Business to Business E-Commerce: Infosys technologies and Prairie Four Square - Term Paper Example

Executive Summary Business to business e-commerce entails buying and selling of products electronically, it has become an effective form of carrying out business. Real business values from the internet perspective emanate from business to business transactions that encompass e-commerce. Prairie Four Square (PFS), an insurance company wishes to incorporate e-procurement to cut savings incurred by its purchasing department. PFS seeks to implement JAVA-based Ariba software. To this end it has short listed three top IT firms to submit their proposals for consideration to be awarded the project contract. Infosys technologies, an IT consultancy firm based in Bangalore is among these three firms. Infosys is disadvantaged by the fact it is an offshore company which lacks adequate experience compared with the other two companies which it is up against. However, it relies on a number of factors to counter these disadvantages. These include the project contracts that it has delivered to PFS together with the quantifiable savings attributed to the same. It has also already initiated three similar projects in other organisations. Introduction Business to business e-commerce, an area that entails electronic selling and buying transactions, has become core to carrying out business effectively. If executed properly, it can assist a business organization to achieve significant improvements. Such improvements are more likely to be observed in the areas of productivity and cost savings. Many business organizations employ numerous strategies in an attempt to make dubious returns on investment. Such strategies entail; outsourcing, downsizing, empowering employees, shifting organisational structures and processes from horizontal to vertical, procuring IT systems and so on (Neef, 2001). E-commerce has been hailed as one of the areas within which business organizations can accelerate revenue increase and expand their client base. However, as some may point out, it is a relatively un-significant step for those businesses that wish to expand. Even though it is an essential segment of an overall e-business strategy, when it comes to online retailing, it is simply a slightly effective expansion of the entire sales process. As many business organisations are experiencing first hand, the real value of the internet emanates from business to business transactions. That is, buyer to vendor transactions that entail e-procurement (Neef, 2001). Prairie Four Square (PFS) is one such company that wishes to incorporate e-procurement in its business operations. This report seeks to address the various issues likely to be faced by both Infosys technologies and Prairie Four Square (PFS) in the incorporation of Ariba e-procurement system project. Prairie Four Square (PFS) aims at making enormous cost savings once the project is successfully completed and executed. Challenges The strategic nature of the Ariba e-procurement system project initially made PFS Vice president and Chief Information Officer consider engaging the services of leading IT consultancy firms. Consequently the two narrowed the firms best suited for this project to two. It is worth noting that Infosys technologies was not among these firms; that is, the firms selected were top IT firms in the United States (Narus & Seshadri, 2004). This implies that the Ariba e-procurement is a mega project which entails numerous complex tasks, strict timelines, and several related factors. Therefore, when Infosys technologies was also eventually considered by PFS as one of the IT firms that could be awarded the project, several challenges were bound to arise. For these challenges to be addressed, it is imperative that they be highlighted first. One major challenge likely to be faced by Infosys lies within the area of global marketing. Several issues arise within this context. Three main challenges that this project is likely to pose on Infosys within the context of global market include: the political and legal environment within which they operate; the cultural environment; and the competitive environment (Steers & Nardon, 2006). On the political and legal environment aspect, Infosys is supposed to undertake the Ariba e-procurement project in a foreign country. That is, considering the location of its headquarters. In this regard, Infosys has to adhere to the rules, regulations, taxation laws, trade laws and, local contractual obligations. The political and legal environment as a problem is a common challenge to many firms operating in the global arena. For instance, some countries may be under the English law whereas others may follow their own devised laws and systems (Steers & Nardon, 2006). Incidentally, there are situations where local authorities in other countries would prefer controlling the global imports in their countries. The reason behind controlling global imports would be to protect their local industries. This they could do through imposing tariff and non tariff barriers. Political ideologies could also be a major impediment (Steers & Nardon, 2006). Different countries have different political ideologies, as such; challenges within this regard are likely to surface hence impeding smooth flow of business operations. However, there are global firm’s public activities formulated by some countries to ensure that difficulties brought about political ideologies do not become impediments. Incidentally, in situations where political ideologies differ, top multinational firms prefer employing expatriate managers from neutral nations. These firms keenly observe changes in local governance and manipulate their own changes in tandem to changes in the administration (Steers & Nardon, 2006). Another challenge posed when operating in the global market is with regards to the cultural environment. Differences in traditions and customs followed by different communities across the globe can be a major impediment when conducting business in the global arena. These differences can lead to situations where communication with customers, user, and consumers is misinterpreted. The variances in ideas, beliefs, values, semiotics, traditions and assumptions pose significant challenges to firms operating on the global platform. To this end, it is imperative that such firms ascertain differences and similarities in cultures and espouse the necessary steps to incorporate the same. It is worth pointing out that it is necessary to take such steps as this saves on resources like time and money. In this regard therefore, it is imperative that firms recruit the right type of personnel for global assignments and arrange for them to understand the following factors: How to address and deal with their consumers in these countries; the various approaches to be assumed in different countries, that is, either soft sell or hard sell; where the emphasis ought to be placed, either time, quality or both; and finally, how to react to different situations (Steers & Nardon, 2006).. Another challenge likely to be experienced by Infosys is with regards to the competitive environment. Already as it is, their bid to land the Ariba e-procurement project is set against two top IT consultancy firms in the United States. The odds are against Infosys in the sense that these well established within the states and bear a competitive edge in many aspects. Competition can accelerate an organisation to excellence if taken in the right spirit. However, it can be dispiriting if a firm’s competitors engage in tactics that could drive them out of business. Such tactics might entail; strategies to block distribution channels, formulating restrictive trading contracts, lowering prices, and so on. Such tactics can force them to either become aggressive in their approach or retreat. A typical example in this regard can be drawn from Coke and Pepsi, two multinational firms that have always engaged in fierce competitive battles (Steers & Nardon, 2006). Cost Savings Infosys handle regular maintenance tasks for PFS. Such tasks include; rectifying software flaws, cleansing corrupt data, and running program tests. Incidentally, they also complete higher value maintenance related tasks such as: business process reengineering; installation of specific packaged solutions; application development; technology consulting; and program management (Narus & Seshadri, 2004). The quantifiable cost savings accruing from the above tasks cannot be overemphasised. The applications and the maintenance tasks carried out on the same offer a wide and significant level of returns. Some of the major quantifiable cost savings attributing to the maintenance tasks and applications provided by Infosys technologies to PFS entail; lower implementation costs; lower business transaction costs; lower personnel costs; lower business enhancement costs; enhancing and supporting customer experience; and lower process costs. It is worth noting that all these are costs specified in the project contracts. There are quantifiable cost savings that are not specified in the project contracts, these include; employee reduction; reduction in the number of corruption incidences per annum; efficient process in paying disability claims; and efficient record comparison processing. As Graham (2011) points out, quantifiable cost savings are those savings that can be converted in monetary terms even though the money cannot actually be seen. For instance, the introduction of a new procedure that will ease sales operations could imply that salespeople will save an hour daily. Basically, the implication is that the sales personnel are not reduced but quantifiable cost savings still accrue. That is, they have an hour to spare daily to execute their duties, which is translated to sales. That is a benefit that can be expressed in monetary terms. Looked at from a PFS perspective, Infosys managed to enhance the processing time by 8 hours and the record comparison efficiency by 56 percent. It should be noted that failure to implement failure to deliver reports on time attracts a 360,000 US $ penalty. There is a 1 percent probability that reports are not delivered on time. However, with 8 hours of CPU time saved each month this challenge is addressed. This translates to cost savings (Narus & Seshadri, 2004). Reduction of liquid cash reserves held by PFS to settle disability claims is another quantifiable cost savings attributed to Infosys technologies. That is, it is not a quantifiable savings specified in project contracts. Infosys facilitated reduction of these reserves by 14 million dollars. This was achieved by streamlining the claims settlement process and the claims submission process as well. As part of this redesign, Infosys automated the manual process which had traditionally been in place. With the process being more efficient, PFS did not only complete the related tasks faster, but it also did so accurately. In tandem with insurance regulations, PFS was enabled to lessen its cash reserves. At an estimated cost of capital of 10 percent PFS attained significant savings (Narus & Seshadri, 2004). Subsequent to learning the nature of project tasks at PFS, Infosys moved some of them to Bangalore. Infosys deployed 75 people to work on the project in the United States and 250 to work on the project tasks in Bangalore. After carefully scrutinising the manner with which the tasks were carried out and completed PFS reduced the number of people in Bangalore to 100. The surplus 150 were redeployed to other PFS projects at no extra costs. This culminated to quantifiable costs savings considering that a fulltime equivalent costs 8000 US $ monthly in the United States and 3200 US $ per month in India (Narus & Seshadri, 2004). Another area that Infosys delivered quantifiable cost savings not specified in project contracts to PFS is on the area of data corruption. Infosys reduced incidences of corruption at PFS from 24 to O. Each time a corruption incidence took place at PFS three programmers would take an average of four hours each to reconstitute the corrupt data. This they did at an FTE rate of 45 US $ an hour. Incidentally, these programmers would be helped by a technical support person at an hourly rate of 40 US $. With the elimination of corruption incidences, all the costs attributed to corruption incidences were negated as well (Narus & Seshadri, 2004). Knowledge Transfer Time Cost Savings Knowledge transfer is costly in that it entails time and money. It takes time to create, document, and execute a transition (Colby, not dated). Along the same lines, Lundan et al (2002) points out that resource costs attributing to knowledge transfer are quiet substantial. These resource costs emanate from efforts to codify and impart complex knowledge to the recipients. Knowledge transfer to a significant extent relies on the recipient’s absorption capacity and the general environment with regards to the giver and the receiver. Within the knowledge transfer context, those responsible for a task assume the role of the recipient. They decipher, study, and acclimatize to the appropriate information objects found to satisfy the information needs. Subsequently, these information objects are incorporated into the existing mental model. That is, fresh knowledge is constructed. Subsequently this information is imparted to employees within the organisation for application purposes (Maicher & Garshol, 2008). All these elements cost time and money. Transitional costs are substantial and range from 2 to 15 percent of the overall costs. The transition costs depend on the type of IT services to be transferred. It is worth noting that the IT costs will be lower if the services being rendered are low valued. Like for like for instance, rendering commodity services such as desktop management knowledge transfer attracts small transitional costs. However, knowledge transfer of IT services that are customized, such as application management attracts substantial costs (Oshri, 2010). Building on the foundations of knowledge management, outsourcing, and organisational learning literature, transition is conceptualised as a combination of three processes. These processes are identified as transfer, learning and adaptation. For instance, subsequent to the signing of an outsourcing contract, client staff ought to transfer, knowledge experiences, and routines to service provider personnel. Consequently, service provider personnel are expected to absorb the same and replicate the outsourced tasks. Knowledge transfer within this context entails learning to execute outsourced tasks such as the applications being implemented by the service provider (Oshri, 2010). It ought to be noted within this context that limited knowledge transfer and insufficient learning during the transition process is challenging. Additionally, it might culminate to increased risks and costly mistakes to the client organisation, that is, to PFS. Knowledge transfer significantly influences the performance of the application being incorporated in the client company. Incidentally, it is a key factor when it comes to offshore outsourcing as compared to other factors attributing to transition. It is worth noting that knowledge transfer has a higher potential to disrupt a smooth and efficient transition. Still on this note and more importantly, it requires an enhanced level of coordination which is even more challenging (Oshri, 2010). To this end, it is apparent that sole sourcing the Ariba e-Procurement System project from Infosys technologies bears significant quantifiable cost savings to PFS. As highlighted above, a key factor in knowledge transfer is an enhanced level of coordination. If the system project is sourced from more than on firm then the chances of an enhanced level of coordination is compromised. Additionally, chances of making costly mistakes due to poor knowledge transfer are highly reduced. As Rahul, Infosys engagement manager puts it, sole sourcing the Ariba e-Procurement System project to Infosys bears significant benefits. By participating in the project from day one, Infosys will be able to do away with the knowledge transfer time. However, if Infosys is involved in the project during the maintenance stage, some knowledge transfer time would be necessary to bring them up to speed (Narus & Seshadri, 2004). As already highlighted above this would be a costly affair on the part of PFS. Rahul, still on the same point states that it would take approximately 5 programmers around 12 weeks to learn an Ariba e-Procurement System. That is, an Ariba e-Procurement System installed by another supplier. The implication here is that since the programmers will be based in Dallas, their fulltime equivalent costs will be put at 8000 US $ monthly (Narus & Seshadri, 2004). This therefore implies that if Infosys only engaged in the systems project during the maintenance phase, a colossal amount of time will be consumed. This in effect would imply them spending a lot of time in an effort to track down where the problem might lie. Subsequently this translates to more money. Savings attributing to knowledge transfer would therefore accrue only if Infosys is engaged in the project right from the beginning. Selling Infosys’ Ability to Deliver the System project / Recommendations The most effective way that Infosys can sell the form’s ability to deliver an end to end to solution is through upgrading their marketing skills. This they can do be ascertaining their unique selling point (Stone, 2001). Basically, a unique selling point is a unique attribute bore by the organisation that makes it appealing to customers. In the transactional funnel approach, a unique selling point gives the seller a greater chance of attracting a prospect’s attention. Through highlighting their Unique Selling Point, officially puts Infosys in a competitive race with other top companies already short listed against it. This automatically culminates to commoditisation. To this end, it is imperative that Infosys make a list of the unique selling point they currently have and those that they consider to use in future. More often than not, an organisation’s selling point is those attributes that through time becomes its distinction point from competition. It is worth noting that customers in part determine the unique selling proposition (Hillestad & Berkowitz, 2004). Already as it is, Infosys have a unique selling point, a positive attribute to their name that gives them an edge over the other IT firms that they are up against in this regard. They can convince PFS that they can properly deliver an end to end solution on numerous accounts. First, there are other Ariba e-Procurement System project that Infosys has already initiated all being offshore projects (Narus & Seshadri, 2004). This therefore implies tat they have some experience in this area that can enable them initiate this project. Still on experience, there are some positives aspects attributed to the Ariba e-Procurement System project already initiated. Like for instance, an Ariba e-Procurement System project initiated for a healthcare organisation. In this particular project Infosys has been able to save the organisation 100,000 US $ per annum. This it has done through switching the organisation’s change order procedures to an online from a manual based system (Narus & Seshadri, 2004). Such experiences can be modified and be transferred to PFS which might lead them to experience similar benefits. Incidentally, Infosys can grab the opportunity presented when the PFS president will be visiting the Infosys headquarters in Bangalore to demonstrate their abilities. Infosys plans to take all its members affiliated to the PFS project for a five week training of JAVA in Bangalore. They cease this opportunity to invite the PFS visitors for a sit in so that they could comprehensively demonstrate their ability to deliver an end to end to solution. Still on its proposal, Infosys could document some of the projects it has delivered to PFS in the past years. These it can use to demonstrate that it is able to deliver the tasks assigned to them along the basis of three key factors, that is; quality, reliability, and timelines (Narus & Seshadri, 2004). Conclusion In the contemporary real world of business to business, within the context of e-procurement, three key challenges are bound to surface. These challenges entail; linking computer systems of buyers and vendors, getting an organisation’s employees to apply procurement tools, and finally, reengineering the process. Infosys technologies should thus take these elements into account and come up with measures on how to address them. To overcome these challenges widely regarded as an impediment to a smooth integration of an e-procurement application; it is imperative that the outsourcing team be focused and dedicated. However, it should be noted that the buyer also plays a key role in this process. E-procurement is defined as an end to end process. It begins with a buyer clearly specifying his needs, that is, product needs and ends with the payment. In this regard therefore it can be concluded that the entire process requires the full participation of all the major stakeholders. Reference List Colby, K. (not dated). “Knowledge transfer: extending the value of outsourced relationships.” Retrieved 20 July 2011, from http://www.iaccm.com/news/contractingexcellence/?storyid=941 Hillestad, S., & Berkowitz, E, (2004). Health care market strategy: from planning to action. Jones & Bartlett Learning Lundan, S., & European International Business Academy. Conference, (2002). Network knowledge in international business. Edward Elgar Publishing. Maicher, L., & Garshol, L, (2008). Scaling topic maps: third International Conference on Topic Maps Research and Applications, TMRA 2007 Leipzig, Germany, October 11-12, 2007: revised selected papers. Springer. Narus, J., & Seshadri, D (2004). “Infosys Technologies Ltd.: Growing Share of a Customer’s Business.” Retrieved 20 July 2011, from http://www.vikalpa.com/pdf/articles/2007/april_june_83_92.pdf Neef, D (2001). E-procurement: from strategy to implementation. Upper Saddle River. NJ, FT Press Graham, N, (2011) Project Management for Dummies. John Wiley and Sons Oshri, I, (2010). Global Sourcing of Information Technology and Business Processes: 4th International Workshop, Global Sourcing 2010, Zermatt, Switzerland, March 22-25, 2010, Revised Selected Papers. Springer. Steers, R., & Nardon, L, (2006). Managing in the global economy. New York. M.E. Sharpe Stone, P, (2001). Make marketing work for you: boost your profits with proven marketing techniques. Magdalene Road, Oxford, UK. How To Books Ltd Read More