E-Commerce: Enterprises Identify ROI, but Need Vision

Transcription

1 Strategic Planning, W. Andrews, L. Perlstein Research Note 12 November 2002 E-Commerce: Enterprises Identify ROI, but Need Vision Astute enterprises are deploying e-commerce to strip away layers of unnecessary internal processes to get return on investment now. The smartest are doing the same for external relationships to augment such return. Core Topic Internet Platforms and Web Services: E- Commerce Software Key Issues How will electronic commerce intersect with traditional enterprise strategies? What technologies will be necessary to support electronic commerce? Strategic Planning Assumptions In 2007, all major vendors of outward-facing applications (such as portals, customer relationship management, supply chain management and enterprise resource planning software) will provide "good enough" sell-side e-commerce platforms (0.7 probability). More than 10 percent of Global 2000 enterprises will use Internet-accessible auctions to dispose of branded merchandise by YE05 (0.7 probability). Through YE04, enterprises using sell-side e-commerce syndication to more than five customer e-procurement facilities will achieve at least 50 percent greater connection efficiency than those that establish separate connectors (0.7 probability). By YE06, 60 percent of e-commercepowered sales will include an interenterprise Web-services-powered connection to facilitate the transaction's consummation (0.7 probability). Many buyers no longer consider e-commerce to be a privilege; instead, they see it as a necessity. At the very least, they expect to learn more than a supplier's address and mission statement from its Web site; increasingly, that expectation includes the ability to select products, place orders and track account information. This evolution in user expectations for their business relationships is driving a continued increase in interest in e- commerce. In a recent Gartner survey, more than 40 percent of participants said they intend to increase e-commerce spending in 2003 even as Gartner forecasts a continued soft market for e- commerce software licenses (see "E-Commerce Software Initiatives on the Rise in the United States"). Therefore, we see a consolidating market, but continued innovation available to enterprises willing to spend to gain access to it. Simultaneously, e-commerce is expanding well beyond the boundaries of Web sites and into the full spectrum of commercial strategies such as channel sales, syndication to procurement and e-marketplaces. This continued innovation is obscured by the economic conditions that have wrenched the technology industry, in general, and any sector connected to the consumer-facing Internet, in particular. Watchful enterprises will see real opportunities for transformational and tactical strategies that can establish competitive advantage. Prediction: E-commerce will be only a strategy, and not a discrete multiapplication platform, by Factors driving a continuing reduction in license pricing around sell-side e-commerce software include the generally poor economic conditions and a glut of vendors with similar, or at least indistinguishable, value propositions. Although the e-commerce Gartner Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 specialists who rocketed to extraordinary sales and stock market value in 2000 scrape the bottom of the stock market today, their nightmare of effective entries at often-reasonable prices by established vendors to predate the Internet is becoming more evident. As a result, enterprises are finding "good enough" offerings more available from these larger vendors, which, in turn, has energized specialists and generalist vendor groups' R&D (as well as acquisitive) behavior. In 2007, all major vendors of outward-facing applications such as portals, customer relationship management (CRM), supply chain management (SCM) and enterprise resource planning (ERP) software will provide good-enough sell-side e- commerce platforms (0.7 probability). Impact in 2003: In 2001, Gartner predicted that in 2004, four vendors that provide all aspects of a sell-side platform will emerge as sales leaders (0.7 probability). This dynamic is well on its way to completion (see "The Sell-Side E-Commerce Platform Adds Another Element" and "Consolidation Pressure Could Squeeze Sell-Side Vendors"). Microsoft and IBM have emerged as leaders in sell-side e-commerce provision, and Siebel Systems and SAP have matured to present themselves as challengers in the market. During 2003, there will be further selfrepositioning from sell-side vendors akin to BroadVision's strategy in 2002 to redefine itself as a portal vendor. Reacting in 2003: Enterprises should expect their selected e- commerce vendors, in most cases, to present newly minted identities at contract renewal time; in some cases, these will be genuine and should be considered warnings of trouble in the shape of changed vendor direction. Enterprises should not presume that specialist vendors will cease to exist or be acquired, but should prepare contingency plans if their selected vendor undergoes substantial financial changes. Prediction: Auction syndication will increase enterprise participation in online auctions and drive other syndication projects, as well. Enterprises of all sizes are developing a new sensibility of ebay, where they see their products for sale. In some cases, the products are out of life cycle and are being sold by jobbers with whom the enterprises have relationships. In other situations, customers have failed and are liquidating products or have finished using an item and are seeking to squeeze out the last of its value. Regardless, these enterprises are finding themselves in a position similar to upmarket automobile marketers their products are for sale in a marketplace over which they have no 12 November

3 control. This places their brand at risk and creates a submarket from which they derive neither revenue nor profit. Until the advent of online marketplaces, notably ebay as well as its business-to-business and business-to-consumer competitors, few efficient means for the disposal of such merchandise existed. The use of ebay to dispose of this merchandise is, however, accelerating, and enterprises are considering its use to capitalize on sales of their out-of-life-cycle goods. More than 10 percent of Global 2000 enterprises will use Internet-accessible auctions to dispose of branded merchandise by YE05 (0.7 probability). Impact in 2003: Enterprises are exploring the use of online e- marketplaces by placing items up for sale infrequently and through personal auction identities. Only a few enterprises in 2003 will use ebay to research prices and evaluate demand. They will be consumer goods manufacturers whose use of traditional retail for such information would be impossibly slow. Fewer than 5 percent of Global 2000 enterprises will experiment with online auctions in The majority of these experiments will involve selling branded goods that previously would have been sold to jobbers or would have been destroyed. Reacting in 2003: All enterprises that experiment with online auction houses in 2003 should use integrative technologies (such as those offered by auction aggregators or developed in-house) to exploit ebay application programming interfaces or those offered by other vendors (see "ubid: Extending Marketplaces With Web Services" and "Samsonite Syndicates to Online Auctions"). Additionally, enterprises must address this opportunity organizationally to succeed, structuring sales incentives and encouraging the skills necessary to sell in consumer e-marketplaces. Using ebay on an ad hoc basis for individual items is sure to produce a disappointing return on investment (ROI), unless enterprises factor in the costs inherent in evaluating, photographing and posting items at auction. The increasing facility with which these technologies empower enterprises will drive their increased adoption through Prediction: Engaging in e-commerce will commonly include addressing e-procurement. The continued impact of e-procurement as a cost-reduction strategy will include the parallel need for enterprises to address commerce syndication through services or software installations (see "Commerce Syndication: Add Indirect Sales to E- Commerce"). Increasingly, enterprises identify feeding customers' e-procurement systems (such as those installed by 12 November

4 Ariba, Commerce One, Clarus and SAP) as a strategic necessity to preserve revenue from major customers. Three categories of vendors manage this business challenge: Generic integration brokers offer toolkits for converting data from legacy systems into an interchangeable format (such as XML). Specialist e-commerce vendors address multiple perspectives on e-commerce simultaneously, of which syndication is one (see "How Syndication Saved an Office Supply Vendor"). Syndication specialists provide products intended to address only the specific issue of syndicating commercial content directly to e-procurement systems (and sometimes to online auctions). Through YE04, enterprises using sell-side e-commerce syndication to more than five customer e-procurement facilities will achieve at least 50 percent greater connection development and deployment efficiency than those that establish separate connectors (0.7 probability). Impact in 2003: Enterprises that developed separate e- commerce strategies for a customer-facing Web site and for managing alternate external sales models, such as e- procurement, will, in 2003, reconsider this configuration and establish plans for unifying the strategy through a syndication model to the Web site or through the use of the sell-side platform as a syndication starting point for external sales models. Reacting in 2003: Any enterprise that is invited to provide an informational feed to an e-procurement system should understand that more such invitations will follow. Efficient management of a multifeed environment will demand aggressive internal devotion of development resources to support syndication or selection of a vendor to insulate the enterprise from variable requirements. Prediction: Web services will emerge slowly as a buttress to e-commerce. The interconnections of interenterprise processes are ripe for Web services. Ultimately, the connections will overlay one another in a complex environment, demanding the simplification that Web services bring to such interoperability problems. The benefits of Web services can already be gained in interenterprise e-commerce. However, most of the activity in interconnection is proceeding in parallel, which obscures the necessity for a moreflexible model than proprietary point-to-point or hub-and-spoke 12 November

5 arrangements. The proliferation of these models will establish the looser interconnections of Web services as being valuable. Ultimately, a combination of de facto standardization (such as the likely future requirement for new suppliers to be "Wal-Mart compatible," whether or not Wal-Mart is present in a supply chain) and de jure aggregation (such as that embodied in UCCnet) will define the rules of engagement. Vendors will emerge and recede to manage the interconnections of enterprises in particular verticals and, ultimately, across broader realms as well. For the immediate future, Web services will serve mostly as the roots that e-commerce applications will send down into enterprise applications such as ERP and CRM stacks. For the immediate future, Web services will mostly address the surfacing of existing application results into new venues, such as portals and e-commerce applications. By YE06, 60 percent of e-commerce-powered sales will include an interenterprise Web-services-powered connection to facilitate the transaction's consummation (0.7 probability). Impact in 2003: Enterprises should expect vendor pitches on providing Web services windows into their products to focus on accessing Web services brokers that will do the "heavy lifting" of locating and accessing internal applications. Web servicesdelivered functionality from the vendors as an aftermarket add-on will only be promises; interconnections among enterprises via Web services will be established for occasional syndication capabilities, but will be mostly only theoretical. Reacting in 2003: Enterprises seeking simpler ways to provide connections from legacy applications to multiple outward- and inward-facing applications may do so through Web services connections into legacy applications. Forward-looking enterprises may wish to establish mini-web services networks for software functions such as "order status" or "customer address" that numerous developers will likely seek at design time. Acronym Key CRM ERP ROI SCM Customer relationship management Enterprise resource planning Return on investment Supply chain management Bottom Line: During 2003, there will be opportunities for enterprises to improve e-commerce tactics that support established business models and allow for creative, and even new, models. New technologies, such as Web services, will support, but not drive, many of these opportunities. 12 November