InformationWeek
Defining The Business Value Of Technology
January 18, 1999
Behind The Numbers:Value Chains Go Global
usiness pundits have long claimed that commerce is like a chess match in which the brightest
players are thinking two or three moves ahead. Global commerce? Oh, that's a game of 3-D chess.
Well, that gaming metaphor is overdue for a long sabbatical or a quiet retirement.When it comes to buying and selling products, services, and information in multiple countries, the means of communication are rapidly changing the paradigm from geopolitical gaming to business value. That's one of the key findings of an InformationWeek Research global survey released this week of 450 IT managers. Fielded simultaneously on the Web to InformationWeek readers in the United States, the United Kingdom, Japan, Germany, and France, the survey shows that the telephone is still king, but electronic networks are increasingly becoming a highly strategic part of commerce.
Which types of companies are on the leading edge of this revolutionary change in commerce and communications? Today, global value chains and supply chains are almost exclusively the domain of very large organizations. Nearly half of all U.S. respondents work at organizations with revenue of more than $1 billion annually or more than 5,000 employees. Thus, large organizations active in global value or supply chains enjoy a sizable lead time over their smaller competitors.
More organizations use value chains to buy than to sell. The most popular applications involve the purchase of physical products (61%), electronic products (60%), services (49%), and data (45%). Among organizations using electronic networks as a sales tool, 40% use them to market physical products, 36% for services, 32% for electronic products, and 28% for data.
Are electronic value chains in your company's future? Keep us in the loop at the address below.
Rusty Weston
Managing Editor/Research
rweston@cmp.com
This week in Behind The Numbers:
| Obstacle Course | Strategic Apps | Satisfied Customers | A Variety Of Options |
Obstacle Course
What's holding back the spread of global value chains? Language barriers. Regulatory differences. Telecommunications issues and tying back-office systems to the Internet. But while the obstacles are daunting, companies that have deployed such electronic applications are too busy to bother looking back, according to the InformationWeek Research global survey.
Nearly two-thirds of companies that purchase goods or services or data electronically are actively engaged in the process: 65% conduct such purchases frequently, 29% occasionally, and only 6% infrequently. By contrast, 71% say their organizations make frequent sales, 22% sell occasionally, and only 7% sell infrequently.
Strategic Apps
You don't have to be a soothsayer to foresee the rise of electronic value chains. The business benefits from these applications include cost savings, shorter product cycles, faster delivery times, and improved customer satisfaction.
Given such returns, it's not surprising electronic purchasing and sales applications are considered very strategic by IT managers who participated in our survey. Asked to rate their strategic importance, respondents gave these applications an average grade of 7.8 on a scale of 1 to 10, in which 10 is extremely significant. More than half rated these applications 8 through 10, which translates to "very important."
Satisfied Customers
Becoming a star at a young age is considered a double-edged sword. You want to enjoy fame while you're young, but what if you peak too early? What will happen to the rest of your career? That's not a problem for most of us-or for electronic value or supply chains.
The early returns look good: Only 6% of companies adopting electronic purchasing or sales applications aren't satisfied. But there's room for improvement, as the majority rate themselves only somewhat satisfied. Then again, 37% of the companies surveyed are highly satisfied already. That's a promising review for a nascent technology.
A Variety Of Options
Where it comes to tightening customer relationships in the Information Age, there are myriad means of connecting and infinite ways of adjusting the links. The Internet receives most of the media coverage, though enterprise resource planning earns plenty of attention, too. But most of the heavy lifting between organizations is done using electronic data interchange, extranets, supply chains, or value chains.
There are plenty of options, but the question at hand is whether existing electronic choices are effective for real-time, business-to-business connections. Prediction: The number of organizations engaging in extranets or value chains will increase at Internet speed this year.
Extra Research:
Global Value Chains
These four charts from InformationWeek Research's Global Value Chain study did not appear in the magazine but are published here to provide you with deeper analysis of the subject area.
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