e-Business software applications are becoming widely adopted by enterprises seeking to capitalize on the efficiencies, effectiveness, and business opportunities made possible by the Internet.
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Enterprises are shifting internal business processes such as fulfillment, human resources, and finance to the Internet and are collaborating with third parties to create efficiencies and better service to customers, employees, and business partners. For example, rather than managing human resource functions such as benefits internally, enterprises work with third parties to manage 401(k) and healthcare plans. This provides better service to employees while allowing human resource managers more time to leverage the talent of employees' skills. Supply chain efficiencies can be developed using e-business processes as well. Collaboration among supply chain vendors improves demand forecasts, promotes efficient inventory management, and reduces cycles times.
One theme underlying the shift to the Web is the desire to have mission-critical information available throughout an organization on a real-time basis. The traditional client/server architecture fragments data and decentralizes it across an organization. The Internet provides the benefit of centralized data and real-time feedback with a more economical architecture. All that is needed is an industry-standard Web browser (e.g., Internet Explorer), and businesses are on their way. They can then use the Internet to market and sell products, communicate with customers, and electronically link with business partners.
Investment opportunities in this space abound. Market forecasters such as International Data Corporation and Forrester Research have suggested that growth rates in e-business sectors will be in excess of 50% compounded annually over the next few years. Substantial forecasted growth rates can often lead to hype and hope, but they can also mean good opportunities for diligent investors. E-business software investment areas include customer relationship management, supply chain management, application service providers, and business-to-business e-commerce. Now, let's address several of these sectors and the leaders in each.
Customer Relationship Management (CRM)
As outlined in our free Motley Fool Research report on the company, Siebel Systems (Nasdaq: SEBL) is the leader in the CRM space, with approximately 20% of the market share. Enterprise resource planning (ERP) and database vendors such as SAP (NYSE: SAP), PeopleSoft (Nasdaq: PSFT), and Oracle (Nasdaq: ORCL) are all vying for a piece of the CRM pie by trying to offer customers total e-business solutions. Companies such as Davox (Nasdaq: DAVX) with its call center applications and Broadvision (Nasdaq: BVSN) with its e-marketing are trying to carve out their own niches in the CRM space as well.
Supply Chain Management (SCM)
The SCM space is fragmented, with many different vendors offering solutions to specific problems. However, i2 Technologies (Nasdaq: ITWO) has established itself as a leader in this segment. Manugistics (Nasdaq: MANU) is a viable competitor, along with software stalwarts Oracle, SAP, and PeopleSoft.
Business-to-Business (B2B) E-Commerce
As discussed in the Motley Fool Research Internet Report on B2B E-commerce, Forrester Research estimates that $2.5 trillion worth of goods will be transacted online by 2003. B2B e-commerce providers offer exchanges for vertical (industry-specific) and horizontal (bringing together firms from several industries) markets. Buyers and sellers can congregate on these exchanges and use catalogues and auctions to increase market efficiency, reduce purchase costs, and improve inventory management. Leading B2B firms such as Commerce One (Nasdaq: CMRC) and Ariba (Nasdaq: ARBA) are worthy of investors' attention.
The Internet is now a mainstream tool for many companies. It is not uncommon for the CEO of a firm to be directly involved in its Internet strategy. As a result of the adoption of the Internet for business purposes, e-business software applications have experienced explosive growth. The e-business software sector is red hot, and investors interested in this space will find many investment ideas.
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CRM software is one of the fastest growing e-business sectors. The Internet economy has empowered the customer. Websites are expected to be open for business 24 hours a day, 7 days a week. Comparison-shopping is made easier by clicking though to the next offer. Enterprises are utilizing CRM applications to attract, retain, and leverage relationships with customers across all touch points in the organization. It is much more cost-effective to retain an existing customer than to attract a new one. CRM applications can be used to provide customized product offerings, marketing campaigns, and an additional communication channel via the Web. Richer marketing strategies and sales tactics predicated on better data, combined with superior customer service, can lead to increases in top-line growth and profitability.
SCM software reduces inefficiencies in supply chains by managing the flow of goods. More efficient supply chain management can produce better demand forecasts, distribution, and inventory turnovers. Like CRM software, SCM applications sales are expected to realize explosive growth rates as firms clamor to create efficient supply chains.
Prior to the proliferation of the Internet, some companies transacted business through Electronic Data Interchange (EDI). EDI is a an expensive proprietary platform, inhibiting wide adoption. However, the Internet has changed the overriding model for how B2B commerce works, allowing transactions to occur in a more efficient manner.
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