InformationWeek

July 12, 1999

The Enterprise:
The Impact Of E-Business

The shift to electronic business will drive spending on a par with Y2K rates-and require the right structure within your company

By Judith S. Hurwitz

Judith Hurwitz here's a shift taking place in companies across the globe that will be more significant than the changes wrought by the Y2K computer date-field problem. I call this shift E2K-the shift of technology and business toward electronic business.

While E-business isn't new, its impact will be dramatic. It's fostering a new, borderless global economy-which is not only a technology issue, but also a new philosophy and approach to doing business. In brief, companies are externalizing their business applications via the Internet-a trend that I see sparking a software spending binge over the next decade in order to gain competitive advantage.

This increased spending will focus on three key areas: business to employee (such as intranet E-business sites), business to business (E-supply chain, E-marketing, and E-support), and business to customer (via an E-lobby or enterprise portal).

Why will companies move at such a dramatic pace? Compare the market capitalization of a traditional company such as General Electric with that of an Internet upstart such as eBay or eToys. Traditional companies risk being E-finessed or E-marginalized by upstarts. Many CEOs of traditional companies say things like, "If a group of people can raise $100 million in venture capital and hire a dozen teen-agers with Web skills, they can advertise and market their way into my space without any of my overhead expenses."

These CEOs understand what addressing E2K entails. They must do three things to avoid being E-finessed:

Clean house. Implementing E2K requires opening your computing infrastructure to customers, employees, and partners-meaning that your customers may spot problems before you do. To minimize risk, identify areas where your company may run into trouble.

Create what we at Hurwitz Group call a "hypertier" applications architecture. Without an applications architecture underlying your E2K infrastructure, you won't be able to compete with startups that have no legacy and no expenses. To start, conduct an audit of the structure of your current applications and underlying architecture. Match this against a hypertier architecture that's based on a fluid design and that lets you react in real time to changing market and customer requirements.

Strike a balance between effectiveness and efficiency. Traditional companies specialize in becoming efficient. They cut costs out of processes and send invoices on time. In stable markets, efficiency is paramount.

But E2K puts many businesses in turmoil. In this scenario, companies operating on the Web look to sell products and services that create brand awareness and lead to sales. These "dot-com" companies focus on effectiveness above all; they spend

little to no time on efficiency. However, after they succeed in driving market capitalization and creating brand awareness, they must learn to add efficiency. Likewise, traditional companies must learn to be effective.

To be successful in E2K, both dot-com and traditional companies must find the right balance between efficiency and effectiveness. The sweet spot for success is what I call the profit line. Conduct an objective assessment and audit to see if your company is able to reach it.

E2K will drive spending on a par with Y2K rates. Success in E2K will require companies to have the right organizational architecture-plus these key individuals:

A chief E-business officer who looks to the future and helps the company prepare for success.
Executive producers to lead from technology and business standpoints.
Web strategists who can extend the Web structure to meet the business' strategic objectives.

The opportunities for success with E2K are tremendous. Companies must focus on positive outcomes and leverage their core strengths with future market changes.

Judith S. Hurwitz is president and CEO of Hurwitz Group Inc., a Framingham, Mass., research and consulting firm focused on electronic business applications and services. She can be reached at jhurwitz@hurwitz.com.

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