e-Business

10 THINGS
10 9 e-Business
8
YOU MUST KNOW ABOUT

Dr. Ravi Kalakota, co-author of e-Business: Roadmap for

Success, talks to Tony M. Brown, eAI Journal’s editor-in-chief.
Dr. Ravi Kalakota is an educator, author, and consultant. He is also the founder and CEO

7
of a new Internet startup, hsupply.com, which provides a business-to-business vertical procure-
ment portal for the hospitality, healthcare, assisted living, and building supplies industries. He’s
also the founder and CEO of e-Business Strategies, a research and consulting practice designed
to help large companies create tomorrow’s business models today. He is the director of the Center for Digital Commerce
and eminent scholar of Electronic Commerce at Georgia State University. He has written several books, including
e-Business: Roadmap for Success, Electronic Commerce: A Manager’s Guide, and Frontiers of Electronic Commerce

6
(all published by Addison-Wesley).

lthough the term e-business has you change your internal metabolic sys- tomer. At the back end, you are dealing

A entered the mainstream business

lexicon, many people, including
IT professionals, are still uncertain what
tem. It is the same thing with e-busi-
ness. A company can say they are doing
e-commerce, but if they don’t change
with one supplier and the interface
problems there are rather simple.
Medium-to-large enterprises have a

5
it means. Is it the same as e-commerce,
for example? What does an e-business
look like? How does it differ from a nor-
mal business?
One thing is certain — everyone
should have the answers to these ques-
internally, there is no impact. And the
really hard part is changing your inter-
nal processes and structure.
Everybody talks about e-business and
e-commerce, but the execution of it is
where the whole thing falls apart. Very
much harder time in e-business because
they have multiple constituents to sup-
port. With a large company, the magni-
tude of the problem is far greater. The
components of e-business are in three
critical pieces — interfacing with the

4
tions. To get them, eAI Journal caught
up with Dr. Ravi Kalakota, the co-
author of e-Business: Roadmap for
Success, one of the most definitive
books published on e-business to date.
few people understand the execution
side of e-business. I’ve done a lot of con-
sulting and it is the same frustration —
you come up with great ideas, but they
are difficult to implement because you
are talking about huge organizational
customer, the supplier, and the employee.
For a large company dealing with thou-
sands of suppliers, the interface problem
on the supply side becomes extremely
complicated. That’s where supply chain
management really kicks in.

3
eAI Journal: Dr. Kalakota, what is
e-business?
Dr. Ravi Kalakota: The simplest way
to put it is that e-commerce is buying
and selling on the Internet; e-business is
change. Also, at the large enterprise
level, it requires an unprecedented
amount of application integration to
make e-business a reality. And it is much
more than integrating applications, it’s
integrating application frameworks —
It’s similar on the customer side. With
a large company model, you’re dealing
with many channels at once, including
resellers and end customers. When you
start to deal with multiple customer seg-
ments, the problems become complex

2
about what an organization has to look
like to enable commerce online. If e-
commerce is the tip of the iceberg, e-
business is everything below the water-
line. It makes everything float, but is not
visible, and can probably do the most
something we haven’t seen before.
eAIJ: What are the key components
of an e-business system?
Dr. Kalakota: It depends on the size
and you need Customer Relationship
Management (CRM) systems that re-
quire heavy-duty processing. You see the
CRM area flourishing for this reason.
eAIJ: What are the key enterprise

1
damage if not implemented correctly.
I was always on a diet at one time or
another in my life, and I asked myself,
“What makes a diet work?” A diet
works if you put a lot of work into it and
of the firm. Companies with 200 people
will behave differently from companies
with 10,000 or more. For a small com-
pany, say an Internet start-up, the only
constituency that matters is the cus-
technologies that enable e-business?
Dr. Kalakota: From the customer
side, there’s multi-channel integration.
With most e-commerce activity, man-

24 eAI Journal • January 2000

agement has said, “We are going to treat
the Internet as a separate channel. We
are going to build our systems so that we
can sell to the customer through this e-
channel.” But quickly, we’re realizing
that the customer doesn’t want to do
business in only one channel; (s)he
wants to go across channels. A good
example is online banking. It failed mis-
erably in America because we didn’t
understand that customers who deposit
$10,000 at a branch would go home and
want to look at that $10,000 and pay
bills with it. This requires you to inte-
grate both the offline and online. We call
this “synchronization.” It’s difficult to
achieve and I expect it will be a major
driver for a lot of e-business investment
over the next three to five years.
The second major trend — one that’s
causing me concern — is the emergence
of wireless technologies, where cus-
tomers and employees are interacting
with the firm through a wireless medi-
um. From an applications standpoint, the
infrastructure needs are really unclear.
Much of what we have implemented will
quickly become legacy systems. In the
past, it took 20 years for something to
become a legacy system. In the 1990s, it
has taken as little as five to seven years.
Soon, it will probably take only two
years. By the time the company finishes
implementing something, it’s legacy.
The issue for managers is how to con-
stantly look ahead and make sure sys-
tems are compatible. Security and
authentication become even more
important in the wireless world.
The other big trend concerns enter-
prise applications. Many companies
have just finished installing their
Enterprise Resource Planning (ERP)
systems and the IT departments are
tired of the endless battle to get that
done. Do they scrap what they’ve just
implemented and start all over, or do
they migrate what they’ve just imple-
mented? That’s a major issue many peo-
ple are debating. Scrapping and starting
over gets you to e-business much faster
at a prototype level, but not at a produc-
tion level. So now you have a dilemma
inside the firm — management wants
the company to quickly become an e-
business, but this means you cannot do
things in the same way you did in the
past. You could say it’s a multi-channel
problem faced from an inward perspec-
tive — how to integrate all the different
enterprise systems.
eAI Journal • January 2000
Ten Things You Must Know About e-Business
1. Technology is the driver of business strategy.
2. e-Business is about getting internal processes and applications to sup-
port business over different channels, including the Internet.
3. e-Business enables both business-to-consumer and business-to-business
e-commerce. They are interdependent and not mutually exclusive.
4. Senior management must align business strategy, processes and appli-
cations to create an e-business system.
5. The new business design is to create flexible outsourcing alliances
between companies to improve costs and customer satisfaction, using a
low-cost, pervasive medium like the Internet.
6. e-Business recognizes that controlling the flow of information is more
powerful and cost-effective than moving and manufacturing physical
products.
7. e-Business is about using technology to innovate, enhance, and enter-
tain the entire customer experience.
8. e-Business designs require re-configurable processes and partner com-
munities.
9. Application integration is crucial for e-business as it ties together all the
enterprise components that are “below the waterline.”
10. Obsolescence is occurring at an increasing rate. The issue for managers
is how to constantly look ahead and make sure systems are compatible.
Compiled by Tony M. Brown, based on an interview with Dr. Ravi Kalakota and “The
Rules of e-Business,” Chapter One, e-Business: Roadmap for Success.
eAIJ: How important is ERP to the tionally know it. This disintegration has
e-business picture? already started. In the last 20 years, cor-
porations have moved from a vertically
Dr. Kalakota: ERP is a vital compo- integrated model to more and more out-
nent. You cannot do e-business without sourcing. It’s now going even further.
it. The core of e-business is order man- I’ll give you a simple example. In order
agement and that’s what ERP does. My to make a movie, a bunch of talented
strategy is to surround the ERP with people come together, shoot the movie,
other smaller, more flexible applications and disband to go on to make other
that talk to the core ERP. But there are movies. The exact same thing is hap-
some key questions to answer. How pening at the programming level, espe-
flexible are these systems to that kind of cially in the Internet world. When you
interfacing? Does the core base let you want to deploy a good product, you
do the flexible interfacing at the front bring a bunch of talent together, create
end? That’s the major challenge. It could something, and then disband.
be a problem with SAP because a lot of So, what we’re seeing is the emer-
the core engine was built a long time gence of “fluid structures.” In many
ago and the majority of the code written ways, the strategy is short-term; there’s
inside SAP came out in the early 1980s. nothing like long-term strategy any-
more. You need to have much more flu-
eAIJ: How must a business change idity of structure to quickly bring the
its organization and processes to best and brightest together. They create
become an e-business? value. Once the environment changes,
they can easily disband. It’s a project-
Dr. Kalakota: From an organization- based model — and this has a lot of
al standpoint, you’ll definitely see the impact on the structure of the firm and
disintegration of the firm as we tradi- the way you design IT systems. In the
25
U.S. today, IT is still largely deployed
following a vertically integrated model.
We don’t have a good handle yet on
what IT is going to look like in these
fluid environments.
eAIJ: In your book, you talk a great
deal about application integration.
Why do you believe it’s fundamental to
e-business?
Dr. Kalakota: The core components
of sophisticated e-commerce products
are never built in-house anymore. You
basically buy a bunch of core compo-
nents from different companies and then
figure out how to tie all the pieces
together to create an e-business. The
glue tying it all together is Enterprise
Application Integration (EAI).
The problem becomes complex in a
fast-moving environment, where you
have to put the glue in place quickly.
The EAI component is so critical
because, if you don’t have it or it does-
n’t work well, you cannot go to market.
Right now, I see companies trying to
invest in their own glue because there’s
no standard approach to integrating
these third-party components.
eAIJ: In your book, you also talk
about increasing process visibility.Why
is this important?
Dr. Kalakota: With a traditional cor-
poration, if a customer has a question
about an order, he typically calls some-
one at the company. This customer-fac-
ing employee then speaks to a col-
league to figure out where the order is.
The colleague has to call 10 other peo-
ple to find out what’s going on. If
you’re now saying you’re going to put
everything online and make yourself
internally visible to the customer, that
means you’re providing a view inside
the black box. You’re enabling visibility
of your processes. That’s probably
unheard of and extremely hard to do.
And it extends beyond consumers or
end customers to your suppliers. When
a customer asks about an order, for
instance, getting the answer often
involves going to your partners and
looking inside their systems. If your
partners cannot provide that kind of vis-
ibility, your customer satisfaction is
going to be shot.
Input and output were all we really
cared about. Before we never cared
26
Figure 1 — Roadmap to Market Leadership
about what was going on internally. I shows how difficult it is to separate and
think it’s time to do that. classify these things.
eAIJ: Are some processes more im- eAIJ: How does an organization
portant for an e-business than others? become an e-business?
For example, Business-to-Business
(B2B) commerce. Dr. Kalakota: There are five stages
(see Figure 1) in the road map to take a
Dr. Kalakota: You cannot really sepa- company from a cross-functional busi-
rate business-to-consumer and business- ness unit to an inter-enterprise communi-
to-business e-commerce. They are two ty. At each of the stages, it’s important to
faces of the same e-business coin. For align the scope of e-business design with
example, when you buy a book online, the nature of application integration. For
the purchase triggers a lot of B2B com- example, if the e-business design is
merce at the back end. The converse is restricted to a single business unit, then it
also often true — when B2B happens, it makes no sense to have a grandiose inte-
reaches the consumer at some point. gration plan that connects the entire
Take a simple example — returns enterprise. On the other hand, companies
processing. Many of the things we look often create an e-business vision that
at in e-commerce are one-way — flow- cannot be implemented because there’s
ing from the business to the customer. misalignment between the scope of the
But that doesn’t work anymore because design and magnitude of the application
7 to 10 percent of all products purchased integration problem.
are returned. Now, you have to worry A company also has to consider how
about a two-way flow — and few com- many years it will take to get there. If
panies have processes in place that can the company wants to get there in one
handle effective returns processing. year, the kind of investments and activi-
What do they do with the returned prod- ties they perform are going to be differ-
uct? Most of the e-commerce companies ent from what they would perform if the
don’t have any warehouses, so they send effort will take, let’s say, five years.
it back to the supplier. That is now con- In terms of maturity, many companies
sumer-to-business (C2B) commerce. It Continued on page 60
e-Business: Roadmap for Success
e-Business: Roadmap for Success is written by Dr.
Ravi Kalakota and Marcia Robinson. It is available
from Amazon.com. For your convenience, we have
included a link from the online version of this article
on our Website — www.eaijournal.com.
Reprints of this article, and any other in eAI
Journal, are available. Contact Denise Cullers at
214-340-2147 or denise@eaijournal.com for details.
eAI Journal • January 2000
Continued from page 26
are still at stage one, although they want to
get to stage five. Companies need to con-
sider their maturity in EAI and how it’s
going to impact their maturity in the busi-
ness model. For many companies, the
vision tends to get away from reality. The
vision might be an integrated enterprise,
but managers need to ask what, in reality,
is the maturity at the EAI level? If the
vision is at four and maturity is at one, you
have a big problem. Often, that’s the case.
eAIJ: So e-business reality trails the
vision by some considerable margin?
Dr. Kalakota: By at least three steps.
eAIJ: How should management
think through the migration path?
Dr. Kalakota: They should do it in
small increments. What I call “small
wins,” are critical. They should stitch
together the small wins.
eAIJ: What are the key points senior
managers need to understand about e-
business?
Dr. Kalakota: The CEO has to under-
stand that strategy depends on execution.
To win, you need an adaptive strategy at
the high level. To implement it, you need
the adaptive infrastructures and applica-
tions. In the middle comes the organiza-
tional issue. Is your organization adapt-
able at the execution level? Often, we
find that people create these great adap-
tive strategies and the CIOs are creating
great adaptive infrastructures, but the
middle piece is missing. How to convert
that adaptable strategy and link it with
the adaptable infrastructure — what I
call adaptable execution — is not there.
And it is really hard to do.
A CEO thinking pure strategy and
saying the technology is somebody
else’s problem is not going be success-
ful. The same goes for CIOs. Many of
them talk about strategy and business
but don’t really understand what it
means on the other side. It’s a tricky
problem that requires significant study.
It’s crucial for e-business success. eAI
Editor’s Note: Dr. Ravi Kalakota clearly
articulates the crucial role for application
integration as an enabler for e-business. We
agree entirely. That’s why we are eAI Journal
— The Resource for e-Business and
Application Integration.
60
Continued from page 22
educated users is counterproductive.
With missed timelines and budget over-
runs, IS management tends to question
the efficiency of the Web effort. That
runs the risk of turning a potential inter-
nal ally against your efforts. Analysts
will tell you that for companies to suc-
ceed in an e-business setting, everyone
in the organization needs to be pulling
in the same direction.
In its desire for perfection, IS often
becomes victimized by a kind of mis-
sion creep that adds levels of complex-
ity to a Web project. But we must re-
member that our goal is to empower the
user, and therefore the organization,
with information exchange that both
parties find beneficial. It’s a bad idea to
put an entire business on the Web, but
that’s what some organizations are try-
ing to do. Meanwhile, the clock ticks
and customers can’t interact with your
organization the way they must.
Exacerbating the problem are the
physical limitations of existing systems.
For instance, IS may tell you that there’s
no way the project can be completed in
less than 18 months, at a cost of $4.2 mil-
lion dollars. Your online data mart, they
say, is relational. The legacy data you
need to make your Customer User
Interface (CUI) truly effective is stuck, as
data, on a legacy mainframe computer.
Extracting and migrating that data to a
new relational database, you’re told, will
take untold thousands of hours. Don’t
forget the costs involved with imple-
menting the new database software.
An alternate approach might be
batch migration. But you quickly real-
ize that’s fraught with shortcomings,
too. Synchronizing the changed and
added data with the original dataset on
the mainframe presents a new round of
problems. In addition, Marketing is
bound to give you additional headaches
with this “solution,” rightfully carping
that their customers are complaining
they can’t always get the data they need
or want. For instance, if the customer
wants to see his/her account status, or
check on a previous order, what good is
the Web if it takes even two minutes to
access that information? What good is
it if the information is still stored on the
mainframe, and IS is only batching 25
percent of the data per week to a new
Object Relational Database Manage-
ment System (ORDBMS), hoping that
customers won’t ask for the stuff still
on the other side?
You can clearly see how the desire
for overkill and its paralyzing effects
threaten the benefits of Web communi-
cations. Executives and IS managers
need to step back and revisit the reasons
they want to be Web-enabled in the first
place. They want to give specific cus-
tomers specific information. That tech-
nology exists right now. It’s easier to
implement than most IS professionals
imagine. Sometimes when solutions are
simpler than we anticipate, it takes a
while to think outside the box and real-
ize that we don’t need to reinvent our
entire business system.
Conclusion
Software is available today that makes
legacy data usable for Web access —
without the expense and time IS depart-
ments have become accustomed to hear-
ing about. It’s software that lets you keep
your data on the mainframe, yet enables
you to access it in real time using a Web-
based application. The impact is enor-
mous. Companies can save the time they
would have spent migrating the data to a
new relational database. They can save
their money by not having to buy that
new database and continuing to use their
existing software and hardware. Most
important, they can save their own hides
since the customers who’ve become
indoctrinated to the new world of instant
information can find that on their com-
pany’s Website. eAI
About the Author
George Langan,
President and Chief
Operating Officer
of Cross Access
Corp., was named
to his current posi-
tion in March of
last year. He has an
extensive track record of working with soft-
ware companies of all sizes, from startups
to multi-national firms. Prior to joining
Cross Access, Mr. Langan served as
General Manager at Bell + Howell. He has
also been VP, Marketing at Legent Corp.,
and was the founder and president of TAI,
a software firm that developed back office
applications for the brokerage, banking
and utilities industries. Before that, Mr.
Langan worked at AT&T. Voice: 408-735-
7545; Website: www.crossaccess.com.
eAI Journal • January 2000