Advancing e-commerce: a regional perspective

Is Asia the next frontier territory in e-commerce development? How are the small and medium enterprises in the region faring in this IT rush? And what about the adoption of enterprise resource planning, electronic charge cards and ...?

Four panelists discussed the adoption of e-business strategies in the Asia-Pacific Region at a key session during the 4th International Conference on Electronic Commerce (ICEC 2002) hosted by CityU in October 2002. Four panelists, from Australia, Korea, Taiwan and Hong Kong, were invited by the moderator, Dr Patrick Chau from the University of Hong Kong, to address five key points: the history of e-commerce; major problems affecting e-commerce in the region; the focus of future research; e-commerce's strengths and weaknesses; an analysis of e-commerce from the multidimensional view point of academics, people in industry and governments.

The impact of e-commerce on SMEs

An Australian academic underscored the importance of e-commerce for the future success of business in the region. "Around 20% of the small and medium size enterprises (SMEs) in Australia will declare bankruptcy if they do not adopt electronic business methods and integrate these practices into their business strategies and processes," said Dr Shirley Bode, from the School of Computer and Information Science at Edith Cowan University.

Currently, Australian SMEs are falling behind larger businesses and corporations in several areas, for example online payment and e-procurement, said Dr Bode. Therefore, it is important that governments train, fund and educate smaller businesses that are keen to strengthen their e-commerce business strategies. "Most SMEs in Australia still lack confidence in e-business activities. They lack training and access to resources that enable them to adopt e-business practices," she said. "This means many SMEs are missing opportunities to penetrate more international markets. Subsequently, they are likely to fall behind the bigger players."

In response, both state and federal governments in Australia have started work on several solutions. In September 2002, the federal government announced a A$22 million investment package aimed at promoting e-business techniques among SMEs that currently employ undeveloped or underdeveloped e-business practices. Money has been allocated for the production of brochures, case studies and other information sources that encourage SMEs to engage in more complex e-business practices, such as e-procurement and online payment. Funding has also been provided for Government Online, a resource that provides SMEs with access to assistance in developing e-business strategies.

At the state level, the government of Victoria has established its first policies that address the e-business needs of SMEs. A government-funded website has been created that includes an FAQ site, a resource centre and access to one-to-one business advice information sharing. In addition, A$10m has been earmarked to help SMEs access the government's electronic purchasing scheme, to fund teams of e-commerce advocates, to help SMEs locate experts in target areas such as technical support and marketing, and to set up meetings and training sessions.

Resources are also used to help SMEs network with consultants experienced in developing e-business practices. Researchers at the Edith Cowan University found that SMEs tend to rely on external consultants for the design of their websites, a practice that outsources their e-business strategy. "Part of my research has been in developing an online training course for SMEs," said Dr Bode. "These training sessions enable them to gain greater control over their e-business development. We help them to plan effective engagement processes, initiate an effective e-business strategy, and locate website designers and e-business planners."

Dr Bode concluded that many SMEs lack sufficient skills or knowledge to adopt e-business techniques. She reiterated that assistance should be government-driven, not vendor-driven, thus enabling SMEs to develop along their own lines, not lines set out by vendors or other third-parties. "Training should encourage SMEs to identify what they need and what they can achieve, and shouldn't focus on the requirements of the vendor or larger companies," she said.

The long road towards full ERP

Professor Jae Kyu Lee, from the Korea Advanced Institute of Science and Technology, argued that although countries such as South Korea have achieved very high levels of Internet usage and online trading, full ERP (Enterprise Resource Planning) is still a long way off. However, Korea has made a strong start towards comprehensive adoption of e-business. "The good news in Korea is that Koreans maintain a very positive attitude towards the Internet and e-commerce in general," said Professor Lee. "Korea has achieved very high market penetration levels, with more than 80% of Koreans using the Internet. Our levels of online trading are second only to the US."

One reason for the high levels of online trade is the increase in the number of female users, suggested Professor Lee. Household goods, accessories, perfumes, and clothing make up a higher percentage of online business than in 2001, a phenomenon that has occurred concurrently with a sharp rise in the number of women using the Internet from home. "In fact, perfume, home wear and groceries constitute the second highest increase in sales since 2001." In addition, Professor Lee's research shows that online trade is allowing people from more remote and less urbanized areas to participate in ever-expanding markets. Agriculture has experienced the highest increase in online trade in Korea, as more and more farmers use the Internet to trade.
However, one of the problems is ERP integration among the smaller companies that are struggling to compete with larger players. ERP attempts to integrate all departments and functions across a company onto a single computer system that serves the needs of different departments. It is less about "planning" and "resource"; it is more about integrating the various functions and features of a business enterprise.

Full ERP is a challenging objective but one that South Korea needs to face and there have already been some significant advances. "One important step towards fuller ERP integration is the i-market run by Korean conglomerates," said Professor Lee. "Previously desktop purchasing meant creating an internal database, but recently groups of companies have made an aggregated marketplace for desktop purchasing-this is the i-market. The i-market integrates companies in terms of payment and logistics, for example, and the e-procurement systems in this system become tightly integrated with the outside e-procurement marketplaces."

As an example, Professor Lee cited what is happening in larger bureaucratic institutions such as large-scale healthcare centres. "Some bureaucratic departments are removing their procurement divisions since this can now take place online. Seoul National University hospital has cut its procurement department and now uses EasyHospital.com to purchase supplies. This process of de-marketing, or Ode-sourcing', means a significant reduction in the number of suppliers as large organizations aim for quantity discounts."

"To help smaller companies develop ERP systems, South Korea is setting up an initiative that will educate and train 200,000 companies over the next two years," said Professor Lee. "One of the major promotions is helping with the installation of ERP packages that will standardize financial and business practices between SMEs and other major companies. A major outcome will be further reductions of costs and better efficiency."

Different expectations of e-business

One of the challenges facing the region is different companies have different uses and expectations for e-business, said Professor T P Liang, from the National Sun Yat-sen University, Taipei. These factors need to be considered as more and more SMEs and larger companies move towards greater adoption of e-business strategies, he said.

The Taiwanese government has acted as a strong advocate for e-commerce over recent years, explained Professor Liang. "It has committed US$100 million in support and development, and as a result Taiwan boasts a high level of high-tech competence and acceptance. Taiwan has a strong high-tech industry, and the government is keen to move towards e-everything," he said.
Using statistics from the IDC/ World Times Index, Professor Liang demonstrated that Taiwan possesses a positive attitude to the Internet and e-commerce in general. Some 85% of Taiwanese companies have already adopted some aspects of e-commerce; mobile phone penetration rate has reached 96.6%, slightly behind the world's number one user, Luxembourg (96.7%), with Hong Kong figured at 84.4%. There are more than 22 million phone numbers among a Taiwanese population of 23 million; and, according to an e-government rating system devised at Brown University, US, Taiwan (72.5%) outranked South Korea (64%), Canada (61.1%) and the US (60.1%) in terms of online government business usage and deployment. It is important, though, to add that companies from different sectors have diverse expectations about how e-business techniques can enhance and improve overall business plans and objectives, continued Professor Liang. "For example, banks focus on e-business as a tool for promoting and sharing information," he said, "whereas companies in the service and manufacturing sectors view e-business techniques as a means to reduce costs and increase efficiency". For these reasons, the government has developed a five-point mechanism for building up e-business: offering stipends to encourage local communities to establish links with major international companies, such as IBM and Hewlett-Packard; granting funds of up to US$3 million to local manufacturers and the service industry; focusing on the banking system, funding projects that enhance online payment; examining delivery systems to link local companies with companies such as FedEx and other systems based at air and seaports; and establishing a collaborative project to look at ways to integrate greater communication between companies specializing in design systems, such as web designers. "The first two are already well-established, and we're currently working on the others," explained Professor Liang. "By focusing on the individual needs of different sectors, we hope to facilitate the adoption of e-business strategies among Taiwanese companies."

One card for all: the case of the Octopus card

The next speaker, Mrs Cindy Cheng, Sales and Marketing Director of Octopus Card Limited, Hong Kong, spoke of Hong Kong's achievements in the area of e-business, but she warned that many Hong Kong SMEs still lack the skills and knowledge that will enable them to achieve greater levels of e-commerce adoption. "The e-business situation in Hong Kong is relatively healthy, however," Mrs Cheng said. She emphasized the importance of links with the mainland as a vital ingredient in the future success of Hong Kong's e-business planning. More than 90% of households had access to broadband, and mobile phone penetration rates were very high. "People in Hong Kong view the emergence of e-commerce positively," she said, "especially in terms of banks and the impact of larger companies. More than 60% of companies think e-commerce will give them an advantage over their competitors; 68% believe e-business will reduce costs; 63% see a potential improvement in sales; and 48% identify the possibility of establishing more business with non e-business companies."

However, the Hong Kong public does not consider e-business to be the only answer to future business developments, Mrs Cheng said. Part of the reason is the general lack of awareness about e-business among SMEs. For this reason, the government has provided HK$300 million to SMEs in the form of grants. SMEs can apply for up to HK$2 million per project and use the money to overcome inhibitors to adopting e-business, such as lack of training and knowledge. The introduction and continuing success of the Octopus card, the electronic charge card used extensively throughout Hong Kong, is an example of the success of e-business in Hong Kong. "The Octopus card has achieved a 95% market penetration rate," said Mrs Cheng. "There are 8.9 million cards in operation and we clear 7.6 million daily transactions. The cards are not only used on buses and the MTR (the Mass Transit Railway), they are also used in fast-food restaurants, convenience stores and the larger supermarkets. We clear US$50 million every day, making us one of the biggest central clearing systems in Hong Kong, second only to the major banks such as HSBC and the Hang Seng Bank. Future applications include use in taxis, parking meters, tunnels, and as access control devices in schools and apartment buildings."

Although the card has been a success, Mrs Cheng did not envisage a time in the near future when the one card would satisfy all our needs. "I don't think we'll see one card that covers everything in my lifetime, but the Octopus card could be used to do a lot more things!"