eBusiness - Survey of real benefits

eBusiness as usual seems to be the catch-cry of leading eBusinesses in the United States - despite the "dot-gone" era.

eBusinesses running in 9 industry groups were surveyed by InternetWeek to compare whether eBusiness had changed significantly since 2000. "Bricks and Mortar" companies with annual revenues of over US$1billion were included as well as larger Internet-only companies. 

Although the statistics lack specific detail and cannot therefore be applied to your situation, they go beyond the "spin" of press releases or "white papers" to provide a more accurate picture of what is going on.

Also - we believe that the benefits of using the Internet for eCommerce and eBusiness are likely to be understated because the companies involved in the survey have probably been using EDI or the Internet for several years - so the improvements and changes are largely MARGINAL i.e. the companies surveyed were unlikely to be comparing improvements as a result of moving from paper-based systems to Internet-based systems.

(Note: The percentage improvements for individual companies changing from paper-based to Internet-based are likely to be closer to those presented on our "eBusiness Cost-Benefit" page.)

Survey Results and Comments

1. Business growth is healthy due to the Internet.

  • 60% said of companies said that their Internet Revenues had grown by 20% in the last year. 34% said more than 60% growth
  • 48% said that their Customer Base had expanded less than 10% in the last year - 32% said it had expanded by 10-20% due to the Internet.

These numbers might not sound dramatic - but consider this - if you had a 1/3 chance of increasing your revenue in a new market niche by 60% in 12 months, would you be interested?

- or -

If you had a 1/3 chance of expanding your existing customer base by 15% in 12 months would you be interested? (15% cumulative is doubling roughly every 5 years).

The average expected Internet revenue growth was for 2001 was 32% - that's 32% on top of existing figures! Would those numbers improve your bottom line?

2. eBusiness is not mainstream - yet.

The Internet affects less than 10% of business activities for over half of the respondents. Even so, these relative small percentages are of a very large pie - the companies in the survey are have annual gross revenues of over US$1b each.

Also, when comparing percentage changes between years and the rates of spending on eBusiness, it is not going to be long (2002?) before 20% of business will be directly affected by the Internet for 50% of the companies - not 10%. (The average % of Purchase Orders and Sales Orders made via the Internet increased from 9% to 16% of transactions over the last 12 months - a 50% increase.)

3. Integration of the Internet with in-house systems is only 80%.

Given that the survey covers large companies - presumably with huge transaction rates - we find it surprising that there are not more companies automating their in-house Sales Orders and Purchase Orders processing. Complexity, cost, and legacy systems "drag" may be the reasons for the 20% that have not automated.

4. Cost savings are steady rather than spectacular.

We believe that the savings are MARGINAL savings - i.e. the companies surveyed were unlikely to be comparing improvements as a result of moving from paper-based systems to Internet-based systems, they were comparing last years Internet systems with this years Internet systems. Irrespective of whether the figures are marginal or not, what is it worth to your company to reduce a significant portion of your overheads by10-20% - in ONE year.

Area for Savings <10% 10-20%
Purchasing Costs 52% 36%
Customer Management 53% 30%
Fulfillment and Delivery 61% 27%

5. The Manufacturing Sector gets above average benefits in Customer related benefits.

We deal with manufacturing software for complex and unique products, so the results for Manufacturers were of particular interest. We were pleasantly surprised to see these statistics:

Factor Avge Mfg
Cost Reduction in Customer Management 9% 15%
Expanded Customer Base 7% 10%

There are no clear reasons for these significant improvements on the overall averages (Well, we think 50% is pretty significant!).

It may be that Manufacturing is more complex than other industry sectors and that automation benefits are greater because the marginal costs of additional information are reduced.

For example the positive impact of the following practices may be disproportionate because what was relatively complex when compared with other industries prior to Internet integration, is now straightforward:

  • Vendor-managed inventories - suppliers keep close track of customer inventories and replenish as needed 
  • Evaluated receipts settlements - the automatic payment of invoices assuming that the transactions being automatically paid meet a pre-defined set of criteria.

See Also: eBusiness Cost-Benefit | XML - What's involved?

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