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Joining the Internet Ecosystem

Robert LLOYD
President of Europe, Middle East and Africa, Cisco Systems

Abstract

The dotcom phenomenon was a blot on the Internet landscape. It left many industry commentators and businessmen alike believing that the savings and increased sales that the Internet can deliver are nothing but myth. But businesses, small and large, are realising the true benefit that the Internet can deliver. A recent study Gartner undertook with Cisco Systems predicts that the Internet Economy in Europe will grow from $53 billion in 1999 to $1.2 trillion only five years later. Is this hype in itself? Cisco doesn't think so. This paper examines this maturing of a marketplace that is coming to accept the value the Internet can bring to companies. It also suggests a simple five-stage model that maps the way that businesses, especially small and medium sized businesses, can best use the Internet to reap its long term gains.


1. Introduction

Despite the hype behind the well-documented dotcom boom witnessed over the past 18 months, the fact is the Internet is here and is here to stay. When dotcom fever peaked in 1999, the financial markets were awash with venture capital funding. As the shake-out took hold, disillusionment spread and now, two years later the Internet has been branded as yet another fad. This is far from the truth. We believe this is just a part of the cyclical nature of business. It is only a matter of time before e-business becomes integrated into daily business. This will occur when business fully accepts that the Internet can bring long-term value rather than overnight gain. Cisco foresees this will take place in less than five years time.

Lets look at the facts. According to industry analyst, IDC, the number of Internet users in Europe will grow to 233 million by the end of 2004, up from 117 million at the end of last year.

Surfing the net aside, European business decision makers are also starting to acknowledge that the Internet can deliver greater savings and help streamline processes to be more efficient. A recent study by Gartner in conjunction with Cisco Systems, revealed that 75 per cent of European decision-makers believed that 'the Internet is a fundamental and irreversible change to the way everyone does business." In this same study, 85 percent agreed, "e-commerce is a major change to our industry, and one that we have to follow."

 

2. The Internet Economy in Europe - a maturing market

This is nothing new for Europe. Gartner's 'The Internet Economy - Revolution to Evolution " - the first report to measure the size and shape of the Internet economy in Europe - canvassed the views of over 800 company executives across Europe. Their sentiments further illustrated the fact.

Europe is becoming increasingly sophisticated, moving from the simple use of email to more sophisticated applications. The study states this noting that Internet Commerce will be the fastest growing part - at a 123 per cent compounded annual growth rate (CAGR). This further underscores how the Internet Economy has moved from just building web sites to developing and utilising web sites to their full potential. And the potential is quite sizeable! Gartner estimates that the Internet Economy in Europe, alone, is set to equal almost 15 per cent of Western Europe's combined GDP by 2004.

3. Follow the road

Cisco has developed a model - The Internet Business Roadmap - which details the five
tages that companies need to go through before the Internet is seamlessly and transparently integrated into all their key business processes. While it was developed primarily for SMEs, it is relevant for larger businesses too. Some enterprises may already have taken some of these steps, but it is in integration, where the power of the Internet lies.

3.1 E-mail

The simplest of Internet technologies, email is often the first stage in every company's Internet evolution. Although simple in setting up and using, its role shouldn't be underestimated. It opens powerful new opportunities to share information, collaborate efficiently on documents and work remotely. Written communication becomes almost instantaneous at a cost that falls far below that of the Old World alternative methods (post, faxes and courier).

3.2 Website

Having a presence on the world-wide web in the form of a website delivers two powerful benefits. First, from a customer care standpoint, it allows customers to contact companies and receive up-to-the-minute status on fulfilment and assistance with their product/service. Secondly, it opens a company's information up to a world-wide audience of over 70 million Internet users, every hour of every day.

3.3 E-commerce

Selling and offering sales support over the web allows companies to reach previously untapped markets, maximising sales and customer reach. Cisco for example sells 80 percent of its solutions this way. e-Commerce is not, however, just for big business. Another example is Jack Scaife Butchers Ltd, a British family business, which has been running since 1902 has changed from a tradition of running a single shop to selling solely through mail order and the Internet. Since implementing e-Commerce in 1997, costs have been slashed and turnover risen from £200,000 to £750,000.

3.4 E-business

E-business is seeing the Internet as something more than a sales and marketing tool. Companies are now embedding the Internet in the very fabric of their business, in the very nature of their culture with the use of intranets and extranets. With the introduction of self service applications, remote access and the adoption of teleworking, not only can huge administrative savings be made, but productivity and job satisfaction levels can also be accrued.

The ABB Group worked with Cisco to achieve a number of e-business goals. These ranged from workforce optimisation by encouraging flexible working amongst its German workforce by providing unmetered Internet at home to consolidating the buying power between ABB's groups and its suppliers by using the Internet as a facilitator.

3.5 The Ecosystem

The Ecosystem is the development of a community of shared interests, objectives and goals and by bringing all key stakeholders together - customers, suppliers, employees and shareholders - into an environment that provides tangible benefit to all. This enables departments and individuals to focus on their core competencies, and let the other stakeholders focus on the rest.

For example, Cisco worked with British Airways to bring its e-strategy to life. When it started redesigning its extranet, improving the use and deployment of self service applications and exploiting e-procurement technology across the company's supply chain, Cisco worked with all the key departments from HR and training to finance and purchasing. These solutions allowed BA to save an estimated £380 million per year. But there were many intangible benefits too; better staff morale and employee satisfaction which in themselves directly affect customer service and productivity.

 

4. Testing your iQ

The biggest barrier to moving down this roadmap is often not technology but organisational change. Put simply, many businesses are unable or unwilling to change their organisations to adapt to e-business either from fear or from a lack of vision. So working with the correct partner is vital, giving a company the confidence not only of receiving the most suitable Internet solutions but also most suitable total solutions such as marketing and sales support.

Cisco has developed a new web-based business service to help companies understand what the Internet could do for them. Called the Internet Quotient or iQ, it offers a variety of resources and an introduction to Internet business concepts in the areas of e-commerce, customer care, and supply-chain management and it outlines customer and Cisco experiences in Internet business.

5. Conclusions

While some have said, 'no-one is making money out of the Internet' - this may have been the case for many dotcoms. Cisco's experience, on the other hand, has shown that there are very significant savings to be made, customer insight to be gained and efficiency to be reaped. So while making money on the Internet remains a challenge, the savings being achieved are undeniably - making companies more profitable.

For this to happen, however, it is vital that there is board level acceptance of the Internet's benefits and the strategic importance of fully embracing it. Unless it is integrated into every aspect of the business and shared with every individual, it will not work.

Companies also need to understand that the barrier to entry into previously impenetrable markets is lowering due to the Internet. Thus, it has enabled agile new competitors to steal customers from old incumbents using a vastly lower cost structure. More than ever before, we are in a globalised marketplace. If European business's fail to recognise the value the Internet can bring then the gap between the countries getting it, and those not, will only widen. Countries slow to adopt the Internet will be slow to receive the economic benefits that come with it. And their businesses - whether family butcher shops or large traditional companies - will see that the Internet was not all about hype at all.