Great Expectations

The right Internet technology investments can make staying competitive a lot easier

By Tulu Tanrikorur

Every major company must have a clear e-business strategy in order to survive. If you want to remain competitive, incorporating an Internet strategy into your business plan is now almost mandatory. In fact, if your company has not invested much thought into its Internet strategy, your competitors will surge ahead while your company will be left behind trying to catch up.

To get started, your company should answer the following important questions: Which e-business initiatives should you undertake in order to stay competitive? What will your company's next generation business model look like? How will you use the Internet to increase demand, reduce operational costs, and optimize relationships with suppliers and customers?

In this article, I will explain an approach to successfully managing the risks of expensive technology investments. I will also address technology management issues that your organization either is trying to solve now or will run into shortly, depending upon your current level of involvement with the Internet. But first, I'd like to briefly answer these questions: What are some of these e-models? What is different and common about them for the enterprise?

E-BUSINESS MODELS

Forward-thinking companies already know that they must eventually use multiple "e-business models," which address the complementary needs of an enterprise. As these companies tactically choose to implement their newly redesigned processes one project at a time, they know that they are investing in an Internet infrastructure for their future, not merely for a single-purpose deployment.

In order to support Internet initiatives, your enterprise must also have a clear Internet technology strategy and plan. Implementing any Internet model is technically a challenging process. Thus, undertaking such initiatives coherently is even riskier if you do not have an overall technology direction for your enterprise. In the book Enterprise E-Commerce (see Resources), the authors also acknowledge this need: "Whether developing e-commerce in-house or pursuing the package route, a holistic view of e-commerce initiatives is needed in order to avoid many pitfalls that result from taking separate and isolated views ... [Otherwise,] multiple stand-alone initiatives would tie their systems and their company in knots."

RISKS AND REWARDS

The Internet poses many more risks as well as rewards in creating a competitive advantage than any other IT generation. As Michael Porter points out in his Harvard Business Review article (see Resources), "The key question is not whether to deploy Internet technology - companies have no choice if they want to stay competitive - but how to deploy it." Although having a sound e-business strategy is a prerequisite, it is not enough. You need the ability to execute that strategy, which can be challenging because associated costs remain high.

Today, you face a plethora of Internet-based technology options - solutions that usually involve packages and are from multiple vendors. The integration among the Web, back-office systems, and external partners requires big budgets and needs involvement from all key corporate managers, which can be difficult to coordinate.

You compound the integration problem when your enterprise implements multiple e-business models without a common technology framework or plan. Consequently, multiple managers will make short-term decisions that shape your organization's Internet infrastructure with little or no coordination among themselves. These problems are very common in today's world and even occur at technology-savvy companies. As a result, very expensive technology investments continue providing less-than-expected returns and reusability.

TODAY'S MODELS

If you look at the Internet space today, you notice companies implementing a variety of e-business initiatives. Although it is not the intention of this article to analyze each model in detail, I think it is still important to understand, at a high level, how these models differ. Table 1 lists some of the most common models.

Private exchanges are basically set up by enterprises to manage their operating and manufacturing needs over the Internet. A company will choose a few critical yet strategic suppliers or partners and most likely maintain long-term relationships with them. This model may also be known as a "private hub" where companies prenegotiate buying decisions. If a company creates an e-store, e-service, or portal that is completely under its control, the site will be biased toward that company.

Independent industry exchanges, on the other hand, are in a better position to provide access to a large number of buyers and sellers. Such exchanges provide either a buffer zone for companies to dynamically address their emergency needs or a convenient place to do one-stop shopping within specific industries. They leverage the buying and selling powers of many businesses with different sizes.

Companies can also conduct e-commerce by directly selling goods or services to many buyers. While "e-stores" are usually product-focused, "e-service" sites focus on key Internet-based services for value-added functions (such as authentication, transportation management, and electronic bill presentation). Company portals, on the other hand, generally address the needs of their employees. They enable access to a company's internal information from a variety of knowledge sources and provide the capability for team or project collaboration.

Please note that you should not view my categorization - supporting certain pricing mechanisms (such as static, dynamic, forward and backward auctions, bartering, and so on) - as a clear indication of a specific Internet model. For example, you could create an "e-store" that auctions off only some of your products at certain times while fixed prices are the norm for most of your products.