ComputerLink articles by Brian Pitre

E-commerce is changing the business process

Consider this: The Gartner Research Group recently observed that "The Internet already has the potential to replace rather than simply supplement traditional methods of conducting business." Even if they are half wrong, this means that things are really heating up with e-commerce. However, the growing ubiquity of e-commerce in all facets of business is not fully understood by many managers.

The Enabler
Internet based e-commerce is affected by two basic laws. First, Moore’s Law states that every eighteen months, processing power of computers doubles, while cost holds constant. For the past thirty years, Moore’s law has operated consistently and should continue to do so indefinitely. By reducing costs and increasing productivity, computers will continue to influence every aspect of our lives.

Second, Metcalfe’s Law explains the rapid expansion of the Internet. Metcalfe’s Law, simply put, says, "more begets more." The facsimile machine illustrates the principle: If you have one facsimile machine, its value is zero—because there must be two machines to make it useful. Further, additional machines geometrically enhance the value of all the other existing machines. Therefore, when you purchase a facsimile machine today, you get much more than a phone with a printer. You also share in the utility of the millions of machines already out there, giving your purchase tremendous value and usefulness.

Perhaps you can remember doing business without a facsimile machine, but it’s almost impossible now. These two laws or forces will constantly fuel the growth of the Internet. Meanwhile, our hunger for "smaller, cheaper, faster," will spur new technologies and their adoption by business on the Internet. Technology that is the exception today could be the rule tomorrow.

Your Business
Keep the simple perspective that the Internet will save you money where you currently do business and simultaneously generate significant new revenue. Today your business should be examining how to use Internet based e-commerce technologies. You should be actively engaged in redefining your business models and processes around these Internet enabling technologies. Corporate culture, too, will need to make adjustments in so that it can understand, implement, and take advantage of new technologies.

Companies must reconcile themselves to the fact that everyone is wired or soon will be. Choosing the right technology and Internet presence now will ensure smooth transition and stronger growth in the years ahead. As your company prepares for these changes, remember that Internet technologies have one major redeeming quality: they can often be deployed in conjunction with your current infrastructure.

Reduced Cost
The savings available with Internet technologies are often amazing. The average cost of a telephone transaction is $5.00. Compare that to the Internet transaction at a mere penny. A traditional bank transaction costs your company $1.07, but Internet banking transactions cost just a penny. Processing an airline ticket normally costs as much as $8.00. You can do the same business on the web for a dollar. With savings like these, your business may be able to pay for new Internet infrastructure by simply doing business.

The Effect
With less expensive computers and more services available on the Internet, savvy businesses are significantly reducing their costs for all types of transactions. These companies are creating a fundamental change in the business process, but more importantly, they are changing their position in the competitive market. As these business adopt lower transaction costs they become more competitive in their markets and present a major challenge to their competitors. Even start-up firms are able to compete with and even overpower industry giants with the help of e-commerce.

Some companies capitalize on Internet technology to an amazing extent and quickly rewrite the rules for a particular industry. Amazon.com has turned the retail book industry upside down by drastically reducing transaction costs and virtually eliminating inventory. Although neither Amazon.com nor the technology they use to do business existed three years ago, the company has become the top retailer of books in an industry previously dominated by such venerable giants as Borders and Barnes and Noble. Those giants didn’t see Amazon coming, and today companies are warned not to get "Amazoned."

The Objective
Consider Amazon.com the benchmark standard for your business and its e-commerce. If you are not yet selling your goods and services as easily and effectively as Amazon, rethink your strategy and strive toward that goal!

The Competition
Companies perceive the Internet as a way to showcase their business to the world marketplace. However, many fail to understand that the Internet fosters a world of competitors who are equally viable in that marketplace. More and more of your competitors will embrace e-commerce and change their business processes. The longer you wait, the more difficult it becomes to change, and the more advantages your competitors will gain.

Now is the time to get moving in a new direction. The question is not how much the change will cost, but how much your company will benefit.