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The rise of e-business
SPECIAL REPORT: THE RISE OF E-BUSINESS
By David Berreby
New IBM technologies are connecting companies with suppliers and customers around the globe.
In the development of e-commerce -- Internet-based buying and selling -- 1998 proved to be a watershed, as millions of people opted to do their Christmas shopping on the Web. The numbers exceeded all expectations, topping $5 billion in the United States alone, according to the Marketing Association of America. Internet stocks jumped, and projections about the growth of
e-commerce are scarcely out before they have to be revised upward. In May 1998, for example,
the International Data Corp. estimated the e-commerce market would reach $333 billion in 2002;
half a year later the estimate was at $400 billion and rising. For businesses,
the vaunted attractions of e-commerce are clear: No warehouses, no waiting, no guesswork. Rather than stockpiling what it believes will sell, a retailer can simply respond to the orders that stream in over the Web. Instead of setting a price based on past history, a seller can see in moments what buyers are willing to pay. Instead of hoping that advertising reaches the right buyers, a company can use the information Web browsers provide to target exactly the relevant people. It is an increasingly compelling vision, and one that few companies can ignore if they are to avoid being left behind.
But selling is only part of the story. All the before and after activities that support commerce -- from putting out requests for price quotes
and managing procurement to order fulfillment, distribution and customer service -- are being transformed by network computing.
As companies discover the speed and efficiency of online transactions -- internal as well as external ones -- business as usual is
rapidly coming to mean e-business.
Yet, if the potential of e-business is clearer now, so are the challenges it poses. With the capability to request bids from anywhere in the world, traditional supply-chain relationships will change, as companies compete on a global scale. Some intermediaries will find themselves displaced as new ways for companies and customers to interact evolve. Along with the tremendous emerging opportunities for unknown upstarts are the risks for firms that fail to adapt quickly enough. The challenge for many corporations is to learn how to transform themselves into e-businesses while avoiding the mistakes that come from haste, and to find ways of adding e-business capacity without losing old capacities.
To ease the transition,
IBM
has developed a host of e-business solutions, and it is helping companies integrate their systems and applications, so that they can safely and efficiently transform themselves into e-businesses.
Meanwhile, Research is contributing to the entire spectrum of technologies that form the infrastructure of
e-business, from supply-chain and customer-relationship management tools to security systems and particular solutions developed with customers. Some of this work has been described in previous issues of Research magazine. The current issue focuses primarily on the expanding variety
of online negotiations that can enable customers to obtain the best deals for services and goods, from paper and pencils to insurance and travel.
Significantly, the customers are not just individual consumers. Indeed, says Stuart Feldman, director of
IBM
's Institute for Advanced Commerce, "Most of the growth in e-commerce will be in the business-to-business area, which already accounts for the lion's share." According to Forrester Research, 90 percent of the $43 billion worth of commerce conducted over the Internet last year was business-to-business, a segment that will surge to $1.3 trillion by 2003.
IBM
itself is part of this accelerating trend. In 1998, the company purchased $1.7 billion dollars of goods and services over the Web, a figure that will rise to more than $12 billion this year. And Research, by making it simpler and less costly to participate in business-to-business
e-commerce, is enabling smaller companies to establish a presence in
this market (see "XML: the next big thing").
To ensure that this growth is not stalled by incompatibilities between proprietary solutions, standards are essential. Two of the most important emerging standards for new business processes are
OBI (Open Buying on
the Internet), which enables MRO (Maintenance, Repair and Overhaul) procurement by helping to define the sequence of interactions, and Rosetta, which specifies how to build general-purpose supply chains in the
IT
industry. Research is both helping to define these standards and building components for
IBM
offerings that will comply with them.
Creating the infrastructure and specific solutions for e-business is proceeding rapidly. Yet, the implications of these momentous changes rippling through the global economy -- whether they concern businesses transacting million-dollar deals or consumers Christmas shopping in pajamas -- are not easy to predict. There are many questions still to be addressed, not only about the fundamental enabling technologies but about policy issues and economics, as well. While these broad subjects can only be touched on here, the projects described below are helping to shape the future of e-business.
David Berreby is a freelance writer who lives in New York City.
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