As your business expands, a simplistic approach to managing online sales and marketing may no longer be enough. When is the right time to switch from an ad hoc approach to integrating your technology? How much will you have to spend to integrate your technology, and what benefits can you expect? Angus Kidman offers some guidelines.
For many businesses, with e-commerce is a useful means of attracting customers but it remains a relatively minor part of their overall mix. According to the 2006 Sensis e-Business Report, 63 percent of Australian businesses that offer the facility to buy online take less than 10 percent of their orders that way.
If your business falls into this category, then it's likely that you handle incoming orders in a fairly ad hoc manner. Many smaller companies effectively run their online stores entirely separately from their other channels, and integrate their electronic orders by retyping or importing them into existing stock control and financial systems. Because the majority of businesses outsource the running of their website, it appears to make sense to treat it as an entirely separate offshoot.
While this is an inexpensive way of getting started with e-commerce, it's fairly inefficient, especially as order volumes begin to grow, and it introduces more potential for errors. With 19 million people worldwide going online to shop each day, according to IDC research, e-commerce is becoming an increasingly important consideration for all businesses.
Taking an ad hoc approach also generally makes for slower order processing, a dangerous strategy in an era where customers increasingly expect instantaneous service and fast delivery. A recent survey by content management company, Akamai, found that 75 percent of consumers won't return to a site that takes more than four seconds to load. They are also similarly impatient with slow-to-respond sites.
Another good reason for streamlining your systems is to position yourself for future growth. There's a clear correlation between business size and ability to handle e-commerce. Sensis found that 52 percent of businesses with less than 20 employees can handle online payments, that figure rises to 63 percent for larger operations. If growth is your goal, then integration will eventually have to be a major strategy.
If the percentage of orders you are taking online is already above that 10 percent 'cutoff mark' (or growth patterns suggest you will reach that level soon), then looking at an integrated system makes sense. This is even more important if you already have an automated stock control and management system—without having all your channels managed through this system, you aren't taking full advantage of your existing investments.
In an ideal world, online orders should generate an automated packing slip, make adjustments to stock levels, update all appropriate bookwork, and possibly even generate orders for stock items that are running low. Realistically, you may not be able to achieve quite this level of integration if you have limited funds. However, automation of any step in the e-commerce chain leaves more time to pursue business-building activities and waste less time on administrative trivia.
Forrester Research splits all-in e-commerce packages into two main categories: infrastructure-driven and application-driven. Infrastructure-driven packages come from companies that already have a strong business in creating operating systems and server software and other core system components, which are then integrated with similarly branded e-commerce management applications. Microsoft and IBM are the most obvious players in this area.
Application vendors such as SAP or Oracle are typically more focused on the applications themselves, but combine this with a back-end data system that makes it easy to exchange data between different components. Such components can be generic (such as order management) or may be targeted to the needs of a particular market sector.
Because they already offer systems designed for different vertical markets, integration may be more straightforward in this scenario. Many large vendors attract an ecosystem of associated developers who will build solutions for particular needs. While this can help you quickly get a system that matches your needs, examine the financial health of any smaller providers before committing. If there's a sudden collapse, you may have relatively few support options, despite the association with the larger technology vendor.
Which approach you take may depend on which elements of your current system you find most valuable. If you already have good stock control and financial systems, see if the same provider can also offer e-commerce solutions. If everything is working badly, you may want to start again from scratch, although this process will typically take at least a year to plan and execute.
Make sure that the system you develop matches the scale of your business. Companies dealing with relatively few stock-keeping units (such as services businesses, or single-product offerings such as accommodation) will probably find integration easier than retailers dealing in thousands of items.
While there's always room to develop more efficient approaches, you should try and build your system as much as possible around the way people actually work. Asking staff to entirely change their approach simply to fit the requirements of an existing technology can be a recipe for disaster. But the fewer changes you make to the actual software and data structure, the simpler the inevitable upgrade process will be when changes are needed.
Such software is rarely cheap, but the cost needs to be considered relative to other investments. Spending $10,000 to implement a new software platform may represent a major capital investment, but it's a relatively small amount in salary terms. Over time, if your system enables your orders to be processed automatically, staff costs are likely to be much lower, and that's before you consider 'soft' benefits such as improved customer satisfaction.
One option worth serious consideration is software-as-a-service, where you pay someone else to manage the infrastructure on a contracted monthly basis. This makes cost control easier and also minimises the amount of IT expertise you need in-house. Working externally in this way doesn't mean you can't integrate in-house systems; select a supplier who will work with your existing data sources if they meet your current needs.
You shouldn't necessarily expect a quick return from such investments, but the time frame shouldn't be too long either. According to the Sensis study, 57 percent of companies achieve a return on their investment in e-commerce within one year, and only 16 percent don't expect to get a return at all. Of those who have made a profit, 19 percent have seen a return of more than 50 percent on that investment. With the right planning, you too can be in that category.
Integrating Technology Case Study
It was when Melbourne computer reseller Emperor's Mind planned an expansion into Sydney that the need to integrate its existing patchwork of business systems became urgent. The lack of an audit trail in its existing systems became a major concern once the expansion was planned, says Jason Castan, director and head of technical services for the company, which implements Apple Mac-based solutions for media and advertising companies. "Without a system that provides some level of financial accountability, then there's no faith. And once you lose faith in the system, people work around the system."
Emperor's Mind replaced its existing approach–MYOB for accounts and FileMaker for tracking customer orders and inventory and for managing its site–with SAP's Business One package, which was implemented by Attkey Computer Solutions. The company's website is now hosted externally but draws information directly from SAP using database queries.
A key aim for the project was to change the entire back-end system, but not alter any of customer-facing information sources. Castan was also keen to no
t alter the fundamental SAP package itself, as that would complicate any future upgrades.
The fixed deadline for opening the Sydney store made planning an issue, and there were several glitches which had to be eliminated after rollout, but the fundamental benefits of having properly audited, centralised information were realised very quickly.
What lessons can other businesses learn? For any large-scale implementation of this type, planning is critical, Castan emphasises. "Clearly articulate your requirements before you start using the system," he says. "Especially if you're not that technical, you need to be really clear in documentation as to what the desired output of your business is."
That documentation should cover not just processes, but all the outputs—from websites to courier labels—you expect the system to produce. "Document what the site does in terms of functionality. Be very clear with paper examples. A good kit of documentation that clearly sets out examples of what you want to produce out of the system is really important."
Developing a co-operative relationship with your provider is also vital, even though there will probably be moments of frustration during the implementation. "You need to find a middle ground for both of you. Post-implementation, you always end up with little glitches and you need someone to manage those bugs and issues. Find a partner and develop an open and honest and mutually beneficial relationship."
Issues to consider when purchasing integrated e-commerce software:
• Can the package handle a range of functions, including catalogue management, sales campaigns, activity reports, and integration into financial systems?
• Can the software handle high customer volumes?
• What is the pricing model, and is it reasonable?
• Are the vendor and any associated companies financially strong and well established?
• Can you get local support and service?
*Source: Forrester Research