An integrated framework for developing e-business projects.

ABSTRACT

Modern research in the area of e-business development is based on analyzing and classifying value proposition, technology architecture, e-business applications, and others. However, these aspects of e-business development are usually separated from each other and not considered as one integrated process. This paper presents, through analyzing existing e-business development approaches and models, a new integrated framework for developing e-business projects. This framework is based on defining the e-business strategic model, selecting business model, identifying e-business applications, and developing technology architecture. The paper explains in details these four elements of the integrated framework, and their utilization in development of e-business projects.

1. INTRODUCTION

In today's competitive economic environment, executives are asking tough questions about the value proposition, effectiveness, and returns on investment from their e-business projects. Nowadays, every such project has to be justified with a solid business case that includes analysis of value-created activities on the strategic and tactical levels.

The drive for a clear economic justification stems from fact that a large number of e-commerce enterprises have not been able to create profit with their e-commerce ideas. Lack of a sound value proposition to customers, poor interaction between value model, business processes and technology of e-commerce are reported to be the primary reasons. This raises the question as to why this interaction is so elusive in many e-business projects.

E-business projects involve a wide range of interdisciplinary participants and consequently involve multiple views and requirements. Typical categories of participants include: (1) business-oriented professionals like managers, analysts, and developers, (2) product and process oriented participants such as operations managers, workers, suppliers and customers, and (3) IT-oriented professionals like software architects, software engineers and IT department personnel. Analysis of e-commerce project means various things for different participants and different details are looked at. For example, a business manager might consider strategic aspects of e-commerce development as most important. At the same time, an IT manager will be just concerned with installing e-business applications. However, the real value creation in e-commerce projects necessitates the alignment of strategic, business, application, and technical views/requirements in one stream in case of developing e-commerce projects.

The current academic literature on the analysis of e-business systems is fragmented and do not result in the business and technology alignment. Existing e-business modeling and analysis framework can be classified into "strategic models" and the "application classification models." The strategic models try to identify the relationship between e-business and value creation/competitive advantage. On the other hand, e-business project literature is more focused on the IT requirements such as selection of e-business applications and their implementation issues. This chasm between the two models makes it hard to align business and application/technology components of developing e-business projects.

In this paper, we analyze existing approaches in developing e-business strategic value models and applications classification models. Through this analysis, we identified that these models are not linked to each other. Moreover, they are not connected with e-business product and processes. To overcome the limitations of the existing approaches, we created an integrated framework for development of e-business projects. This framework includes four main elements:

* Strategic model describes the three economic levers of creating value in e-business projects

* Business model that is based on e-business products and processes related to strategic value creation

* Applications model which describes the classification of e-business applications

* Technical architecture, which is, associated with the e-business systems IT architecture, IT implementation and support.

This approach is valuable for e-business development because it:

* Integrates, subordinates, and clarifies main steps in developing e-business projects

* Provides important connections between strategic value model, e-business products and processes, and applications selection.

* Generates sufficient level of details to be able to develop efficient and value-oriented e-business project.

In the paper, we present in details the first three models. The fourth one, technology architecture, is briefly defined but, assuming the scope of the paper, is not presented in full details. We also present a case study that shows the application of the framework.

2. ANALYSIS OF EXISTING APPROACHES TO DEVELOPING E-BUSINESS PROJECTS

Analysis and modeling of e-business development from the theoretical and practical standpoints can be found in a variety of researches and literature sources. As we found, these analysis and modeling usually consider different aspect of e-business. In many cases, researches presented strategic models that connect e-business/Internet to the value creation and competitive advantage. For example, Porter (2001) described an e-business/e-commerce value chain framework model. His value chain analysis of e-business explored the primary activities, like inbound logistics, operations, outbound logistics, marketing and sales, which have a direct impact on value creation. Porter also analyzed support activities (services, implementation, etc.), which affected value only through their impact on the performance of the primary activities. However, Porter did not provide any integration of his value chain framework model with other elements of e-business development, for example, technology infrastructure or e-business applications.

Treacy and Wiersema, (1993) went beyond the process view of Porter's value chain to include two other dimensions: customer intimacy and product leadership. They discussed the three disciplines through which companies are able to create value and lead the market because of e-business. The first discipline is achieving operational excellence by developing capabilities for high-volume, repetitive operational tasks for the lowest possible cost products. The second value discipline is the increase in customer Intimacy by tailoring products and services to fit an increasingly fine definition of the customer. The third discipline is product and technology leadership by faster innovations in process and product technologies. Although Treacy and Wiersema's model is more extensive than the Porter's model, it still did not address all aspects of e-business development.

Amit and Zott's (2001) business model combined Porter's (2001) value chain analysis and Treacy and Wiersema's (1993) three value disciplines with other leading theories of entrepreneurship and strategic management. They characterized the business model with the following three dimensions:

* Transaction content, which refers to the goods or information that are being exchanged, and to the resources and capabilities that are required to enable the exchange.

* Transaction structure, which refers to the parties that participate in the exchange and the ways in which these parties are linked. The choice of transaction structure influences the flexibility, adaptability, and scalability of the actual transactions.

* Transaction governance, which refers to the ways in which flows of information, resources, and goods are controlled by the relevant parties. It also refers to the legal form of organization and to the incentives for the participants in transactions. The legal form of organization.

The authors (Amit and Zott, 2001) also presented a framework to connect this business model with four value creation potentials (dimensions) in e-business: efficiency, complementarities, lock-in, and novelty. The first dimension is associated with value creation through increased transaction efficiency and lower process costs. The second dimension is the complementarities of products and services. The third dimension is the "lock-in" effect that results from network externalities and high switching costs. The final dimension is the novelty that indicates the value creation potential of innovations.

The relationship between business model and value creation dimensions signified a very important aspect of integrated e-business development. However, the Amit and Zott's model still did not provide links between the strategic business model and other elements of e-business development, like those of applications selections and IT infrastructure.

Besides a variety of strategic models, there is a significant amount of research done in the area of e-business applications classification, development, and implementation. The objective of classification was to create a convenient instrument for making an efficient e-selection and implementation of e-business applications. One of the popular classification models is based on the concepts of e-hubs (Kaplan and Sawhney, 2000). According to the authors, e-hubs are Internet-based intermediaries that host electronic marketplaces and mediate transactions among businesses. They present e-hubs as the new middlemen that can create value by aggregating buyers and sellers, creating marketplace liquidity, and lowering transaction costs. The two main criteria used in this e-hubs classification are "what" businesses buy-manufacturing inputs or operating (MRO) inputs--and "how" they buy--systematic sourcing or spot sourcing. These two criteria classify B2B hubs into four categories: MRO Hubs, Yield Managers, Exchanges, and Catalog Hubs (Kaplan and Sawhney 2000). This scope of this classification quite limited because a substantial portion of e-businesses is a company specific, not an intermediary. Moreover, this classification model does not address the relationship between the e-business applications and product/processes existing in an organization. Also, it does not relate the application selection with the value added capabilities of those applications.

Another popular classification of e-commerce models (Rayport and Jaworski, 2001) is also based on two main criteria. The first one is sources of content organization, which may refer to products, services, and information. The second criterion is the focus of the e-commerce business strategy, which can be on the supply side (supply chain movement) or demand side (better customer experience). The classification describes the four main "pure" groups of e-commerce models: Forward-Integrated Producers, Supply-Side Aggregators, Backward-Integrated User, and Demand-Side Aggregator. Based upon these four "pure" models, the authors also introduce combination, hybrid models like Hybrid Integrator model and Hybrid Aggregator model. The authors also describe potential business implications of utilizing different models in terms of sources for competitive advantage, benefits to produces and users (Rayport and Jaworski, 2001). The analyzed classification emphasizes the B2B e-commerce models for individual organizations (not intermediary or middlemen) that are used to facilitate either their customers' (buyers) demand (Demand-Side) or make their supply chain more effective and efficient (Supply-Side), or do both in a hybrid model. In this regard, this classification is opposite to the previously discussed e-hubs classification, and intermediary e-business models from consideration. However, neither of the described classifications consider connecting e-business applications with business products/processes, and, ultimately, with value creation in an organization.

Several researchers (Rappa, 2002; Bambury, 2002; Timmers 1998) developed classifications of e-business/e-commerce models that are based on the vertical or horizontal integration of various companies and industries. For example, Rappa (2002) offers eight different forms of e-commerce models including: brokerage, advertising, infomediary, merchant, manufacturer, affiliate, community, subscription, and utility. In another paper (Timmers, 1998), the classification groups include: e-shops; e-procurement; e-actions e-malls, and third-party marketplaces. The described analysis of the existing classifications clearly demonstrated a variety of approaches (sometimes contradictory) used in grouping e-business/e-commerce models.

Analysis of existing models for developing e-business projects demonstrated that these models, being in generally quite sophisticated and on target with their objectives, are not integrated with one another. They are rather fragmented and narrowly focused on a specific aspect of e-business, like value creation or applications selection, and do not provide a clear understating on how to proceed with the development of an e-business project.

3. THE PROPOSED FRAMEWORK FOR DEFINING E-BUSINESS PROJECTS

The objective of typical e-business projects is to develop detailed roadmap to transform the existing e-business infrastructure to achieve desired business outcome as shown in Figure 1. The e-business project definition exercise involves a wide range of interdisciplinary participants and consequently involves multiple views and requirements. Analysis of an e-commerce project means various things for different participants and the participants look at different details. The value creation in e-business projects necessitates the alignment of different viewpoints and details in one stream. We propose a multiple layered model to link various types of models reported in the literature into one process stream. Figure 1 shows the four levels of the proposed model. The first level is the strategic model that explains the impact of e-business systems on company's competitiveness, the ROI and the value creation. The second level is the business model that enables a company to move from strategy/vision to real e-commerce products and processes that need to be developed. The business model gives an enterprise a distinct shape and defines its high-level functionality. It provides the layout of the products and services, and defines the processes that deliver the products and services. Further, it describes the players who create the value by playing specific and defined roles.

The third level is the application model. The business model defined in the second level must now be embodied in an assembly of e-business applications such as enterprise applications and e-commerce applications. The fourth level entails a technology architecture that allows flawless implementation of the application model and its operations.

The proposed framework requires e-business project managers to develop details of the top three layers. We describe the first three models in the following subsections.

3.1 The Strategic Model

As discussed earlier, the companies and investors are increasingly asking questions on the value and economic justification of e-business projects (Lewis, 2000). He quotes that the three levers important in economic justification are: cost reduction, revenue enhancement and asset intensity reductions. Our strategic model focuses on the identification and clear description of the value drivers that fall into the same three categories as shown in Table 1. Often the drivers of value creation are not quantifiable in e-business/IT projects (Sawhney, 2003). Our model does not eliminate the drivers that are not quantifiable. Rather, the proposed strategic model requires the managers to clearly state how the e-business projects could contribute to the three economic levers.

The identification of the factors that contribute to the value creation is essential to link the e-business project development to the financial goals. For example, e-business improves efficiency of business-to-business transactions, reduces cycle times and transaction costs (Porter, 2001). Drivers of operational efficiency fall into cost reduction group. Besides improving operating efficiency, e-business creates entirely new opportunities for creating value from extended enterprises as described by Amit and Zott (2001). The extended enterprise model enhances revenue in a number of ways. For example, e-business enables the mass customization and customer driven product enhancements, customized pricing that reaches customers through highly targeted promotions.

Our model would identify the drives of value creation that fall into asset intensity reduction group also. For example, dis-intermediation allows the companies to eliminate the certain stages of the supply chain. Collaborative enterprise framework enables the companies to outsource business processes and reduce up-front investment in the development of the business infrastructure. Asset intensity reduction creates the variable cost structure and increases flexibility. The flexible and variable cost structure helps the companies to adapt to market dynamics quickly compared to the big players.

3.2 The Business Model

As described in Figure 1, the business model links the strategic model and application model. The business model provides the layout of the products and services, and defines the processes that deliver the products and services. Further, it describes the players who create the value by playing specific and defined roles. Essentially, the business model provides an operations level description of the business. Detailed operational description is essential to link the strategic model with detailed oriented application/IT viewpoints. On the one hand an e-business application is linked to the economic model through the details of the business model. This requirement is evident in our description of the strategic model. On the other hand, the business model would describe what the e-business application has to deliver in terms of process and products.

We propose two models that characterize the business model: (1) the process model that analyzes the business processes and their performance, and (2) the product model to describe the products and services provided by the company.

3.2.1 The Process Model

When viewing an entire business or part of a business, the way work is performed can be summarized in terms of a set of business processes. A business process is a related group of steps or activities in which people use information and other resources to create value for internal or external customers (Alter, 2001). The set of processes a firm uses to create value for its customers is called as value chain (Porter, 2001). The value chain includes primary processes that directly create the value the firm's customer perceives and support processes that add value indirectly by making it easier for others to perform the primary processes. The e-business applications are the building blocks of the business processes and create value through improved process performance. For example, Porter (2001) lists the prominent applications of the Internet and how they contribute to the value chain. The ERP application vendors in fact describe the functionalities they provide through business process maps. The e-commerce applications facilitate the automation of inter-organizational business process. The e-business applications contribute to the three economic levers of value creation through improved process performances such as output rate, cycle time and asset/resource conception. We present a model to characterize the business process in the e-business environment and assess the benefits the e-business technology.

The first component of the proposed business model is a model developed by Choi et al. (1997). According to this model, the e-business/e-commerce can take many forms depending on the degree of digitalization of the three dimensions: (1) the virtual process, (2) the agent (an intermediary of the supply chain), and (3) the product and services provided as shown in Figure 2. The automation of the business transaction can be explained by the digitalization of the process. The digitized process reduces the administrative overheads and costly paperwork. For example, ERP applications integrate the business processes across the functional silos and automate transactions. Technologies such as EDI and exchanges digitize the inter-organizational transactions. Digitalization of the process is also largely responsible for the popularity of outsourcing, i.e. physical agent with integrated operations. Digitalization of the process enables the business process integration across business partners using technologies such as collaborative hubs and web services. The impact of the digitization of the process is not limited to the above. For example, digitization of the design process makes it possible to offer custom products much more easily. The digitization of the process applies to all the following supply chain processes: product design, procurement, sales, manufacturing, and product support.

The second dimension is the "agent", which is also referred to as the "virtual agent". This dimension explains the concepts of disintermediation and re-intermediation. Disintermediation reduces the supply chain cost by eliminating of the physical agent (link) in the supply chain either by virtual agent like online stores and exchanges. The disintermediation is not limited to supply chain. For example, e-procurement applications facilitate individual employee to do carry out the purchasing transactions without involving purchasing department. Digitization of the agent also reduces asset intensity by reducing the need for physical infrastructure or eliminating the need for an intermediary. Re-intermediation is another important notion evolved largely due to e-commerce. Re-intermediation means creation of a new entity (largely virtual) in the supply chain such as reverse aggregators, value added resellers (VAR) and marketplaces.

The third dimension is the digitalization of the products and services. As discussed in the "product and services" model, digitalization of the product impacts the cost of the product and enhances the revenue. Digital products also open up new opportunities to reduce supply chain costs by extending the virtual agent & virtual process aspects to the product delivery itself. For example, the bug & fixes of the software can be shipped physically through CD or can be downloaded from a website. Thus the detailed modeling of the business process using this model helps to define a clear value proposition in terms of process efficiency (cost reduction), revenue enhancements and asset intensity reduction.

Digitization of the process is not only limited to the value chain activities described by Porter (2001) but also includes all the business activities such as new product introduction. The level of digitization of the process drives the process efficiency and asset intensity reduction. For example, digitized documentation would reduce transaction costs, asset intensity and cycle time. The process digitalization can also enhance the product offerings, thus the revenue as well. The digitized order entry can facilitate customization (example Dell Computers), and the digital process can be more convenient for customers. Added benefits like customization and transactional ease would be attractive to customers.

The process model thus provides the operational level details of the company's business processes. It clearly explains how the process facilitates the delivery of the product package proposed in the product model. Further, it explains how the process is implemented in terms of the technology, resources and organizations. This characterization helps us to describe the economic benefits of the e-business projects and link with the strategic model. On the application model side, the process model clearly explains the processes that are required to be imbedded (operationalized) in the application model.

3.2.2 The Product Model

Compelling product and services is a key factor that creates value to customers and contributes to the revenue generation (Treacy and Wiersema, 1993). For example, e-business can help companies to package newer services to customer. Further, companies tailor products and services to individual customers as shown by Dell. The second component of the business model is the "product model" that helps us to describe how e-business applications create value through enhanced product offerings. Based on the extensive literature search we find that Alter (2002) provides a rigorous framework to characterize and analyze products in an e-business environment. A simplistic way to look at a company's product is to characterize it along the following dimensions: product vs. service, commodity vs. customization, and information vs. physical product as shown in figure 3. Most products produced for external customers involve a combination of information, physical, and service components.

[FIGURE 3 OMITTED]

Products vs. Services

A pure service product is a set of actions that provide value to a customer who receives neither information nor physical things. The difference between products and services is that the product's value comes from usage by the customer after it is produced, whereas the value of service comes from the execution of service tasks. In the automobile example, the service package can include basic services and customized service options. In the bank example, service package constitutes key primary product dimension. The services packaged with physical products are becoming one of the competitive dimensions for the companies. For example, Dell computer is well known for its services.

Physical Product vs. Informational products

The second dimension is the physical vs. informational product. The development in content creation and content distribution technologies made it possible to digitize the product and distribute the product electronically. The informational product aspects have major impact in many areas, such as publishing and music. For example, traditional publishing involved designing and producing a fixed document, such as a magazine or book, and distributing paper copies of it. Electronic publishing still involves producing the document and distributing it, but the shift to electronic documents brings a wide range of new possibilities. During the production process the document itself can be customized to the needs or tastes of specific readers. A multimedia document can augment text and graphics with audio, video, and models the user can execute. Digitization of the product reduces the cost of the product and increases convenience. Digitization of the product offers enormous opportunities in create valuable product package in traditional businesses such as automobile and banking, as shown in the Table 2.

Commodity vs. Custom products

The third dimension is the commodity versus customized products. A product or service is a commodity if each customer receives basically the same type of value and little is done to adjust the products or services to the particular likings of the customer. When a product or service is customized, the requirements stage of the customer experience includes consideration of and active response to the customer's unique desires. These specifications must be obtained from the customer and converted into a form that controls the production of the specific product or service the customer receives. E-commerce technologies help companies to reach the customers directly and facilitate effective customization process. For example, e-business technology made it possible for Dell Computers and CISCO to offer customized product offerings to individual customers.

The product model enables us to explain the impact of e-business projects on the revenue enhancements clearly. E-business systems have enabled the companies to create compelling consumer value by packaging services, customizing the products and digitization of the products. The consumer value helps companies to capture bigger market, retain customers and charge price premiums. Product model thus explains what needs to be done in order to enhance revenue. The product model describes the product at the operational level details, which is essential to link with the application model.

3.4 The Application Model

The application model is as well the technical model fall into the Information Technology focused analysis. The key decisions the IT department has to make in the e-business projects are: (1) selection of appropriate software applications to imbed into the business processes designed in the process model, (2) implementation of the software, and (3) assessment of the total cost of ownership that includes implementation, maintenance and operational costs. The business processes described in the process model, encompasses multiple software applications/systems and multiple organizations (Table 2). The process design can be digital, manual, can be mixed and disjointed with partial automation. E-business projects from an information systems point of view involves the assessment of the current systems infrastructure and what needs to be done to imbed the proposed process and product design (business model).

We propose an application model that classifies software applications along the process dimensions. This approach is consistent with the approach employed by Porter (2001) and Chopra and Meindl (2002). We combine existing literature on the classification of e-business applications and defined classification groups as shown in Table 2. We want to caution that a clear demarcation of the application is difficult to achieve in practice. Latest software packages may encompass multiple application categories. For example, the next generation ERP applications are providing collaborative application features.

To illustrate the integrated framework of developing e-business projects that is described in this section, we will apply a case study in the following section.

4. CASE STUDY. INDUSTRIAL PLASTICS MANUFACTURER

Industrial plastics are sold to high-performance plastic molders and manufacturers. The plastic compounds are used in many applications such as household products, office supplies, and automotive components. Customers are mainly in the chemical, construction, automotive and electronics industries. To illustrate the concepts of the paper, we focus on sales and customer support processes of this company.

Current Business Status: This company has implemented An ERP system. The ERP system integrates the business processes within the company. Also, the company has implemented call center operations software, which is a CRM module. The interactions with the customer are done through company's salespersons.

Desired Business Outcome: After implementing the ERP system the company wants to evaluate the next logical step of bringing the Internet-based customer portals. Specifically, the company wants to evaluate a project proposal to implement a "Customer Portal" and to bring the sales and customer support processes online.

4.1 The Strategic Model

Table 3 shows the potential drivers of the value creation in the implementation of the Customer Portal. The process and product model described below explains how the customer portal creates values through these drivers.

4.2 The Process Model

Description of the process and product models is essential to link the customer portal implementation to the strategic model. We have described a snapshot of the sales and customer services process before the implementation of the portal in Table 4. As shown in Table 4, customer interaction is handled manually before the implementation of the Customer Portal.

Table 5 lists the key process steps that will be changed after the implementation of Customer Portal. The improvement in process performance can be explained the digitization along the three dimensions described in the process model in Figure 3.

4.3 The Product Model

The customer portal is a powerful tool to reach a wider range of customers and attract niche markets by providing plastics customization. Moreover, the company can provide a faster service and also add newer services such as payment processing. Hence, the customer portal implementation also creates value by enhanced product offerings. We illustrate the impact of customer portal on product offerings in the three-dimensional comparison (Table 6).

Table 6 shows the product and services offered by the company before the implementation of customer portal. In addition to that, Table 7 describes the product offerings the company will be able to provide after the implementation of the portal. The product model clearly explains how the portal helps the company towards revenue enhancements. The product model can also be used to for competitive analysis. The product offerings of this company can be compared against competitor's products. Often, the e-business projects are initiated to catch up with the competition on the product offerings.

4.4 Application Model

The application model shows appropriate software applications to imbed the business processes designed in the process model. In the case study site the ERP applications was implemented. We present the application model of this project in Figure 4 below. The ERP application (shaded) is the existing applications and all the other pieces are the applications that are required to be implemented as part of this project. The model is presented below is logical one because product configurator is part of many ERP applications. Also, the call center module may also be part of the integrated ERP/CRM package.

[FIGURE 4 OMITTED]

5. CONCLUSION

There is increased pressure in the market today for clear economic justification for e-business projects. This trend is largely due to fact that a large number of e-commerce enterprises have not been able to create profit with their e-commerce ideas. Lack of a sound value proposition to customers and misalignment of business and technology objectives are reported to be the primary reasons for the failures. E-business projects typically developing detailed roadmap to transform the existing e-business infrastructure to achieve desired business outcome. The project definition exercise involves a wide range of interdisciplinary participants and consequently involves multiple views and requirements. Analysis of e-business project means various things for different participants and different details are looked at. It is essential to align different viewpoints and details in one stream in order to achieve business and technology alignments.

The current academic literature on the analysis of e-business systems is fragmented and do not assist in aligning the business and technology objectives/views. In this research, we have developed an integrated framework to link various types of models reported in the literature into one process stream. Specifically, this framework is based on defining the e-business strategic model, selecting business model, identifying e-business applications, and developing technology architecture. Our framework provides important connection between strategic value model, e-business products and process model and the e-business application selection. The product and process model jointly provides the operational level details to bridge the gap between strategic/business viewpoint and technically oriented e-business application selection and implementation oriented viewpoints. Our model generates sufficient level of process and technical details required for e-business project development, that aligns the technical details with business objectives. The integrated framework proposed in this paper focused on the development of e-business project based sound value model. We want to mention that we have not included the technical architecture and implementation related issues such as total costs of ownership (TCO) and organizationa] risks, in our analysis. We argue that the discussion of the TCO and organizational issues are moot unless the e-business project presents sound value proposition to begin with. However these issues are important in the implementation decision that follows the strategic decisions.

TABLE 1. THE STRATEGIC MODEL

                Economic Levers of Value Creation

                 Revenue               Cost             Asset Intensity
               Enhancement           Reduction              Reduction

Sample       Superior market      Lower general and   Increased working
E-business   perceived customer   administrative      capital turnover
Business     value                expenses
Levers
             New channels, new    Lower               Reduced physical
             reach                marketing/selling   infrastructure
                                  expenses

             Individualized       Lower cost of
             customer life        goods sold
             cycle

TABLE 2. A CLASSIFICATION OF E-BUSINESS APPLICATIONS

Application Category            Examples of the E-business Applications

Enterprise Systems              * Enterprise Resource Planning
                                * Customer Relationship Management
                                * Supplier Relationship Management

Procurement Side Applications   * E-procurement
                                * Exchanges--Auctions & Catalogs
                                * Supplier Portals

Demand Side Application         * Storefronts
                                * Exchanges--Auctions & Catalogs
                                * Customer Portals

Collaborative Commerce          * eDesign and Product Lifecycle
                                  Management
                                * eManufacturing
                                * eFullfillment

Services                        * Escrow Services
                                * Credit Card Processing Services

TABLE 3. THE VALUE MODEL FOR THE IMPLEMENTATION OF CUSTOMER PORTAL

Value Creation Driver               Customer portal can address

Revenue           Sales Volume      * New channel for existing/new
Enhancement                           product portfolio
                                    * Increase business volume
                                    * Customer retention through
                                      enhanced services
                                    * Capture niche markets through
                                      customization

                  Price             * Product customization
                                    * Brand image building
                                    * Effective customer segmentation

Cost Reduction    Cost of goods     * Commodity price reduction
                  sold              * Single point of access by
                                      partners through portal
                                    * Data accessibility

                  Operations        * Transaction/process cost
                                      reduction
                                    * Lower customer acquisition and
                                      retention cost
                                    * Shorter order processing (lead)
                                      time
                                    * Reduction in the headcounts in
                                      sales and support

Asset Intensity   Working capital   * Reduction in Inventory
Reduction                           * Reduction in accounts receivable
                                      cycle

                  Fixed Assets      * Better warehouse management

TABLE 4. THE ORDER-TO-CASH BUSINESS PROCESSES BEFORE THE CUSTOMER
PORTAL

Process Step     Process steps that are digitized

Step 1:        * Standard catalogs are posted to company's homepage.
Product          Also catalogs are mailed to customers by the sales
selection        department
               * Customers contact sales department if they want to
                 make a purchase. Based the detailed discussions,
                 customers select the product specification.

Step 2:        * Customer's purchasing and manufacturer's sales people
Order            do the product specification if customization is
negotiation      requested. The specification is sent to engineering &
                 production for approval. Upon approval, the price and
                 order details are quoted.
               * Upon completion of the negotiation and an agreed price
                 had been arrived at, the negotiated price will be
                 reflected on the purchase order.
               * Upon receipt from the ERP system an email
                 acknowledgement will be sent to the customer.

Step 3:        * Upon receipt of the order, customer service creates a
Order            sales order in the ERP system.
Management     * Within the S.O. creation stock availability and
                 customer credit status is checked. If the customer has
                 credit problem the S.O. will be automatically blocked
                 for delivery until credit is cleared or released by
                 authorized officer from finance department who is
                 notified via email on the pending S.O. If credit is
                 okay S.O. will be released to warehouse.
               * In the event that there is no available stock a
                 production order will be executed. And production will
                 commence. Once product is available delivery of
                 product is scheduled.
               * If there is available stock, goods will be issued and
                 shipping department arranges delivery to customer
                 bringing with delivery documents.

Step 4:        * Once goods are issued the ERP system creates the
Payment          billing entry as well as invoice document.
processing     * In the event the address for the delivery of goods is
                 different from the paying company, accounting sends
                 the billing document either via courier or hand carry.
                 Else billing document are presented upon goods
                 delivery.
               * Payment are received either via direct payment to
                 company's bank account or via the company's collector.
                 Upon receipt of payment customer accounts are directly
                 credited. Hence, customer credit is updated.

Step 5:        * Customer call support department for any questions
On-going
support

TABLE 5. KEY CHANGES IN THE PROCESS STEPS AFTER THE IMPLEMENTATION OF
CUSTOMER PORTAL

Process Step     Process steps that are digitized

Step 1:        * If the customers sign in the portal they will be
Product          provided catalog with product details including the
selection        price
               * Customer can customize the product and get the price
                 quotes online

Step 2:        * The customer calls sales representative only when
Order            price negotiation is involved
negotiation    * Once an agreement on product quantity and price is
                 arrived, the information is updated on customers order
               * An email confirmation on the order will be sent to the
                 customer

Step 3:        * The sales order is created in ERP system automatically
Order            when the customer confirms the order on the portal
management     * Customer will be able to see the order status on the
                 customer portal

Step 4:        * On-Line payment processing--customers will be able to
Payment          see the invoice and pay through portal.
processing     * Customers maintain their profile (payment method,
                 addresses, etc.

Step 5:        * On-going support features--documentation and emailing
On-going         the service requests.
support        * Tracking the service requests online

TABLE 6. PRODUCT OFFERINGS BEFORE THE PROJECT

Dimension 1:   Dimension 2:    Dimension 3:
Product Vs.    Physical Vs.    Commodity
Service        Informational   Vs. Custom     Description

Product        Physical        Commodity      Standard plastics
                                              compounds
Product        Physical        Custom
Product        Informational   Commodity      Standardized product
                                              listing on the website
Product        Informational   Custom
Service        Physical        Commodity      Plastic delivery
                                              Basic services included
                                              with purchase of item
                                              Technical support through
                                              a toll free line
                                              Confirmed orders and
                                              invoices mailed to
                                              customers
Service        Physical        Custom
Service        Informational   Commodity
Service        Informational   Custom

TABLE 7. PRODUCT OFFERINGS AFTER THE PROJECT

Dimension 1:   Dimension 2:    Dimension 3:
Product vs.    Physical vs.    Commodity
Service        Information     vs. Custom     Description

Product        Physical        Commodity      Standard plastics
                                              compounds
Product        Physical        Custom         Customized plastic design
                                              using configurator
                                              Price quotes online
Product        Informational   Commodity      Standardized Product
                                              listing on the website
Product        Informational   Custom         Access to custom
                                              specifications
                                              Access to confirmed
                                              orders
Service        Physical        Commodity      Plastic delivery
                                              Basic services included
                                              with purchase of item
Service        Physical        Custom
Service        Informational   Commodity      Access to confirmed
                                              orders, invoices
                                              Online invoice tracking
                                              Online payment processing
                                              Access to customer
                                              information such as
                                              shipping address and
                                              billing address
Service        Informational   Custom         Technical support
                                              requests
                                              Tracking of service
                                              requests

5. REFERENCES

Alter, S., Information Systems: The Foundation of E-Business, Prentice Hall, 2002.

Amit, R. and C. Zott, "Value Creation in E-Business", Strategic Management Journal, Vol. 22, 2001, 493-520.

Bambury, P., "A Taxonomy of Internet Commerce", URL: www.firstmonday.dk/issues/issue3_10/bambury/index.html, 2002.

Choi, S., Stahl, D. and Whinston, A., The Economics of Electronic Commerce, MacMillion Technical Publishing, 1997.

Chopra, S. and Meindl P., Supply Chain Management--Strategy, Planning and Operations, Prentice Hall, 2001.

Hegde, V. and Radovilsky, Z., "An Integrated Framework for the Selection of B2B Supply Chain Model", Proceeding of the 14th Annual CSU-POM Conference, 2002.

Kaplan, S. & M. Sawhney, (2000) "E-hubs: The New B2B Marketplaces", Harvard Business Review, May-June 2000.

Lewis, D., "Pressure Mounts to Gauge E-Biz ROI", InternetWeek, No.835, 2000, 147-148.

Mogollon, M. and M. Raisinghani, "Measuring ROI in E-Business: A Practical Approach," Information System Management, Spring 2003, 63-81.

Porter, M. E., "Strategy and the Internet", Harvard Business Review, March-April 2001.

Rappa, M., "Business Models on the Web", URL: http://digitalenterprise.org/models/models.html, 2002.

Rayport, J. & Jaworski, B., e-Commerce, McGraw-Hill/Irwin, New York, 2001.

Sawhney, M., "Damn the ROI, Full Speed Ahead", CIO Magazine, July 15, 2002, URL: http://www.cio.com/archive/071502/netgains.html.

Sawy, O., "Identifying Structural Models of B2B Procurement Exchanges", Final Technical Report, External Acquisition Research Program, University of Southern California, 2001.

Timmers, P., "Business Models for Electronic Markets", Electronic Markets, Vol.2, No. 2, 1998.

Treacy, M. and Wiersema, F., "Customer Intimacy and Other Value Disciplines" Harvard Business Review, 71(1) 1993: 84-93.

Vishwanath G. Hegde, California State University, Hayward 

Zinovy Radovilsky, California State University, Hayward

Author Profiles

Dr. Vish Hegde earned his Ph.D. at the University of Pittsburgh, Pittsburgh, PA in 1997. Currently he is an assistant professor of management and finance at California State University, Hayward. He has worked in Information Technology/ERP industries for five years prior to joining California State University, Hayward. He has an extensive consulting and product management experience with e-business/ERP software applications.

Dr. Zinovy Radovilsky earned his Ph.D. at the Scientific Research Institute of Labor, Moscow in 1984. Currently he is a professor of management and finance at California State University, Hayward. He has published a number of papers in international and domestic referred journals. Also, Dr. Radovilsky has had an extensive consulting experience in quantitative business modeling and operations management.