Dell Business

E-business Value AssessmentCenter for Research in Electronic Commerce (CREC)McCombs School of Business, The University of Texas at Austinhttp://crec.bus.utexas.eduStudy sponsored by DELL Computer CorporationDr. Anitesh BaruaE-mail: barua@mail.utexas.eduPhone: 512-471-7895Dr. Prabhudev KonanaE-mail: pkonana@mail.utexas.eduPhone: 512-471-5219Dr. Andrew WhinstonE-mail: abw@uts.cc.utexas.eduPhone: 512-471-8879Fang YinE-mail: Fyin@mail.utexas.eduPhone: 512-471-7962ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinProductivity 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 AustinMotivation 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 AustinMeasuring 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 AustinA Model of E-Business Value% Online Business,% Online Procurement,% Customer Service Provided OnlineOrder Delivery Time, etc.Revenue/employee,Gross Profit Margin,Return on Assets, etc.ITApplicationsProcessesE-BusinessReadinessCustomersSuppliersInternalCustomersSuppliersInternalCustomersSuppliersE-BusinessDriversOperationalExcellence MeasuresFinancial MeasuresⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinData 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 surveyIndustry Respondents45%35%11%9%RetailersManufacturersDistributorsWholesalersEmployee Distribution59%10%31%Less than 100Between 101 and 400More than 400ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinHighlights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 percentagegains 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 AustinHow 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*significantat10%;**significantat5%;***significantat<1%E-business drivers Revenue per Employee Gross Margin ROA ROIC 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 *** *** *** *** ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinDo operational excellence lead to improved financial performance? (Table 2 in the report) Increase in Revenue Per Employee Increase in Gross Margin Operational Measures No Yes No Yes % online revenue 10.5 40.4 12.0 42.2 % online MRO procurement 11.3 19.7 11.6 19.1 % online production goods procurement 12.3 23.6 12.9 21.6 % service request resolved online 16.8 40.2 19.2 40.7 % new customer acquired online 10.9 43.4 15.2 43.3 % existing customer doing business online 14.8 43.9 15.3 45.3 Comparison of operational excellence measures of firms reporting increase in financial performance with firms reporting no financial gainsⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinEffect of firm size on e-business impact (Table 3 in the report)Average Increase for firms with revenue < $1 Million Average increase for firms with revenue >= $10 Million Financial Measure Mean Median Mean Median Increase in revenue per employee 46.9% 40% 13.2% 5% Increase in gross margin 39.6% 25% 11.8% 8% Increase in return on asset 47.6% 40% 10.3% 5% Increase in return on invested capital 50.2% 50% 20.9% 10% Comparison of average and median financial gains for firms with revenue < $1 million and revenue ≥ $1 million.ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinCustomer orientation of IT –Informational (Table 5 in the report)% Agree (somewhat to strongly agree) Customer Orientation Question (Informational) “No” to increase in Revenue per Employee “Yes” to Increase in Revenue per Employee All product-related information is available online (e.g., price, product description, catalog, etc.). 56% 81% Customers can customize their orders online without phone/face-to-face interactions. 33% 64% A comprehensive FAQ section is available online. 45% 58% Customers can interact using online forums and/or communities (e.g., chat rooms, bulletin boards) 23% 33% Customers see personalized content (e.g., products, prices, order history, order status, etc.) when they log onto the web site 27% 40% Comparison of informational capabilities of firms reporting increase in financial performance with firms reporting no financial gainsⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinCustomer orientation of IT –Transactional capabilities (Table 6 in the report)Comparison of customer transactional capabilities of firms reporting increase in financial performance with firms reporting no financial gainsAvailability of Transactional Feature “No” to Increase in Revenue per Employee “Yes" to Increase in Revenue per Employee Customer Orientation Question (Transactional) No Yes No Yes Customers can submit orders online 46% 54% 18% 82% Customers can modify orders online 70% 30% 43% 57% Customers can pay online 64% 36% 32% 68% Customers are notified of their order status automatically 70% 30% 47% 53% Customers access a secure website for ordering and other interactions 54% 46% 26% 74% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinSupplier orientation of IT –Transactional capabilities (Table 8 in the report)Note: The results are similar for supplier orientation informational capabilities (Table 7 in the report)Comparison of supplier oriented transactional capabilities of firms reporting increase in financial performance with firms reporting no financial gainsAvailability of Transactional Feature “No” to Increase in Revenue Per Employee “Yes” to Increase in Revenue per Employee Supplier Orientation of IT Applications (Transactional) No Yes No Yes Systems allow automated invoice transmission and processing 64% 36% 63% 37% Systems track status of orders online 74% 26% 71% 29% Payments are electronically sent to suppliers. 70% 30% 72% 28% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinE-business processes –Suppliers (Table 12 in the report)Majority of the firms have not leveraged the Internet and other IT for supplier relationship management% Agree (somewhat to strongly agree) Supplier Processes Related Measures “No” to increase in Revenue per Employee “Yes” to Increase in Revenue per Employee Method of sharing product roadmap and demand forecast with suppliers is well defined. 26% 28% Information exchange policies with suppliers (e.g., frequency, precision, real-time or delayed, format, and channel) are well defined. 29% 38% Supplier selection criteria are well documented. 43% 52% Supplier quality monitoring process is well defined. 37% 45% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinInternal Orientation of IT (Table 13 in the report)Majority of the firms have not leveraged the Internet and other IT for internal operations% Agree (somewhat to strongly agree) Internal Orientation of IT Applications “No” to increase in Revenue per Employee “Yes” to Increase in Revenue per Employee Employees can retrieve required information through corporate intranet. 51% 52% Employees manage administrative processes online. 38% 41% Best practices/project management information is available through the corporate intranet. 28% 33% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinE-business readiness –Customers (Table 14 in the report)Customers of firms with observed increase in financial measures are generally more ready for e-business% Agree (somewhat to strongly agree) Perceived Readiness of Customers “No” to increase in Revenue per Employee “Yes” to Increase in Revenue per Employee Overall Customers feel comfortable regarding security and privacy in electronic commerce 52% 78% 69% Customers consider it important to engage in electronic commerce 49% 76% 67% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinE-business readiness –Suppliers (Table 14 in the report)Suppliers of firms are generally NOT ready for e-business% Agree (somewhat to strongly agree) Perceived Readiness of Customers “No” to increase in Revenue per Employee “Yes” to Increase in Revenue per Employee Overall Suppliers have Internet-based systems to engage in electronic commerce. 47% 59% 56% Suppliers feel comfortable (regarding security, privacy etc.) engaging in e-business 41% 55% 49% Suppliers are willing to share information electronically with us. 53% 65% 62% Suppliers consider it important to engage in e-business. 47% 56% 53% Suppliers consider it important to improve coordination and collaboration. 65% 66% 65% ⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinLevels of Online Procurement (Table 15 in the report)% Online Procurement 0% 1% to 20% 21% to 50% > 50% % of firms procuring MRO items online 34% 41% 16% 9% % of firms procuring production goods online 42% 31% 20% 14% Average level of online procurement of all firmsⒸCopyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at AustinMore 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)