<B> E-Commerce Takes Hold</B>
Business travel executives know that the consumer travel sector already dominates Internet e-commerce. E-commerce is not just about buying a discounted airline ticket online in a one-time transaction, nor making an 'impulse buy' online. It is also about data warehousing, data mining for information and conducting T&E analysis. E-commerce is about big business today and facilitating larger corporate travel sales. Corporate travel managers and meeting planners must look at what they do as an industry; their purchases are a business-to-business application
According to a Forrester Research study, e-commerce retailing revenues currently are estimated at $7.8 billion, and projected to increase to $43 billion by 2003. Compare that with a projected $1.3 trillion market projected in the same study for business-to-business e-commerce services in 2003. That is more than 20 times the size of the consumer e-commerce market.
Others predict the scale of the B2B market in 2003 will represent approximately 9 percent of all U.S. business trade, about equal to the GDP of Italy.
The question is: How does one get an advantage in the e-commerce era?
For business users, e-commerce impacts the value chain at all levels. Understanding how to extract real value from new technology will separate the leaders from the rest. We are observing explosive market capitalization growth among the players shaping the Internet and e-commerce arenas. But remember, we have seen strong growth before from vendors who bet the farm that dedicated digital fax machines linked to high-speed servers would be the world's long-term solution for global electronic document distribution (they weren't); or that users would enjoy dramatically reduced corporate travel costs when bulky, costly high-end teleconferencing systems were installed in business conference rooms (they weren't); or, more recently, that satellite telephone services would provide a new solution for offering mobile services anywhere on the planet (they didn't).
In these examples technology was the driver. There was no clearly defined vision of what the market really needed and was willing to pay. Similarly, the rapid introduction of new "gee-whiz" e-commerce technologies might blur the lines between technology (features, functions, etc.) and customer benefit.
A three-generation model can be used to describe the evolution of e-commerce services. First generation e-commerce service displaced paper with Internet-based electronic alternatives, for example, converting catalogs to Web pages. Less than five years ago, first generation e-commerce services were unique, leading edge and created competitive differentiation. Today, a strong Web presence is the minimum a business needs to survive.
Second generation e-commerce services displaced business processes with Internet-based alternatives. In the late 1980s, Electronic Data Interchange was introduced. Its premise was simple: Most businesses send too much paper. Some information, such as purchase orders and routine transactions, could be standardized and moved electronically, reducing transaction costs. Hundreds of EDI standards and ventures were created. The initial selling proposition was reasonable and spawned many business plans. Paper-based purchase orders cost an average of $2.50, whereas an electronic transaction costs about 25 cents.
The results? Many firms failed, and EDI did not live up to its expectations. Yet some leaders, both users and suppliers, emerged. They shared a common trait: They recognized EDI as a new business process. By contrast, other players simply delivered EDI services rather then benefits and missed the real opportunity.
Parallels exist in today's e-commerce market. Firms that understand the distinction between e-commerce technology features alone versus customer benefit and service will be the real winners. Displacing a manual process with an Internet solution is not enough. The winners will be capable of doing more than providing a Web page and first generation services. The winners will understand the users' business processes in depth and provide sustainable support.
Third generation e-commerce services will displace traditional business markets with Internet-based alternatives. Third generation e-commerce networks fundamentally will alter how business is conducted. For example, in a recent interview, the CEO of E-Loan projected that in a few years, most loans will originate via Internet links to multiple, worldwide lenders. Third generation players must understand the difference between delivering "hard" and "soft" cost savings. Hard cost savings include reducing paper-based transmission and labor costs. Soft savings can be derived from automated, efficient "purchasing engines" that link online purchasing to internal management systems, which improves cash flow and bottom-line financials.
The competitive differentiator for third-generation e-commerce service will be market and process expertise rather than technology.
<I>Paul B. Silverman is CEO of SecurFone America Inc., which is based in San Diego, Calif.