commerce defined

E-commerce is a major business innovation which tends to be successful when led by commercial rather than technological considerations. E-com-merce exploits information and communication technologies (ICTs) to re-engineer processes along an organisation’s value chain in order to lower costs, improve effi ciency and productivity, shorten lead-in times and provide better customer service. Electronic commerce or e-commerce therefore con-sists of the buying, selling, marketing and servicing of products or services over computer networks. Strictly speaking, according to the OECD, e-com-merce may be defi ned only as the method by which an order is placed or received and does not extend to the method of payment or channel of deliv-ery; therefore for the purist, the simple process of gathering information online or sending an e-mail does not constitute e-commerce. Whatever the arguments over the defi nition, for the quantity surveyor, e-commerce allows for instant communication through the supply chain, giving the partners a clear real-time picture of supply and demand.

One of the fi rst organisations to use the term e-commerce was IBM, in October 1997 when it launched a thematic campaign built around the term.

Over the past few years major corporations have re-engineered their busi-ness in terms of the internet and its new culture and capabilities, and con-struction and surveying have started to follow this trend. As with any new innovation there are forces that act to drive forward the new ideas as well as those forces that act as inhibitors to progress. These are illustrated in Figure 4.1 and discussed later in the chapter. E-commerce sprang to public attention in 1997, after the meteoric rise in the value of the so-called dot.

com companies. Many within the construction industry were sceptical about the application of e-commerce to construction and in 2000/2001 when the value of shares on the UK stock market collapsed and many virtual compa-nies evaporated overnight, leaving massive debts and red faces, there was a collective ‘I told you so!’

The general consensus is that the failure of many dot.com companies occurred owing to a combination of some or all of the following factors:

• Poor business models;

• Poor management;

• Aggressive spending;

Forgetting the customer;

• The changing attitudes of venture capitalists.

In 1999/2000 alone it was estimated that the total amount of venture capital investment in B2B (see later defi nition) exchanges was $25 billion world-wide, but this decreased to a trickle by 2001.

In common with other market sectors, e-construction has had a number of false dawns; for example, at the height of dot.com mania fi ve of the largest

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contractors in the UK announced the creation of the fi rst industry-wide elec-tronic marketplace offering the purchase of building materials online as well as a project collaboration package. Just over a year later it was announced that the planned internet portal was to be shelved, due to lack of interest.

Despite this lack of enthusiasm from within the industry and the profes-sions, due in large part to the continuing client lead drive for effi ciency and added value, as well as examples from other sectors, the move to become an e-enabled industry continues. Information technology is at the heart of the developing tools and technologies that pool information into databases.

An equally important aspect is looking at the attitudes of the people who need to feed information into and to use the system. The internet in par-ticular provides a platform for changing relationships among clients, sur-veyors, contractors and suppliers; open exchange of information is critical in order to harness the best from this virtual marketplace and one of the biggest challenges is creating a culture that encourages and rewards the shar-ing of information. Too many people are still startshar-ing from the viewpoint that knowledge is power and commercial advantage, and the belief that the more they keep the knowledge to themselves, the more they will be protect-ing their power and position. Despite the somewhat slower uptake by the construction industry compared with other sectors, Figure 4.1 illustrates the wide range of e-markets available for construction and quantity surveying applications from basic e-shop websites to complex value chain integrators and collaboration platforms. Why then has e-commerce not become the dominant way of conducting business in the construction sector? In a survey of the construction industry commissioned by the Construction Products Association in 2005, 83 per cent of those surveyed cited the culture of the industry as the major constraint on the development of e-commerce in con-struction. The survey also concluded that at fi rst sight little had changed since 2000 when 86 per cent of those questioned in a similar survey cited the same cause for the slow uptake of e-commerce. Yet, despite this negativ-ity, 80 per cent believed that the construction industry is still committed to embracing new technologies; however, growth at 26 per cent had been much slower than the predicted 50 per cent in 2001.

The key advantages for the adoption of e-technologies were considered, by respondents in the 2005 survey, to be:

• reducing costs;

• faster transactions;

• fewer errors;

• reduced paperwork.

Interestingly, ‘access to new markets’ which ranked very highly in the early days of e-commerce surveys has now disappeared from the list of perceived advantages.

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The main disadvantages of e-technologies were seen to be:

• initial set-up costs;

• loss of personal contact;

• retraining of staff.

One of the more surprising results of the Construction Products Association survey was respondents’ views on the effect of e-commerce on construction products. While 80 per cent of the industry as a whole and 69 per cent of manufacturers and distributors expected little or no change in the range of products available, 10 per cent of the industry as a whole and 19 per cent of construction product manufacturers expected a decrease in product aware-ness. Looking forward to 2012, when asked to predict how the propor-tion of business done with their suppliers and customers using e-commerce would change, the highest increase was envisaged to be with suppliers, with an overall increase of 48 per cent compared to 30 per cent with customers.

The above fi gures indicate that to date, the majority of organisations would

e-Markets

Figure 4.1 Classification of Electronic Commerce Business Models Source: Paul Timmers.

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appear to use e-commerce to track the competition and improve commu-nications. In addition, it would appear that many companies, particularly SMEs, are engaging in e-commerce activities as a result of competitive pres-sure, suggesting a defensive line of action rather than a differentiated one.

However, as clients become more e-enabled, quantity surveying practices must follow or be left behind. As in the case of supply chain management techniques, and certain public sector procurement agencies, the pressure will come from the client; even so, few if any quantity surveying practices have made the leap from simple website to transaction platforms.

A high percentage of quantity surveying practices now have their own websites. Software such as Microsoft Expression Web, as well as inexpen-sive proprietary website templates makes the process of producing a pro-fessional-looking website comparatively simple and inexpensive (e.g. www.

duncancartlidge.co.uk). This so-called fi rst generation presence is used mainly for marketing and employs the simplest form of business model (illustrated in Figure 4.1). The so-called second and third generation pres-ence, which incorporates transaction applications, has shown a much slower growth rate, particularly in the construction sector.

In a survey of e-commerce adoption carried out by Statistical Indicators Benchmarking the Information Society (SIBIS) across seven EU states it was found that the leading e-commerce all-rounders were in distribution and fi nancial network sectors, whereas offl ine and basic online organisations were most likely in construction and manufacturing.

As shown in Figure 4.2, internet technologies may be exploited in mar-keting and sales by introducing web marmar-keting and eventually e-sales; this is referred to as the front offi ce development path of e-commerce, since it involves dealing online with fi nal customers. Integration of closed business networks involving suppliers and distribution networks is defi ned as the back offi ce development path. The next step is the integration of applica-tions and exploiting processes synergies – the all-round e-commerce model.

6.5%

Figure 4.2 E-commerce development stages and degree of engagement, ex-pressed as a percentage, in e-commerce in the EU

Source: empirica SIBIS.

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The transparency of the internet should be a driving force for changing business strategies and attitudes and yet it will take a quantum leap in con-struction business culture to disclose sensitive information to the supply chain. It has been suggested by a leading construction industry dot.com that the European construction industry could save up to 175 billion euros per annum on building costs and reduce completion time by up to 15 per cent through the widespread adoption of e-construction technologies.

When the lean thinking initiative was introduced into construction, it was the car industry that provided the role model. Now that some sections of the construction industry are talking seriously about e-commerce, it can once again look to the motor industry for a lead. In America, the three major domestic motor manufacturing fi rms have been dealing with suppliers via a single e-commerce site for a number of years – an initiative that has resulted in reported savings of over £600 million a year. Similar initiatives are also to be found in the retail and agriculture sectors, but perhaps in the rush to establish the fi rst truly successful construction-based e-portal the UK players ignored some basic business rules.

Several years after the advent of e-construction the current shape may be considered as follows (and see Figure 4.3).

The shape of e-construction