Best-of-breed could end up ‘worst on the Net'

BY ROGER MAYES, PRODUCT SPECIALIST, ORACLE SA

While adoption of Internet-based procurement is beginning to gather momentum in the US, SA could find its best-of-breed approach to software hampers its ability to deliver efficient services over the Internet.

A recent ISM/Forrester Research Report On eBusiness, reports a significant increase in online purchasing in the US over the past three months. The fraction of companies that purchased direct materials online surged to 64.6% in the second quarter, from 53.3% in the first quarter.

More companies purchased indirect materials online, as well, rising to 84.2% of respondents this quarter from 78.1% last quarter. The report tracks online activity for both manufacturing and non-manufacturing organisations.

This level of adoption in SA may take a little longer, says Oracle product specialist Roger Mayes, but the writing is on the wall for companies to start looking at their online systems. "Companies will have to re-examine their business processes in the light of online opportunities."

Mayes warns that a massive problem encountered by companies migrating some of their processes onto the Internet is the inability to integrate them with other systems. "The silo mentality that has prevailed in IT for decades is casting a shadow over effective e-enablement, in that online systems only deliver a true return on investment when they are integrated with other business processes.

Many South African companies have long been proponents of the best-of-breed approach, which means buying the best software to suit individual business applications.

"Integrating that lot is a challenge," says Mayes. "Putting it all online will be an even greater challenge at a larger cost."

The IDC research group says 45% of IT spend goes to data cleansing, managing numerous databases, integrating systems and ensuring that accurate information is available to everyone in the organisation.

The report also notes that manufacturing companies are falling behind non-manufacturers in their adoption of the Internet in purchasing activities.

Mayes points out the report surveyed large to medium-sized enterprises in the US, but maintains that companies in SA follow a similar trend.

"Manufacturers are, on the whole, conservative, and the tough economic climate in which we operate today is increasing their caution. They want to keep their risks low, and are opting to stay with what they know rather than embark on what may appear to be a dot-com venture."

The Report On eBusiness also revealed that more than one-third of large buyers bought goods or services via e-marketplaces or private hubs. Almost one-third of buyers used an enterprise-wide procurement tool that incorporates the Internet. For the first time, more than half of responding companies (51.5%) reported collaborating with suppliers online -- compared with only 48.2% in the prior quarter -- and buyers also reported higher levels of satisfaction with their suppliers' online capabilities.

Miraculum, a corporate purchasing hub that uses Oracle's technology, delivers solutions through a variety of procurement options, aiming to reduce total input cost, while maintaining or improving levels of quality, service and technology. Mayes believes that the argument for using such hubs by South African companies is even more compelling.

"The vast majority of companies in SA would benefit from online, but are nervous of making the investment themselves. Collaborating with a hub operator gives them access to infrastructure and expertise, which can dramatically smooth the road to e-procurement. "

Hubs, adds Mayes, have suffered as a consequence of the dot-com fallout, but in the light of research data emerging from reports around the world, the time is ripe for companies to re-look at making use of these services.

 " For further information in this regard please contact Channing McDonald on 011 880 0101. "