Chapter 1

ELECTRONIC BUSINESS SYSTEMS

E-Business (Electronic-Business)
 The use of Internet technologies to internetwork and empower business processes,
electronic commerce, and enterprise communication and collaboration within a company
and with its customers, suppliers, and other business stakeholders.

“It’s happening right before our eyes: a vast and quick reconfiguration of commerce on an evolving
e-business foundation. What is the difference between e-commerce and e-business? We define e-
commerce as buying and selling over digital media. E-business, in addition to encompassing e-
commerce, includes both front- and back-office applications that form the engine for modern
business. E-business is not just about e-commerce transactions; it’s about redefining old business
models, with the aid of technology, to maximize customer value.”

Remember that e-business is the use of the Internet and other networks and information
technologies to support electronic commerce, enterprise communications and collaboration, and
Web-enabled business processes both within an internetworked enterprise, and with its customers
and business partners.

The days of manufacturing products and placing them in inventory are withering, as more
and more companies switch from that build-to-stock model to a build-to-order manufacturing
environment, where products are custom-built or assembled to specific customer orders. Thus,
companies like Netro Corp. and Lightwave Microsystems are relying on Web-based manufacturing
execution systems and other collaborative e-business applications to support a detailed online
view of the status of manufacturing processes that is shared among a company’s employees,
suppliers, and customers. This enables agile manufacturing companies to be responsive to
changing customer requirements during the production process, and make realtime adjustments to
improve the efficiency and quality of manufacturing processes.

“The world-class enterprise of tomorrow is built on the foundation of world-class application

clusters implemented today.”

E-Business Application Architecture

Figure 7.2 presents an e-business application architecture, which illustrates the

application components, interrelationships, and interfaces with customers, employees, business
partners, and other stakeholders of an e-business enterprise. Notice how many e-business
applications are integrated into cross-functional enterprise application clusters like enterprise
resource planning, customer relationship management, decision support, supply chain
management, and selling chain management. Thus Figure 7.2 gives you a good overview of the
interrelatedness, interdependence, and integration of the e-business applications that are vital
components of the successful operations and management of an e-business enterprise.

Cross-Functional Enterprise Systems

“Integration of the enterprise has emerged as a critical issue for organizations in all business
sectors striving to maintain competitive advantage. Integration is the key to success. It is the key to
unlocking information and making it available to any user, anywhere, anytime.”

Information systems in the real world typically are integrated combinations of cross-
functional business systems. Such systems support business processes, such as product
develop, production, distribution, order management, customer support, and so on. Many
organizations are using information technology to develop integrated cross-functional enterprise
systems that cross the boundaries of traditional business functions (such as marketing and
finance), in order to reengineer and improve vital business processes all across the enterprise.
These organizations view cross-functional enterprise systems as a strategic way to use IT to share
information resources and improve the efficiency and effectiveness of business processes, thus
helping an e-business attain its strategic objectives. See Figure 7.3

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 For example, as we have seen in the Real World Cases, business firms are turning to
Internet technologies to help them reengineer and integrate the flow of information among their
internal business processes and their customers and suppliers. Companies are using the World
Wide Web and their intranets and extranets as a technology platform for their cross-functional and
interorganizational enterprise systems.
In addition, many companies have moved from functional mainframe-based legacy
systems to integrated cross-functional client/server applications. This typically has involved
installing enterprise resource planning (ERP), supply chain management (SCM), or customer
relationship management (CRM) software from SAP America, Baan, PeopleSoft, Oracle, and
others. Instead of focusing on the information processing requirements of business functions, such
enterprise software focuses on supporting integrated clusters of business processes involved in
the operations of a business.

Enterprise Resource Planning

Enterprise Resource Planning (ERP)

 Integrated cross-functional software that reengineers manufacturing, distribution, finance,
human resources and other basic business processes of a company to improve its
efficiency, agility, and profitability.

“ERP is the backbone of e-business. In other words, ERP is a business operating system, the
equivalent of the Windows operating system for back-office operations.”

Enterprise resource planning (ERP) is a cross-functional enterprise system that serves as

a framework to integrate and automate many of the business processes that must be
accomplished within the manufacturing, logistics, distribution, accounting, finance, and
human resources functions of a business. ERP software is a family of software modules that
supports the business activities involved in these vital back-office processes. For example, ERP
software for a manufacturing company will typically track the status of sales, inventory, shipping,
and invoicing, as well as forecast raw material and human resource requirements. Figure 7.4
illustrates the major application components of an ERP system.
Many companies began installing ERP systems as a vital conceptual foundation for
reengineering their business processes, and as the software engine required to accomplish these
new cross-functional processes. Now ERP is being recognized as a necessary ingredient for the
efficiency, agility, and responsiveness to customers and suppliers that an e-business enterprise
needs to succeed in the dynamic world of e-commerce. Companies are finding major business
value in installing ERP software in two major ways:
1. ERP creates a framework for integrating and improving their back-office systems that
results in major improvements in customer service, production, and distribution
efficiency.
2. ERP provides vital cross-functional information quickly on business performance to
managers to significantly improve their ability to make better business decisions across
the enterprise.

Figure 7.5 illustrates some of the cross-functional business processes and supplier and
customer information flows supported by ERP systems. As we will see several times in this
text, installing ERP systems successfully is not an easy task because of the major changes
to a company’s business processes required by ERP software. Now let’s look at how a
global corporation views the business value of ERP systems.

Customer Relationship Management

• It costs six times more to sell to a new customer than to sell to an existing one.
• A typical dissatisfied customer will tell eight to ten people about his or her experience.
• A company can boost its profits 85 percent by increasing its annual customer retention by only
5 percent.
• The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a
product to an existing customer are 50 percent.
• Seventy percent of complaining customers will do business with the company again if it quickly
takes care of a service snafu.
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• More than 90 percent of existing companies don’t have the necessary sales and service
integration to support e-commerce.