Welcome to the new e-business

The latest ACN survey shows that companies are still enthusiastic about e-business, even if they now want to use it to cut costs rather than become global internet giants.

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By  Neil Denslow Published  November 25, 2002

I|~||~||~|Once the hottest buzz word in the IT sector, ‘e-business’ is losing its lustre, as dot-coms fail and traditional companies question the value of their IT investments. While some Middle East organisations still cling to the dream of using e-business to transform their operations into internet giants, the majority of the region’s companies are now focusing on using e-business for the more realistic goal of making their existing processes both quicker and cheaper.

According to the recent ACN e-business survey, only 17% of companies in the Middle East consider e-business to be primarily a business-to-business (B2B) tool. This though, is the area where e-business has had the most impact, even if this success has often been drowned out by the internet hype surrounding some business-to-consumer (B2C) web sites.

“People have always thought of e-business as Amazon.com,” complains Farid Metwaly, general manager, IBM Middle East, Egypt & Pakistan. “[Amazon] did their job in promoting e-commerce, but using your computer to buy a book is a very primitive form of e-business,” he adds.

The success of Amazon.com and other sites caused many companies to seize on e-business as a means of trying to create a global customer base. This dream still persists, with nearly 80% of respondents to the ACN survey believing that e-business can extend their company’s geographical client base. However despite these global ambitions, a mere 3% of respondents said their companies were actually using e-business for sales.

This low adoption rate for sales suggest that the Middle East has failed in implementing e-business. However, while the region has been slow, the picture is probably not as bleak as the 3% figure suggests. This is because while many companies are using technology as an integral part of their sales processes, they don’t think of it as e-business as it doesn’t follow the Amazon model. Instead, technology has become so embedded within the organisation that it is considered to be just business, rather than e-business.

“We often forget that there are several sectors that would collapse without e-business. For example, the finance sectors and the airlines couldn’t function without their networks. You physically couldn’t get a ticket without the network,” says Charles Ashman, Gulf & Levant enterprise service group, business unit manager, HP

The distinction therefore has to be made between e-business and e-commerce web sites, such as Amazon.com. Rather than selling goods to consumers via a web site, e-business is about using information technology to improve processes within a company and streamlining the supply chain.

“[People] no longer like to use ‘e-business’ as it is such a generic word, but whenever you are doing something to automate your business, you are doing e-business… The word itself is out of fashion, maybe, but the initiative of automating business has never been stronger,” says Zaid Abunuwar, enterprise & partner group manager, Microsoft Gulf.

Although they may not consider it to be e-business, companies in the Middle East are beginning to realise the benefits of using technology to automate internal processes. Indeed, the need to save money is now overtaking the search for new customers as the primary motive for implementing an e-business solution.

“We are being approached by fewer and fewer people who see the internet as a new way of tackling their clients. More of them are taking the second route, [and saying] ‘we need to reduce our internal costs’,” notes Tony Sparks, CEO of ASPGulf.

So instead of setting up e-commerce web sites, companies are using IT to cut communication costs through voice over IP (VoIP), for instance, or making the supply chain more efficient by integrating their back end with their suppliers’. Essentially, companies are interested in using e-business to address specific problem areas, rather than just because it is fashionable. “It’s back to what does my business need to do in terms of business change and how can technology support that, rather than what is the next big idea the technology industry wants to throw at me,” says Mark Raskino, research director, Gartner EMEA.

The Middle East may now be waking up to the advantages of using IT, but companies within the region have been slow to adopt e-business. For instance, 29% of respondents to ACN’s survey said that their companies were not using e-business at all, while 36% said that it was only being used within IT. “In terms of embracing e-business, we [in the Middle East] are at a very early stage right now,” confirms Tariq Habib, senior manager, business & technology, Comtrust.

The ACN survey suggests that one of the main reasons for this low level of penetration is lack of support from companies’ business units. Over 30% of respondents did not agree with the suggestion that senior management at their company was informed enough to meet the challenges of e-business.

Habib agrees that many companies are being held back from implementing e-business solutions by resistance from senior levels. “Selling the concept [of e-business] internally to the management is pretty difficult, especially within large corporations and large government organisations,” he says.

Again, the misperception about what e-business means is part of this problem, as many businessmen have focused more on the dot-com financial crashes rather than the advantages that automating internal processes can bring to a company.

To overcome this challenge, the IT industry is redefining how it sells e-business and trying to find ways of demonstrating a clear return on investment (ROI). For while concepts such as greater access to data and improved decision-making sound advantageous, they are difficult to prove, much less put a value on.

As such, faster completion of business processes is becoming the main selling point for e-business solutions, as this time reduction can be quantified and shown to sceptical customers. “A dimension of change that is inherently measurable is preferable to something like being more customer-centric, which sounds good, but can often be a bit woolly,” notes Raskino.

“[Furthermore,] when people go for radical time reduction, they nearly always get cost savings and customer service benefit out of it as well,” he adds.

||**||II|~||~||~|Organisations in the Middle East are particularly likely to be able to accelertate their processes by using technology because of the large number of local companies that are part of a wider business network — either as the local representative for another company, or as part of a larger regional organisation. Technology is the only way of connecting geographically dispersed organisations and allowing each office to access real time information stored at one central location.

“We are quite unique in this region in that we deal with so many distributed businesses... [and] these are typically the kinds of businesses that can get some form of a reward from the ‘new e-business’,” says Sparks.

Companies in the Middle East recognise the importance of processes to the success of an e-business implementation. In the ACN survey, 52% of respondents rated integration with existing business processes and applications as the ‘single most important aspect of purchasing an e-business solution.’

However, while supporting existing business processes may ease user adoption, re-engineering these processes is often key to generating cost savings and an ROI from an e-business project.

“There are people with a lot of technology, but a low return on it. In many cases… what’s wrong is a lack of business change to take advantage of what the technology can do, because business change is incredibly difficult and slow,” says Raskino.

Some processes are clearly in need of streamlining. For instance, one Middle East government investigated implementing an e-business solution in order to accelerate import processing by its various departments. While the project’s consultants accepted that a e-business solution would lead to timesavings, they suggested that reducing the number of signatures needed from 27 would be a more beneficial first step.

This is not an untypical example. Many organisations have complex, or even undocumented, back offices processes, which have to be clarified in order to make an e-business project successful.

“This is currently the biggest [stumbling block] in implementing e-business solutions in the Middle East market,” suggests Haitham Al-Faris, president & CEO of Al-Faris Technologies.

Clearly defined processes are similarly vital in streamlining the supply line and integrating back end processes between partner companies. However, having to redefine these business processes can substantially add to both the challenges and costs of implementing an e-business solution.

“If you have two [clear] processes on either side of a trading interface… linking via e-business is not a big problem. The problems occur when you’ve got very convoluted and multiple layered processes and no clear authority on either side. That’s when e-business becomes difficult,” says Ashman.

Even when faced with these challenges, the time and investment needed for implementing an e-business solution will nearly always prove to be ultimately worthwhile. However, the ROI is unlikely to come from extra revenue and more sales, but rather through more cost effective business processes.

“Companies doing this are not making money, but saving money and ultimately improving the bottom line,” says Sparks.||**||

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