They Won't Believe You
- 31 May, 2000 16:02
Last week, in the space of two days, I met two CIOs with a similar problem: both had frustrating encounters with young stock market analysts. These analysts were probing for how enthused and committed the organisation was towards e-commerce. Each CIO explained that their organisations had implemented business-to-business (B2B) e-commerce in the early 1990s. The young analysts scoffed; after all, e-commerce and the Internet are synonymous, which meant B2B wasn't happening prior to 1995. As a result, both CIOs found themselves under pressure. The companies were tagged as e-commerce laggards and had their share value marked down.
Yet both organisations had used e-commerce for over 10 years in the form of electronic data interchange (EDI). One CIO observed that it was a pity EDI began with a capital "E". If it was a small "e" everyone would believe them.
Put EDI under a microscope and it certainly looks like B2B e-commerce. My first InTEP session in 1994 was on EDI. Given the CIOs' concerns, I decided to review the report from that meeting. It made fascinating reading.
The InTEP speaker was from a large importer and distributor of electronic equipment, with revenues of $600+ million and around 2000 staff. The company had implemented EDI in 1989 at the behest of one of its largest customers. This client wanted to streamline the process of recording transactions and saw paperless trading as the solution.
Despite being press-ganged into EDI the InTEP member quickly became an enthusiastic convert. By 1994 nearly 20,000 orders were processed via EDI. It led to a 100 per cent growth in sales volumes from some trading partners. Between 30 and 40 per cent of all business entailed no direct sales involvement. Finally, in terms of value, 90 per cent of the business orders received then were via EDI.
There were other benefits. EDI accelerated order processing, which significantly boosted cash flow, increased inventory turns, reduced the days outstanding and enabled the organisation to secure rebates for meeting volume benchmarks. The report could easily have been written today about B2B e-commerce. If you and your company were currently under scrutiny regarding implementing e-commerce, and you were boasting about this track record six to 10 years ago, wouldn't you be more than a little exasperated?
EDI was clearly about business-to-business electronic trading. It facilitated supply chain management and replaced the need for paper correspondence and audit trails. But it did not use the Internet. Private networks known as VANs carried the traffic. As such, it did not allow unauthorised people to trade. Spontaneous business from complete strangers was not possible. However, today's B2B e-commerce is between trusted parties. Of course, Internet organisations are busy investing millions in firewalls and other security to prevent outsiders getting in while the "Love Bug" virus is clearly illustrating that there is still a long way to go with Internet security.
All the B2B e-commerce hype must gall long-time EDI champions. It advocates an inferior functionality, in place of a tried and trusted technology, and it penalises them in terms of their share price because they are cautious about embracing it. Even if they did implement B2B e-commerce, there are no real business advantages over what EDI offers. In fact, these CIOs probably relate to the Monty Python sketch where the Yorkshireman laments "if you try telling that to the kids of today they won't believe you".
Peter Hind is the manager of User Programs, which includes InTEP, at IDC Australia