Center for Research in Electronic Commerce (CREC)
McCombs School of Business, The University of Texas at Austin
http://crec.bus.utexas.edu
E-business Value Assessment
Dr. Anitesh Barua Dr. Prabhudev Konana
E-mail: barua@mail.utexas.edu E-mail: pkonana@mail.utexas.edu
Phone: 512-471-7895 Phone: 512-471-5219
Dr. Andrew Whinston Fang Yin
E-mail: abw@uts.cc.utexas.edu E-mail: Fyin@mail.utexas.edu
Phone: 512-471-8879 Phone: 512-471-7962
Study sponsored by DELL Computer Corporation
Productivity Paradox
“We see computers everywhere except
in the productivity statistics.”
-- Nobel Laureate Robert Solow
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
Motivation behind the study
Internet economy is about the transformation of traditional
businesses to e-business, and just not a dot com revolution.
Confusion regarding the true potential of the Internet economy.
The Internet economy is big, but how good is it?
Are e-business initiatives paying off? If “yes” where and how? If “no”
why not?
Wide range of sizes
Industry sectors: manufacturing, retailers, wholesalers and
distributors.
Ongoing research activity of CREC since late 1980s
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
Measuring E-business Value
E-business success measured ultimately by financial
performance
To see financial benefits (e.g., increase revenue per employee),
choose measures of operational excellence (e.g., % of
customers doing business online, % online procurement)
To achieve operational excellence, invest in e-business drivers
(e.g., online IT capabilities for customers and suppliers), and e-
business processes.
Synergistic investments in e-business technology coupled with
restructuring of processes that emphasize online interaction with
customers and suppliers, and developing online support for
customer and suppliers relationship management.
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
A Model of E-Business Value
Revenue/employee, Financial
Gross Profit Margin, Measures
Return on Assets, etc.
% Online Business,
% Online Procurement,
Operational
% Customer Service Provided Online Excellence
Order Delivery Time, etc. Measures
IT E-Business
Processes
Applications Readiness E-Business
Drivers
Customers Customers Customers
Suppliers Suppliers Suppliers
Internal Internal
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
Data collection
A 74-item questionnaire developed by CREC researchers
Over 4500 U.S. and European firms contacted by MarketVision Research.
Approximately 1200 firms responded to the survey
Employee Distribution Industry Respondents
9%
31% 11%
45%
59%
10% 35%
Retailers Manufacturers Distributors Wholesalers
Less than 100 Between 101 and 400 More than 400
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
Highlights
Firms that have observed increase in financial performance have
significantly better operational excellence performance (e.g., % existing
customer doing business online, % online procurement) and higher-levels
of investments in e-business drivers (e.g., integration of Web and back-
office systems).
Smaller firms observe much higher percentage gains in financial
performance with e-business relative to larger firms.
There is significant potential to gain efficiencies with online supplier
relationships.
Firms have not leveraged the power of online product customization.
Firms need to invest in increasing the e-business readiness of customers
and suppliers.
Firms must redesign their customer and supplier processes for e-
business transformation.
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
How can a firm achieve high levels of financial
benefits in e-business? (Table 1)
Comparison of driver levels of firms reporting increase in financial
performance with firms reporting no financial gains
Revenue per Gross
E-business drivers ROA ROIC
Employee Margin
System integration *
Customer Orientation of IT (Informational) *** *** *** ***
Supplier Orientation of IT (quality)
Supplier Orientation of IT (supply-continuity) * ** **
Supplier Orientation of IT (relationship) *** *** *** ***
Internal Orientation of IT *
Supplier Processes * *
Customer Processes *** *** *** ***
Supplier E-business Readiness * *
Customer E-business Readiness *** *** *** ***
* significant at 10%; ** significant at 5%; *** significant at = $10
with revenue 50%
% of firms procuring MRO items online 34% 41% 16% 9%
% of firms procuring production goods 42% 31% 20% 14%
online
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
More information
Academic details of this study will be presented at Multichannel Conference
on Productivity and the Internet Economy, Austin, November 2-3, 2000.
Details available at http://www.internetproductivity.org/
Copies of other productivity-related papers available at
http://crec.bus.utexas.edu
Value and Productivity in the Internet Economy (in IEEE Computer, May 2000) by
Anitesh Barua, Andrew B. Whinston, and Fang Yin.
(http://crec.bus.utexas.edu/works/articles/IEEE_Computer.pdf)
Not all Dot Coms are Created Equal: An Exploratory Investigation of the
Productivity of Internet Based Companies by Anitesh Barua, Andrew B. Whinston,
and Fang Yin. (http://crec.bus.utexas.edu/works/articles/digital.pdf)
ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin