New Report from the Economist Intelligence Unit and IBM Finds Companies Move Beyond the Web to Transform Business Models


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SOMERS, N.Y - 12 May 2000: -- A new report from the Economist Intelligence Unit and IBM, E-business Transformation, finds that companies are looking beyond the obvious sources of value from e-business such as cost cutting and greater efficiency and are instead using the Internet to pursue new growth opportunities. The report also concludes that companies have begun to assess e-business performance with customer-centric metrics that go beyond immediate financial return.

The report is based on a survey and interviews with more than 350 senior executives worldwide conducted by the Thought Leadership Services division of the Economist Intelligence Unit and written in partnership with IBM.

Senior executives from leading traditional and dot.com companies throughout North America, Europe and Asia participated in the report. Included were General Electric, General Motors, Barclay's Bank, DLJDirect, Intel, and Qantas. The executives' responses indicate a drastic and rapid change is underway in global business models and organizations.

"The results of this report indicate that e-business is moving beyond the initial phase of rushing to the Web," said Don Durfee, editor at the EIU. "Companies are taking e-business to the next level, both in how they assess successful implementation, and in what they hope to gain."

The report found that senior executives are now looking beyond the initial sources of e-business; 80% of respondents are using the Internet to enter new markets or completely new businesses.

More than half those surveyed said that they expect the Web to change their fundamental business models One- third of all respondents expect that they will need to drastically reorganize their companies to adapt to a Web-based business model.

Additionally, executives now see organizational constraints and skill development as more significant obstacles to e-business transformation than technology challenges.

More than 50% of survey respondents cite a lack of employees with e-business skills as a major obstacle to e-business strategy implementation; a similar number pointed to a lack of understanding on the part of key middle managers; By contrast, only 30% cited a lack of appropriate technology infrastructure.

"Companies seem to understand that the Web is about more than just immediate return," said Chuck Rieger, Principal of IBM's e-business Innovation Institute at IBM Global Services. "e-business is about changing business models, improving customer service, and improving your business-- not just about short- term financial gain."

The executives also indicated that companies are focusing on customer response in assessing e-business performance, rather than just looking at immediate financial return. "An increase in customer satisfaction," was rated "very important" by 58% of the respondents. Additionally, "the ability to act as a truly customer-driven enterprise," was cited by 52%.

"It seems that the top level management is saying, 'We get it,' but we're not sure middle-level managers do," said Rieger. "Not only is there a need to find IT talent, but there's a real need for people who have e-business marketing and strategic skills as well."

Other findings of the report include:

The potential for e-commerce growth is highest in Europe. While e-commerce revenues are expected to grow exponentially worldwide, executives expect them to more than quadruple in Europe, from 4% of total revenues to 19%. In North America, executives expect on-line transaction revenues to grow from 9% to 24%.

Leading traditional companies are successfully leveraging their brands and customer bases to compete in the on-line world. For example, Land's End is using its well known brand, loyal customer base, and large customer service operation to capture a major share of the on-line retail clothing market.

The report is the second collaboration between the Economist Intelligence Unit and IBM Global Services. It is available from the EIU's New York or London offices or can be ordered through the EIU store at (http://www.eiu.com).

The Economist Intelligence Unit is a member of the Economist Group, the global communications and information firm and publisher of The Economist. For more than 50 years the Economist Intelligence Unit has been a leading provider of information on global business and financial developments, economic and political trends, government regulations and management practices. The Thought Leadership Services division of the EIU develops leading edge research in co-operation with the world's foremost consultancies, financial services and technology firms.

IBM is the world's leading e-business company offering a wide range of services and solutions that help businesses take full advantage of emerging innovation like smart technologies. IBM Global Services is the world's largest information technology services provider, with 1999 revenues of more than $32 billion. Services is the fastest growing part of IBM, with more than 138,000 professionals serving customers in 160 countries. IBM Global Services integrates IBM's broad range of capabilities --services, hardware, software and research -- to help companies of all sizes realize the full value of information technology. For more information on IBM, visit http://www.ibm.com; for more information on e-business, visit http://www.ibm.com/e-business/

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