LEARNING OBJECTIVES
● To understand the main elements of a Web-based ‘business’.
● To identify the common technological applications that enable and facilitate e-business.
● To be able to explain how each of these applications work.
● To understand how each of these applications is used and implemented by business.
INTRODUCTION
The previous chapter explored the technology of telecommunications, networking and computing and how they evolved to create the Internet. It also looked at the design and development of different network infra- structures and how they are used by business.
This chapter continues the theme of explaining technology to the non-technical. It will focus on the kinds of applications and tools that are used by Web- and Internet-enabled businesses. It will identify the common functions that a Web-based business fulfils and the main tools that achieve its business objectives, explaining how they work and the business advan- tages and disadvantages of each.
WHAT IS A WEB-BASED BUSINESS?
In this context, a Web-based business is one that explicitly uses the World Wide Web to fulfil one or more business processes. There are many different kinds of business processes, but when we examine how businesses
‘Back-end’ applications or programs support the front-end services and are the indirect interface with users. Back-end applications have the capability of communicating with a required resource such as databases or legacy systems. For example, once the request for the customer’s bank account is received with the necessary details, these would usually be processed via a Web server and then the details retrieved from a database of customer accounts.
Some of the commonly known Web-based applications include:
● e-CRM (electronic customer relationship management) – there are over 150 definitions for e-CRM. Briefly, it is a means of enabling ‘360-degree’
Figure 3.1 An illustration of some Web-based e-business processes
customer visibility by capturing relationships and interaction through- out the customers’ lifetime. It is about retaining customers, creating incremental sales, anticipating customer needs, providing customer support, and more timely and personal contact. Traditional CRM has mainly concentrated on point of selection and purchase and less on complaint tracking, delivery, replacement and support. E-CRM has achieved improved knowledge of the customer by fusing information from different communication channels into a single database of infor- mation. Integrating all the communication channels means that most of the customer information can be gathered and accessed through websites, feedback forms, website browsing behaviour, transaction behaviour, inbound and outbound e-mail with embedded Web addres- ses, telephone call centres (the largest part of e-CRM), interactive TV and mobile telephony (SMS1and WAP2), to name a few.
CASE STUDY Mobile CRM
Cendres & Metaux (CM) is a medium-sized Swiss company employing around 300 staff who are both office based and external sales staff who service markets in Europe, the USA and the Far East. CM’s main activity is processing precious metals such as gold and platinum across its three main divisions which are dental technology, the watch- making and electronics industry, and prestige jewellery.
What makes CM one of the leaders in the industry is its state-of-the art production technology and its high-quality customer service which is underpinned by its IT systems. At the beginning of 2001, CM wanted to improve and streamline its market and customer relationship activities by seamlessly integrating the data from their office- based internal staff with data from their international sales force.
Using SAP, they were able to implement a mobile multi-lingual e-CRM sales system. This system improved customer service by enabling the external sales force access to the same data as the office-based team across all three divisions – so they had customer information at any time, at any place and in any language. The sales teams were then able to prepare their calls and visits more systematically, and retrieve user-specific views of relevant data they needed, to help them deal with their clients more effectively and efficiently. Like the office-based sales teams, the external staff were able to access specific reports and use sales analysis tools on their mobile hardware, and send data to head-office updating central records in real time.
Source: SAP website: http://www.sap.com/solutions/crm/customersuccesses/
CASE QUESTIONS
(a) Do you think this system is central to Cendres & Metaux’s e-commerce plans? Explain.
(b) How does the system implemented by Cendres & Metaux enhance long-term customer relationship management?
euros a year. VB’s strategy focuses on innovation and customer orientation and to provide customers with a range of products to complement their lifestyles. In order to do this, they needed to ensure that the sales force had a consistent customer database with a stable infrastructure that enhanced communication between internal and external sales teams.
The solution was an e-CRM system with a Web-browser–based interface which allowed external sales employees to access all customer and project information, status reports, activities and data for bid invitations while they were away from their offices.
The sales force can also enter information directly into the database while they are with the client. Communication between the internal and external sales forces has benefited both the organisation and also the customer, by ensuring that any customer queries can be answered faster and the data is more reliable and up-to-date, with no delays in updating information. The e-CRM system has improved customer service, productivity and revenues.
Source: SAP website: http://www.sap.com/solutions/crm/customersuccesses/
CASE QUESTIONS
(a) How has the e-CRM system improved customer service, productivity and revenues at Villeroy and Boch?
(b) What areas of CRM cannot be executed by an electronic system in Villeroy & Boch’s case?
● e-marketing (electronic marketing) – identifying prospective customers, tracking and collecting data on these potential customers and then targeting them. A number of different Web-based technologies and techniques are being used and will be discussed later in this chapter.
● e-services (electronic services) – a concept first coined by Hewlett Packard (HP)3 where many business services can be provided to a business or consumer using the Web. HP defines e-services as ‘modular, nimble, electronic services that perform work, achieve tasks, or complete trans- actions’. They are also considered to be customer services supplied over the Internet, providing support and information through determining
customer requirements, acquiring the service or product, after-sales support and support in the disposal of the good or service at the end of its lifecycle.
CASE STUDY Professor Voss,4 Chair in Management Technology and Learning at London Business
School, defines e-service as ‘the delivery of service using new media such as the Web’.
He describes e-service as covering a broad spectrum from pure sales on the Web with little or no e-service content, to pure service as delivered free or as part of a service contract. Some e-services, such as remote bulk printing, may be done at a website;
other e-services, such as news updates to subscribers, may be sent to individual computers. Other e-services will be done in the background without the customer’s immediate knowledge, where the customer will no longer have to visit a merchant’s website to engage their services. E-services are being created to run on any device, each one able to trigger a request that sets into motion a whole range of services devoted to completing a whole process without human intervention. Some of the current examples are UPS’s package tracking, MapQuest.com’s driving directions, and even banking and brokerage firms are making their services externally accessible.5 Thus, e-services increase competition, broaden distribution channels, lower costs through easier out- sourcing and ease the integration efforts required to implement value added partnerships.
● e-marketplaces, dot coms, e-auctions and e-shops – all types of organisa- tions that enable the commercial exchange of goods and services with customers over the Internet via a website. These organisations are discussed in detail in Chapters 5 and 6.
● e-Supply Chain Management (e-SCM) – involves the coordination of all supply activities of an organisation from its suppliers and partners to develop a product or service for delivery to a customer using Web technology. Supply-chain management is a whole subject in itself and is only touched upon briefly in this chapter in the context of the different Web-based applications that are possible.
CASE STUDY e-Supply Chain Management
Carlsberg Group was founded more than 150 years ago and is a market-oriented company with a leading position within the global brewing industry. Carlsberg Denmark is a subsidiary of the Carlsberg Group located in Copenhagen. The Danish brewers have to forecast and deliver over 350 different drink products to over 23,000 customers across Denmark. These have to be coordinated across 3 production sites, 2 main stocking terminals and 16 distribution offices. Carlsberg forecasting must also factor in elements such as seasons, weather, events and promotions to get the fulfilment numbers right. It must also deliver the right product to the right customer at the right
enable them to improve the accuracy of their forecasting and production planning and so lower costs of inventory and improve delivery to customers. They wanted a system that would integrate the different applications, seamlessly allowing access to informa- tion across systems and departments.
The solution was an integrated supply-chain system which enabled every piece of relevant information on every transaction to be updated in every part of the system whenever something happened. Carlsberg input sales history information into the systems daily, to build a long-term forecast for replenishing its retail, wholesale, restaurant and convenience store sales channels over a 12-week period. The company then uses the system’s demand planning capabilities to create a short-term forecast for a 10-day period with an additional 3-week forecast. There is also the ability to include other factors such as promotions, with all results being reviewed with the sales force to ensure accuracy. The demand planning system enables sales forecasters and production planners to cooperate together and produce forecasts more easily, faster and with all the relevant information. If the forecast or any conditions change, they are able to build new plans more quickly than before, and send them to necessary production, stocking and distribution centres. This allows them to reduce inventory and get better and more precise information to customers. By implementing this supply chain management solution system Carlsberg achieved a more than 30 per cent reduction in stock and have improved their ability to deliver the correct items at the correct times to the correct customers by 20 per cent.
Carlsberg working with SAP also plan to integrate CRM systems to provide better service to customers by linking customer systems to their own, allowing them to integrate additional customer information (what they have ordered, when they ordered it and what they have sold) into their forecasting and planning system. Carlsberg are also piloting business-to-business procurement systems to integrate the purchase of raw materials (such as glass and packaging) into their forecasts and plans. Their aim is to create a fully integrated electronic supply chain.
Source: Carlsberg and SAP website: http://www.sap.com/solutions/crm/
customersuccesses/
CASE QUESTIONS
(a) What areas of the system implemented by Carlsberg contribute to its overall aim of a fully integrated supply chain? Is there anything missing?
(b) How does Carlsberg’s infrastructure compare with Bill Gates’s conceptual model of the organisation as a digital nervous system, conducting business at the speed of thought (see Chapter 8).
These Web-based e-business applications are bound by the capability of the technology and the data is controlled and manipulated by the organisations’ back-end systems. Some of the back-end applications are based on knowledge management processes including:
● Data warehousing where data collected from the organisation’s various and diverse business systems is collected in a server-based central repository. The data is ‘cleansed’, which means that it is organised into relevant and appropriate ‘metadata’ (a summary of data), and is struc- tured as a relational database making it easier to index, search and access by the end users. Data warehousing allows information process- ing to be offloaded from expensive operational business systems onto lower cost servers and can be made accessible for users over an intranet.
Data warehousing is expensive (costs may average US$1 million) and is mainly used by large multinational organisations.
● Data miningis an application that can make use of a data warehouse or alternatively information stored in some other large database such as intranet servers. It includes the analysis of data for relationships that have not previously been discovered. The kinds of results yielded include:
● Associations, where one event can be correlated to another event (for example, train passengers buy newspapers at a certain time).
● Sequences, where one event leads to another later event (for exam- ple, a carpet purchase followed by a purchase of curtains).
● Classification, where patterns are recognised, resulting in new organisation of data (for example, profiles of customers who make purchases).
● Clustering, where groups of facts not previously known are found.
● Forecasting, where patterns in data can be used to make predictions about the future.
● Enterprise resource planning (ERP)6attempts to integrate all departments and functions across a company onto a single computer system that can serve all different departments’ particular needs. ERP organises, codifies and standardises an organisation’s business processes and data, to make sure that transaction data is transformed into useful informa- tion that can be analysed to support business decisions. This enables various departments to share information and communicate with each other more easily, for example product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing cus- tomer service and tracking orders. Typically, an ERP system uses or is
Figure 3.1 illustrates conceptually the interaction between the back- end and front-end applications. They may interact directly with one another, or more typically, interact through an intermediate program (often called middleware) that mediates front-end and back-end activities.
One of the most common and difficult problems is integration and compatibility of both front- and back-end systems and also between different back-end systems. The reality is that business systems typically interface with other corporate systems such as accounting and inventory, many of which use legacy software based on older mainframe computers with different programming languages and operating systems, which may not work with the latest Internet technologies. In such cases, the corpora- tion needs to either switch to a new system, or get the old and new systems to talk to each other. Since the former option usually means scrapping the old system, most companies prefer to look at integrating the two.
Integration will only become widespread and useful once a common and universal framework providing a vocabulary and interface to bridge the communication between disparate applications and systems across the Internet and intranets, is implemented. Some multinational IT corpora- tions are providing open source platforms that are freely downloadable, such as Hewlett Packard’s ‘e-speak’7 in order to promote it as a universal standard. Other companies such as IBM and Microsoft support comparable structures such as UDDI (universal description, discovery and integration) and SOAP (Simple Object Access Protocol) for facilitating the interaction of e-services.8
Creating middleware and achieving compatibility across different sys- tems (new and legacy) and databases is an extremely complex area and is the crux of successful integration of e-business systems. Although only mentioned briefly here, detailed analysis of middleware and back-end system integration is beyond the scope of this book as the area is a topic, which requires a specialist information systems and programming tome in its own right.
The common functions of both front-end and back-end systems are:
data capture and delivery; dissemination of information, communication, promotion and interaction; and interfacing with third parties. The Web-
based technology that enables and facilitates these functions can be listed as:
● Web pages
● Cookies
● Search engines
● Shopping Carts
● Videoconferencing
● Interactive ‘chat’
● Bulletin boards
Although these technologies are usually incorporated into websites to provide an all round functionality, they can also be standalone technolo- gies. The following sections will examine each of these technologies, explain how they work, how they are used by organisations and what kind of common business objectives they can achieve.
WHAT IS A WEB PAGE AND HOW DOES IT WORK?
Web pages are created by a format known as hypertext – a concept and word invented by Ted Nelson, a computer scientist in the late 1960s who wanted to be able to look at a number of related documents while he was reading one. Twenty years later, hypertext was developed into a usable language and infrastructure by Tim Berners-Lee. Hypertext is a specialised kind of database system in which objects9 (text, graphics, audio, video, programs) can be creatively linked together even though they have differ- ent formats through hypertext links or hyperlinks, which usually appear as highlighted or underlined (hypertext link). Hypertext is the organisation of information units into connected associations that a user can choose to make, and are particularly useful for organising and viewing large data- bases that consist of disparate types of information.
The actual Web page is a file that is written in HyperText Markup Language (HTML). This defines the structure and layout of a document by using a variety of tags or attributes that are basically a set of directions that tell Web browser software how to display and manage a Web page’s text and images for the users – similar to music score which contains instruc- tions that tell a musician how to play a particular song. These instructions (known as tags or markups) are embedded in the source document that creates the Web page or html file. Tags reference graphic images located in separate files and they instruct the browser to retrieve and display these images within the page. Tags can also tell a browser to connect a user to another file or World Wide Web address Uniform Resource Locator (URL)
which can perform interactive animations, calculations or other simple but specific tasks without having to send a user request back to the host.
HTML is a formal recommendation by the World Wide Web Con- sortium (W3C),11an industry consortium which seeks to promote universal standards and interoperability on the World Wide Web and is generally adhered to by the major browsers, such as Microsoft’s Internet Explorer and Netscape’s Navigator. However, both have also implemented some features differently and provide additional non-standard codes, which results in some Web pages not being viewable in certain browsers.
There have been some new developments in HTML, such as dynamic HTML which enables more animated and user interactive Web pages, for example changing text colours/fonts as a user passes a mouse over the text or allowing a user to ‘drag and drop’ an image to another place on the Web page. The biggest obstacle to the use of dynamic HTML is that many users may still be using older browsers, and so a website must create two versions of each site and serve the pages appropriate to each user’s browser version, which can slow down user access to a Web page.
Other developments are Extensible Markup Language (XML), also for- mally recommended by W3C. Whereas HTML describes the content of a Web page in terms of how it is interacted with – for example, a new paragraph is indicated by the letter ‘p’ placed in mark up tags (<p>) – with XML it describes the content in terms of what the data describes, which would enable a program to identify and use the data in a way it wanted. For example, the word ‘telno’ placed within markup tags could indicate that the data that followed was a telephone number. This means that an XML file could be processed purely as data (in this case it would dial the tele- phone number). It can be stored with similar data, or like an HTML file, it can be displayed – depending on the application in the receiving computer.
XML is ‘extensible’ because, unlike HTML, the markup symbols are unlim- ited and self-defining. It is expected that HTML and XML will be used together in many Web applications.
HTML has actually been reframed to incorporate XML creating XHTML, a particular application of XML for ‘expressing’ Web pages. Unlike HTML, but similar to XML, XHTML can be extended by anyone that uses it.