Section 2: E-commerce in Australia

In the present research, organisational collaboration in ITOL projects will be examined against the e-commerce backdrop. But just what is e-commerce? It is certainly characterised by inter-organisational systems but the likes of EDI and ATMs have been with us for over 20 years. The Internet and the Web are certainly important, particularly as they are so ubiquitous and because they allow the development of applications that would have been prohibitively expensive a few years ago. In the end though, the Internet is just another communications mechanism - albeit one with exceptional and extremely useful features.

Nor are e-commerce applications characterised by radically new system development methods. Web design and development is certainly new but any non-trivial e-commerce application must interact with an organisation's underlying, mainstream transaction processing systems. As such, these new applications require exactly the same software engineering and information systems techniques that have been developed and refined for the better part of 40 years. However, what is different and greatly exciting about the e-commerce boom is the tremendous amount of interest it has generated among non-technical executives. For example, Business Review Weekly now has a whole section of each edition (sometimes running to 20 pages) devoted entirely to eBusiness. One result of all this is that issues the information systems (IS) professionals have been trying to make part of the mainstream business agenda since (at least) the early-1970s are now being taken seriously by the wider business community.

NOIE defines e-commerce as "every type of business transaction or interaction in which the participants prepare or conduct business electronically" (NOIE, 2001b, 9). This broad definition covers all forms of electronic processes, regardless of the technology used.

In light of the above, our survey respondents' views on the essential characteristics of e-commerce are interesting. These are presented in Table 1 below.

Table 1: Characteristics of e-commerce

E-commerce encourages organisations to move beyond the current interest in outsourcing to collaboration in product and service delivery for customers. Feeny (2001, 2) has suggested that we can better grasp the business potential of e-commerce by clarifying its three domains of operations, marketing and customer services:

• e-operations using web technology focuses on strategically changing how a business manages itself and its supply chain, based in producing the organisation's core product or service. Results relate to automating administrative processes; reviewing the organisation's basic infrastructure; improving the performance of individual business units in the organisation through help from other parts; expanding competitive procurement through electronic buying (wider supply base, increased competitive pricing, lowering administrative costs); and enabling the virtual organisation. Important here is the role of information - in content of the product, in its intensity along the supply chain, and its dispersion across the value chain.
• In e-marketing, web-based initiatives aim at realising strategic change in downstream activities, by direct interaction with the customer or via a distribution channel. Technology can enhance the selling process, the customer's buying experience, and the customer's usage experience.
• E-service is about new ways of addressing specific customer needs, acting as the customer's agent to achieve desired outcomes.

2.1 Private sector

The SME sector is a vital one in the e-commerce landscape. In the US, SMEs account for over 60% of all businesses while in Singapore, the figure is 62% (Fife & Pereira, 2002). In Australia almost one million SMEs provide jobs to almost five million members of the workforce and make significant contributions to the economy.

In terms of B2B, Australia was ranked equal 4^th with Singapore with B2B estimated to be contributing 1.1 per cent to the GDP, compared with 3.0 per cent for the US (NOIE, 2002b). But in a recent report (Boston Consulting Group, 2001), it was claimed that while Australia came fourth on world rankings with regards the number of people connected to the Internet, we lag in other respects such as in terms of Australian business' involvement in e-commerce, particularly SMEs. Reasons for the slow take up of e-commerce among SMEs include the lack of strategic awareness; lack of technical knowledge; mistrust of technology; the "what's in it for me" syndrome; and high costs; and immediate competing pressures. Another study (NOIE, 2001a) suggests that among the major impediments to e-commerce uptake by small businesses are the lack of access to information and ICT skills, and the lack of practical experience of the business case for e-commerce.

Internationally, research by Fife and Pereira (2002) show that lack of capital and skilled personnel, the high cost of e-commerce applications, and the need to re-engineer SMEs' core business processes remain as the most challenging impediments to the adoption of e-commerce applications by SMEs. For example, the authors point out that most estimates put the cost of establishing a web site at around $US15-17,000. Furthermore, in a recent survey of small businesses in the UK, 48% of respondents said that they did not have web sites and did not understand the potential benefits that might flow from e-commerce applications. In addition, only 50% of SMEs with web sites were using them to sell goods and services. In the US, 62% of SMEs reported not having web sites and only 12% were using them for online sales. The same research notes that since SMEs are part of some 80% of the supply chains of large corporations, these SMEs would require a re-engineering of their core business processes so that both SMEs and large corporations can realize e-commerce generated cost savings (Fife & Pereira, 2002).

Many of these impediments to e-commerce adoption--particularly lack of technical knowledge, high costs, and lack of access to information and IT skills--were found to be true in the ITOL projects studied in this research.

2.2 Government

It appears that e-commerce sectoral facilitation is a priority in only a small number of the strategies released by governments around the world. Therefore, much of the sectoral e-commerce development in Australia, particularly the facilitation of collaborative frameworks, is at the forefront of global B2B e-commerce initiatives. There doesn't appear to be comparable work in other countries of bringing together intra-sector competitors to delineate areas of cooperation and competition within value chains, as NOIE is doing in Australia (NOIE, 2001a).

The Federal Government has established NOIE as its lead agency tasked with developing policy and advice on information economy issues and coordinating across Commonwealth and State Governments a range of activities to accelerate e-commerce adoption. In this research the focus will be on the ITOL program but there are other initiatives that have been put in place through NOIE to ensure Australia maximises the gains from B2B e-commerce. These have focused on sectoral facilitation and approaches; a legal and regulatory framework; and enabling business interaction with Government online. These include a A$6.5 million initiative (announced in September 2001) to be implemented over two years, aimed at encouraging SMEs to become e-businesses through the provision of cost-effective electronic procurement software solutions to enable online transactions with government, in addition to the provision of training and support. This is especially crucial in light of recent research by Singh and Laidler (2000) which found that people interact with government two or three times a year but only two percent use the Internet to search for the appropriate government contacts; and that in November 2000, half the adult Australian population had not used the Internet sometime during the year.  The authors emphasise the need for an activity and customer-focussed approach to providing government service on-line, rather than a functional (or individual department) based approach.

A complementary program to ITOL is "Networking the Nation", a five-year $250 million Regional Telecommunications Infrastructure Fund, designed to help bridge the gaps in telecommunications services, access and costs between urban and non-urban Australia.  Established in 1997 and administered by the Department of Communication, Information Technology and the Arts (DCITA), the program provides grants to not-for-profit organisations to enable them to undertake activities and projects that address a range of telecommunications needs in regional, rural and remote Australia.

A corollary program is the $78 million Incubator Program, which is a major component of the $158 million Building on IT Strengths (BITS) program. Through this, incubators are provided with funds so that they can assist start-up IT firms turn ideas and R&D into successful businesses (DCITA media release, 23 Feb 2000).

Several research reports have also been published recently exploring issues relating to e-commerce, data from which has been used by government to inform its e-commerce strategies. Among the more recent publications are:

• Advancing with E-commerce (Ernst and Young, October 2001) details the costs and benefits of investing in e-commerce by SMEs and provides information on the key challenges encountered with its adoption.
• B2B E-Commerce: Capturing Value Online (NOIE, October 2001) provides an independent assessment of contemporary developments in b2b e-commerce and a description of Government achievements and NOIE's role in this space.
• APEC e-business: What Do Users Need? (CSIRO, September 2001) analyses the business and technical challenges facing companies as they go online.