Presentation to UBC Commerce Faculty

1. Presentation to UBC Commerce Faculty April 28, 2000

2. UBC: eComm Boom-Agenda • What is eCommerce? • The Business Value Chain • The Impact on Developers and Engineers • Business Change & New Skills • Market Positioning • Supply-side Metrics • Sell-side Metrics • Summary and Questions

3. Growth Outside “First World” Global Mergers and Acquisitions Reinvigorated IT Competitive Environment Internet Applications Massive Dislocations in Value/Power in Supply Chain Ubiquitous Customer Connectivity More Power to the Customer Massive Changes in Value Licensing Economic Models © 2000 Giga Information Group Business Drivers for Future Growth in Internet E-Business Applications Continued Productivity Growth in the Global Economy

4. Think E-business, Not E-commerce • E-commerce is the Cause, E-Business is the Effect • E-Business is about Structural Transition and Business Transformation from Old Business Models to New Business Models • E-Business Requires Effective Inter-Enterprise Integration Processes and Technology • E-Business is not a Technology Issue; It is a Serious Top Management Strategy • Success is all about Execution © 2000 Giga Information Group

5. Let’s have a Guess at the Size • B2B in 1998 - US$ 43 billion • Forecast for 2003 - US$ 1.3 trillion • Perspective in terms of total B2B trade: • Only 9.4% of total • Forrester Research

6. Five Main Categories of Business • Price Discovery - matching buyers and sellers • eBay, eTrade, Letsbuyit.com • Needs matching • Grand and Toy • Innovation • Linux development, Business Objects • Product design and delivery • Manufacture and assembly • Distribution (Transmission Services) • Banks networks, gas distribution networks Don Tapscott

7. The eCommerce Matrix Business Consumer B2C Amazon Dell B2B GM/Ford EDI networks Business C2B Priceline Accompany C2C EBay QXL Consumer Source: The Economist

8. Lessons From Big Pioneers Where U.S. Fortune 500 Companies Are in E-Commerce Low Will High Skill High Will Low Skill Phase 2: We Know E-Commerce Is Critical and We’ve Started Phase 3: We’ve Got a Lot of E-Commerce Stuff Going on but Where’s the Pay-Off? 3 of 16 10 of 16 Phase 1: I Guess We Should Do Something With E-Commerce Phase 4: E-Commerce Is Giving Us Competitive Advantage 1 of 16 2 of 16 Low Will Low Skill High Will High Skill

9. Opportunities New ways forbuyers tofind productsand services? New ways forsellers tomove products andservices into themarket? Newexchangesfor biddingand trading? Newproducts? Production Roles Transactor Consumption Roles Suppliers Sellers Seller’s Agent Buyer’sAgent Buyers Revenuefrom organizingreducing, sellinginformation? New waysto provide marketinfrastructure Information Provider Infrastructure Revenuefrom taking ononline marketrisk? Market Trust Supporting Roles

10. Stages of Web Functionality LEVEL 4 - Leading Personalized content ~ Secure commerce ~ Advertisement serving ~Advanced searching ~ Custom usage reporting ~ Custom Java applets ~Advanced user management and access control LEVEL 3 - Advanced User profiling ~ Authentication ~ Access control ~ Electronic Commerce ~ Online support ~ Basic Advertisement serving ~ Legacy integration Chats and Forums ~ Dynamic publishing ~ Imported partner content ~ Advanced reporting LEVEL 2 - Standard Basic Profiling ~ Content Management ~Basic searching ~ Personalized Email ~ Electronic catalog LEVEL 1 - Entry Static content ~ Simple animation effects/Java Script ~ “Stock” usage reporting

11. Getting Started With eCommerce Directed Discovery Market Facing Identification Assessment Implementation Supply Chain Workspace Do we need to dosomething?Are we alreadyinvolved in a project? Are the thingswe’re doing todaythe right things?If not, what are theright things? How do we bestdeploy our limitedresources andfocus on our realobjective?

12. Internal Operations Sales and Marketing R&D / Knowledge Mgmt Finance Supply Chain Mftg HR eCommerce Affects the Entire Business Where Do You Start? Supply Side Market Facing Suppliers Agents Vendors End User Sales Reps Distributors Retailers Start Here! Start by understanding and getting closer to the customer!

13. FirmInfrastructure Corporate’s support in sales and marketing Facilities that enhance the firm’s image Margin Superior management information system Team work Application eng support Most repeat response to customer’s quotation Advanced testing/evaluation techniques TechnologyDevelopment ProprietaryProcess UniqueEquipment Unique vehicle scheduling Career development for staff Extensive training on application and marketing HRManagement EffectiveTraining Transportation suppliers that minimizes damage Highest quality incoming parts Highest quality replacement parts Procurement Statistical process control Reliable & high quality products Short cycle time Flexible labour Rapid timely delivery Handling that minimizes damage Accurate and responsive order processing Superior technical literature & sales aid Latest trade & product seminar High customer face time Handling of inputs that minimizes damage Delivery on time Extensive buyer tracking Complete field stocking of replacement parts Margin InboundLogistics OutboundLogistics Marketingand Sales Operations Service Value Chain of a Differentiator

14. The Internet Reshapes the Value Chain The new Internet value chain Customer Acquisition Ordering/ Payment Relationship Management Production Delivery Service • Customers found through • Affiliate networks • Shopping bots • Portals/hub sites • Ad networks • In B2C: • Direct sales by manufactures • Retailers pass orders and payment to supplier, take a commission. • In B2B: • Hub Sites facilitate orders • End users buy directly with purchasing cards • Build to order becomes more common • Orders sent to component makers for just-in-time assembly • Suppliers take on greater role in building quick-to-assemble modules • Manufacturer ships to customer • Shippers like FedEx move into home delivery business • Suppliers take on greater role in building quick-to assemble modules • Retailer takes on more service & support • Service becomes a new sales opportunity • Customer relationship management becomes a reality, not just an aspiration © 2000 Giga Information Group

15. Manufacturer/publisher Wholesaler/distributor E-retailer Reintermediation Portal/aggregator Disintermediation Sources: Benchmark Capital; The Economist Consumer Rebuilding the Value Chain

16. Re-engineering the Customer Experience Purchase Criteria Customer Anger Preferences Power Content&Experience Content& Transaction CustomerPriorities ChannelIntegration Assets Decision-Making Process Purchase Occasion Buyer Behavior Functional Needs Outside-in Approach Systems Economics © 2000 Giga Information Group

17. The Evolving Value Chain The Internet is blurring traditional boundaries between what companies, customers and suppliers do and what services they offer. Traditional Roles Customer & Retailer Manufacturer & Suppliers Distributor & Retailer Retailer & Customer Manufacturer & Retailer • Buying: • Research • Decision • Order • Payment • Producing: • Source • Buy • Build • Assemble • Delivering: • Distribution • Shipping • Pick-up • Set-up • Servicing: • Questions • Problem • Resolution • Repair • Reselling: • Identify Need • Match Need with Product • New Order Customer Manufacturer Supplier Distributor Retailer © 2000 Giga Information Group Internet Roles

18. The Internet Reshapes the Value Chain Potential Impact of Internet on Business Processes(0-2 = Small; 3-4 = Some; 5-6 = Medium; 7-8 = A Lot; 9-10 = Major) 0 2 4 6 8 10 Customer-Oriented Processes: Acquiring customers Taking order/billing/getting paid Making the product Delivering the product Serving the customer Deepening relationship Internal Processes: Developing the product Procuring supplies Hiring/retaining employees Raising capital Tracking/managing money Managing risk © 2000 Giga Information Group

19. Positioning in a Mind • You see what you expect to see • Past conditioning • Build a leadership position in the prospect’s terms • NOT YOUR terms!!! • Change dethrones leaders • So, if you are not a leader, look for the hole • Don’t trick the prospect, build trust

20. Because the Internet allows assisted self-help, it affects industries where self-help was not an option before — like brokerage The Internet’s Impact on Industries Distribution of Customers by Self-Help Preference 10 10 Distribution of Customers, Pre-Internet 8 8 6 6 Distribution of Customers, Post-Internet Internet Shifts Curve This Way Percent of Customers 4 4 2 2 0 0 No Human Help No Self-Service Mixed Self-Service With Help When Needed

21. It also affects industries where self-help has become the norm — like books, computers or groceries The Internet’s Impact on Industries Distribution of Customers by Self-Help Preference 10 10 Distribution of Customers, Pre-Internet 8 8 6 6 Internet Shifts Curve This Way Distribution of Customers, Post-Internet Percent of Customers 4 4 2 2 0 0 No Human Help No Self-Service Mixed Self-Service With Help When Needed

22. Process Closing sale/taking order/getting paid Connectivity with trading partners Acquiring customers Delivering the product Billing/getting paid Procurement Solution Commerce service providers IP-based EDI Competitive bidding Outsourcing logistics EBBP Hosted e-procurement service E-Commerce for Small and Mid-Sized Companies

23. Positioning in the Deeper Forest • Do it the “Amazon way” • have a button on every page searched • whether relevant or not • Tune the features to fit the search routines • yeild a high level of returns for searches • provide a repetitive recognition of name • Structure the features to mirror the the touchpoints of the complimentary community • regular association with supportive businesses • eCommunity - A Group of Common Interest

24. Benefits of Integrating with your eCommunity • Example: BP Amoco (BP Chemicals) • 7 million tons of production per year • Manual collating of information from shipping brokers • Implemented an Extranet linking brokers, BP units and customers globally • Resulted in a flexible system requiring minimal resources • Global tracking efficiency

25. Expectations of the Prospect • Target your sector • move from the local to the global view • Once you have the interest • don’t let go • continue to build trust • perform in your prospect’s terms • People want instant reliable information • Your Value Chain becomes your delivery key

26. The Sell-Side E-Commerce Value Cycle Attracting customers, marketing products User profiling Pre-sales support Displaying products Product configuration Advertising User feedback User authentication Customer Price negotiation Customer service Technical support Ordering & payment Post-sales activities Negotiating prices, accepting orders Billing Fulfillment/ distribution

27. Attracting customers/ marketing products Billing Relationship mgmt. Customer service Impact of Internet on Sell-Side Business Processes 0 2 4 6 8 10 External Customer Processes: 1. Acquiring customers for products 2. Taking the order/billing 3. Making the product 4. Delivering the product 5. Serving customer after sale 6. Relationship management Internal Processes: 7. Developing the product 8. Procuring supplies and inventory 9. Hiring/retaining employees 10. Raising capital (debt/equity) 11. Tracking/managing money 12. Managing risk 0 2 4 6 8 10 (0-2 = Small; 3-4 = Some; 5-6 = Medium; 7-8 = A Lot; 9-10 = Major)

28. Innovations in Closing the Sale: FreeMarkets Source: FreeMarkets

29. Procurement • Goal: most cost-effective management of procurement activities • Situation: “When did you order it… ?” • Procurement inundated with paper • 70% of orders high-volume, low-dollar items (comprise only 3% of accounts payable) • Challenge: an intranet application to provide “one-stop shopping” • Automated ordering & tracking, strategic procurement partner interface, online hiring of outsourced services

30. Solution: MS Market • Online ordering and resources • Order office goods, locate approved vendors, initiate purchase orders, track vendor payments, and submit expenses • Automatic transaction approvals • Electronically routed, sent to approving authority when required • Web app built on Microsoft platform • Server: Windows NT & BackOffice Products (IIS, SQL Server, Site Server Enterprise ) • Client: Windows NT Workstation (32-bit OS), Microsoft Office, Microsoft Internet Explorer 4.0

31. January 1998 MS Market Activity • January MS Market activity • $155M and 23,951 requisitions processed worldwide • The number of year-to-date MSMarket users is: • 9,494 requisitioners, 2,496 approvers who are not also requisitioners. • 11,990 People in the process • Domestic activity: International activity: • 16,638 requisitions 7,313 requisitions • $115M $40.5M • Current month volumes equate to an annual run rate of over $1.6B.

32. Results • Rules removed, red tape reduced • Can place order in 3 minutes or less • No need to go through admin assistant • Better business practices • Uploads transactions directly into SAP • Handled $1.6 billion in orders last year • 12 employees redeployed to advantage • Flexible deployment for IT • Incremental changes to app without reloading each desktop • Reliable, only 3% of orders require help

33. Savings • P.O. Costs reduced from $60/per to $5/per (saved 30 minutes/order by automating data entry) • Requisition to P.O. time reduced from 2 weeks to 8 minutes • $1.6M/yr in CP staff redeployment (12 FTEs) • $4-6M in additional supplier price and payment discounts • On track for 5-10% decrease in ~$2B/yr spend • Scalability • Time savings for employees

36. Information Fragmentation • On average, business information resides in 7 systems • 75% claimed lack of integration caused problems: • Consistency and compatibility of data • Extraction and collation of data • Only 10% thought their automated processes communicated well with the value chain. © 2000 Giga Information Group

37. E-Business Application Strategies • Buy vs. Build-&-Integrate, Buy and Build-&-Integrate • Loosely coupled plug ‘n’ play • Whether business units or companies • Customer-centered business process innovation • New and rapidly evolving business processes • Stick to the knitting…specialize in core competency • Form and break business relationships rapidly • Powerful content aggregator as central mover, vs. federated association of more equal players All require more flexible, business process-driven application solutions, that can be sliced and diced in many ways © 2000 Giga Information Group

38. Data AccessServices PresentationServices Applications and Application Development Tools S Y S T E M M A N A G E M E N T Packaged Applications Object Oriented Tools 4GL Tools, 3GL API Desktop Workgroup Department Division Enterprise NetworkComputers Web Browser PersonalComputer Terminals Application Enabling Services TP MonitorsWork Flow Event Services Mail Intelligent Agents Telephony Dist. Services Directory, Time Security, Transactions Comm. Services Conversational Remote Proc. Call Messaging Object Services COM/DCOMCORBA Common Transport Semantics Signaling& Control Plane Transport Services SNA TCP/IP NETBIOS APPN IPX ATM Channel WAN LAN Physical Networks Build versus Buy Internet Client/ Server M’frame • Common architecture • Presentation Services • Application Packages • Development Tools • Application Enabling Services • Data Access Services • Comm. Services • Object Services • Distributed Services

39. Best-Practice SoftwareDevelopmentLifeCycle 7-Month Process Purchase and Play With Tool Business Testing, a.k.a. Requirements! Initiation, Evaluation 2nd Iteration Deploy 0 4 3 1 2 5 6 7 Have Idea, Buy Tool Training Prototypes Evaluate Throw Out First Iteration © 2000 Giga Information Group Planning is everything, plans are nothing.

40. Lessons Learned • BPR and outsourcing essential • Senior management involvement • Project successful because of teamwork • Business, IT, consultant/vendor • BUT, production support group wasn’t involved early enough • Must design for all workflow exceptions • Some steps/issues left out of the process • Involve users in acceptance testing early on • Talk to workers, not just management • Dig deeper, longer

41. Lessons Learned • Look for integration points - Workflow, E-Forms, Output - Legacy renewal and workflow • Hire necessary skills and experience - Web development - Client/Server • Do not develop “homegrown” workflow within applications -“workflow is at the heart of e-business” • Deploy slowly (pilots & phased implementation) • Involve business partners at the beginning • Focus on bandwidth and security issues © 2000 Giga Information Group

42. Thank you UBC Commerce Community Questions? Chrisdennis@sierrasys.com 604.891.6255