The evolving definition of e-business

Version: 4 November 2001

John Mitchell, John Mitchell & Associates, Evaluator/Moderator ANTA E-business Initiative

The impact of e-business

E-business, according to analysts from Government, industry and the media, is starting to have a significant impact on whole industries in Australia, such as banking and finance, on businesses such as travel agents and stockbroking, on metropolitan and regional areas and on individuals working in many industries and businesses. E-business can lower costs, increase efficiencies, reduce inventories, expand market reach, increase speed to market and provide competitive advantages (NOIE, 1999a). In many firms, e-business is creating new jobs, changing many existing jobs and replacing some previous jobs. Hence the urgent need to identify competencies in e-business and to provide training in this field.

The factors driving e-business are profound and include the availability of global communication networks, the expansion of global and national online markets, the emergence of new business models to take advantage of the new technology and the desire of governments and businesses to provide enhanced services for customers.

Current definition

E-business is much more than buying and selling on the Net: e-business means doing business electronically, both within enterprises and externally, using computer networks or telecommunications.
While there are many types of e-business transactions, including business-to-business, business-to-customer and government-to-customer, the type of e-business activity making the most impact on the economy is business-to-business. In particular, business-to-business market exchanges in some industries such as the automotive and mining industries are having profound effects on relationships between suppliers and manufacturers. By 2004, B2B e-business will represent 7% of total global sales transactions. (SMH, 14 Oct 2000)

Currently media attention is focused on the staff redundancies or financial collapse of many dotcom businesses that offered business-to-customer services. Business-to-customer e-business is still hampered by customers' security concerns about providing credit card numbers over the Internet and by the majority of the population who lack the resources or imperative to communicate online. Customers also lack some confidence the purchased items will be delivered on time.
E-business is predominantly a business issue, enabled by information technology. E-business is giving rise to increasing numbers of new business models, encouraging businesses to identify a range of alternative revenue sources for e-business, to develop new marketing strategies and to form new strategic alliances. Some business models for e-business failed during 2000, as the assumptions made about issues such as customer adoption rates and sizes of markets were flawed. A new trend in e-business emerged in 2000, involving the integration of e-business with conventional business activity, of bricks and clicks. This trend intensified in 2001.

Introduction

This paper was developed for the Australian National Training Authority (ANTA) E-business Initiative in 2000-2001 and will be regularly updated at www.catalystinteractive.com.au/ebusiness/, in response to changes affecting e-business practice and theory. This is the version as of 4 November 2001.

Purpose and audiences

The focus of the ANTA E-business Initiative in 2000-2001 is on the training implications of e-business and, specifically, on the development of competencies and qualifications in e-business for the vocational education and training (VET) sector.

This paper draws attention to the fact that the definition of e-business is not, and may never be, settled. The changing nature of e-business sometimes makes it difficult to identify competencies and this will mean that new competencies may emerge each year and that competencies developed in one year may need revising in the next. However, it is important that the evolving definition of e-business be monitored and discussed publicly, to provide a framework and directions for the development of competencies and qualifications in e-business in VET

The main audiences for the paper are VET practitioners and other individuals, the Industry Training Advisory Boards (ITABs) and other bodies interested in the development of competencies in e-business for the vocational education and training sector.

The definition of e-business will continue to be refined during 2001-2002, based on discussions with ITABs and industry and through tracking media reports and reviewing the literature. Readers are invited to send comments and views about the definition to the author John Mitchell johnm@jma.com.au from John Mitchell & Associates.

Types of e-business

An historical summary of the changing definition between 1998-2001 is provided in the Appendix.

One way to make e-business more tangible is to consider some basic types of e-business, as set out in Table 1

Table 1: Basic types of e-business

Term Brief Definition
Business-to-business e-business (B2B) the use of e-business between two companies; e.g. a hospital pharmacy electronically orders a drug from a pharmaceutical supplier who then orders it electronically from a manufacturer
Business-to-customer e-business (B2C the use of e-business between an enterprise and a customer; e.g. a customer orders a CD-ROM online from an online music store
Government-to-customer (G2C) the use of e-business between Government and consumers; e.g. a Government website is used by a consumer to acquire information about Government health services
Government-to-business (G2B) the use of e-business between Government and businesses; e.g. a small business submits its tax return online

Each of these different types of e-business is coming under further scrutiny in late 2001, with some early e-business models falling over and new models emerging, as discussed below.

Changes in the field of e-business during 2000

The year 2000 saw a high level of activity in e-business and substantial interest from the media and business analysts. The top ten Australian web sites in 2000 are set out below. This data suggest that Australians predominantly use web sites for news, entertainment, directories and banking.

Table 2: Top Australian web sites in 2000 (SMH, 19 Jan 2001; Red Sherriff statistics)

Site Publisher Unique Visitors
1. Ninemsn.com.au Ninemsn 2,810,267
2. Yahoo.com.au Yahoo!Australia 1,068,333
3. Telstra.com Telstra.com 953,500
4. Whitepages.com.au Pacific Access 929,250
5. Yellowpages.com.au Pacific Access 693,333
6. Looksmart.com.au LookSmart Aust 628,764
7. Bigpond.com Telstra.com 627,438
8. Commbank.com.au Commonwealth Bank 617,500
9. Abc.net.au ABC 558,667
10. Anz.com.au ANZ Bank 512,750

Highlights of e-business during 2000 included:

  1. In April-March 2000, the sharp fall in the stockmarket value of many companies that solely used online technologies: the 'dotcoms'.
  2. The rise in the popularity of business-to-business e-business, particularly trade exchanges, epitomised in Australia by the CorProcure group of fourteen different companies (AMP, ANZ, Australia Post, Amcor, BHP, Coca-Cola Amatil, Coles Myer, Fosters, Goodman Fielder, Orica, Pacific Dunlop, Qantas, Telstra and Westpac).
  3. The emergence of new business models during 2000, such as ColesMyer's ColesOnline, which is integrating bricks and mortar business with its online operations. (In the final week of November 2000, four of the top five retailing web sites in Australia were owned by conventional department store retailers, Myers, K mart and Target (owned by Coles Myer) and David Jones were first, third, fourth and five most popular sites. The second most popular site, dstore, is now owned by retailer Harris Scarfe.
  4. Changes to the business models of companies such as Wine Planet that was previously only a dotcom operation. Wine Planet is now developing conventional retail outlets.
  5. The reduction in value in late 2000 of some prominent dotcoms that survived the March-April 2000 sharemarket fall, but experienced difficulty in late 2000, such as the online share trading company Etrade and the world's largest portal Yahoo!
  6. Mergers between dotcoms and conventional businesses, e.g. Harris Scarfe's purchase of dstore and Woolworths' acquistion of shares in Greengrocer.com
  7. Mergers between former rivals in the dotcom domain, in areas such as online auctions
  8. The surge in the number of educational organizations, mostly in the USA, that only operate with a web interface with the student
  9. The rise of mobile telecommunication technology, such as text messaging via mobile phone, that shows that e-business does not always require computer networks.

An interesting story to emerge from the 'dotbomb' year 2000 is the success of online auction site e-Bay. In the third quarter of 2000 alone, e-Bay hosted 68.5 million auctions, facilitating the exchange of $US1.4billion in merchandise. (SMH, 30 Jan 2001). Its business model avoids two of the flaws of other dotcoms: it does not rely on banner ads for revenue (Yahoo's problem) and it does not need to warehouse goods (Amazon.com's problem). EBay's business model works: it is an online exchange connecting buyers and sellers and collects a fee for each transaction. (SMH, 30 Jan 2001)

Ongoing debates 2001

  1. In 2001, there are ongoing debates about a number of aspects of e-business, including:
  2. Whether the distinction between 'old' and 'new economy' is valid or worthwhile
  3. Whether e-business will worsen the 'digital divide': the gap between those who use online communication and those who don't
  4. Whether business-to-business networks will have negative effects on small providers
  5. Whether all business-to-business networks will deliver the benefits sought by their owners (Forrester Research predicted in August 2000 that of the 1,000 online marketplaces in the USA, fewer than 200 will exist in 2003. BRW 15 Dec 2000).
  6. Whether dotcoms will be able to overcome an apparent weakness in 'fulfillment' of online orders
  7. Whether the security and privacy issues will be solved and users convinced that they can safely provide their credit card to online companies
  8. Whether vertical business-to-business networks that link together companies in one specific industry are more likely to succeed than horizontal networks that link disparate organizations from many industries.

These ongoing debates will ensure that the definition of e-business will continue to be challenged.

Changing technology trends

E-business changed in 2001 due to the implementation of new versions of previous technology and the availability of wholly new technologies. A report in the Sydney Morning Herald on 14 October 2000, drawing on research from Forrester Research, Gartner Group, Dataquest and Yankee Group, identified the following information technology and business trends likely to impact in 2001:

  1. Spending on e-business software is expected to climb from $US3.1 billion in 1999 to $US14.5 billion in the US alone by 2003. 'As B2B and B2C markets become more competitive, vendors will need increasingly sophisticated software.'
  2. Due to the shortage in IT skills within organizations, there will be an increasing demand for providers of corporate IT services.
  3. The worldwide Application Service Provider (ASP) market will grow from $US3.6billion in 2000 to $US25.3 billion in 2004, as software transforms from a product to a service. However, 60% of ASPs are expected to fail by 2001. 'This will have a devastating effect on businesses that have outsourced their data services to an insolvent ASP.'
  4. The B2C leader will continue to be the USA, with online retail sales expected to reach $US10 billion in the US in Christmas 2000, double the total in 1999. By 2003, US consumers and businesses will spend $US2 trillion over the Net, but retailing will make up just $US144 billion of the total.
  5. The B2B e-business activity will continue to dominate, growing quickly from $US145 billion worldwide in 1999 to $US7.3 trillion by 2004. By 2004, B2B e-business will represent 7% of total global sales transactions.
  6. Broadband technologies will continue to be provided. In the Asia-Pacific there will be 11.3 million residential broadband subscribers by 2003, mostly using cable modems and ASDL (high speed access over normal telephone lines). The roll out is happening more quickly in the USA than in Australia or Europe: in the USA 3.3 million homes had broadband access in 2001 and this is expected to grow to 16.6 million homes by 2004.
  7. Telecommunications infrastructure, particularly the provision of fibre optic technology, is expected to grow exponentially, to satisfy the rapidly increasing demand for data traffic. Wireless technology will become more common, enhanced by new and faster mobile phone networks. Wireless technology is expected to move through a number of different generations in the next few years.
  8. The focus of chip makers will shift from PCs, as sales of PCs slow, to mobile phones and other wireless devices, providing increased memory and new consumer products. The global market for memory chips will grow from $US222 billion in 2001 to $US320 billion by 2004.

Impact of current trends on the definition, late 2001

The current definition of e-business is set out at the front of this document. Major trends that impacted on the definition of e-business in 2001 included:

  1. the mergers between competing dotcoms, leading to a rationalization of e-business in some sections of industry, e.g. in retailing;
  2. the integration of e-business and conventional business approaches, providing new models for combining the strengths of the old and new approaches to business;
  3. the development of secure systems for financial transactions over the Internet, leading to an expansion of business-to-customer e-business;
  4. and the expansion of e-business activity in the government, health, education and other service sectors.

Increasing demand for training in e-business

Despite the ongoing controversies and debates about e-business, industry analysts predict that the demand for e-business will rise extraordinarily in coming years, and that current levels of training will not meet future demand.]

Expansion in e-business occurred in a wide array of industries in 2000-2001, due to the increased efficiencies, improved revenues and enhanced customer services that are often delivered by e-business. The expansion in activity is evident by the proliferation of business-to-business trading exchanges in fields such as the mining industry, the increasing numbers of business-to-customer services such as buying shares online and the increasing number of government-to-customer services such as paying bills online. Industries that are regularly cited as experiencing growth in the use of e-business include banking and finance, tourism and hospitality, retailing, electronics and communications.

As a result of this expansion in the use of e-business, training in e-business is needed in three separate domains: firstly, for IT specialists, such as web designers and programmers; secondly for workers in all those industries that are embracing e-business; and thirdly, for customers who want to be able to access online services. The first group -IT specialists - tend to gain most media attention, which is understandable, because without the technology experts there will be no tools to use in business. During 2000-2001 in Australia, the IT&T Skills Taskforce and Skills Hub drew public attention to the urgent need to address the shortfall in IT training.

The report E-competent Australia (ANTA, 2000) also addressed the second area where training is required: for workers in all those industries that are embracing e-business. These workers often find themselves in jobs that require a hybrid mix of skills that pre-date e-business and skills that are required now because of the emergence of e-business. For instance, some farmers need to become very proficient in using the online medium for a range of uses: banking, selling, marketing, buying and researching. Some hospitality workers need to become very proficient in using the online medium to access the hotel chain's customer database, to maintain contact electronically with regular customers and to access on-the-job learning materials.

The current ANTA E-business Initiative is addressing the need to develop competencies and qualifications in e-business in the VET sector that are thoroughly validated by industry. VET organizations around Australia report a growing demand for training in e-business, but the training needs to be based on a coherent definition of e-business.

Conclusion

The definition of e-business will continue to be debated, affected by the development of new technologies, new business thinking and changing business practices. While debate will continue about the best business models and practices, there will be no preventing the inevitable increase in e-business activity, leading to the need for additional training.
This paper on The Evolving Definition of E-business will continue to be updated, to capture the changes in definition of e-business, as the VET training in e-business that is designed and delivered needs to be based on a clear understanding of the meaning of e-business.

John Mitchell
Evaluator/Moderator of the ANTA E-business Initiative 2000-2001
johnm@jma.com.au
4 November 2001

Appendix: Changes in the definition of e-business, 1998-2001

The following discussion traces the changes in the definition of e-business from 1998-2001, showing that as the impact of e-business expanded, its definition widened.

Definitional changes in 1998-99

To clearly identify the nature and understanding of e-business in late 2001, firstly we need to clarify the changing definitions in 1998-1999, as discussed in E-competent Australia (ANTA, 2000). The definitions of e-commerce shifted in 1998-99 in two major respects:

  • it was common during 1998 to see e-commerce defined as 'financial transactions over the Net', but the trend by late 1999 was to define e-commerce as any business communication involving electronic communication, including internal communication
  • in 1998 e-commerce was often defined as the technical event of an electronic communication, but the trend by late 1999 was to see e-commerce as an approach to business, with the technology as the enabler.

The National Office for the Information Economy (NOIE) demonstrated these changes to the definition in 1999. For instance, the following definition was provided by NOIE in April 1999 in Australia's e-commerce report card:

E-commerce is defined as every type of business transaction in which the participants (i.e. suppliers, end users etc.) prepare or transact business or conduct their trade in goods or services electronically. (p.3)
While e-commerce is dominated by online technologies, the scope of e-commerce covers 'all forms of electronic processes':

Online technologies are the most significant facets of e-commerce and include Internet retailing, Electronic Data Interchange, Internet banking, electronic settlements and browsing and selection of products and services over the Internet. (p.3)
This 1999 definition is much more substantial than previous definitions of e-commerce as buying and selling over the net.
A fuller definition of e-commerce was provided in NOIE's October 1999 report, E-Australia.com.au. The October 1999 definition widens the scope of e-commerce, and clarifies that e-commerce is not just about buying and selling goods, it is also about inter-company and intra-company activities:

In e-commerce, business is communicated and transacted over networks and through computer systems. The most restrictive definition limits e-commerce to buying and selling goods and services, and transferring funds through digital communications. However, e-commerce also may include all inter-company and intra-company functions (such as marketing, finance, manufacturing, selling, and negotiation) that enable commerce and use electronic mail, EDI, file transfer, facsimile, video-conferencing, workflow, or interaction with a remote computer. E-commerce also includes buying and selling over the World Wide Web and the Internet, transferring electronic funds, using smart cards and digital cash, and doing business over digital networks. (p.60)

This October 1999 definition is recommended as the main reference point for the ANTA E-commerce Initiative, taking into account the fact that the nature and definition of e-commerce may change in future, due to new developments in business and technology.

New business thinking

The Commonwealth Government has consistently emphasised the new business thinking underpinning e-commerce, as set out in Table 1 below, to the point where the Government is now 'viewing e-commerce as a business issue rather than an information technology issue' (Australia's e-commerce report card, 1999, p.20)

Table 1A: Business principles of e-commerce highlighted by the National Office for the Information Economy in 1999

Source Date Description
The Sectoral Impact of E-commerce - A Scoping Study (Electronic Trading Concepts et al, for NOIE) March 1999 E-commerce is part of an evolving approach to business that could eventually involve the application of information and communication technologies (ITC) to the production and distribution of goods and services on a global scale. (p.3)
Australia's e-commerce report card (NOIE) April 1999 The Commonwealth Government is now embarking on a strategy … viewing e-commerce as a business issue rather than an information technology issue. (p.20)
E-Australia.com.au (NOIE) October 1999 E-commerce is about different and more efficient ways of doing business. (p.2)
E-commerce - beyond 2000 (Allen Consulting Group for NOIE) November 1999 E-commerce will bring significant changes to business, consumers, government and the economy. Companies are changing the way they do business. (p.2)

That e-commerce can create new ways of thinking in business was noted by Hammer and Champey (1993):

The real power of technology (such as electronic commerce, telecommunications technology services or multi-media) is not that it can make the old processes work better, but that it enables organisations to break old rules and create new ways of thinking - that is, to reengineer.

Industry leaders' definitions

The following interviewees for the E-competent Australia (ANTA, 2000) study placed a similar emphasis on e-commerce providing new ways of doing business:

The modus operandi and business models in all industries will be re-invented because of e-commerce. (Phil Kiely, Managing Director, Oracle, interview, 13 January 2000)

The changes due to e-commerce are quite mammoth. It is totally challenging the way we do business and the relationships between buyers and sellers. (Ms Judith Maddocks, National Business Manager, Telstra Learning, interview, 28 January 2000)

If you are doing business electronically, you are doing business differently and there are different skills and competencies required. It is not just a matter of transferring conventional skills to e-commerce. The capacity to undertake business electronically will be a core competency in the future. (Mr David Edwards, Executive Director, Australian Society of Certified Practising Accountants, interview, 19 January 2000)

E-commerce is essentially re-engineering businesses. (Cliff Smith, Managing Director, Novell Australia, interview, 7 January 2000)

I see e-commerce mainly as a business issue not an issue, with IT as the enabler or deliverer; for without users, IT is nothing. Some IT people lose sight of the bigger picture. The important issues are what does business want to achieve and how does IT fit with the business strategic plan. (John Ridge, President, Australian Computer Society, interview, 12 January 2000)

The industry leaders quoted above are consistent in their view that business thinking needs to drive e-commerce, not technology.

Academic definitions, 1998-2000

The discussion above focused on the definitions of e-commerce provided by NOIE and by leaders in industry. Following is a brief discussion of definitions in the academic literature between 1998-99, which shows a similar tendency to expand the definition by 1999.

In 1998, Lawrence et al noted that there has been an explosion of names to identify doing business electronically, 'such as electronic commerce, eCommerce, iCommerce, Internet commerce and digital commerce' (p.2). Lawrence et al use the terms 'electronic commerce' (or e-commerce) and 'Internet commerce' interchangeably. They then define e-commerce as follows:

"Electronic commerce can be defined as the buying and selling of information, products and services via computer networks today and in the future, using any one of the myriad of networks that will make up the Internet." (pp. 2-3)

Turban et al (2000) importantly add the word 'exchanging' to the definition of Lawrence et al, to cater for more than just financial activities:

"Electronic commerce is an emerging concept that describes the process of buying and selling or exchanging of products and services and information via computer networks including the Internet." (p.4; italics added)

Turban et al (2000, p.5) observe that e-commerce can occur in a 'pure' form (e.g. ordering and receiving software via the Internet) and in a partial manner (e.g. ordering a book via the Internet and receiving it from a courier). They suggest (p.5) that e-commerce ranges from 'pure' to 'partial' depending on the degree of digitization of the product (or service), the process and the delivery (or intermediary).

The NOIE position on e-commerce can accommodate the refinements to the definition of e-commerce made by Lawrence et al (1998) and Turban et al (2000). The NOIE definition is close to Timmers (1999), who provides a broad but simple definition of e-commerce as 'doing business electronically' (p.4).

Definition in E-competent Australia

The definition of e-commerce provided in E-competent Australia, finalized in February 2000, is based predominantly on the three following sources: current international literature, interviews with Australian industry leaders and research by the National Office for the Information

Economy (NOIE). These sources demonstrate that:

  1. E-commerce is primarily a business issue rather than an information technology (IT) issue
  2. E-commerce is about new ways of doing business that are enabled by IT
  3. E-commerce makes use of computer networks in new and more effective ways and involves all electronic communication used in business.

Of the three components of e-commerce in the definition set out in E-competent Australia (ANTA, 2000) and cited above, the first two remain intact in early 2001. However, the emergence of mobile technology such as the sending of text messages between mobile phones, illustrates that e-commerce does not always require computer networks.

By 2001, this definition needs to be expanded, to include the new business practices that developed during 2000-2001 and the new business models for e-commerce that emerged in 2000-2001, which are discussed in the body of the paper, 'The evolving definition of e-business'.

Distinction between e-commerce and e-business

The terms e-commerce and e-business require some comment, as different people distinguish between e-commerce and e-business in different ways. In E-competent Australia (ANTA, 2000), e-business was taken to mean an individual company, enterprise or organisation or business unit, that uses e-commerce, e.g. the online travel agency travel.com.au could be called an e-business. However, in defining e-commerce as 'doing business electronically' (Timmers, 1999), E-competent Australia (ANTA, 2000) was suggesting that e-commerce is an overarching set of business principles behind new ways of doing business electronically.

Key participants in the ANTA E-commerce Initiative Projects agreed in April 2001 to use the term e-business as the descriptor of doing business electronically, both within enterprises and externally, using computer networks or telecommunications. E-business is used to describe both the overarching set of business principles behind new ways of doing business electronically and also to describe actual businesses or business units that put these principles into practice.

E-commerce is now defined as it was some years ago, to narrowly mean the financial transactions of buying and selling electronically.

The ANTA project is now referred to as the ANTA E-business Initiative.

Different interpretations of the terms e-commerce and e-business may continue, in Australia, for some time, for the following reasons. Firstly, some people see e-business as interchangeable with the term e-commerce. Secondly, the popular media likes to use e-business instead of e-commerce and to place the prefix e- before many words, particularly in newspaper headlines. Thirdly, academics are divided in their definitions of the two terms, with some seeing e-commerce as the overarching concept and others seeing e-commerce narrowly as buying and selling electronically.

While we can expect that e-commerce and e-business will continue to be defined differently, present indications are that the term e-business may emerge as the most popular one in daily use, even though the project started by using the term e-commerce as the basic reference point.

References

Electronic Trading Group, The Allen Consulting Group, Acuity Consulting, (1999), The Sectoral Impact of

Electronic Commerce - A Scoping Study, Department of Communications, Information Technology and the Arts

Hammer, M. and Champey, J. (1993), Reengineering the Corporation: A Manifesto for Business Revolution, Harper Collins, New York

Lawrence, E., Corbitt, B., Tidwell, A., Fisher, J., Lawrence, J., (1998) Internet Commerce. Digital Models for Business, John Wiley & Sons, Ltd, Brisbane

Mitchell, J.G. (2000), E-competent Australia. The impact of e-commerce on the National Training Framework, ANTA, Melbourne

National Office for the Information Economy, April 1999, Australia's e-commerce report card, Department of Communications, Information Technology and the Arts, Canberra

National Office for the Information Economy, October 1999, E-Australia.com.au, Department of Communications, Information Technology and the Arts, Canberra

National Office for the Information Economy, November 1999, Summary of E-commerce- Beyond 2000, Department of Communications, Information Technology and the Arts, Canberra

National Office for the Information Economy, 1999, Skill shortages in Australia's IT&T industries, Department of Communications, Information Technology and the Arts, Canberra

National Office for the Information Economy, 1998, Where to go? How to get there, Department of Communications, Information Technology and the Arts, Canberra

Office of Government Online December 1999, Commonwealth Government Online - Progress Report, Department of Communications, Information Technology and the Arts

Sydney Morning Herald, 14 October 2000, 'Keeping on top of the technology wave'

Tapscott, D. (1996), The Digital Economy, McGraw-Hill, New York

Tapscott, D. (1999), Creating Value in the Network Economy, Harvard Business Review Book, Boston

Timmers, P., (1999), Electronic Commerce, Strategies and Models for Business to Business Trading, John Wiley & Sons Ltd, Chichester

Turban, E., Lee, J., King, D., Chung, H., (2000) Electronic Commerce, A Managerial Perspective, Prentice Hall, New Jersey