A recent EBN survey of purchasing managers would have made Thomas Edison proud. The survey found that the people most responsible for business-to-business procurement would rather pick up the phone than go online to purchase strategic goods.
The online purchasing of indirect goods-simple products such as pencils, paper clips, and furniture-is fine. But when it comes to the procurement of strategic goods-complex, configurable products that represent the promise of b2b-purchasing managers prefer to do business the old-fashioned way.
The disappointing news is that, for most companies, b2b is still "Bell to Bell," or telephone to telephone. The privileged place that the phone still holds in corporate purchasing raises a serious question: Is something wrong with online purchasing programs, and if so, what can be done about it?
According to the EBN survey results, the problem with online purchasing is simple: Most online procurement systems fail to answer the many questions required for strategic purchasing.
Strategic purchasing often requires answers to many pre- and post-order queries, such as when will my order ship, which configurations make sense, and what are my past invoices.
A recent Morgan Stanley study estimates that for every buy/sell transaction, there may be as many as 15 to 20 pre- and post-order queries.
The problem that many purchasers encounter is one long familiar to database-management professionals: back-office operations-the chief repositories of the real-time information required for e-commerce-are not designed to handle the frequent information requests that characterize strategic purchasing.
Enterprise resource planning systems are good for what they were designed to do-organize and automate various internal processes. But the Internet and ERP are worlds apart. One is about volume and scalability; things tend to be fast in the Internet world. The other is about precision and detail; things tend to be slow in the ERP world. Nowhere is this value gap more evident than in b2b programs. Many purchasing managers have stared into that yawning gap, and have reached for the phone.
What the EBN survey shows is that certain information must be rapidly accessible in order to do business online. The answer for e-businesses is a system that bridges the Internet/ERP gap and makes the heavy data required for e-business available online.
To do this, businesses must think about how end users want the data; it must come fast, and come accurately. Businesses must think about where the data comes from (in some organizations, it may come from different, heterogeneous systems). They must also know how the data will be used, and package and structure it accordingly. Thus, to meet the data demands of b2b, enterprises need to think of the data as an application in and of itself.
If your customers are calling you as often as they were before you implemented your b2b program, you have a problem. Most likely, your system is based on the "direct access only" approach. It's taking your customer directly to your back-office operations, which can't answer your customer's many questions.
So, it's really all about the data.
Essentially, the promise of b2b is a three-part proposition. Looking at each part helps show why a b2b data platform is necessary.
First is the cost of buying and selling. By putting time- and labor-intensive processes such as buying and selling online, businesses can realize efficiencies that significantly shorten the supply chain and dramatically affect profitability.
One of our customers, a large manufacturer, estimates that the typical purchasing transaction conducted by phone may cost the company upward of $75 in labor. The estimated cost of the same transaction online? Less than $1. If you're in a business like our customer's, with thousands of transactions every day, you'll see why online procurement has captured the attention of so many c-level executives, starting with the chief financial officer. A platform that makes the data supporting these transactions rapidly available online will help businesses realize the procurement savings that b2b promises.
Next, if "direct access only" is the bane of online purchasing, the situation is worse in a second major area of activity: business intelligence. The winners and losers in b2b will soon be separated depending on how they use their enterprise data to understand themselves. Business-intelligence programs-which decision-makers have used since the '90s to better understand how their businesses are doing in sales, marketing, finance, and human resources -are becoming even more important to those transforming themselves into e-businesses.
If buying and selling points to the inadequacies of direct access to the back office, business intelligence further exposes those inadequacies. Staging data in rapid-access databases is the first step to every business-intelligence project.
Finally, the importance of data becomes most apparent when looking at what economists expect will be the most radical contribution to business in the Internet Age: the re-imagining of the enterprise. The Internet is allowing companies to make themselves more efficient by parceling out manufacturing functions to trusted supply-chain partners and by removing boundaries between various customer-facing functions (for example, sales and marketing). And you do not have to be a Dell or a Cisco to achieve this. What you need to do is remove the barriers that separate customers, partners, and employees in the old model.
The IT world often uses architectural metaphors to describe the management of the data that ties all these people together: the back office, the firewall, the data warehouse. To rebuild your enterprise, you need to know how to rearchitect it. A data platform designed to rapidly deliver key enterprise information can help do this.
The telephone doesn't even enter the discussion of how companies are rebuilding themselves. That's because such rebuilding, and most high-level promises of business in the Internet Age, is exclusively an online proposition. If that sounds obvious, it should be. But in an age where the hype of b2b is eclipsed by the reality of people still using the phone for their strategic-goods buying, this simple message is worth repeating: When it comes to business, it's all about the data, and it needs to be online. The sooner businesses begin heeding this message, the faster they will begin to realize the promises of b2b.
Carol Mills Baldwin is president and chief executive of Acta Technology Inc., Mountain View, Calif., an e-business data-infrastructure provider.