December 13, 1999

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E-Transformation
The Fast Track To Becoming An E-Business
It's no longer a question of Whether, but How-- and the best Web models are emerging

By Clinton Wilder

n business, there's little doubt that the final year of the 20th century will be remembered as the one in which virtually every large company got serious about E-business. By any measure--level of management commitment, deployment of human resources, or the focus of new IT investments--E-business has soared to the top of company priority lists.

E-business is no longer a question of Whether, but How. In the past six months, favored models and approaches to E-business have emerged. Although one size doesn't fit all, two strategies in particular have come to the fore among billion-dollar companies, according to InformationWeek Research's newly released E-Business Agenda Study. The most common approach could be called immersion--the process of gradually deploying E-business applications and initiatives across most of a company's business units. The vast majority of IT and business managers surveyed say their companies have already deployed E-business widely (46%) or plan to do so in the next 12 months (34%).

"These initiatives are being launched for different reasons in different areas of the company, and some have farther-reaching implications than others," says Justin Yaros, senior VP and CIO at entertainment company Twentieth Century Fox. "But we [in IT] are the glue that binds, because technology touches all of them. It's a real shift in how IT is being used. Now it's all about the front lines, touching the customers."

The second most-popular approach to E-business involves collaborating with a partner that lives and breathes Internet business every day--a Web-only startup. This practice is especially prevalent among companies with more than $1 billion in revenue, which perceive that they need such partnerships to successfully tackle the most important challenge of E-business: speed. "For a lot of our initiatives, the issue is no longer whether it fits in that fiscal year's budget--it's time to market," says Delta Air Lines Inc. CIO Charlie Feld. "That's a huge change for a major corporation."

That's why established companies are seeking to parlay the "E" know-how, energy, and enthusiasm of the countless Web startups for whom Internet time is the only time they know. Two-thirds of the companies surveyed say they have partnered with a Web-only company or will do so in the coming year. While a solid 34% of all-sized companies are doing so today, nearly half (49%) of large companies already have such partnerships.

The motivation spurring large companies to pair with small Web firms isn't just the need to infuse an old-line enterprise with a new, faster culture; it's the simple fact that Web specialists already have a beachhead in online commerce. When Merrill Lynch & Co. wanted to add aggregated procurement capability to its Business Financial Services for small-business customers, it formed a joint venture earlier this year with 70-employee Works.com Inc. in Austin, Texas. Works.com was already selling a Web procurement service to small businesses for office products from distributor S.P. Richards & Co. "We considered building pieces of it ourselves, but they had the technology and the deals in place," says Merrill Lynch vice chairman Launny Steffens. "We had enough other priorities. This was an effective and efficient way to leverage their resources."

Such partnerships are a two-way street; the Web startup has to see an adequate level of commitment to E-business and Internet time on the part of the larger partner. Case in point: The executive from a Web startup hired to run Toys "R" Us' E-commerce unit abruptly quit last summer after he felt the company wasn't moving fast enough on hiring and committing resources.

When Works.com executives first presented their company to Steffens and his Merrill Lynch team at an Austin hotel last spring, it was the startup that was impressed with the speed of the $35-billion financial behemoth. "After 10 minutes of my 15-minute presentation, Launny stopped me," says Works.com founder and CEO Bo Holland. "He said, 'We'd like to do a deal with your company. What are you doing for breakfast tomorrow?' We literally had a deal within 12 hours of meeting. That's very uncharacteristic of a large company."

"We were trying to impress them that we could move at the speed of an Internet company," Steffens says. "But in building your E-business, I'm not sure about speed at all costs. What you really need is speed, agility, and wisdom, at the same time."

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