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e20 Authors: Elizabeth White, Lisa Calkins, Flint Brenton, Melanie Marten, Liz McMillan

Related Topics: Cloud Computing, Cloud Data Analytics, Business Process Improvement, Enterprise 2.0

Article

How Cloud Computing Is Changing Business Commerce

Utilizing the cloud can eliminate steps and help you conduct business commerce more efficiently

Cloud computing is changing the rules of the game for many industries. Every day we hear compelling stories about how banks use cloud-based solutions to help customers pay bills online, health care institutions tap cloud networks to collaborate on medical care, and colleges leverage technology to create virtual classrooms.

Cloud computing hasn't had a huge effect on business commerce. Despite billions spent on technologies to streamline the process, business commerce has been remarkably resilient to technological progress. Commerce collaboration between companies is still weighed down by paper-based processes and outmoded operating infrastructures. In fact, more than 80 percent of business-to-business commerce transactions are completed manually, and companies still send 85 percent of invoices and payments on paper.

Things are changing. With increasing frequency, companies are starting to use cloud-based solutions and networks to grease the wheels of business commerce.

The move to cloud is part of a global shift where companies are reaching outside their four walls and learning to manage the interconnected web of relationships on which their businesses now depend. It used to be that companies could focus on their internal operations and trust that their businesses would run themselves. But as the lines between what's insourced and what's outsourced are becoming increasingly blurred, this is no longer the case. Rather than operate as a single entity, companies must managing their outward relationships. And many are beginning to turn to the cloud to do it.

Using the cloud, companies can drive a more efficient, effective, and consumer-like commerce process. Take the case of a manufacturer that wants to start making and selling a new type of product that requires a special polymer that none of its current suppliers can provide. It starts with a lengthy, expensive vendor search that goes something like this:

The Engineering team conducts customer focus groups to determine the requirements for the product and then develops specs. The Procurement team does a vendor search. Suppliers outline their capabilities and bid on the project. The Accounting team sets up the new vendor in the system. The IT team makes sure the new vendor has the right software to send invoices and statements electronically. The Legal team sets up a contract for the transaction.

By plugging into the cloud, the same manufacturer can speed the processes along the following way:

Engineering engages customers in an ongoing discussion through an online community and quickly and cost-effectively consults experts in the field of polymers to determine the exact type that's right for the job. Procurement searches for and finds potential suppliers through a global network of qualified candidates and sends out a request for bids to hundreds at once, all over the globe. Suppliers provide a detailed view into their capabilities online and buyers view ratings submitted by members of the network who have worked with them and can provide insight into their performance, among other things. Accounting sets up a new vendor with just a couple of mouse-clicks, because the vendor's information is already stored electronically. IT has nothing to do because the new vendor's software system integrates seamlessly.  Legal starts with a boilerplate contract from an online best practices library.

In today's competitive business environment, utilizing the cloud can eliminate steps and help you conduct business commerce more efficiently. Here's how to do it right.

  1. Automate: Paper processes erode a company's profitability. By moving business commerce processes to the cloud, you can digitize the work and make them as easy as those used to drive personal commerce.
  2. Analyze: Take a look at your infrastructure, processes and relationships, and then figure out how cloud-based solutions can help you improve your commerce practices. Think about the collaborative nature of the cloud, especially as it relates to your enterprise's working capital and business transaction strategy.
  3. Implement: When implementing a cloud-based service, make sure the vendor offers a true, shared, multi-tenant platform that can grow (or shrink) with your business and budgetary needs as they evolve.
  4. Leverage: Now that you've picked a cloud platform, continue to foster the relationships you've already made with customers, suppliers, partners and other parties connected to your evolving extraprise. Being part of a community lets you network, share best practices, and collaborate with your partners and your peers. This means you can manage and optimize all your trading relationships in one place - delivering greater efficiency for you and your partners.

Successes
Staples is one retailer that's successfully leveraged the cloud. To streamline its online order-to-cash cycle, Staples tapped into the Ariba Network, a cloud-based business collaboration platform used by more than 340,000 companies around the world to drive over $173 billion in commerce each year, and cut its customer service calls by 40 percent and reduced processing costs from $8 to $2 per purchase.

MarkMaster, a maker of rubber stamps for business use, uses the same network to help its prospects buy electronically using online catalogs and paperless invoices. The initiative moved the company to 95 percent paperless transactions and pushed revenues up 20 percent year over year without raising its cost of sales.

Collaborative commerce is a better way of doing business. But technology doesn't make it happen all by itself. Implementing to execute bad processes more quickly won't get you to the next level of productivity. Ensuring that your organization is employing best practice business processes in collaborating with its trading partners will, as will having access to market knowledge and expertise one can use to make more informed business decisions.

More Stories By Gregory Spray

Gregory Spray is Senior Vice President of the Solutions Management at Ariba. In this role, he is responsible for the company's solutions strategy, roadmap and plan.

Prior to joining Ariba, Mr. Spray served as a Partner in Accenture, a global management consulting, technology services and outsourcing company. During his time at Accenture, he was responsible for the overall Procurement BPO offering strategy as well as managing a global team of sales architects. Mr. Spray also served as Chief Executive Officer of Alliente, a procurement services provider. At Alliente, he successfully built and grew the business which was later sold to Ariba in 2004.

Mr. Spray received his BBA in Information Systems and Quantitative Analysis from the University of Wisconsin, Madison.

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