 | Issue: | Global-ICT 2002 |
| Article no.: | 6 | |
| Topic: | Collaborative Commerce, an advanced form of E-business | |
| Author: | Kathy Harris | |
| Title: | Vice-President and Research Area Director | |
| Organisation: | Gartner | |
| PDF size: | 56KB |
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Article abstract
Collaborative Commerce, an advanced form of E-business, enables multiple enterprises to work interactively are characterized by organizational models called Enterprise Value Chains (EVCs). EVCs are linear, unsophisticated, inflexible and involve few companies. Today’s E-marketplaces are Value Networks, and use more sophisticated technology and processes. Dynamic Value Networks do not yet exist. They will permit processes and relationships to be re-structured ‘on-the-fly.’
Full Article
A new model for business applications is unfolding, driven by exploding demands and opportunities, and enabled by Internet and integration technologies. The model, which Gartner calls Collaborative Commerce (C-Commerce), achieves dynamic collaboration among employees, business partners and customers. In C-Commerce, enterprises harness the full power of the Internet to gain revenue and profit improvement by going beyond rigid value chain models and simple information sharing. C-Commerce applications will replace static value chain applications as the dominant application model by 2004 (0.8 probability). C-Commerce is the most advanced form of E-business, which has become synonymous with conducting business over the Internet. The C-Commerce vision includes inter-enterprise Internet connection, but it goes a step further by enabling multiple enterprises to work interactively — often by dynamically restructuring their relationships. Enterprise value chains (EVCs) are the organizational model that will characterize C-Commerce). As enterprises increase their reliance on partnering to achieve business goals, EVCs will grow in number and complexity. In turn, vendors must build increasingly complex technology that moves beyond today’s end-to-end process execution and instead utilizes case-based reasoning and other sophisticated logic that dynamically alters processing based on current conditions and business rules. Further, enterprise business users must develop robust capabilities such as work design, process modeling and explicit capture of decision-making data and rules (see Figure 1 for definitions). How Will Enterprise Value Chains (EVCs) Evolve? EVCs will evolve in three stages. These are differentiated by the complexity and sophistication of the process and work automation and by the dynamism of relationships within the chain. · Stage 1 — Linear Value Chains (LVCs) LVCs are in broad use today and are usually simple relationships, characterized by few enterprises in the network and with the business partners relying on formal, trusted relationships to ensure performance. LVC networks and technology are relatively unsophisticated with basic functions to move messages and data (transactions or documents) sequentially from enterprise to enterprise across the chain, with processing occurring at each step along the chain by the enterprise that ‘owns’ the current process step. Business and technical processes are generally structured and inflexible. Building an LVC is usually costly and difficult due to high integration requirements and proprietary data standards. Changing the rules within the LVC is complicated by formal agreements (e.g., process, legal, commercial and other issues are defined on a point-to-point basis between each enterprise and all others) and by customization of technology and processes. Most LVCs have a lead enterprise that initiates the work when it receives a request; the lead enterprise usually responds to the requester once all chain members complete their work. Channel masters often dictate rules and standards, and many of the relationships are win/lose or win/win with one partner winning much more than the others. LVCs may be simple or complex: A citizen applies to a municipality for new water service connection. A municipal engineer designs the connection and awards the work to an approved contractor. The contractor completes the work and notifies the municipality, which manages all communication, billing and the ongoing relationship with the citizen. · Stage 2 — Value Networks (VNs) Early examples of VNs are found in today’s e-marketplaces. Operating agreements are established on a market-wide, rather than on a point-to-point, basis. The business processes and technology are sophisticated enough to enable partnerships to be defined based on previously established terms and conditions. Partnerships among the participants may be established when the VN is originated (e.g., by the founding partners of an exchange) or just in time as processes are executed. Any enterprise can ‘join’ the VN by simply agreeing to, and operating within, its terms and conditions. VNs are enabled by process and work management products that manage processes as they ‘travel’ across the multiple processing enterprises. Intervention by employees of an enterprise occurs only for exception handling or for performing activities that cannot be automated. This complex process and work management is made possible by predefined standards for content exchange and processing, by data ‘enrichment’ (i.e., descriptive or processing code is embedded in the data itself) and by the addition of process status information. Status is carried with the data and updated at each work step. Workflow and process control technology can interrogate the enriched data or status and use it to dynamically modify the flow of work. VNs may actually evolve in two steps: first, where a single set of terms and conditions apply that all participants must follow; and later, with a broader, more flexible set of terms and conditions from which participants may select a subset within which they operate. · Stage 3 – Dynamic Value Networks (DVNs) No DVNs exist today, and the full capabilities are not likely to emerge before 2006. Mature c-commerce will become a reality when DVNs are feasible. Two major business differences differentiate DVNs and predecessor applications: 1) end customers (requesters of services) can and will routinely initiate the work process; and 2) work or process collaboration is possible between and among all participants in a business environment (e.g., enterprises, applications, people). DVNs will operate in a ‘cyber market’ and the enabling collaboration environment must include knowledge-based business rules. A requester (the end user or customer of a process) will choose a ‘point of entry’ into the DVN, launch a request and ‘awaken’ a process. The associated business rules will be interrogated and will provide instructions about how to process the customer request and how to route the request through the network of applications and enterprises. With the addition of knowledge-intensive business rules and further data enrichment (advanced logic and status data), the DVN processes can become self-adapting; that is, the routing of a request can be dynamically altered based on current data, status, business rules and the capabilities of cyber market members. For example, a new provider of an existing product (steel bolts) can update the collective business rules and data to define its capabilities (can deliver bolts that meet IEEE standard C.135.1-1999 and can deliver overnight) and update its status as an available resource (effective today). When the next request for that product is processed, a connection can be dynamically formed to the new provider when it accommodates the request better than others in the network. Further, with customer-initiated work requests, the concept of a lead enterprise fades away and an enterprise’s competitive edge becomes its capability to best fulfill the request and to most quickly respond to market changes. Thus, the value of brand and of channel power is diminished in favor of performance, adaptability and flexibility or even the brand of the collective. DVNs alter the individual and collective visibility of enterprises in the chain and change the dynamics of opportunity. DVNs optimize the use of knowledge (intellectual assets) across the chain and create new knowledge that benefits all chain participants. C-Commerce and Enterprise Value Chains in Latin America Building EVCs and benefiting from C-Commerce will require increasingly sophisticated automation of complex work processes, capture and codification of knowledge-intensive business rules, and robust, reliable telecommunications – to connect people, devices, applications and data. C-Commerce applications will ride on Telecommunications. Will Latin America be able to take widespread advantage of C-Commerce? Will it be able to keep pace with North America, Europe and Asia? Latin America, including Mexico and the four largest Caribbean nations, is comprised of 26 countries with a total population of approximately 530 million. This enormous market presents an extraordinary opportunity for providers of all types of products and services — at least potentially. The picture is clouded, however, by vast differences in income distribution — and in Internet access — among various population groups and countries. One important result has been comparatively low Internet penetration. An average of 4 per cent of the world’s Internet users are in Latin America, but these users are concentrated in the largest metropolitan centers of the largest economies. Latin American Challenges in C-Commerce Growth and Telecommunications Demand: Latin America’s challenges which may ultimately shape the demand for C-Commerce applications and for telecommunications services and products include: 1. Web Infrastructure and a Digital Divide: Latin America is not a homogeneous consumer market – far from it. Social and economic inequalities among citizens will persist and with it, a ‘digital divide’ in technology sophistication and adoption and in e-business adaptation. Persistent broad diversity will restrict the widespread growth of business to consumer (B2C) C-Commerce initiatives. Cost concerns that prevent many users from accessing the Web from home have spurred the success of Internet kiosks in countries such as Peru, Chile and Brazil. Other access methods include ‘cyber cafes’ (which account for 21 per cent of Internet use in Mexico) and the workplace (accounting for 25 per cent of access in Argentina). Despite announced government policies of promoting Internet usage, the cost of telephony and Internet services is high. For all of these reasons, the digital divide is wide in Latin America, and will remain so through at least 2006. B2C C-Commerce initiatives will stagnate until digital divide and cost issues are less prevalent. Currently, while it is feasible for enterprises to offer a small portfolio of ‘premium’ services to their web-connected consumers, these consumers will pay a premium fee to use these services. Widespread extension of collaborative business processes to consumers will not be feasible in most industry segments until a critical mass (40-60 per cent) of their consumers are web-connected. Business to business (B2B) C-Commerce will be less impacted by social and economic inequalities. Globalization has made the local enterprises aware of the profits and cost reductions information and communications technology can bring. This and the presence of multinationals will positively affect c-commerce, starting with supply chain management. 2. Global and Regional Economy: Latin American economies, some more than others, face regional economic crises and instability. Until the global economy stabilizes and improves, investment by user companies in telecommunications and sophisticated business applications will be slowed in Latin America as it is in all regions. Once economic conditions begin improving, widespread innovation in C-Commerce business practices and business models will be delayed (12-18 months depending on the region) in favour of retaining and extending legacy approaches and systems. 3. Cost of Telecommunications Services: The cost of enabling telecommunications is high in Latin America compared to other regions of the world. These high prices will limit investments in applications and telecommunications infrastructure by consumers and by enterprises. Until prices fall to a level that provides a positive payback to investment by enterprises, only the largest (highest volume or deepest pockets) enterprises can benefit from C-Commerce. 4. Capital Infusion — slowed and in some sectors, stopped: Innovation and enhanced capabilities are critical to the evolution of C-Commerce and value chains. Vendors and service providers are loathe to innovate in today’s economic environment. Further, the shadow of the dot com failures hangs over technology in general. Latin American application vendors and telecommunications vendors or carriers will be stymied by a lack of funding from venture capitalists and angel investors. Further, enterprises have slowed their spending and will replace legacy systems less often, opting instead to add functionality through enhancements. In doing so, they have reduced their demand for innovative functionality and the potential return for investors in technology. 5. Internet usage and access is growing, but slowly: In most Latin American countries, the telecommunications infrastructure is mediocre at best, and in some regions virtually nonexistent. Investments in telecom infrastructure are growing, however, as a result of widespread deregulation. Even where deregulation has occurred, foreign direct investment has been made with rapid return on investment in mind, first targeting the higher-income population and more-active economic areas. They include: · The metropolitan triangle of Sao Paulo, Rio de Janeiro and Belo Horizonte in Brazil · The East-West corridor from Buenos Aires, Argentina, to Santiago, Chile · The Northern corridor from Caracas, Venezuela, to Panama passing through Bogota, Colombia · The Mexican triangle of Mexico City, Guadalajara and Monterrey Extensive portions of the largest countries are still underserved with robust networks and Internet services — as are countries where deregulation hasn’t yet occurred, and political and socioeconomic subdevelopment is more evident. Widespread Internet among small business and consumers as well as large enterprises is needed to stimulate high growth in C-Commerce and a true cyber market. 6. Trust in relationships and processes In Latin American the issue of trust is twofold: · First and foremost, from a C-Commerce and EVC perspective, enterprises must be able to trust their value chains partners. Trusted relationships for C-Commerce and relationships with more geographically distant partners are more difficult to establish in a sluggish or eroding economy because business risk, financial risk and technical risk are exacerbated. Establishing trusted relationships and the ease in building the relationship are key enablers of C-Commerce initiatives. · The second facet of trust is the security of online transactions. In an environment with a poor basic infrastructure, the speed of electronic transactions multiplies risks whenever security failures occur. The potential loss is multiplied and causes enterprises and their customers alike to mistrust powerful C-Commerce applications. Conclusion Until several large, successful C-Commerce applications are active in public networks in Latin America, the lack of trust will inhibit further C-Commerce adoption. Further, the lack of trust will cause potential buyers or partners to focus on the best known (i.e., perceived to be the most trustworthy) or the best funded companies. This focus on the well-known and well-funded will prevent new entrants from entering the market and thus reduce overall innovation and competition.”
