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Net Impact

A recent study commissioned by Cisco Systems estimated that Internet business solutions could save companies in Germany, France and the UK 82 billion Euros over the next 10 years. In the US, companies are hoping to save $.5 trillion during the same time. The disparity is not just a case of Europe lagging behind the US, it is down to fundamental differences in business culture that means whilst progress may look slow, the pragmatic approach will pay off.

It is generally accepted that when it comes to business, where the US goes, Europe will follow a year or so later. So it is no great surprise that the Net Impact study shows many more American companies have adopted Internet Business Solutions than their counterparts in Europe's three biggest economies; Germany, France and the UK. They are also enjoying far greater financial returns. But that doesn't mean that European companies will simply copy the behaviour of their counterparts across the Atlantic in order the achieve parity. From my experience in leading Cisco's Internet Business Solutions group in Europe, there are fundamental differences in the approach European firms take in implementing web-based applications.

Europeans generally have a preference for developing a strategy, planning it in detail and then executing it in a strong fashion which means there is a longer lead-in time. Germans, for example, like to establish a very robust ROI model before they make any investment decisions. Once the programmes are commissioned, they tend to roll out more or less independently of the economic environment. In the US, companies tend to require a much shorter fuse before these projects are launched, and once given the go-ahead, it can be a bumpy process, with stops and starts along the way. The willingness to experiment is much more of a mindset over there; and if you get burnt, well that was a lesson learnt and you can go on and do another project. Here, experimentation is more on the periphery.

Most of the large European companies we deal with are multi-country and one of the big issues they face is how to roll out a standard infrastructure across different territories, many of which may have invested in their own systems. It is these more advanced territories that may have to make the most sacrifices initially in order for the company as a whole to benefit. Say, for example, a country has put in an excellent web-based ERP system and now the company is trying across Europe to put in a totally standardised supply chain solution. Those countries who were the furthest advanced, are probably going to get less functionality from the standard system. But the company as a whole will get a far greater payback with a common infrastructure.

Also, European companies tend to be less CEO driven than their US counterparts. They have more complex governance structures, a number of different parties will always get on board a particular initiative and frequently there are significant powerbases in the different countries in which they operate. So you need critical momentum in the company to get effective execution rather than one believer in a top executive position.

There are other, more country-specific factors that have affected the take-up of Internet business solutions in Europe's three leading economies. To a certain extent, the UK has been held back by the lack of a national broadband infrastructure. Even the most aggressive company cannot move that far forward unless all its supply base has the opportunity to access sophisticated web applications, needing speed and bandwidth. In Germany, there is a slower, more deliberate approach, which we see very consistently amongst most of our German customers who have adopted far fewer solutions per company and they are still at the early phase of pushing through one or two bold initiatives. In France, there are a number of reasons why Internet business solution adoption rates are slower. There's the historic result of Minitel. And some would even argue that there may have been less urgency to look for alternative processes because the country has invested in a good transport infrastructure. But my team is starting to see the larger French firms beginning to take the Internet quite seriously, and I believe France to be one of the most exciting markets in Europe at the present time.

Some of the most useful statistics in the Net Impact study are the rates of adoption by industry. Whilst the financial services are leading the way, it's the industries are often regarded as slower moving, such as manufacturing and government, that anticipate they will have some of the biggest gains once they have fully implemented their Internet business solutions. Take government for example. Their infrastructure in many places is so decayed that when they do invest, they are often replacing a whole network rather than upgrading bits of it. Their political objective is to deliver more and better services to citizens through the increased productivity of their staff. This is achieved through web-enabling many processes so that staff can be re-trained to work for citizens in other areas. Manufacturers, who are under tremendous cost pressures at the moment, are looking increasingly at IP-based solutions that allow them to track assets and inventory on the shop floor.

One of the most significant differences that Net Impact showed up is that Europe is ahead of the US when it comes to measuring investments in web-based applications. As explained above, US companies have traditionally taken a greater leap of faith than their more process-oriented European counterparts. But metrics are still at a nascent stage. Two or three years ago e-Business projects scarcely faced any financial bar. They were often developed and funded on a wing and a prayer and were deliberately put outside the traditional corporate ROI structure. Now they are being brought firmly within the fold so they have to go through the same scrutiny as any capital investment. That does make it difficult and frequently they won't be self-standing as there is an infrastructure you need to put in before realising extraordinary payback on any of them. "You have to be prepared to pay out to get pay back."

Companies also won't see convincing returns on their investments if they only adopt one of two solutions. As the Net Impact study shows, companies who are investing in customer relationship, supply chain and workforce optimisation solutions simultaneously are the ones beginning to increasing returns.

Compelling metrics are not always the reason that companies adopt Internet business solutions. Top executives realise that it is the way their corporations need to develop to remain competitive. The economic downturn has, paradoxically, helped senior executives focus on the heavyweight solutions offering real productivity benefits. Many have been looking at processes enabling them to continue giving good service to their customers whilst having to operate with less people. I believe that the more savvy business leaders are the ones building stress-tested systems now, which they can then scale when the recovery gets more solid.


Toby Burton
Vice President
Cisco's Internet Business Solutions in EMEA.




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