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HOW MUCH E-BIZ DOES YOUR BIZ REALLY NEED?

by Allen L. Pinkus, Ph.D.
Vice President, Adonix

Many companies are rushing to move their business onto the Internet in the hope of cutting costs, improving productivity and expanding their customer base. In their haste, these companies ignore a basic concept: When you introduce new technology, take time to think about what your business needs really are and how that technology can help meet them.

A company’s business needs are defined by:

• Its core business processes: Which one or two processes are most important to the continued success of its business?
• Its structure: Centralized or dispersed?
• What it sells to whom: Specialty goods to a few customers or mass-market items to consumers?
• Its relationships with its customers and suppliers: How much information does it have to share and how quickly?

When we talk about the Internet, we often treat it as if it is a single thing: what we see when we surf the Net through the World Wide Web via our browsers. The Internet, however, is a multifaceted communications tool that can be used for many different purposes.

Just as every company needs a telephone and business cards to do business, today every company needs a presence on the Worldwide Web, if only to provide basic information to stakeholders, i.e., employees, vendors, customers, investors. But not every company needs to conduct a buyer’s auction, process credit card payments or enable live chats with customer service representatives through its Web site.

Understand Your Business Processes

Before your company jumps onto the Internet, you should make sure that you understand its business processes. Traditionally, organizations have been divided into departments that perform specific functions. Most of the important activity in a business, however, occurs in processes that spill over functional boundaries. For example, filling an order can entail actions by sales, customer service, warehousing, traffic and manufacturing. Once you understand the processes that define your business, you can determine which can be performed more efficiently via the Internet.

An essential step in understanding business processes is evaluating the systems that support those processes, e.g., back office systems that handle order management, production scheduling, inventory control, purchasing, logistics, and accounting. Whether you call your back office system MRP, ERP or something else, if you can’t efficiently fill orders, send accurate invoices, and quickly process payments, the Internet won’t help you. It will only aggravate your problems.

There are four approaches a company can take to using the Internet, de-pending on its structure, products, and partners. We’ll call these approaches:

• B2U
• Extended B2U
• B2B
• B2C.

Let’s look at what’s behind these acronyms.

B2U

B2U stands for “business to yourself ” – providing your employees tools to perform processes needed to run your business, e.g. taking orders, buying materials, performing quality control. These days most companies do B2U at its most basic level on a client/server system with graphical user interfaces (GUIs) that run on desktop PCs. A company centralized at a single site, buying from a relatively small number of suppliers and selling a specialized product to a relatively small number of customers can benefit most from a B2U approach.

Extended B2U

Companies with more complex and geographically dispersed organizational structures can gain efficiency by moving to an extended B2U, i.e., an Intra-net, an in-house Web site that only employees can access. Although parts of your Intranet may link to the Internet, it is not accessible to the public. Using an Intranet, employees at any location can connect to the system through an Internet service provider and interact with it not via GUIs, but through a Web browser. It doesn’t matter where they are – Cairo, Illinois or Cairo, Egypt; Paris, Texas or Paris, France. Local and remote employees, production planners and CFOs on vacation can access the same functions and perform the same processes as if they were on site (if they have authority to do so), but what they see on their screens looks a little different.

GUI versus browser (Intranet) interface

B2B

The B2B (business to business) approach makes some of your business processes available to chosen partners over an Extranet – a Web site that your employees and partners, but not the public, can access. An Extranet uses the public Internet as its transmission system, but requires passwords. It works well for companies buying (or selling) commodity-like products sourced on the basis of price or delivery time.

B2U is particularly effective when supply chain integration is vital, i.e., when a company shares information with partners to expedite the exchange of goods and money. An Extranet can provide partners with any information you let them access, e.g., current inventories, pricing information. Vendors can submit quotes through an Extranet. A distributor can link his Web site directly to a manufacturer’s online product catalog. Customers can track their own shipments, reducing call traffic to a vendor’s customer service center.

Who is in control of the relationship governs how an Extranet is used. If a small company sells tail light lenses exclusively to Ford, it’s probably going to need to connect to Ford’s Extranet instead of operating its own. If a company buys large quantities of sheet metal strictly on the basis of price and delivery time from a variety of small suppliers, or if it supplies aftermarket auto parts to thousands of repair shops nationwide, it makes sense for it to let its partners connect to its Extranet and treat them like branch offices.

B2C

Companies whose primary sales target is the consumer are candidates for a B2C Internet presence. A B2C company makes certain pages of its Web site available to the public via the Internet so that they can learn about products and place orders, ask questions and learn the status of their purchases. Buying something on a B2C Internet site should be as close to a real bricks-and-mortar experience as possible. A customer should be able to find quick answers to ques-tions such as “Is it in stock?” and “When is it going to be delivered and by whom?”

Analyze Your Back Office Needs

What all these approaches have in common is the need for a back office “e-backbone” to automate all the action from recording a sale to processing payments. One reason why electronic data interchange (EDI) did not fulfill its promise as a business enabler was that many companies accepted orders via EDI and then had to re-key them into their back office systems because those systems could not accept EDI input. The same bottleneck can develop in a B2B environment unless a company’s back office systems can receive orders directly from the Internet and process them in the same way that they would an order entered manually. These systems should be able to take an Internet order and automatically trigger actions to determine, among other vital information:

• Does the order pass the credit limit check?
• Is there enough inventory to automatically allocate to this order?
• If there is, is it necessary to automatically generate a picking document in the warehouse so that the order can be shipped immediately?
• If there isn’t, is it necessary to automatically generate a production order in the plant to manufacture the items?

Not all back office systems that claim to be e-business-enabled offer the same flexibility when it comes to extending your business processes to the Internet. Successfully moving your business processes to the Internet requires systems that are inherently:

• Web native
• Open.

A Web native system has these attributes:

• Its core architecture is designed to be deployed on the Worldwide Web
• Any part of the system can run in Web browser mode, i.e., on Internet Explorer or Netscape
• The system supports internal communications in some standard fashion, most typically using XML (extensible markup language).

If a system is Web native, you can easily run your business on both an Intranet and Extranet. There may be little more to do than to set some display and security parameters and push a button to generate a Web version of essential business information such as Stock Status Inquiry. A Web native back office sys-tem eliminates development and implementation delays and substantially lowers maintenance and operating costs compared to one that is not.

“Web native” also means that a company can outsource some business processes, perhaps logistics or customer service, to a strategic partner or application service provider (ASP), which will significantly reduce its IT investment.

A system is open if its developer has published its application program-ming interface (API), the method to be used to interact with that system. Using an API, a programmer can write short programs that can enable the system to readily share information and functions with other systems.

In an open system:

• Business partners can more easily connect their Web sites and systems.
• Companies can quickly exchange information, as they were supposed to be able to do by EDI.
• A company can link to a B2C Web site and do much more than just take orders, i.e., it can show accurate stocking information, delivery times and carrier tracking information.

With a closed system, these capabilities are much more difficult to provide in any reasonable, cost-effective and timely way.

The next step after analyzing your business processes and needs and evaluating your back office systems is to develop a plan to move to the Web. It might start with an Intranet B2U connection for company personnel and move outward to provide some of those capabilities to business partners (B2B). Even-tually, if a company sells to consumers, it can move to a full-service, public B2C site.

To do this well means selecting a system that is Web-capable at its core, inherently built that way from the ground up, so that you have a choice of GUI or browser as you see fit. It needs to be open to link to other Web sites and systems and fully exploit the potential inherent in the Worldwide Web to handle business more efficiently and increase revenues and profits.

Using the Internet

	B2U	Extended B2U	B2B	B2C
Via	Local network	Intranet	Extranet	Internet
Connects	Local employees	Remote employees	Business partners	The World
Interface	GUI	Browser	Browser	Browser
Accessible functions	All	Most	Some	Few
Products	Specialized Commodity Consumer
Partners	Few Many

Dr. Allen Pinkus is vice president of Adonix (www.adonix.com), a developer of enterprise applications for midsize companies, and a former professor of industrial management at Carnegie Mellon University. He may be contacted at 724-933-1377.

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