The dot.com promises did not deliver, but the internet is still has an important role in today’s business. I had just assumed that e-commerce was just an essential part of business today and never really considered the huge financial costs involved in adopting e-commerce practices and this was a major contributing factor in the collapse of many the earlier dotcoms.
I can see how it is hard to justify the investment in e-commerce because of the difficultly of establishing which area or areas of the company are benefiting from the investments. The justification of e-commerce implementation is vital for the largest of public companies down to sole trader businesses. It is even more important for a business to justify the application of resources towards e-commerce as technology can be outdated and superseded.
I have personal experience of the e-commerce justification processes. This justification occurred was when I was employed with a large multinational chemical company. The company operated across 45 countries and each company operated their own systems. It was decided that the company would implement SAP across all countries. SAP provided the business with a system that could operate forecasting, procurement, ordering, accounting, warehousing etc.
Australia was part of cluster of a country that was put online initially as a pilot before the global cut over. After a period of six months the project was assessed based on a series of metrics. The metrics that were measured included reduction in inventory write off, warehousing savings and staff rationalisation savings. The return on investment ratio was calculated using these savings divided by the country specific costs allocated to Australia. Based on this ratio the company found that they could significantly increase profit while having a payback period of under 18 months globally. The results were even more pleasing as many of the less developed countries could benefit even more than Australia as their old systems were less efficient.
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This topic for my self did confuse me a bit, but after studying it and reading your blog, I understand it a bit clearer now. I suppose I was looking at justification from a general perspective, for example when a lot of the countries had to adopt the IFRS’s they would have had to justify everything after implementation and would have used metrics to measure performance. I know this isn’t really directed so much at e-commerce, but I suppose what I’m getting at is that any company that is adopting new plans and strategies needs to be monitored and justified. Management and the stakeholders need to know whether the implementation is worth while regardless whether or not it is EC technology.
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