Overcoming the Barriers to E-Commerce
by Leslie Langnau, senior technical editor
Reports of the demise of the business-to-business e-commerce model are greatly exaggerated, to borrow a famous phrase. Fewer than the 1,000 launched in the last two years survive, but the point is, they are alive and, in many cases, kicking b___.
Recent reports in the Wall Street Journal indicate that companies are beginning to invest in their businesses again. For example, executives at Manugistics Group Inc., a maker of supply chain management software, told Wall Street that companies are signing contracts again.
No doubt, there are barriers to B2B e-commerce implementations. Investor expectations are one of them. Here are a few others that we compiled while researching the best practices of successful implementations. Awareness of these can help move you closer to success.
One of the more important barriers is venture capital, or lack of it. Traditional venture capitalists do not seem to be so venturesome at the moment. This development, though, has placed you, the one needing new tools and products to establish and operate supply chains and exchanges, in the role of venture capitalist. Problem is, if your company is like most companies in this market, you don’t have spare dough to risk.
This puts a stress on developers of these products who now find that the easy sales pitches are gone. Hopeful sellers of supply chain solutions must prove their numbers, often to the CFO.
There’s good news and bad news about such an arrangement. As the customer fully funding the product, you are more likely to get what you want and need. But it can cost you because economies of scale just aren’t possible on tight budgets. ROIs are running about two years or more.
Another barrier to consider may be government legislation. Covisint, the automotive supply chain exchange, has certainly had its run-ins with this obstacle. Antitrust investigations in the U.S. and Germany caused many delays. For example, the organization had to stop hiring full-time employees until investigators determined whether the organization would be a competitive problem or not. Imagine implementing an exchange with part-time help. These investigators even inhibited the group from integrating systems supplied by its founders and conducting transactions.
Another problem involves the acquisitions companies have made in the past few years. Couple this with downsizing of the last few months, and you end up with short staffs desperately trying to integrate and standardize all the systems of the various acquisitions. And they have to complete this integration before they can begin to put in e-commerce solutions among all the parties; otherwise, they’ll have a worse disaster.
And while you are working to implement these systems at your company, you often must expend energy and resources to help your small business partners join the link. It’s becoming clear that they have a strong role in cutting costs. But they don’t have the cash or the staff to install these solutions.
Then, you must help them overcome their own inertia and resistance to change. The fax was a wonderful device years ago, only to be replaced by newer technology. But it still works and people tend to prefer familiar technology to new devices said to improve efficiency.
Another barrier that management often overlooks is education. New processes and procedures mean employees must learn to use the new systems as well as change their behavior from the “we’ve always done it this way” attitude. The money that must be spent to accomplish this change can be more than the total cost of the hardware and software needed to implement e-commerce. Some people who have gone through this process say the costs can be as much as five times more.
Despite these barriers, though, the benefits are worth it. These barriers are not insurmountable. The success stories we cover in the article on page 42 prove that. One of the points made clearly by the successes is that establishing an e-commerce solution is an ongoing process. You will always be altering it, tuning it more closely to your partners needs. Success comes one step at a time.
