E-Business is Dead, But Not Buried

Friday Feb 23rd 2001 by Chris Pickering
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In this Incarnation, E-Business Comes Back as a Serious Tool to Increase Business Effectiveness

It's time to rejoice: E-business is dead! Long live e-business!

First, the obituary. E-business was born in 1995, and died in the summer of 2000.

At its birth, e-business was widely heralded as a magic elixir for businesses big and small. E-business promised to increase revenues, reduce costs, and attract a worldwide customer base—all for the price of a Web site. Messiahs preached e-business. Businesses converted to e-businesses in droves. And the press celebrated the "New Economy." E-business was going to change the world.

E-business grew rapidly as an infant. Leveraging its Internet ancestry, its first demonstrable skill was communication. Using Web sites to display marketing information, collect customer feedback, and give companies a 24x7 virtual presence was almost irresistible. These information sites, often called "brochureware," made everyone sit up and take notice of e-business.

During puberty, e-business grew like a weed and matured rapidly. Its success as a business communication vehicle led to the first e-business transactions—online sales. It turned out that brochureware whetted customers' appetites to consummate sales immediately. Electronic catalogs and online ordering capabilities—e-commerce—marked e-business's growth through puberty. Now e-business was affecting revenues. Customers, and companies, could do business 24 hours a day, 365 days a year. E-business attracted more and more converts. By 1998 all Fortune 1000 firms were using the Internet in some way and 63% were doing e-commerce (Survey of Advanced Technology—1998 by Chris Pickering). Enthusiasm for e-business bordered on the hysterical.

Businesses looking for venture capital jumped on the e-business bandwagon driven by venture capitalists. No business plan was complete without an e-business component. It even got to the point where business plans needed only e-business components. Startups selling the same old products but using the novelty of the Web to do it had no trouble getting funded.

Established economic principles were pooh-poohed by e-entrepreneurs, venture capitalists, and the press alike. Profits didn't matter—"mindshare" did. Cost control was for anal-retentive accountants—e-businessmen spent whatever it took to attract customers. Cash flow? Where'd you hear that tired old phrase? The trick in the new economy is to blow through the latest round of funding so you can go back for more. Besides, once we issue the IPO, those astronomical multiples will take care of all our cash needs for a long time.

By the time e-business reached adolescence its future looked bright. The naysayers grew silent, as experience seemed to support the prophets of the New Economy. Dot-coms were funded, and grew, in the absence of profits—in some cases, in the absence of even the hope of profits. Stock-market valuations soared, and soared, and soared. What could you say? It seemed that there was no end in sight. Maybe e-business was magic, maybe e-business could work miracles.

Then, suddenly, the hemorrhaging began and e-business passed aged rapidly. Venture capitalists—the source of needed transfusions—began asking for evidence of profitability before injecting more money into heretofore bellwether dot-coms. And the dot-coms themselves had mostly bad news for Wall Street. By the spring of 2000 no one was willing to pay ridiculous multiples for the stocks of companies that could not say whether they would ever turn a profit. E-business the miracle-worker was growing weaker by the day.

E-business the miracle-worker died in the summer of 2000. It turns out that it wasn't magic, that it couldn't ignore economic laws, that it couldn't produce profits when costs always exceeded revenues. E-business the miracle-worker was mortal after all. May it rest in peace.

Long Live E-Business

E-business the miracle worker left its mark, though. Its virtues—communication and collaboration, 24x7 availability, a simple interface—have had a lubricating effect on business processes that is so powerful they have given a new life to e-business. E-business is different this time. It has been reborn as a business tool. No miracles. No New Economy—just a tool to be used when the job requires it.

And there are plenty of jobs that require it. The old jobs of brochureware and e-commerce still need to be done, as do the newer jobs of customer relationship management (CRM) and supply-chain management (SCM). Intranet applications, such as human resources (HR) portals and time-and-expense reporting systems, have proven valuable. Procurement systems linked to vendors' order-entry systems are another natural e-business application. These are all everyday business applications; just the thing e-business is good for.

Looking at e-business as just another business tool is a healthy and necessary step in e-business's evolution. As long as e-business was supposed to be magic, it was impossible to judge it fairly. Now that its mystical aura is gone, it is easier to see e-business for what it is. From this new vantage point—as an enabling technology for greater business effectiveness—the future of e-business seems secure.

Some still cling to e-business the miracle-worker and are trying to raise it from the ashes by calling it "m-business," for mobile business. But the truth remains the same—m-business or e-business, it's still just a business tool. Long live e-business.

Chris Pickering is president of Systems Development, Inc., an IT research and consulting firm. He also is a senior consultant for the Cutter Consortium, where he has written a survey-based report on the state of e-business (more information is available at www.cutter.com/itgroup/reports/ebustrend.html). He may be reached at cpickering@mail.planetkc.com.

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