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Theme: Outsourcing E-Commerce
is Becoming Popular
http://ecnow.com/top10trends1999.htm
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September 1, 1999 *2,200 subscribers*
Volume 1, Issue 08
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Issue: http://ecmgt.com/v1.08/full.issue.for.printing.htm ECnow.com 1999 trend #03: "Movement of e-commerce to a service
industry" and "outsourcing of e-commerce functions will become very
popular."
COMMENTS FROM OUR READERS Our
bulletin board allows readers to comment on trends and issues throughout the month.
Please stop by and add your comments and see all the responses at http://ecmgt.com/bulletinboard.htm Question of the Month "What
do you expect to happen with e-commerce? Do you expect to see the industry move
in the direction of a turn-key service industry, rather than a purely product
or technology driven industry? Do you see "netsourcing" (the outsourcing
of e-commerce functions) becoming pervasive?" Selected Answers of
the Month ***
With regard to outsourcing e-commerce functions, I
think this trend is in high gear. There are so many functions associated with
e-business/e-commerce that it's almost inevitable that outsourcing is the only
way. Too many areas of specialty, too much competitive pressure, too much customer
service required expecting to do it all in house and do it well. The growth
of a company cannot be dependent on every company having an army of technology
implementers. They are hard to find and very expensive. The key for technology
providers is to be the technology people and enable clients to use applications
with only the expertise of their business people required. Therefore the turnkey
netsourcing economy should be serving up shortly. It only makes sense. (J.M.,
Maplewood, New Jersey, USA) ***
The answer is yes - I do expect to see
an increase of software being deployed across the Internet and billed on a rental
basis. (R.E., London, ENGLAND) ***
It takes several years to produce
software and good software has usability testing up front. The Web is changing
so fast that most software is going to miss the mark. The solution to this is
to have the applications be of a more dynamic nature and have them continually
modified and updated. With the net it makes little sense for each business to
support the infrastructure necessary to continually upgrade the software so it
will need to be done elsewhere. (D.S., Santa Cruz, California, USA) ***
Unfortunately, it most likely will happen. Firms will see this as a quick solution
to becoming 'e'. They will miss the boat on differentiating themselves from others
in the same market segment, and will not have the discipline to change the business
model that e-commerce requires. Especially with the ERP vendors, they will become
e-commerce without touching e-business. (R.P., St Louis, Missouri, USA) ***
The ASP market is growing to a USD $2B market. Netsourcing criteria include: support
services, reliability, infrastructure (backup, UPS, air, fire, diversity), connectivity,
performance, collocation, scalability, partitioning, and security. For many, hosting
opens new markets without in-house concerns (shortage of skilled IT talent, 7x24
support, no up-front capital costs). The ASP market is huge yet hard to define.
What it can mean: - Providing a best-in-class data center (Exodus with
superior Internet peering)
- Outsourcing CRM/SFA/ERP/Supply Chain apps (Qwest,
USI, US West, etc)
- Running Microsoft apps on a Java client and a remote
Server (saving corporations $5K+ annual maintenance support)
- Enabling
collaboration (Notes, NetMeeting, Voice/Video over the Internet)
- Provide
convergence (voice/data, Internet/Interactive TV, voice/EMAIL/VMAIL/Fax, etc)
- Who says you need a PC interface to the web? Imagine this scenario: your
lost in a strange town -- you call 800-IAM-LOST on your cell phone and verbally
say where you are and where you want to go. An Interactive Voice Response queries
a portal ASP, providing you directions along with targeted advertising (restaurants,
entertainment, etc) along the way. The advertisers pick up the cost of the portal
functionality (the portal ASP makes money, the advertisers get new business, the
cellular company gets minutes on their network), and if the call drives an E-Commerce
sale, the business partners share in the transaction revenue.
- Enabling
a company exposure to new markets without the barrier of entry/exit. Apps can
include simple functions as web hosting to provide exposure, or as sophisticated
as configuration management all the way through order fulfillment and billing.
And in the future, apps will provide an interactive look and feel paradigm --
when you travel, you'll be able to look at the amenities of your prospective room
-- view the tours on the trip -- see and hear the tour guides, etc.
(M.N.,
Petaluma, California, USA) ***
If the Internet remains product or tech
driven it will go nowhere. The net has to become service and marketing driven.
Most of the services that we now see developing will soon have to be scrutinized
with cost cutting being a big factor. Outsourcing has traditionally been the tool
to do this that companies used in a variety of industries. Hand in hand
with outsourcing key elements in the business of the net will have to be developed
globally with local constraints in mind. Example, India has only 100,000 credit
card merchants in the country. This is the size of Jacarta alone. If businesses
sell goods and services on the net via credit cards they will have to redesign
their payment mechanisms to get the critical market mass in India (eg. VPP, mail
order, check orders). Anyone with better ideas and implementation of these key
elements will win business hands down. (A.B., Calcutta, INDIA) ***
The
prospect of netsourcing becoming a turnkey service is very probable and desirable
for companies which are focusing their expertise on their own service or product.
This type of service would be extremely valuable to those who cannot afford to
rely on hiring an in-house expert, and this would give them a greater latitude
to change who they source this to if the results are not to their satisfaction.
I would liken this to hiring an advertising firm to build the image and then maintain
that portion of the competitive edge. (D.R., Santa Cruz, California, USA) ***
I do believe that industry will migrate toward turnkey e-commerce solutions. Recently,
KPMG has partnered with Quest and Cisco in an aggressive strategy market and deliver
on this promise. I am currently involved with ERP implementations in the
middle market. In working with senior executive teams to formulate strategy, the
daunting cost of an ERP initiative is often the largest obstacle. Turnkey e-commerce
solutions will provide new and exciting options, particularly for the middle market,
and will drastically lower the point of entry to world-class information systems
and tools. (M.W., Connecticut, USA) ***
I worked at SAP and helped found
Pandesic (owned by SAP and Intel) which is offering "netsourcing" e-commerce
apps and services. My sense of what is happening is that, Yes, there is a trend
towards browser-based apps that were once pleasingly-plump-Client apps. Entire
companies are springing up to offer such products (services really). The trend
will be strong and it will take hold quickly. That said, be dubious of "trends".
Too often we extrapolate "trends" five years out (and beyond) and THAT
is where we start to sink in our perennial-trend-quicksand. No one knows what'll
be hot in five years and in fact most savvy people just try and stay a year ahead
of the masses. 'Net apps WILL take hold, but for how long and to what degree is
any "experts" guess. (J.M., Laguna Hills, California, USA) ***
A large portion of the e-commerce market will turn to "netsourcing"
/ "turnkey" solutions for applications and other e-business functions.
Many companies are already turning to "netsourcing" for portal management
which in some cases includes calendar, time management, and messaging applications
and supports intranet and internet functions. A logical extension is desktop productivity,
ERP, and CRM applications, etc. Technology companies can use their expertise to
bring other less technical companies to the Internet quicker and cheaper and by
combining these services with applications can create value that will be hard
for business executives to resist. This makes pure economic business sense and
will become the standard within the next few years. Product and service sells
but the harder question is who will bring it all together. (M.V., Atlanta, Georgia,
USA) ***
Companies are struggling to keep up with technology and bandwidth.
They are forced to move faster and faster and become more efficient in order to
remain competitive. They have recognized the need to outsource some or all of
their technology infrastructure to outside specialists. We have already seen this
trend with the semi explosion of ASPs. It is natural that e-commerce would follow
in these footsteps. (S.C., San Francisco, CA, USA)
***
My company
can take on the industrial giants through the outsourcing functions available
today. We could choose to do all the activity in house which would mean more time
and money spent for quality that is not consistent. But now I can enlist the services
of a multi-million dollar firm to perform the tasks for a fraction of what it
would have taken in terms of time and money. I just think of payroll functions
as an easy example. Therefore, YES, outsourcing functions is good and popular
right now, especially for small to medium sized businesses. However as companies
will realize, as soon as they grow to a certain mass and density, it is in their
best interest to use in-house resources. ( A.F., San Francisco, California, USA) ***
My opinion (as a working graphic artist/photographer) is that e-commerce will
be moving toward "netsourcing" of software applications... (C.G., Santa
Cruz, California, USA) ***
I expect to see continued development in
the area of netsourcing. This is a logical step forward and could mean continued
explosive growth in e-commerce by involving smaller companies in more sophisticated
technology. Most every industry moves toward "turn-key" or packaged
solutions as it matures. We have seen the time required for an industry to mature
shrink with the development of technology. I believe this trend will continue
and the e-commerce industry will mature even faster than the computer hardware
industry or networking industry has. (J.S., New Albany, Indiana, USA) ***
There will be a complex web of sub-contractors who will be responsible for providing
content related to e-commerce. Yes, there will be netsourcing but that will be
in various segments - company A will be responsible for co-hosting/co-locating
the servers, company B will be responsible for security and access while many
others will provide personalized contents. All these will be visible via a portal
or similar technology. (S.V., Sunnyvale, California, USA) ***
Yes, the
future of e-commerce is through turnkey applications. (A.M., Edmonton, Alberta,
CANADA) ***
The long-term outlook will follow the principle of maximum
exploitation of major assets. This principle might lead Microsoft, SAP, Oracle,
etc. to consider delivering on an application or even module basis. Partnering
with an infrastructure vendor would in turn maximize that asset owner's utilization.
In time, the trend is one of a service business---a high-tech automat, so to speak...The
e-commerce site becomes just the doorway to the integrated content/service economy.
(M.I., Laguna Beach, California, USA) ***
The market is splintering
in its needs, with large companies and companies with many e-commerce tools in
place demanding more integration support, and smaller companies and those with
fewer applications in place demanding standard, packaged applications requiring
less integration support. Fortune 1000 companies and e-commerce early adapters
will require enterprise software to be provided as a turnkey service. This is
consistent with dynamics in other established industries like Distribution and
Construction - as the products become more standardized, customers try to improve
logistics and all the steps leading to completed purchase. For smaller businesses
and new users doing stand-alone applications, users will focus more on selecting
the best tool to solve their particular business problem. These companies do not
want the complexity of custom solutions and do not want to pay the higher costs
associated with full system integration, for their initial e-commerce projects. By
the way, my opinion is that for e-commerce implementation has barely begun and
to become a real mass market (and get to the really big $$), implementation will
have to become more standard. Customers don't have the time and money to implement
all of the applications that are needed today and there are not enough IT people
in the world to make it happen. (S.A., Menlo Park, CA) ***
Yes, e-commerce
will move towards turn-key service industry due to the growing needs of businesses
today and not be limited to product only. I would tend to think service industry
will become a very important part of e-commerce but not necessarily the pervasive
function. (M.K., California, USA) ***
E-Commerce will continue to develop
along two fronts, namely: products, technology and service; turnkey operations
for those services such as on-going consultation, education, etc. Many organizations
will not want to develop in-house expertise and will content themselves with developing
expertise in their specialized fields. There will be a real need for comprehensive
e-commerce support... (E. K., CANADA) ***
Large companies will seek
to swallow large swaths of e-commerce by offering turnkey systems. Companies such
as Microsoft, AT&T, portals all will vie to be both a conduit (pipe) as well
as a provider of services for which they can derive revenues. Smaller firms will
continue to build specialized systems and applications, focused on ways to deliver
value through customer service and the specific needs of end users. (J.S., Walnut
Creek, California, USA) ***
There will be increasing number of outsourcing
opportunities, but in many stages of the e-commerce development / implementations,
you will see a staggering of in-house and outsourcing. (T.Z., Sunnyvale, California,
USA) ***
Large corporations will always develop in-house e-commerce
solutions, but the small and even medium size business will opt for turn-key systems
where all the expertise, processing, and known costs are performed by a host provider.
This will be especially true as robust security is developed and companies become
more confident in it. This will be a modern extension of the Service Bureau concept
of economy of scale. Business are buying turnkey systems today in an attempt to
reduce the time and cost of in-house development. And they are doing it in a massive
scale with the current ERP systems inspite of their incredibly high cost (not
only purchase but implementation). Still, companies today, large or small, that
buy a turnkey system must then have the in-house ability to support it, and this
is expensive. The internet and e-commerce present a new solution where
the small to medium company can buy it (an application solution) and have the
full solution supplied by the vendor at the vendors site. And the training is
minimal as well. All any company will need in-house are small PC's with browsers.
People are already learning how to navigate a web site and that can be quickly
extended to a turnkey system. Large companies are already switching their
in house systems to be browser driven on an intranet (the systems cost and maintenance
savings are enormous). Smaller companies will enjoy this savings through the new
age service bureau (Oops, sorry, new age terminology is: "outsourcing of
e-commerce functions", golly, even the vocabulary changed. All this presupposes
that the Government keep its hands off. (R.C., Silicon Valley, California, USA) ***
As our company struggles to put up its first e-commerce pages which actually take
orders and ship product 24X7 without human intervention, our conclusion is that
if you want it to work without "gaps" – re-keying or manual connection
of information between disparate systems -- you have to do it yourself. XML and
other connectivity may allow us to outsource portions of our e-commerce solution
in the future while connecting seamlessly to our internal systems, but nothing
we've looked at will let us do it yet. (S.F., San Jose, CA) ***
Netsourcing
will be a strong option for starters if that is easier to start with and more
economical in both time and money. However, although netsourcing has more advantage
over pure product driven e-commerce in the sense that it can adapt to each customer,
still for fast-changing e-commerce, netsourcing may not cope with the varying
situations of each customer quickly enough. In addition, more efficient netsourcing
requires the netsourcing industry to precisely understand its customers' need
in time. This in turn requires in-depth share of information on the target business
which is sometimes not desirable. This security and privacy issue of netsourcing
could be an obstacle…Even though netsourcing can become popular, there still
will be a lot of need for in-house works for the moment. (G. K., Cupertino, California,
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