labels: e-business, infotech
On a comeback trailnews
Shehla Raza Hasan
14 November 2003

Kolkata: Remember the euphoric days of the burgeoning dotcoms, when amateur entrepreneurs thought they could spin money out of the web? Remember the consequent meltdown of IT stocks on the bourses worldwide and the ''dotgone'' era?

While those who had burnt their fingers and lost jobs may look at it as a nightmare that has passed, a recently released survey by research firms AT Kearney and Line56 reveals that e-business is once again becoming serious business across the globe with IT budgetary allocations for its implementations showing a marked rise.

Nevertheless, unlike in the past when e-business strategy was mainly guided by hype and peer pressure, companies today — and tomorrow — are likely to be more cautious, making the whole exercise driven only by concrete positive results with a customer-focus.

The sample was 150 IT executives worldwide from companies spending in excess of $250 million in revenue to develop e-business spending benchmarks and to assess the demand drivers and governance of e-business initiatives.

Those who participated in the survey include chief information officers, chief technical officers and IT managers of top 10 sectors such as manufacturing, government, retail, health, medical, insurance, legal, financial services, automotive, aerospace, military, utilities, energy, chemicals and plastics.

Here are some of the trends that were revealed by the survey:

  • E-business spending now exceeds 20 per cent of the entire IT budgets — compared to 17.5 per cent in 2001 and 19.3 per cent in 2002.
  • 2004 e-business spending will grow at 2.5 per cent — and companies spending more than 20 per cent of IT budgets on e-business are predicting even larger growth.
  • Networking and infrastructure get the largest slice of the e-business pie — results reveal that companies are spending, on an average, 16.4 million on e-business networking and infrastructure, $15.2 million on e-business applications and $11 million on e-business tools.
  • Traditional investments still take the largest portion of funding — the following areas are attracting the greatest slice of company spend, despite hype around areas like mobility solutions and web-services:
    • E-business networking / infrastructure: server H/W ($3.3 million), server S/W ($2.3 million) Database ($1.9 million).
    • E-business applications: ERP ($3.2 million), portals ($2.7 million), SCM ($2.5 million), CRM ($2.5 million).
    • E-business tools: content management ($1.8 million), document management ($1.6 million), analytics ($1.4 million).
  • E-business investment lags user demand.
  • Shift in governance: E-business centralised with corporate IT — e-business management is most commonly centralised within the corporate technology organisation. Outsourcing is the most common form of management but is expected to double within the next three years.
  • Standardising the e-business environment — companies with centralised e-business units had a greater extent of standards definition and adoption across all of the e-business categories.
  • Corporate mandate required — in all categories of e-business, a ''corporate mandate'' is the most effective way of achieving standards adoption.
  • Absorbing the cost of e-business initiatives — centrally purchased e-business technology is most commonly fully absorbed by the central e-business / IT unit rather than being charged out to internal customers.

Customer relationship management (CRM), which was a ''hot button'' in the earlier phase, has declined in overall importance. However, CRM showed a stronger position in among smaller-sized companies, says the survey. While CRM come in at 16 per cent of the application budget overall, but in companies with less than $1 billion business the figure jumped to 23.7 per cent.

The survey also explores at length the idea of e-business governance and found that management of e-business is now most commonly centralised within the corporate technology organisation. These findings differ significantly from a 2001 Line56 research, which found that e-business was predominantly governed within operating units or as standalone units. This shift in the governance of e-business is, however, consistent with the future re-organisational trend towards centralisation that was revealed in the 2001 study.

It was also revealed that centralised e-business units are not only becoming more prevalent, but their roles are also expanding, and that those companies with centralised e-business unit are not only more likely to have standards definition, but are also more likely to gain adoption of defined standards.

The survey also found that e-business investments are made to follow with user demand 74 per cent of the time which also revealed a paradox: companies that first sense or predict demand and then invest also find that in the end, user demand has often not met investment levels.

We are, therefore, on the threshold of an interesting era of e-business — but with the difference — a more cautious careful era, where doing business through the electronic medium is driven by hard-nosed business results rather than just an idea.

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On a comeback trail