Transforming your company into an e-business means leveraging technology and disseminating business knowledge electronically throughout the enterprise. Full-time Internet connectivity and Web-savvy management are mandatory as the Web becomes the primary driver in the development of new e-business models and workflows. Here's what financial managers need to know to become e-business architects.
E-business has already become one of those catchall terms that mean different things to different companies. For accounting software vendors, e-business encompasses electronic commerce, self-service data access and the delivery of business intelligence. IBM defines e-business in terms of content management, commerce transactions and collaboration via groupware. To get a better perspective, let's look at what it means to be an e-business.
First and foremost, an e-business leverages technology. An e-business takes advantage of technology however it can to help realize operational efficiencies in its core competencies. As new technology comes along, an e-business must be an early adopter in order to determine if and how it can derive business benefit from deploying the technology. An e-business aims to convert new technology as quickly as possible into a catalyst for improving its business practices and gaining a competitive edge.
An e-business is driven by digital knowledge. An e-business aims to centralize, share and disseminate business knowledge electronically, both to minimize paperflow and make knowledge available to as wide an audience as possible. This is achieved by digitizing business knowledge in the form of electronic document libraries and making the knowledge available by providing the desktop tools to access and analyze that knowledge. A database repository of corporate knowledge and desktop knowledge-mining tools are both hallmarks of an e-business.
An e-business is a collaborative enterprise that recognizes the need for a close partnership between its stakeholders, employees, customers and suppliers. Anything that can be done to minimize the distance between the business and its partners and automate transaction processing among those partners helps strengthen relationships and reduce costs. This is why self-service access to information and participation in collaborative, electronic workflows are vital to the success of every e-business.
Recently, full-time connectivity to the Internet and Web-savvy management and technology expertise have also become mandatory for any e-business. Connectivity to the Internet lets businesses take advantage of a low-cost worldwide communications network, new "walk-up" software applications and dramatically reengineered Internet commerce (IC) business workflows. Today, a key focus of every e-business is to begin exploiting the rapidly growing range of business services hosted on the World Wide Web as the Web becomes the primary driver in the development of new e-business models and workflows.
The main topics of interest to financial systems managers who are striving to transform their businesses into e-businesses are: e-business technology architecture, or the technology infrastructure required to support an e-business; e-business challenges, or the issues that are holding back e-business from widespread adoption; new Internet-commerce workflows, or how the traditional fulfillment and procurement value chains are being dramatically reengineered; new Web storefront and procurement software; and how enterprise resource planning (ERP) and mid-tier software vendors are integrating e-business functionality with their back-office application suites.
E-Business Technology Architecture
The technology architecture for an e-business is built on a typical three-tier client/server architecture (see E-Business Technology Architecture).
The foundation of any e-business is a database server hosting a database management system (DBMS). A single, universal DBMS engine may be all that is required to manage the business data, or multiple database engines may be implemented to handle different types of data more efficiently. These data types include: textual document files; transaction records such as orders, invoices and payments; summarized data used for decision-support purposes; documents or pictures in the form of image files; Web content in the form of hypertext markup language (HTML) pages and forms; and software objects used by applications to provide specific functionality.
The database engines may include relational (RDBMS), multidimensional (MDBMS) or object (ODBMS) database-management system engines. A single physical server computer or multiple servers running different server operating systems may be used to host the database engine. But for an e-business, the database is a "hub" application, and database access is a key service to be delivered to every employee in the organization.
Above the database server(s) are the application servers that provide specific control of and access to subsets of the data stored in the database(s). These application servers host the software that encapsulates the business rules and logic used by application users to access and manage data stored in the database. Application servers may focus on electronic messaging, publishing Web content, processing accounting transactions or retrieving documents and images from online libraries, for example. Application servers also act as a security layer between clients and the database to restrict access and ensure the business integrity of the data.
The database server, application servers and application clients are connected over a local- or wide-area network (LAN or WAN) to provide local and remote access both to applications and data. Database and application servers may utilize any type of hardware family, such as an Intel PC, a UNIX-based multiprocessor server, an IBM AS/400 minicomputer or a mainframe. The network may be based on a popular LAN network operating system (NOS) such as Novell NetWare or on a WAN using transmission-control protocol/Internet protocol (TCP/IP), the networking protocol of the Internet. In today's e-business environment, an internal corporate LAN/WAN may also function as either a private employee intranet or shared business-partner extranet through connectivity to the Internet.
Linked to the LAN or WAN either by direct cable connection, modem or wireless links are client devices that may be desktop PCs and workstations, laptops, portable handheld devices such as Palm PCs or other devices such as cellular phones and standalone information kiosks. These client devices typically run Microsoft Windows-based applications or use simple Web-browser software to access HTML or DHTML/XML (dynamic hypertext markup language/extended markup language) pages and forms loaded from Web-content application servers, or run compact ActiveX or Java applets downloaded on demand from Web program servers.
The Web server is already a vital part of the technology architecture of every e-business. These servers may be used for a variety of purposes, including: managing connectivity to the Internet by internal users and logging their activities; publishing Web content or downloading applets to Web browsers and other Web servers; restricting access to internal data by external Web clients and servers; and limiting access to external Web servers by internal users.
Specialized Web servers, such as commerce servers, provide specific functionality for managing electronic commerce, such as establishing connections with other services to effect credit card authentication and payment processing, for example. (See E-Business Internet Architecture on page 8A.)
In practice, Web content and commerce servers may not be physically housed within your company but hosted on servers maintained by third-party Internet service providers (ISPs) who charge a monthly fee for running the servers and hosting your Web content and applets. Using an ISP is likely to be a convenient and less costly route to managing e-business over the Internet for most small to mid-sized businesses with limited internal information-systems (IS) resources. It also looks likely that ISPs will move into the business of hosting applications software, such as ERP suites that are usually expensive to acquire and implement. So in the future, an organization's e-business technology infrastructure needs may shrink rather than grow and it can rent both Internet hosting and outsourced back-office application services. In this scenario, Web browsers could literally become the primary window on the world for accounting departments.
The Web browser is already the universal client/user interface for many e-business applications and could become pervasive if the promise of thin-client network computers (desktop computers that rely only on the Java virtual machine to run software locally) is ever realized. This is because browser software is both inexpensive and versatile. Browser software has been ported to run on many different hardware devices and operating systems and can be used either to display content, such as HTML pages and forms, or provide the execution space to run applications as Microsoft ActiveX controls or Java applets. A browser can run independently of popular desktop operating systems such as Microsoft Windows, which makes it cheaper to acquire and maintain, and able to run on non-Intel hardware. However, thin-client desktops put more stress on the network bandwidth and server resources, so what you gain in client simplicity you lose in server complexity. Nevertheless, it is likely that within the next three to five years most e-businesses will be operating three-tier or n-tier browser/server technology architectures.
Transforming your business into an e-business means grappling with concerns over security, performance and technology, and organizing your people and systems to support e-commerce. None of these challenges are trivial, and their range and depth depends largely on how you answer these two questions:
1. Will your e-business initiatives be limited to internal employees only (focused on an intranet) or extended to external business partners (focused on an extranet)?
2. If focused on an extranet, will this activity include e-commerce (EC), and if so will the EC include both business-to-business and consumer-to-business transactions?
If your e-business applications and data are limited to business-within-business use by internal employees only, the challenges you face are simpler. You know the scope of audience you are working with, and you have a greater degree of trust in their interaction with the data. Even so, only certain levels of employees may be allowed access to certain data, and some information, such as salary data or company performance and financial data, may remain taboo. In this scenario, the extent of your e-business initiative may be establishing a basic intranet to provide access to: corporate bulletin boards and information centers; document sharing and collaboration groupware; corporate event and group activity scheduling and calendars; self-service travel booking, training or HR applets; and requisition, timesheet or T&E expense submission applets.
Opening up your systems and data to external parties, even trusted business partners, demands better application and data security to ensure that partners can only access functions that make sense and read or change only the data that they truly "own." Interacting with consumers over the Internet for electronic commerce is more risky. Here there is real potential for unauthorized data access and compromising the security of these consumer-to-business transactions. Internet commerce e-business audiences can have different characteristics (see Three Types of E-Business Audiences on this page).
Much of the concern over security has focused on the problems of sending commerce data, particularly sensitive data such as credit card information, across the Internet a publicly accessible and insecure network. Other security concerns include authenticating who exactly is accessing your internal data to prevent unauthorized access and limiting access to certain data by permission level or time window, for example. Digital certificates and digital wallets are just two ways that authentication and payment processing can be more securely effected. A digital certificate is an electronic identity card that is maintained and vouched for by an external certificate provider so that the identity of a business or consumer can be independently verified as part of an electronic commerce transaction. A digital wallet is an electronic file of payment information, such as a consumer's credit card data, that can be accessed securely either from the client or a server machine during a payment process to avoid the customer having to key in and submit the data manually across the Internet.
E-business extends the reach of applications both inside and outside an organization, so the number of users connecting to applications can dramatically increase along with the volume of requests for data and transactions processed by the application and database servers. To ensure that increased request and transaction loads can be managed and that transactions complete successfully or fail in a controlled manner, many e-businesses will also need to consider implementing transaction-processing (TP) monitor servers to manage transaction throughput and integrity. The job of the TP server is to act as a transaction conduit (or queue manager) charged with balancing the transaction load passed to the database servers to ensure consistent performance by avoiding peaks and troughs in transaction processing. Increased connections and volume may also demand upgrading your network bandwidth, increasing the number of applications servers used or revving up the specification of your database server hardware. A more complex and costly technology architecture is a challenge most e-businesses are likely to face.
Keeping the technology infrastructure for an e-business running and ensuring it takes advantage of the latest advances is a difficult task for even the most sophisticated IS department. As a result, e-business management must either recognize that new roles will be required to manage the changing technology architecture and operational realities more effectively or decide to outsource certain responsibilities to ISPs. An e-business is likely to need full-time staff members in positions such as: chief technology officer (to manage the strategic development of the technology infrastructure); Webmaster (to manage Internet connectivity, information publishing and Web servers); and knowledge manager (to manage the centralization and dissemination of corporate knowledge).
Also, as more e-business transactions are processed electronically rather than manually by order clerks and more inquiries are handled online by self-service data-access applications, many clerical staff members will need to be moved into new roles. These roles will include process-exception handling and spending more time analyzing the e-business activity for improved management information and decision support.
New Internet Commerce Workflows
Electronic commerce (EC) in the form of electronic data interchange (EDI) and electronic funds transfer (EFT) has been around for a couple of decades. EDI is a transaction-mapping standard used when passing a transaction between two software applications, while EFT describes the many proprietary file formats used to pass payment transactions between banks or between businesses and banks. Both EDI and EFT are traditionally associated with Fortune 1000-level businesses, their business partners and banks, or with multinational companies handling significant cross-entity accounting traffic. With the arrival of the Internet, the EC landscape is changing so much and so fast that many writers and analysts are ditching the term "electronic commerce" in favor of "Internet commerce" (IC).
IC does not make EDI or EFT obsolete; it merely absorbs them. Both EDI and EFT can benefit from the reduced cost of using the Internet as a router for communicating EDI transactions and EFT files between parties. This reduced cost comes at the risk of less secure transmission of the data, because the Internet is publicly accessible, and less predictable performance due to variable traffic load on the Internet. Most EDI and EFT transmissions still take place over secure, private value-added networks (VANs) that each EDI and EFT subscriber must bear the cost of. A small amount of EDI and EFT traffic is beginning to use Internet routing, usually via so-called virtual private networks (VPNs) that use point-to-point tunneling techniques to help reduce the security risk and increase the predictability of performance. A VPN is virtual because the network connection is created on-demand across the Internet and private because the data are encrypted and compressed when sent (or "tunneled") between the two points, namely the Internet-protocol (IP) addresses of the sender and receiver. In reality, EDI and EFT will only be truly absorbed by Internet commerce when leading EDI users such as General Electric and retail bank-teller networks manage all their electronic-commerce traffic over the Internet if that ever happens.
In any case, Internet commerce is not about any one technology; it is about leveraging the synergies between the Internet as a routing infrastructure, EDI and EFT over the Internet, the World Wide Web as a vast resource of business service providers, electronic mail messaging and workflow. IC is already reengineering many supply and value chains and promises to introduce a number of new and important standards for managing electronic-commerce transactions and workflows. Two value chains that are already part of the IC landscape are the core business activities of fulfillment and procurement that automate the selling and buying of goods and services.
Internet Commerce Fulfillment Workflow
A typical IC fulfillment workflow illustrates how a combination of technology is pulled together to change the way goods and services are sold electronically in a consumer-to-business relationship. (See A Sample Internet Commerce Fulfillment Workflow on page 13A.) A critical part of this fulfillment workflow is real-time interaction with the back-office accounting system to provide real-time processing information and to manage the workflow from end to end with minimal human interaction or the need to manually rekey any data.
The Internet-commerce fulfillment process uses a Web storefront to engage the consumer in an online buying process by:
- connecting in real time with the back-office inventory, sales-order and accounts receivable modules
- using electronic mail to maintain an informational and promotional dialog with the customer
- nintegrating EDI to alert drop shippers or service providers to deliver goods or services
- nintegrating with electronic authentication and payment authorization services
- providing Web self-service applications to manage status tracking and other exception events
Until now, you could expect to pay hundreds of thousands or even millions of dollars to get a turnkey IC fulfillment solution that links a best-of-breed Web storefront application with your back-office accounting or enterprise resource planning (ERP) applications. But this cost is already coming down as packaged services such as those offered by Pandesic and new integrated Web storefront modules from mid-tier vendors such as Great Plains Software Inc., Navision Software and RealWorld Corp. bring IC fulfillment costs down to tens of thousands of dollars. Within three years, the availability of an integrated IC fulfillment capability will be a standard module in most mid-tier and ERP accounting suites.
Internet Commerce Procurement Workflow
A typical IC procurement workflow illustrates how a combination of technology is pulled together to change the way goods and services are bought electronically in a business-to-business relationship. (See A Typical Internet Commerce Procurement Workflow on page 14A.) IC procurement is actually little more than a sophisticated Web self-service application that applies the concepts of IC fulfillment to the requisitioning process. Real-time connectivity to the accounting system is less important, apart from some internal code table look-ups, since the main interaction is to pass the requisition to the purchasing system (or the accounting ledgers) at the end of its submit-and-approve workflow.
The Internet-commerce procurement process uses a Web-based intranet company store to engage the requisitioner in an online buying process by:
- using electronic mail and workflow to automate the approval and other business-rule checking associated with a requisition
- providing Web self-service applications to manage inquiries on the requisition life cycle or to acknowledge receipt of requisitioned items
- connecting to supplier catalogs across the Internet via item-level hyperlinks
- integrating EDI or e-mail to send purchase-order documents directly to vendors
- leveraging structured-query language (SQL) to post requisitions, unapproved orders or receipts to in-house, back-office purchase-order modules
Most accounting systems today offer IC procurement either by providing a fully Web-enabled purchasing module or a separate Web-requisitioning applet. You may not get the innovation and walk-up user interface of a best-of-breed Web procurement package such as Ariba Technologies Inc.'s Ariba ORMS, but integrated options are usually much less costly to acquire and implement since they are already integrated with the rest of the accounting suite. Some vendors, such as SQL Financials International Inc. with its Clarus e-procurement module, are forging relationships with the IC procurement software vendors (in this case using Elekom Corp.'s Elekom Procurement) to deliver out-of-the-box integration. Over the next three years, we likely will see many more of these alliances, particularly in the ERP accounting space, and many of the startup best-of-breed IC procurement vendors will be acquired, ending up as modules in mid-tier and ERP accounting suites.
ERP and Mid-Tier Software Vendor E-Business Initiatives
ERP and mid-tier accounting software vendors have been steadily increasing the value of their software to e-businesses. Long before the current focus on Web-enabling their software suites, some vendors had already enhanced their packages for e-business to include:
- integration with electronic mail systems for routing business event-driven alert notifications, routing business documents such as orders and invoices as an alternative to printing and mailing, and routing electronic copies of financial and management reports
- integration with imaging systems for scanning and attaching images of paper documents such as check receipts and vendor invoices, and archiving images of reports to store in an online financial report library
- integration with workflow-management systems for visualizing process flows, assembling business functionality around process steps, saving workflows in process repositories and analyzing workflow efficiencies to assist with business-process reengineering
- providing electronic funds transfer (EFT) and electronic data interchange (EDI) output formats for passing electronic transactions between business partners
The rapid rise of the Web acted as a catalyst for more vendors to look at redesigning parts of their applications for walk-up self-service data access via a Web browser and for Internet commerce. Some vendors, such as Oracle Corp. and Prestige Software International, have taken the approach of Web-enabling their whole application deliverable. This means that all the functionality included in Oracle Applications (Release 11) or Prestige Masterpiece/Net can be used by thin-browser clients rather than conventional Microsoft Windows-equipped desktop PCs.
Middle-market, Microsoft technology-centric vendors such as Great Plains Software and Navision Software have recently released Web storefront modules that are designed to fully integrate with their respective inventory, accounts receivable and general ledger modules. Both the Great Plains Dynamics.Commerce and Navision WebShop modules used Microsoft's Site Server Commerce Edition product as the tool to build their Web storefront functionality.
|Accounting software and the complementary applications that support business management will be fundamentally changed by the transition to e-business.|
Microsoft recently scored another win for Site Server when it persuaded Pandesic to incorporate Site Server into its Pandesic e-business offering that provides a complete turnkey electronic-commerce solution based on combining SAP's ERP software with Intel hardware. But not every company is taking the Microsoft technology route. RealWorld is linking its RealWorld Expertise.SQL suite with Lotus Domino Web-server technology from IBM to deliver an integrated storefront offering. By leveraging Domino.Action, Domino.Merchant and Domino.Broadcast, RealWorld offers secure Web shopping, complete back-end integration, electronic transmission of business documents and self-service access to fulfillment supply chains. Infinium Software Inc. is also making use of Lotus Notes and Domino as part of the technology supporting the new e-business Extensions for its IBM AS/400-based Infinium Financials suite. The e-business Extensions combine Web self-service data access with event-driven workflows and electronic mail to handle exception processing such as resolving order-entry credit-limit holds and approving purchase requisitions and orders.
Rather than go straight to full-blown storefronts in their first releases, vendors such as Accpac International and AccountMate Software Corp. have focused on delivering Web-based order-entry capabilities for access both by external customers and internal salespeople. Included in the Accpac for Windows e.Advantage suite is the e.OE.Order Web applet for processing sales orders via a Web browser. Using standard Accpac order-entry business logic, the order entries are passed back to the Accpac database as bona-fide sales orders. AccountMate Software offers its Internet Sales Order module as an add-on applet to its Visual AccountMate suite for Web order entry. In both cases, these order-entry applets ensure secure log-in using a customer ID and password and can restrict how each customer (or salesperson) interacts with the application in terms of what he or she can order and the information displayed during the order session.
Transforming your business into an e-business has to be very high on the list of strategic goals over the next couple of years. Within a very short time, almost every business will have to be an e-business not just to keep up with early adopting e-businesses but just to stay in business. Like buying a PC, you cannot afford to sit and wait for the perfect model to be released at the perfect price. Early adopters of e-business will have already gained valuable insight into how they can transform their businesses or develop new niche businesses from their hard-won experiences with imperfect products and emerging standards.
Many of the core technologies and applications of e-business such as networking, databases, document management, imaging and workflow have been around for a while. The difference today is that the Web has provided the essential glue for tying these technologies and applications together in ways that are hard for anybody to predict. The result of this unpredictability is already proving to be a tsunami of innovation as new business processes emerge and new products and vendors pop up to support them. And because Web time just moves faster, this innovation threatens to overwhelm business managers who do not keep abreast of the rapid pace of technology change.
Accounting software and the complementary applications that support business management will be fundamentally changed by the transition to e-business. These applications can only be incrementally upgraded for so long as vendors struggle to enable their applications for the management of an e-business. Over the next five years, we will see massive changes in the design and deliverables of a traditional accounting system changes that will make the transition to Windows and client/server accounting seem like child's play by comparison.