Ebusiness applications set to soar

Durlacher Research last week unveiled findings from its corporate ebusiness and application service provider (ASP) survey which questioned 500 UK corporations with revenues in excess of £75m. The results revealed that the number of companies which have invested in ebusiness applications is set to grow from less than 20 per cent to more than 50 per cent within the next 18 months.

According to the report, early leads established by new entrants in the ebusiness software space will be challenged by the more established software vendors moving into the same market.

The results showed that 16 per cent of enterprises indicated that they would consider new entrants when looking to extend procurement to the internet. A significantly larger 46 per cent indicated that they would rather consider established software suppliers.

Sarah Skinner, Durlacher's European internet analyst, said that such attitudes would "offer huge opportunities for established software providers and niche enterprise resource planning (ERP) vendors who are ahead of the curve and have an established customer base".

Huge growth in demand
The survey indicated that demand for trading communities has grown from six per cent to 33 per cent, with the highest uptake planned in the IT, engineering, health, utilities and business services sectors.

Skinner also said that 22 per cent of ebusinesses are using or trialing ASP services, with a further 19 per cent looking to invest in such services at some stage in the future. The survey also indicated a significant latent demand for outsourced inter-company applications including e-procurement, supply chain management, business-to-business and collaboration of communications.

The survey also showed that 13 per cent of corporations have invested in an internet-based supply chain management system, with 41 per cent planning to invest in such applications within the next year, and 53 per cent within 18 months. Skinner said that the basic functionality currently offered by all ebusiness applications would be rapidly expanded to include decision support, collaboration and tighter integration with existing back-end systems.

Other findings revealed that the UK corporate market is moving forward from introducing basic internet connectivity to integrating the internet into core business processes, creating a more integrated ebusiness model. Skinner said that 77 per cent of enterprises are using the internet, indicating that the market is now saturated, while extranet use has doubled to 32 per cent. "The UK internet market is poised for a period of qualitative change over the next five years. UK corporations are not unfamiliar with the fundamentals of electronic trading," said Skinner.

About 71 per cent of ebusiness corporations already have electronic data interchange (EDI) connections, but only 19 per cent of these link to supply bases, she added.

Businesses looking forward
Skinner also said that ebusinesses are beginning to migrate their EDI systems, which are traditionally expensive, over to IP VPNs and the internet.

"Ebusiness is not just about replacing EDIFACT with XML, and Vans with the internet, although there is a strong case for doing this. It is about using the most appropriate technology for the type of exchange required," she said.

On average, enterprises and ebusinesses are currently making at least 16 per cent of their transactions through a trading community, with the focus being on content, collaboration and the procurement of indirect goods.

Skinner said that companies are also looking at buying or selling both direct and indirect goods through trading communities. "The concept of trading communities is still new, with six per cent of corporations indicating they do not even know what a trading community is." Only a further 15 per cent are actually making use of, or trialing, an online marketplace, according to the results of the survey.

The results also indicated that the financial community was using trading communities to a more than average extent, with 35 per cent of such organisations employing their services.

Some 33 per cent of the IT sector was interested in the concept of trading communities, followed by 18 per cent of the telecoms market, and 21 per cent of the distribution industry. Skinner said that "trading communities, or online marketplaces, were designed to bring together content, communication and commerce in a centralised online format to address inefficiencies in current trading relationships".

Key growth factors
The report highlighted the fact that the driving force behind ebusiness to date has been the promise of huge cost savings, but the main barrier now is the slow realisation that companies will need a greater degree of back-end integration between their new ebusiness applications and their existing systems to attain these savings.

Initially, however, such integration is expensive to implement and often does not take place with today's systems. Skinner added that the benefits of online procurement can only be seen in larger organisations after they have changed their internal processes. This means that an enterprise will potentially have to buy in high-level management systems or outsource the project to an ASP.

Another major barrier is still security, or "the perception of the lack of security", as Skinner puts it. But Durlacher believes that the growth of secure extranets and developments in VPN technology will solve this problem.