could not be executed because of outages, and these payments are stretching into the millions of dollars for each of several leading online brokerages Not only does an outage scare off otherwise potentially loyal customers, it forces the brokerage to write checks to unhappy customers on their way out the door A final significant problem facing e-businesses (at least those that are publicly traded) is the response on Wall Street to reports of prolonged service failures or customer dissatisfaction In a market where a company that reports earnings slightly below projections can see the price of its stock tumble, word of a serious disruption of service can be crushing as investors (many of them trading online) flee and unload their stock in that company The price paid by e-business (in lost revenue from dissatisfied customers as well as payments made for consumer losses) from inadequate performance and significant site outages is potentially crippling, especially for pure-play Internet companies that have no other customer base or business medium to depend on No Web site is perfect, however, and glitches are a reality in any online application The key for e-business is to establish performance benchmarks to attract and keep customers and to minimize technical problems that make sites unavailable or prevent them from meeting necessary standards No e-business will be successful without adequate and appropriate tools to monitor performance of its Web site and alert site operators immediately about slowdowns and failures of service Ensuring the Customer Experience Given the economic repercussions of a company’s inability to build and retain a base of satisfied, loyal customers, the need for effective site-monitoring applications is paramount, and a site monitor must be sophisticated enough to measure more than uptime According to Forrester Research, only 27% of site managers look beyond uptime to specific network performance standards, and even fewer monitor transaction success rates It is these more complex data, however (not simply whether a page is available) that give important insight into the user experience and associated rates of retention and referral Service-level agreements (SLAs) that provide real value stipulate more than simply what percent of time a site will be up, and monitoring applications gives internal operators and hosting facilities the tools they need to measure other important parameters Identifying whether a slowdown is from an application failure or from a network bottleneck is advantageous to IT personnel trying to fix the problem Additionally, effective use of monitoring software can identify not only real-time glitches, but also design shortcomings Thorough reports from monitors might show, for example, a system weakness that is responsible for transactional failures The more quickly and accurately a problem and its cause are identified, the faster it can be fixed Monitoring software also gives companies the data they need to make projections about future site usage and the improvements required to accommodate increased activity Successful e-businesses can see their usage double in as little as three to six months Understanding growth and anticipating future needs can mean the difference between recognizing the need and getting that extra server now, or waiting until increased traffic crashes the system Features and services like these (what Forrester Research calls “Transaction Management Services”) are provided through effective, sophisticated monitoring software It is this integrated Web quality monitoring that Forrester sees as the next step to managing the total quality of Web-based business If, as they predict, ecommerce reaches global hypergrowth by 2003, it will be those companies with effective monitoring systems already in place that are able to survive and succeed With the preceding in mind, how industry-leading executives perceive the use of e-commerce technology in their companies? What are the business benefits provided by transaction management systems? Should your company build and maintain its own transaction management system, or buy electronic trading network services? This next part of the chapter answers these questions and further discusses the costs, benefits, and perceptions of technologies that enable interenterprise information exchange, or what is described as the transaction management market (TMM) [1] “E-Business Customer Retention,” © Copyright 2003 Mercury Interactive Corporation, Mercury Interactive Corporation, Building A, 1325 Borregas Avenue, Sunnyvale, CA 94089, 2003 Benefits of the E-Commerce Market The letter “e” lost much of its language-domineering swagger with the fall of the dot-com economy Technology marketers, journalists, and analysts now cringe at “e”-inspired products and concepts Venture capitalists hide their money-stuffed mattresses when Silicon Valley experts drop by with business plans Yet, electronic commerce veterans in some of the largest companies in the United States, companies such as Ford, Cisco, WalMart, Procter and Gamble, McKesson, and Compaq, see opportunity in the midst of e-commerce turmoil Increasing Interest in Interfacing Technologies Transaction management market (TMM) technologies automate machine-to-machine information exchange between organizations The share of IT budget dedicated to solutions that interface with customers, suppliers, and service providers is increasing This trend is evidenced by continued demand for CRM, order management, demand forecasting, sourcing, and procurement solutions despite difficult economic conditions And, Web services market hype provides an almost deafening statement about the value of interfacing technologies Therefore, as economic conditions improve and as eXtensible Markup Language (XML) standards begin to reduce intersystems integration costs, there will be an increased demand for transaction management technologies Nevertheless, although interfacing technology demand is consistent across most industry segments, the business conditions generating interest vary considerably Ever-tightening electronic relationships between consumer packaged goods (CPG) manufacturers and larger retailers are driven by the need to accurately track and forecast demand for billions of fast-moving products through a low-margin, geographically dispersed network High-tech manufacturers continue to invest in interfacing technologies to regain some of the control relinquished with business process outsourcing contracts Cash-strapped wholesalers invest in any technology, including TMM solutions, that can reduce the order to cash cycle Despite differing business concerns, interest in technologies that improve interbusiness process efficiency is high Demand Analysis TMM technology interest is strong, but demand is constrained Interest is driven by a number of market dynamics including: Transaction management systems meet many of the investment conditions that gain significance in a slowgrowth economy  The technology provides a clear and calculable return on investment (ROI), is amenable to incremental deployment, and helps control costs  TMM investment is becoming more compelling as innovative deployments enabling VMI, After Tax Profit (ATP), contract manufacturing, and demand planning gain attention and generate competitive pressure  Machine-to-machine communication costs are falling as process standards from organizations like RossettaNet, OAG, and CIDX develop, and as technology standards like J2EE, SOAP, AS1/AS2, and WSDL gain popularity [2] However, strong market forces continue to inhibit new TMM investment Important inhibitors include: Economic uncertainty continues to limit capital resource availability and risk tolerance  Standards are immature Lack of standards correlates to high incremental e-commerce deployment cost  The entry cost for innovative, multienterprise solutions remains high Entry costs are driven by change management and experience development needs, not by technology product costs  Web services and XML marketing hype generates interest and uncertainty in near equal doses  E-marketplace failures continue to haunt many large organizations and inhibit TMM investment [2] Drivers of Change Several important technology developments are driving change in the TMM market First and foremost is the emergence of the Internet as an effective, low-cost means of transporting mission-critical business information between systems Although the Internet alone does not provide the network quality of service (QoS) demanded for mission-critical data communications, software and service providers have built solutions on top of this nearly free transport network Data transport cost declines have fundamentally altered the way companies interact The second major force of change in the TMM market is the emergence of new technology standards, such as Java™, XML, and Web services Overcoming communication barriers, which come in many forms, is often expensive Java, XML, and other technology standards remove a number of machine-to-machine communication barriers and reduce partner integration costs Falling integration costs will affect the TMM market in two ways: first, the addressable market for TMM solutions will continue to expand as solution price points fall into ranges acceptable to small and midsized businesses Second, reducing the cost and complexity involved in deploying and maintaining a TMM system will release corporate resources to other higher-value automation efforts Many experienced users that bought TMM solutions to control order processing costs have since evolved their systems to manage a demand forecasting process, complex pricing data, and Just-in-Time (JIT) inventory strategies TMM Business Benefits TMM solutions provide organizations with the ability to effectively process heavy order volumes and with the ability to better manage very close, codependent partner relations Most TMM deployments address one or both of these business objectives Now, let’s look at how companies can use TMM technology to process millions of orders a week with just a few support staff Others may move a few files a day, but the information in those files affects millions of dollars of production costs For example (according to a recent study by the Yankee Group), Figure 1.1 summarizes values that are delivered by TMM technologies [2] Figure 1.1: The value transaction management technology rate for an organization by category Processing Heavy Order Volumes TMM solutions can quickly and accurately process thousands, even millions, of orders a week Consumer packaged goods manufacturers, apparel manufacturers, retailers, wholesalers, and companies in similar industries manage high order volumes for fast-moving, made-to-stock products In industries such as pharmaceuticals, health products, and electronic components, where both order volumes and per-SKU prices are high, fast and accurate order processing is essential to staying in business Companies facing these conditions leverage TMM technology to scale business without scaling operational costs Combining on-site translation software with electronic trading network service has proven a very effective means of managing order volume growth without scaling order processing head count By working with a network service provider, transaction volume growth (and related corporate expansion) is not encumbered by technology skill and staff development needs It is difficult to compare manual and automated order processing costs The comparison would be interesting, but is not necessary In a high-growth, heavy order volume industry, TMM technology is not a cost-savings option, but a business requirement Therefore, despite TMM’s mission-critical nature in heavy order volume industries, many companies use innovative forecasting, direct shipment, and customer service capabilities, as the most significant advantage to their organization’s gains from TMM service usage today Managing Codependent Relationships and Complex Products In industries with less demanding order volumes, but more complicated products and relationships, transaction management systems are used for equally valuable but very different business reasons In the high-tech, automotive, and chemicals manufacturing industries, products are complex, highly engineered, and often expensive Companies in these industries are highly dependent on partners to produce high-value, high-complex products In these industries and others, dependencies are becoming stronger and products are becoming more complex TMM systems support codependent relationships, allowing companies to play an effective role in complex production processes Companies using TMM technology to manage codependent relations move complex products through the supply chain, and require robust process management capabilities and timely access to information Developing a JIT inventory management program demands near-real-time information exchange and complex business rules management Providing a single available-to-promise date for a solution bundle, including multiple vendor products, requires similar functional capabilities Best Practices Today, companies are extending, or planning to extend, their TMM systems into interesting new business automation scenarios Several of these best-practice examples are described next Speed and Competitive Advantage Speeding business process and improving customer service to gain competitive advantage is not cheap A company could spend nearly $5 million annually to support its machine-to-machine order processing system But, business benefits and competitive distinction greatly outweigh the costs of the system For example, in the food-and-beverage industry, paper and mail are slow Money makes money Anything that slows down money or products costs money Companies usually tackle banking communications first to speed the processing of thousands of small monthly order volumes Most companies usually tackle logistics management challenges next, which is followed by an incremental deployment with a supplier connectivity solution In addition, most companies claim to have achieved a positive ROI in less than 12 months after going live with the banking stage of their implementation Managing Outsourced Business Relationships Most high-tech companies shift their business strategies as the economy begins to slow With cost control pressures mounting and shareholders demanding improved returns, the companies choose to outsource production and certain support services to contract manufacturers (CMs) To support the outsourcing strategy, the firms identify and implement TMM technology The solution manages the mission-critical information flowing between a company and its new CM partners A system could cost less than $400,000 to deploy (including hardware, software, and services) Ongoing costs run approximately $230,000 annually It is difficult to measure the value a solution provides a company, but, an outsourcing business strategy would not be possible without the TMM solution Because of difficult economic conditions and financial turmoil in the industry it services, firms have limited visibility into future demand Companies expect demand to increase as the economy recovers Their new CM relationships should allow them to react rapidly to changing demand and avoid losing sales through lack of production capability Expansion Strategy Support Companies are using TMM technology to support complex operational strategies, as displayed in Figure 1.2[2] The role of TMM technology will continue to expand as costs fall, as standards develop, and as innovative bestpractice use cases emerge from the fog of the current recession Figure 1.2: The role of the TMM solution in the organization The Service Provider Advantage Value added network (VAN) service charges have gained an onerous reputation since the emergence of the Internet as a corporate communications tool The idea of charging per-transaction fees to move data across a network (which is how VAN service charges accrue) riles free-spirited Internet enthusiasts But the Internet’s greatest strength (ubiquity) is also its fatal flaw The last thing a company wants is ubiquitous access to its data traffic, nor are companies interested in the lack of control inherent in a ubiquitously managed network Absent the addition of robust technology, the Internet is insecure, unreliable, and unworthy of mission-critical corporate data VAN service providers offer subscriptionbased technology services that meet corporate data communication needs VANs ensure that data gets from point A to point B securely, reliably, and with an audit trail Companies pay usage-based subscription charges for access to VAN bandwidth Accessing network QoS functionality from a third party also helps separate business objectives from technology plumbing Companies interested in deepening partner collaboration or automating more complex business processes are faced with a myriad of business challenges One-time partners become next-project competitors Partners are contracted to ship to a production plan, regardless of the status provided by a real-time system Processes, which vary by both company and division, need to be reviewed and aligned Obstacles abound in a value chain integration scenario VAN and electronic trading network service providers remove the interenterprise communication obstacle, allowing staff to focus on business, not technology problems TMM Costs It is expensive to build and maintain a TMM system The business benefits can be impressive Ongoing costs are more easily captured and measured The average annual cost to operate a TMM solution is a hefty $2.05 million Average annual VAN cost is approximately $650,000 per year, and the average annual internal operational cost (business and IT support and management labor) totals $2.5 million These figures capture the bulk of ongoing costs associated with operating a TMM solution Software maintenance costs, which were difficult to capture, are not usually included in this costs assessment As the $2 million per year in operational costs indicate, TMM systems are expensive to run When considered as a percentage of IT budget or total revenue, the figures are much less daunting When considering the business strategies TMM systems support, operational costs are well within acceptable ROI and total cost of ownership (TCO) calculation boundaries Finally, let’s look at possible roadblocks to e-commerce Is e-commerce alive and well and feeling fine? Recently, e-commerce has been associated with some fairly humiliating phrases: “dot gone” and “dot bomb” being just two of them At times, e-commerce has become almost worthy of a snicker when the term comes up in conversation, and lately it’s hard to open a newspaper without reading about “pink slip parties,” which former dot-com employees attend to network, write resumes (which they didn’t need during the venture capital boom), learn that flip-flops and cutoff jeans are not appropriate work attire in the real world and, finally, come to accept that the fairy-tale employment they have experienced in recent years has disappeared as spectacularly as Cinderella’s royal ball accessories at midnight Roadblocks to E-Commerce From the sounds of the media, you would think that e-commerce was a landscape of post-Armageddon That must be why eBay experienced a 260% growth in 2002 Want to know a secret? Total e-commerce sales have been predicted to grow somewhere in the area of 60% in 2003 A study by the National Association of Purchasing Management and Forrester Research indicates that business-to-business e-commerce is still in its infancy, with nearly unlimited potential to grow A recent survey conducted by both organizations revealed that 95 percent of companies polled indicated they would be moving forward to implement e-procurement sometime in 2003 This growth is modest compared to what’s happening offshore Boston Consulting Group recently reported that Asian e-commerce continues to triple annually With the preceding in mind, e-business has taken a major hit to the collective solar plexus Amazon seems to be hanging on moderately well, though probably not flourishing It is generally acknowledged that the implosion of many players on the e-commerce stage, most notably the ones headed by 24-year-old CEOs, has enabled the companies left standing to reap more profits due to Web-enabled natural selection Old Dogs Have Learned New Tricks Research firm McKinsey & Company recently unearthed a fascinating statistic: 86 percent of the most successful e-tailers are online channels of existing, established brick-and-mortar companies Someone a long time ago put forth the radical theory that a company needs a business plan to survive in the long-term Web-based companies slapped together on a Saturday afternoon in someone’s home office are not likely to have as sound business plans as a company such as Eddie Bauer that has been around for generations In 1998, the retail giants were laughed at for their hesitant and puny efforts to join the e-commerce party Today, they are the ones left standing It’s obvious that there’s a lesson to be learned from that Here’s another interesting trend In the days of yore (1999 to 2000), many Internet-savvy consumers indicated that when it came to shopping for larger ticket items, such as audio, video, and computers, they would their research online before heading down to a large electronics superstore such as Circuit City to make a purchase Today, many people have taken to wandering the aisles of the large electronics stores to see and touch items, and then return home to make their purchases from online electronics e-tailers Why not? Online return policies have improved about 2,000 percent since the early days of e-commerce and in many instances, there is no sales tax on items purchased from e-tailers Not to mention the fact that buying online enables you to spend the time you would have dedicated to getting to the mall on some vital task such as sleeping late or reminding yourself what your family looks like Trying Not to Antagonize Your Customers Helps Immensely E-commerce companies that continue to grow seem to be the ones that better understand CRM and what it means to their firms There’s no question, purchasing over the Internet is as popular as ever and will continue to grow What many e-tailers didn’t foresee is that the Internet business model enables customers to be fantastically fickle, and all it takes is one misstep to lose a customer forever Good self-service is worth its weight in diamonds, but it should never entirely replace human interaction As a result, it becomes fairly safe to conclude that the e-businesses still standing today are the ones that screwed up CRM the least The survivors have another thing in common: easily navigable Web sites Remember some of the disastrous Web sites that first appeared in 1997 and 1998? The designers sacrificed ease-of-use for art and profundity, with the result that many potential buyers arrived on the site, admiringly commented, “Ooooh, pretty” and logged off to find a site that was easier to use Part and parcel of ease-of-use is a friendly and comprehensive search engine, and this is another element you will find on the sites of the little e-tailers who could Search engines driven by natural language processing are rapidly gaining in popularity as they allow shoppers to pose questions in much the same manner they would to a live store representative For instance, compare brands of digital cameras in the mid-price range Not only searches conducted with natural language processing help the customer, but the technology can also help the e-tailer understand what its customers want and how they want it Privacy, Please Yet another element that has helped some e-tailers remain strong is the issue of privacy Many companies with Web channels have had some decisions to make recently: collect customer data and e-mail addresses and sell the information for a price to boost sagging profits, or prominently reassure customers that their information is private and will remain so in the future? The former choice represents a short-term fix and the latter choice is the ticket to the long-term payoff Many companies that sold customer data from the get-go or made a decision later to sell information seemed to think that their activities would not be noticed, or that the average consumer wouldn’t care if they received a few extra spams brought on by the sale of their personal information This was a serious miscalculation In a crowded information age of little free time and space to breathe, most consumers are becoming rabidly protective of the little privacy they have More importantly, e-tailers and Web marketers that chose to collect information from children not only earned the ire of parents, they began to draw fire from federal and state regulators Finally, the vast majority of companies that made a go at succeeding in e-commerce only to fail a year or two later are like kids who begin playing with a complex toy and give up in a huff when they can’t operate the toy based on the fact that they didn’t read the instructions All’s well and it ends well The toy becomes available to the kid who values it and knows how to use it [2] “E-Business Evolution: Transaction Management Costs, Benefits, and Market Development,” © Copyright 2002 Yankee Group, Yankee Group, 31 St James Avenue, Boston, Massachusetts 02116 [Sterling Commerce, 4600 Lakehurst Court, Dublin, OH 43016-2000, USA], 2002 Summary In a remarkably short time, the Internet has grown from a quirky playground into a vital, sophisticated medium for business, and as the Web evolves further, the threshold for conducting successful business online will move increasingly higher Online consumers are flooding to the Internet, and they come with very high expectations and a degree of control that they did not have with traditional brick-and-mortar companies Businesses, too, are rushing to join the Internet revolution, and new, viable competitors are emerging in all industries The enticement of doing business online must be tempered by the understanding that when the dust settles, a significant percentage of e-businesses will have failed The ones that succeed will be those that are able to deliver a satisfying and consistent customer experience online, building brand loyalty and guaranteeing high rates of customer retention Although customer experience includes intangible, nonquantifiable aspects, it also includes a wide range of entirely measurable Web site elements It is necessary for any organization wanting to succeed in e-business to define a broad spectrum of performance parameters, establishing benchmarks for speed, reliability, availability, and accuracy, and to monitor all of those parameters Nothing works perfectly all the time, and the spoils will go to those e-businesses that constantly and efficiently monitor their Web sites, immediately identifying any glitches that occur and fixing them promptly Moving forward, all businesses will be affected by the global move to electronic commerce Business operations will change, and new processes will be created Companies that start learning in this new environment today will be leaders in the future Furthermore, as future technologies are developed, the SIP will continue to play a pivotal role in the adoption of multimedia e-commerce SIP’s simplicity, easy integration, and extensive interoperability ensure its longevity as the preferred multimedia platform In fact, SIP pundits speculate that it will pave the way for carriers to roll out the innovative voice services only possible with IP These services most likely will include Web integration to simplify follow-me services, call conferencing, and ways for users to speak with a live agent just by clicking a Web site button Although the road ahead looks clear, there are potential obstacles to the wide-scale adoption of multimedia ecommerce Users will need new or upgraded equipment to take advantage of SIP technology Incorporation of SIP into operating systems and in preconfigured PCs will take some time Some movement is being seen in this area, however, with Microsoft® and a number of the third generation (3G) wireless associations adopting SIP as the protocol of choice [7] Note Third generation (3G) is an International Telecommunication Union (ITU) specification for the third generation (analog cellular was the first generation, and digital Personal Communications Service [PCS] was the second) of mobile communications technology With the help of SIP, Voice over IP (VoIP) e-commerce has the potential to change the habits of users by enhancing the way they conduct business communication and transactions over the Internet As SIP facilitates and completes the integration of communications on the Web, much innovation lies ahead So, despite difficult economic conditions and negative sentiment resulting from the e-marketplace catastrophe, much is happening in the e-business world Nearly every company involved in e-business has expressed interest in improving machine-to-machine communication with customers, suppliers, or service providers The majority (approximately 74%) increased their e-commerce technology budget in 2003 compared to 2002; and, despite difficult economic times and contracting IT budgets, half of the e-business companies expect the transaction management market (TMM) budget to increase in 2003 compared to 2002 Java, XML, and related standards are changing the nature of machine-to-machine communication These technologies are driving down integration costs and improving integration flexibility As economic conditions improve, these factors will drive increased spending on technologies that interface with the external business ecosystem Furthermore, transaction management systems support a wide range of innovative business strategies Many companies are extending EDI systems to manage more complex interbusiness automation scenarios Others are rethinking e-commerce strategies and exploring new intercompany transaction cost/benefit scenarios This trend toward complex interbusiness process automation and transaction management will accelerate as IT budgets expand and Java and XML technologies mature Electronic trading network service providers deliver an important and often misrepresented value proposition to an e-commerce solution Security, reliability, and nonrepudiation are foundational requirements for effective interenterprise solutions Most transaction management technology users are not in the business of building and operating secure, reliable, auditable data communications networks Outsourcing these data communication requirements to a third-party service provider can be an effective way to scale transaction volumes without scaling operation costs, and to avoid plunging valuable business executives into the integration technology morass Consistent with the buy low and sell high mantra, now is the time to develop and, if possible, execute e-business strategy The following e-business actions are recommended for companies interested in automating partner information flow:   Develop the business case for TMM technology use  Take advantage of technology change Leverage existing investments Developing the Business Case for TMM Technology Use You should define business objectives and understand technology capability and limitations relative to automation opportunities EDI deployments are often driven by very basic cost-savings arguments or by bruteforce customer requirements TMM systems are capable of managing much more than purchase order and invoice exchange process You should understand your customer (and supply) base and how you can leverage TMM technology to take advantage of these relationships Leveraging Existing Investments Exploring the ways existing systems interoperate can reap significant benefits For example, you could use a content management vendor’s workflow engine to automate process across both Web site and EDI assets You should be able to streamline exception management across multiple platforms You should also be able to provide consistent information to partners, regardless of the partner’s means of access (browsers or machine interface) Systems synergies and cost-savings opportunities abound in the TMM market Taking Advantage of Technology Change Finally, the costs and capabilities of TMM technologies are changing rapidly Understanding the implications of changing conditions will help organizations make wise decisions today, without creating cost of ownership nightmares for tomorrow It is also important to understand how individual vendors are reacting to changing conditions Can a vendor support your architectural strategy and your Web service plans? And if so, how willing will the vendor be to negotiate price to move a new e-business product in a down economy? Well-researched answers to these questions can speed ROI and reduce implementation complexity [7] Vacca, John R., Wireless Broadband Networks Handbook, McGraw-Hill Osborne Media, 2001 ... choices in supplier selection Issues in Implementing Electronic Commerce Although it is simple to describe their benefits, it is not nearly as easy to develop and deploy commerce systems Companies... to help customers achieve the benefits of electronic commerce Your company’s vision for electronic commerce should also be to help businesses establish stronger relationships with customers and... company is “free,” or is at least a significant offset to the marketing and sales budgets for customer acquisition Though somewhat more difficult to measure, word-of-mouth advertising is extremely