Traditional BuyBuild Approach | Electronic Commerce (Charles River Media Networking/Security)

Traditional Buy/Build Approach

Over 93 percent of first generation e-commerce adopters utilized a “buy/build architecture” in establishing their technology platform. This architecture generally begins with a commerce software package from leading vendors such as BroadVision, Blue Martini, ATG, and Microsoft (see Table 4.1)^[1]. Bolted upon this are dozens of individual applications to manage the online channel: planning, merchandising, marketing, fulfillment, customer service, business intelligence, and so on. Hardware connects this infrastructure to the Internet, including database, Web, and application servers; routers and firewalls; load balancers; and the secure facility that hosts it all. To customize and integrate the platform, most companies rely on a systems integrator for 3 to 12 months of hard work that is rarely completed on time or within budget.

Table 4.1: Sample of e-commerce software vendors
Vendor	Description	Sample Customers
Ariba	Ariba provides an open commerce platform to build B2B marketplaces, manage corporate purchasing, and electronically enable suppliers and commerce service providers on the Internet.	CheMatch, Chevron, Covalex, Dow, Merck
Commerce One	Commerce One enables buyers and sellers to trade and creates new business opportunities for all trading partners. Commerce One offers solutions for companies who want to establish a portal on the Global Trading Web, those who want to host portals for others, and those looking for a comprehensive e-procurement solution and robust return on investment. The company’s products include the Commerce One BuySite e-procurement application and the Commerce One MarketSite Solution, the technology that allows Internet market makers to build open marketplaces and link them to the Global Trading Web.	Duke Energy, Eastman, Praxair, Shell, Schlumberger
Crossworlds Software	CrossWorlds Software is a leading provider of e-business infrastructure software to enable the integration and automation of business processes within enterprises and among trading partners using the Internet (acquired by IBM).	Dow Chemical, DuPont, Royal Philips
e-Credit	eCredit.com, Inc. is a leader in the market for real-time credit, financing, and related services for e-business through the eCredit.com Global Financing Network™. With the Global Financing Network, the company intelligently connects businesses to financing partners and global information sources so credit and financing decisions can be processed in real time at the point of sale.	Beckman, BP Amoco, Cargill, Chevron, Commerx, Inc. (PlasticsNet.Com), Conoco, Procter & Gamble, Texaco
HAHT Commerce	HAHT Commerce, Inc. is the leading global provider of business-to-business sell-side e-commerce solutions. HAHT Commerce e-Scenarios™ are the first suite of packaged Internet applications that integrate and automate marketing, selling, fulfillment, and service functions across the entire business customer life cycle, allowing companies to increase revenue, improve service levels, and lower costs to their distribution channels and customers.	Celanese, Dow Corning, OxyChem, Montell Polyplefins, Sigma-Aldrich
i2 Technologies	i2 Technologies is the leading provider of supply chain optimization solutions. The RHYTHM family of software provides comprehensive decision support across both interenterprise and intraenter-prise supply chains: from suppliers’ suppliers to customers’ customers.	OxyChem
IBM	IBM e-business technology and solutions help chemical and petroleum companies compete for market leadership in the following key areas: building efficient and flexible supply value chains, delivering more than price and quality in customer relationships, providing e-market solutions that transform your business architecture, and building business value through ERP extensions.	BOC, Degussa-H ls, Eastman Chemical, e-Chemicals,
Moai	Moai is a leading provider of negotiated e-commerce solutions for online auctions, online procurement, and e-marketplaces. Although Moai’s primary focus is on customers in the business-to-business market, the company also has customers in the business-to-consumer and consumer-to-consumer markets.	Eastman
mySAP.com	The mySAP.com marketplace is an open electronic hub that creates seamless intercompany relationships for buying, selling, and collaborating within and across industries. It provides the infrastructure, security, and applications to transform previously disconnected business transactions into a single collaborative process.	Various
Oracle	Oracle Corp. is the world’s leading supplier of software for information management. The company offers database, tools, and application products, along with related consulting, education, and support services, in more than 145 countries around the world. Oracle provides an Internet-ready platform for building and deploying Web-based applications, a comprehensive suite of Internet-enabled business applications, professional services for help in formulating e-business strategy, as well as in designing, customizing, and implementing e-business solutions.	Hoechst Marion Roussel, ICI Chloro Chemicals, IMC Global Inc, Reichhold Chemicals
Sapient	Sapient provides Internet strategy consulting, sophisticated end-to-end solutions, and launch support to Global 1000 and start-up companies. As Architects for the New Economy(r), Sapient helps clients define their Internet strategies and design, architect, develop, and implement solutions to execute those strategies.	Amoco, ChemConnect, Praxair
webMethods	webMethods is the leading provider of open solutions for business-to-business (B2B) integration. The webMethods B2B(tm) solution provides companies with integrated, direct links to buyers and suppliers, connecting them to major B2B marketplaces and enabling real-time, interactive communication through the Internet, regardless of existing technology infrastructure. Powered by XML, webMethods B2B can automate critical business processes, such as customer relations, procurement and financial services, supply chain management, logistics, and sell-side/buy-side e-commerce.	Ashland Chemicals, ChemConnect, Eastman Chemical, FMC Corp., The Geon Company, Optimum Logistics, OxyChem, Ventro Corp.

With this approach, each retailer and manufacturer reluctantly enters the technology management business and replicates an infrastructure that exists at every other company. Bits and pieces might be outsourced to gain scale and expertise, but the core technology platform gets re-created countless times. Drawing a real estate analogy, this would be similar to all mall-based retailers building, owning, and operating the facilities in which their stores reside, rather than renting floor space from specialized mall developers. In an industry that has never invested heavily in IT (under 5% of revenues on average), this technology ownership approach has proven challenging, especially for midsized retailers and manufacturers.

Real Profit Drivers Distraction

The key elements of retail differentiation have long been branding, merchandising, and customer service. By building e-commerce in-house, organizational focus shifts to technology management, systems integration, and drop ship order fulfillment. Most offline companies have limited experience in these areas and struggle to recruit talent in competitive IT positions. With an average e-commerce staff of 767, multichannel retailers have seen their organizations balloon beyond expectation to support ongoing problems in technology and operations.

Scalability and Reliability Struggle

Front-page headlines in 2002 showcased site failures at such leading online retailers as Toys R Us, eBbay, Yahoo!, Amazon, and Wal-Mart. Smaller companies wage less-publicized, daily struggles to meet consumer expectations for site uptime, response time, and product shipment. Confirming how difficult most businesses have found owning and operating a reliable e-commerce infrastructure, industry analysts have found that a whopping 85% of companies planned to change their commerce software package within seven months of being surveyed. Even with replacement, the reliability problem persists because 93% of sites are technically understaffed. In other words, because of escalating salary demands, equity inflexibility, and less desirable work environments, offline companies face daunting odds in recruiting against start-ups and professional services firms. The end result: over 37% of orders are failing to get to consumers on time.

Third-Party Service Relationships and Integration Management

Industry analysts have found that 68% of companies have to rely on nine or more partners to develop and run their Web commerce sites. Systems integration often constitutes the most important outsourced function because (in a buy/build architecture) literally dozens of complex linkages must be created across applications, commerce packages, databases, legacy systems, and third-party services. Unfortunately, most companies receive less than desired results from their integration partner.

For example, in a comprehensive evaluation of the leading e-commerce integrators, industry analysts have found that even top performers among a sample of 65 integrators earned unimpressive scores, and those on the low end showed surprisingly few strengths. Additionally, not one vendor demonstrated excellence across all service offerings.

Integrators face intense pressure to deliver committed projects, but little pressure to improve quality. That’s because demand for integration services will exceed supply, thus driving the major 3,900 global Web sites to hire whatever service providers they can get.

Vendor clients are confused, too. Stunned by skyrocketing price tags and un-even quality, clients cut corners, switch vendors, or bring work in-house. Unfortunately, few integrator customers have enough depth of experience to know what to cut, whom they should turn to, or how to build complex e-commerce sites themselves.