Has Y2K spend killed e-business?

The take up of e-business systems in the manufacturing sector is not achieving the growth seen in other sectors. But a recent Microsoft sponsored survey by Mori and Cranfield School of Management reveals that the majority of the 120 companies questioned believe that Britain’s e-business is world class and will make the country more competitive in the long run. At the same time, 38% admit investing nothing in e-business over the last year, and less than half had a B2B e-business strategy.

‘Manufacturers are obviously expecting a rapid take-off in e-business activity from a very low base,’ said Pauline McGowan of Mori. ‘The surprising lack of previous investment and achievement may be explained by Y2K projects absorbing budgets.’Currently, manufacturers only trade with 2% of their suppliers via the Web but within two years, this is expected to rise to 20%.

When they do spend on e-business, manufacturers want a quick return. In fact, 58% said they expected payback in 12 months. Fast return on investment was also the most commonly cited top priority when implementing B2B e-business services.

Other results from the survey point to increased use of the Web for procurement and the supply chain applications. At present, 34% of those questioned said they use the Web in the supply chain, compared with 55% in advertising and promotion. Companies’ expectations indicate that the supply chain will catch up within two years, reaching 64% compared with 67% for advertising.

This trend is reflected in e-business benefits experienced and expected by manufacturers. Topping today’s list of benefits are effective use of time and responsiveness to customer needs, but improvements in procurement and the supply chain are expected to rank along side these within two years. 38% said they were benefiting from an optimised supply chain today, and 70% expected this benefit in two years’ time.

Digital trading exchanges are predicted to be a strong growth area. At present, 30% of the sample used these at present but 52% anticipated they would be using them within two years. Increased stock and product visibility in the supply chain were cited as benefits of trading exchanges by 55% who currently or plan to use DTE.

‘Manufacturers are currently just scratching the surface of potential gains from using Web-based technology in the supply chain,’ said Paul Burgum, Microsoft’s Manufacturing Industry Manager.

Predictably lack of budget is the biggest factor preventing progress, quoted by 20% of the sample. However, lack of IT integration came second, with 18%.

Organisations also believe they know the key factors in facilitating successful B2B e-business, but think they are under-performing against these measures. The greatest importance is assigned to scalable and reliable technology, and delivering a consistent service to customers.

Paul Burgum interprets these worries about IT integration and need for reliable, consistent technology as two aspects of the same issue. ‘Until robust, consistent software standards are established throughout the supply chain, the full benefits of e-business won’t be realised,’ he said. ‘Unless this is addressed soon, manufacturers will fall behind and, if the standards issue is ignored, systems will never deliver all the potential long term benefits.’