Early e-businesses in the UK may have perfected the smart, customer-facing Web front-end - but the initial interface often conceals a gaping hole. More often than not, there is no integration with back-end supply-chain systems, no link to order processing and no connection to stock control systems.
True, retail and mail-order companies that simply print out orders received on a Web site, and hand them to staff who then pick the relevant goods from a warehouse are able to test the "e" concept without disrupting existing supply-chain systems. But the downside is that they actually add to the cost of distributing goods when the ultimate objective is to reduce it.
Sophisticated customers are unlikely to put up with the poor service levels of standalone e-businesses. As Tukun Chatterjee, UK technology manager at software and services company CompuWare, points out, customers who might initially have tolerated such service levels in return for being able to order from the comfort of their keyboards are now demanding better.
"They expect to be told goods are out of stock while still online and that means integrating ordering with stock control," he says.
Sooner, rather than later, companies will have to bite the bullet and integrate their Web sites with their back-end systems. PriceWaterhouseCoopers predicts that the greatest IT activity in the next three years will be extending existing enterprise resource planning (ERP) systems such as SAP R/3 to fully integrate supply chains with customer-facing Web-based e-commerce applications.
And this will not come cheap. Calculations by IT consultants GartnerGroup show that for every £1 spent on e-commerce implementation, between £5 and £50 will have to be spent on developing the systems to provide the necessary "glue".
If your business does not need 24x7x365 availability, the expense of a Big Bang integration can be avoided. Dharmesh Mistry, director of technology at Internet systems integrator Entranet, recommends a staggered implementation that allows the waters to be tested.
Integrated e-business should be scalable and have as little impact as possible on existing applications that rely on back-of-shop supply chain systems. To do this it is best to establish a separate order processing system to serve the e-commerce site and execute the details of each sale. This is then connected to back-end stock control just to submit the basic query of whether an item is in stock. Access to existing back-end systems might in turn be best implemented via a separate data server.
Nor is access to the back-end data necessarily enough. The greatest value of back-end systems often resides not in the data but in the business logic that has accumulated over the years within legacy application software.
For example, a credit-checking application might contain not just data about a customer's credit worthiness, but also a more elaborate system of checks and balances allowing finer judgements to be made in the light of individual circumstances. One way of avoiding getting bogged down in integration, while getting off the mark quickly, is to spin off a new business unit to tackle e-commerce. This approach can also side-step logistical issues such as conflicts with existing distribution channels as well as minimising disruption to existing systems.
In this model the customer database is divided into two parts with one dedicated to the emerging e-commerce application, and one supporting the exisiting business. The two segments then feed into a common data warehouse system for gathering statistical data for use in marketing campaigns, but this process can be performed at a more leisurely rate with less impact on the network and legacy systems.
Outsourcing is another method of offloading the burden of integration, but for e-commerce it cannot be done in the usual way where computer systems and IT staff are handed over. Because of the need to update prices and products, there has to be at least some in-house involvement to input data, and monitor service levels. This needs to be reflected in the contract with the outsourcing provider.
In the case of online book publisher Macmillan, its business development director Emma Hardcastle says that Macmillan's outsourcing supplier Integra has maintained the level of service of 98% uptime specified in the contract, with the principle cause of failure being within the database software. Macmillan has the advantage of a tightly controlled, well-defined application and data set, with the main problem being to tune a finely grained search engine. In other e-commerce implementations there may be less control over the environments to be integrated.
This is the case for intermediary or brokerage type companies such as travel agents, which need to integrate with a variety of third-parties, such as airlines and hotel reservations agencies, to provide a comprehensive online booking service. At this level there must be agreed formats for transmitting business documents and data to make such integration possible on a large scale. XML is becoming the standard data description language for doing this over Web-based systems.