Preface
Chapter 3: ERP Solutions, Supply Chain, and Web- Based Enterprise Management
3.4 Web-Based Enterprises Must Always Account for Market Shifts
In the course of the Business Week interview to which reference was made in Chapter 3.3,[3] John Chambers phrased it nicely when he said: "Really good players want to be around other really good players… people like to work for good leadership. So creating a culture of leaders that people like is key." This reference to human capital can best be appreciated if one keeps in mind that, at least in developed countries, the workforce is undergoing a major transformation from manufacturing goods to providing services, and these services are increasingly intelligence-oriented and in full evolution in terms of content.
Internet-oriented services are highly sensitive with regard to costs and pricing. As I never get tired of repeating, "because pricing power is so much reduced, companies are well-advised to understand the role of software agents, not only in Internet commerce but in any and every implementation of
computers and communications."[4] Agents can be used to evaluate competitive price offerings, monitor and filter important information, analyze business and consumer behavior patterns, and buy and sell on behalf of both consumers and providers of goods and services.
Intelligent software helps to integrate ERP solutions in supply chain and Web-based enterprise
management, enhance targeted marketing, ensure continuous and detailed user feedback, both expand and narrow the consumer base as the situation warrants, and create more active trading environments:
To gain such advantages, companies must be focused in their selection by tuning choices to their business strategy and the practices they choose to follow and by establishing in advance expected benefits and the pitfalls associated to each business course.
What agents cannot do — because silicon intelligence is still in its early developmental stage — is evaluate the alternatives and choice of tactics referred to in the preceding paragraph. My personal experience through more than 50 years of professional practice suggests that the main reason behind a company's woes is never bad luck; it is bad judgment, particularly a bad choice of the direction of change.
In the twenty-first century, no company can be guilty of a cavalier disregard of the knowledge-based use of technology and continue to survive. Internet commerce and technology at large have another
aftermath of which it is wise to take notice: the changing habits of total consumer spending, from physical food to logical food. This is shown in Exhibit 3.6, which is based on American statistics. Taking the 1960s as the 100-percent level of reference, in the second half of the 1990s:
Consumer spending on food shrank by nearly 27 percent, currently representing 14.7 percent of the total family budget.
In contrast, expenditures relating to telecommunications services zoomed. They are up 240 percent compared to the 1960s, albeit still at 1.9 percent of total spending.
Exhibit 3.6: The Major Change in Spending Habits by the Public in Less than 40 Years (U.S. Statistics) This major change in how the American public allocates its priorities and its finances has taken place in less than 40 years and is accompanied by critical issues of which one is well advised to take notice.
One of them is the Internet restructuring of purchasing processes, which now involves a much larger number of price comparisons and at the same time is creating more knowledgeable and more active customers.
Another issue is the loss of pricing power by companies, to which reference has been made. This should be seen as a direct benefit of today's pace of technological change. With some advanced
technology companies, customers can use an online configurator of wares to choose among a variety of options. In Dell's case, for example, the system makes available choices of memory size, hard-drive capacity, modem type, etc., up to 19 million permutations.
Yet another critical factor is the advent of Internet portals, which has made online interactive information and associated transactions so much easier for the end user. Since 1998, Netscape's Netcenter, among other examples, has become one of a handful of powerhouse portals, or full-service Web sites that are shopping malls, online launching pads, and entertainment networks.
All three are rolled into one. After the acquisition of Netscape, between netscape.com, aol.com, and the AOL basic service itself, the AOL audience numbers in the tens of millions. This represents a good daytime-nighttime fit of Internet business. Any talk about merging ERP solutions with Web-based enterprise management must take account of these facts.
Indeed, this is one of the better examples of how and why as industrial companies and financial institutions entered cyberspace through the Net, the World Wide Web gained commercial importance.
Corporations have been spending millions of dollars to design Web sites and the demand for site designers is still outstripping supply. In terms of recent statistics, Exhibit 3.7 presents the ten top industry sectors in I-commerce in the United States, and Exhibit 3.8 gives a glimpse of the nine top American I-commerce sites for Christmas 1999–New Year 2000.
Computer hardware and software 100
Travel 98
Stock broking 78
Collectibles 72
Entertainment (music, video) 24
Books 20 Clothing 18
Flowers and other gifts 17
Department store business 16
Event tickets 14
Note: Taking computer hardware and software as 100 in terms of contracted business.
Exhibit 3.7: Top Ten Industry Sectors in I-Commerce in the United States
Amazon.com 100
eBay.com 70
eToys.com 31
Barnesandnoble.com 29
Toysrus.com 26
CDNow.com 24
eGreetings.com 17
Travelocity.com 15
Egghead.com 14
Note: Taking Amazon.com as 100 percent in terms of contracted business.
Exhibit 3.8: Top Nine I-Commerce Sites in the United States during Christmas 1999 – New Year 2000 In connection with the statistics in Exhibit 3.7, note that other top-selling products are electronics, automotive, home and garden items, as well as toys, food, and wine. Because this is a continuous race, the relative positioning of different wares varies as a function of time — but the pattern is characterized by an evolution in relative position rather than a revolution in wares.
European statistics tend to trail those in the United States. As 1999 came to a close, sales of computer hardware and software in Europe were roughly 40 percent of the American level, travel was 38 percent, books were 35 percent, stock brokering was 30 percent, and event tickets were at a mere 5-percent level. On average, I-commerce in Europe stood at about 33 percent of the U.S. level, but its growth was nearly twice that in North America. This suggests that in a few years these numbers might be totally different. Exhibit 3.9 presents the relative strength of Internet commerce in ten different markets.
Exhibit 3.9: Internet Connection in North American Homes and Offices Leads that of Continental Europe by a Margin of More than 3 to 1
Something North America and Europe have in common is that as far as Internet commerce goes, the dominant force is in the hands of the same firms. A number of U.S. companies now have a key position in the European market; among them, Amazon.com has European revenues five times that of its closest Continental rival, Bertelsmann's BOL. Yahoo! is Europe's largest portal with nine million users, dwarfing the 5.4 million of No. 2 T-Online; AOL and Lycos have more visitors than European competitors; and eBay, while late to arrive in Europe, is ranked No. 1 in visitors and sales in both Germany and Britain.
In conclusion, in their quest to master online interactive media, designers refocus their vision with emphasis not only on graphics, but on a flood of services. An integral part of these services is
information originating in ERP and flowing all the way into the supply chain; hence, the recent emphasis on Web-based enterprise management (WBEM).
In addition to mainstream applications come the value-differentiation approaches. For example, Web animation is becoming a space-time phenomenon — an interactive, participatory virtual-reality
experience. Because digital networks are dimensionless with respect to information transfer,
connectivity — not location — is the key. Some experts think that this can lead to digital demographics provided the Internet infrastructure is able to respond to the challenge.
[3]Business Week, August 28, 2000.
[4]D.N. Chorafas, Agent Technology Handbook, McGraw-Hill, New York, 1998.