Assessing E-Commerce Technology Enabled Business Value : An Exploratory Research

Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. INTRODUCTION Despite the recent demise of a considerable number of dot-coms, many traditional brick-and-mortar companies have invested and continue to invest heavily in eCommerce technologies. These companies will spend by 2002, according to one source, over $200 billion dollars on eCommerce business projects (Stuart 1999). While sizeable investments in eCommerce enabled initiatives are being made, it is extremely difficult to measure the benefits received from these initiatives mainly because of the difficulty involved in collecting data. Anecdotal evidence in the information technology (IT) productivity and business value literature suggests that these firms have achieved enormous performance and productivity gains by integrating eCommerce channels with their existing brick-and-mortar channels and thereby transforming themselves into a click-and-mortar business. Cisco Systems, Dell Computers, and Boeing Corporation are examples of large click-and-mortar organizations that have achieved a significant economic benefit by using eCommerce technologies. Cisco claims it is the single largest user of eCommerce in the world, with 90% of its 2000 sales which amounts to about $18.9 billion, coming online It also says that 82% of its customer inquiries are handled online (McIlvaine, 2000). Cisco’s revenues and net income have increased significantly since 1992 and its stock prices soared to the point that made Cisco a company with the highest market capitalization in the world in the early 2000 (Kramaer and Dedrick, 2002). Dell Computer reported over 250% return on invested capital from its logistics and order fulfillment systems (dell.com, November 2000). It makes more than $1 million dollars in PC sales online every day. Boeing’s electronic intermediary, PART online, allowed it to process 20 percent more shipments per month in 1997 than in 1996 with the same number of data entry people and resulted in elimination of 600 phone calls per day to telephone service staff (Teasdale, 1997). In spite of these anecdotes and others, there is no systematic empirical evidence in the IT productivity or business value literature regarding the payoffs from eCommerce business initiatives, especially for large click-and-mortar companies (Brynjolfsson and Kahim, 2000). The fundamental objective of the present research is to assess the eCommerce technology enabled business value. The research will investigate whether firms using eCommerce technology are successful in generating business value and, if they are, what eCommerce drivers determine such success and how best to use these drivers. An exploratory model of e-Commerce business value is proposed depicting the possible effect of management support for eCommerce enabled initiatives, efficient eCommerce support systems (e.g., automated data transmittal and retrieval system, automated order processing system, and online procurement system), and effective eCommerce presence on business operational efficiency and financial success. The model is fully grounded in IT business value and productivity literature (Kauffman and Kriebel 1988, Mahmood and Mann, 1995). The contribution of the present research, once completed, will be an empirically validated eCommerce business value model that can function as a reference framework for strategic managers by offering guidelines for eCommerce based business initiatives. The constructs developed in the model can serve as a foundation for further investigation of different eCommerce drivers and their relationships with business value measures. To the best of our knowledge, this is the first empirical study to address the business value of eCommerce enabled initiatives. The paper proceeds as follows. The next section discusses the relevant prior literature to provide the background information and theoretical perspective for the present research study. This is followed by a presentation of the research model describing different drivers that affect the performance of a eCommece initiative. The theoretical rationales for relationships among the drivers and relevant hypotheses are also presented in this section. The following sections, once the empirical study is completed, will present hypotheses testing results, discussion of relevant results, and conclusions and directions for future research.