E-Business Is More of an Economic Disadvantage to Businesses Than Advantage

E-business is more of an economic disadvantage to businesses than it is an advantage. Discuss.

First, the essay will briefly define what e-business is. IBM developed and promoted the term in the 1997 advertising campaign. It claimed electronic means and Internet could add value and showed how IBM helps its clients to “do real business on the web.” (Gouge, 2003; IBM, 2008). The advertising defined e-business as “transforming key business processes by using Internet technologies” and carried the company forward in B2B market (IBM, 2008). Dubosson‐Torbay et al. (2002) conducted a massive literature review and concluded e-business is a broader term that include other forms using electronic networks (internet, extranet) and IT infrastructure that helps interact within and outside the company and improve customer service. E-business should not be confused with e-commerce. After e-business term was popularized by IMB, Bartels (2000) outlined the major differences between e-commerce and e-business. E-commerce is concerned with ‘front-end’ processes that touch the external parties, be it customer, suppliers or partners, while e-business is a broader term also focused on internal and general processes within the organization, such as inventory management, production, finances, HR management and knowledge management (Bartels, 2002). Bartels (2000) stressed that major reasons for adopting e-business strategy is reducing the costs and improving the productivity, while e-commerce strategies focus on improving the relationships with external parties and working on customer satisfaction. Taking into account that adopting the e-business strategy requires the changes within the company, its structure and culture, there are numerous cases when it was not as successful as it was predicted (Willcocks and Graeser, 2013).

E-business concept has altered the way business operates and organize processes, resulting in groundbreaking changes in recent decades. A number of processes, such as production, storage, accounting, and number of HR management practices has successfully implemented computers with installed enterprise resource planning (ERP) software (Subba Rao, 2000; Tsai et al., 2012). This was also related with the change from using the large mainframes to small and cheap personal computers and own even own laptops (Tsai et al., 2012). The ubiquity of internet made it possible to implement could-based solutions that use internet, also affecting the way people work (ibid). Han et al. (2007) mention a large number of tangible and intangible benefits with the statistics as the proof; this includes the improvement of productivity, cost reduction, growth of revenue and profits, decrease of waste and time of delivery. Intangible benefits include the enhancement of transparency, greater felicity of the company and growth of customers’ satisfaction (Han et al., 2007). As the software packages become more comprehensive and sophisticated, the confusion between the terms ERP and e-business increases, for example Oracle offers a modular ERP platform, the “Oracle e-Business Suite” which include a number of software solutions to help business along the supply chain. However, Himanshu et al. (2011) notes the major difference come from the fact that the traditional ERP systems focus on internal value chain, whereas e-business model is a broader term that also includes the issues of collaborating with suppliers and  distributors, promoting sales and improving customer service. Indeed, IBM, which coined the term, has not suffered from the rise of ERP vendors, instead, it has established alliances with such largest vendors as Oracle and SAP, helping their clients to establish and implement the systems, consulting both parties (IBM and SAP, 2013; IBM, 2014). Himanshu et al. (2011) concludes that the greater integration between e-business and ERP can lead to increased competitive stance of the companies. As the adoption of ERP and e-business is often related and interdependent, they share similar challenges in implementation. Han et al. (2007) quotes the research of the Gartner Group, according to which at least 7 of 10 ERP projects fail partially or fully, even after the period of three years of implementation. The major reasons are the difficulties in customization of ready products, the need of full of partial redesign of business processes, insufficient or improper training and general large costs of implementation. Ram et al. (2013) conduct a comprehensive analysis of existing literature on CSFs of ERP implementation and test their applicability. They suggest the most crucial factors are related to the proper project management when installing ERP, training and education, re-engineering of business processes, system integration (particularly with external partners), and availability of resources to complete and support the implementation.

A number of studies has revealed that adopting e-business orientation leads to economic advantages to businesses. E-business increases the opportunities for business by eliminating distance barriers and promoting internationalization, as existing delivery services can help any company, even small one, offer and promote their products worldwide, be it a new fashion brand from Italy or a Chinese startup offering quality devices (Corno et al., 2015; Rosenterin, 2015). Large and small companies working in hospitality industry can offer pre-booking services from everyone beforehand, while also using social media and e-word-of-mouth promotion (Yang et al., 2014). Service industry firms, apart from obvious online promotion tools, can use Internet to share information about the services for those already interested in visiting certain place (Bilgihan et al., 2014). Restaurants, hotels, hairdressing salons and most of the service companies benefit from the reviews and word-of-mouth as both promotional method and tool to find the imperfections of services (Filieri and McLeay, 2014; Zhang et al., 2014). E-business also promotes the creation of so-called Virtual Teams; software development companies and companies with a large number of positions that can be teleworked create virtual team to pool the talents and expertise from all-over the world, with no space barriers (Ale Ebrahim et al., 2009; Berry, 2011). Similarly, many service companies from emerging countries benefit from growing volume of offshore outsourcing market (Di Gregorio et al., 2009; Tate et al., 2009). Apart from increased opportunities, e-business model benefit from cost reduction, by reducing paperwork, lowered rent from physical location, more effective work with inventory, purchasing, order processing, communication and many other areas that are now often managed by ERP systems within the company (Cross, 2000; Rajkumar, 2001; Ash et al., 2003; Zheng et al., 2004). In addition to greater market opportunities and cost benefits, e-business model helps companies to maintain the competitive advantage by employing the informational capacities to monitor and analyze the information about the market and main competitors (Wu et al., 2003). With the shift from mass production and distribution to customization and rapid change on the market environment, e-business is a crucial tool to attract and maintain company customers (Borges  et al., 2009). The major ways are the implementation of e-business infrastructure to monitor competitors, monitor and influence customer behavior, by analyzing the data about customers’ behavior including e-word-of-mouth (ibid). E-business model nowadays should encompass technology-based competitive intelligence process, especially on very competitive markets (Bose, 2008). In addition, e-business help to have close and interactive relationship with customers (Gummesson, 2002).