European corporate attitudes are restricting e-business

European directors are struggling to sell the importance of e-business to the board, leaving the UK lagging behind the US. Guy...

European directors are struggling to sell the importance of e-business to the board, leaving the UK lagging behind the US. Guy Campos reports

Only a quarter of top European chief executive officers see new technology and e-business as their main challenge in the next three years compared with half in North America. That is according to a survey, published this week, of 251 chief executives in 26 countries carried out by management consultancy A T Kearney.

They were asked how backward European companies are in their attitudes towards technology compared with their US counterparts.

The report also found that European chief executives were far more likely to say the Internet had not changed the way they do business - a figure of 52% compared with 22% in North America.

Is there proof then of the old adage that Europe is several years behind the US? Or a sign that it is harder for UK IT directors to sell e-business investments to their boards?

For Philip Virgo, strategic adviser to the Institute for the Management of Information Systems, the difference in attitudes between continents is a result of the US lead in rolling out an Internet infrastructure.

The US will roll out broadband access, which is the key to profitability for many e-business investments, before most European countries.

In the meantime, it is hard to justify anything but e-mail and slow-response Web sites.

There are conceptual differences too. The American notion of Internet business includes electronic data interchange between companies of the type that is old hat to the London Stock Exchange, to the clearing houses and insurance industry in the UK but is not thought of as Internet business here.

For Alexander Drobik, vice-president of e-business management strategy in Europe at consultancy Gartner, it is not just a matter of definitions and the timing of investment. "Awareness is high in Europe, but action is miles behind. I know of a major European multinational where the IT department had been saying for ages, 'We need to look at these issues'. They were told, 'This is nothing to do with you - it's a business issue,' even though some of this stuff is structural," says Drobik.

"Then the chief executive went to a briefing, came back and said, 'We need one of these things and you've got three months to do it.' It can be done but only by taking risks and cutting corners."

Drobik urges companies to find out what they can do now, even if the implementation of a plan is delayed until network bandwidth and reliability is right. In multinational business planning, even a year is a short time to prepare for action.

If the infrastructure and attitude gap between Europe and the US is bad news, there is some good news on chief executives' expectations about their IT budgets. Three-quarters of those questioned said their company's spending would rise over the next three years. The average increase forecast was 53% and a third of companies expected their investment to double.

Virgo finds this hard to believe. "When companies are looking at an IT investment, it is often about setting out to cut the overall cost of technology. IT and communications are now two of the largest overheads.

"Overall IT budgets are going down and the cost of technology and communications is plunging, in part thanks to the rationalisation we did for Y2K," Virgo added.

Just as IT directors are expressing scepticism about the gains to be had from business-to-business e-marketplaces, backing for their unease comes from the survey. Less than half of the chief executives who took part said they were serious about taking part in an e-marketplace. But a fifth said they were planning to invest more than $10m (£6.8m) in core enterprise resource planning (ERP) software, despite its drop in popularity recently.

We are back to definitions. What we are talking about here is probably investment in extending ERP software by linking it with customers, suppliers and partners, said Virgo and Drobik.

Even here there is a continental difference, with European chief executives only a quarter as likely to say they were going to invest more than $10m in their ERP systems as those in North America - 11% compared with 45%.

"European IT tends not to be as well regarded or to have as much visibility in a company. It is still seen as a support role and not as a strategic element of the company and a source of profit," said Drobik.

Perhaps it is not until Europe catches up with the US in corporate attitudes to IT, that attitudes to e-business will catch up too.

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