E-Business Survey
Trends & Success Factors
Sponsored by:
Code Red Consultancy Ltd
60 Lombard St
London
EC3V 9EA
www.code-red.co.uk
April 2001
Survey objectives
Conclusions
This independent survey, sponsored by
Code Red Consultancy, sought to uncover
the issues and pressures facing financial
organisations in their adoption of ebusiness processes and technologies and to
assist in identifying successful strategies
for the future.
The Internet matters, and the larger the
organisation the more convinced they are
that it matters. On balance 15% of small
companies (less than 50 employees), 55%
of medium companies (51 to 2000) and
74% of large companies (over 2000 staff)
believe that exploiting the Internet is more
important than other business activities.
With a third of all IT development effort
targeted at Internet related systems, the
take up is forecast to rise very quickly,
however many small to medium size
organisation could be left behind.
Responses
The survey was conducted within the City
of London Financial sector and was sent
out to nearly 3,000 people across a range
of organisations. There were nearly 300
responses in total.
The split of
respondents across the main types of
organisations who responded were as
shown in the pie chart below. Respondents
were mainly senior management from both
operational (65%) and IT departments
(35%).
Respondents by Sector
Retail Bank
11%
Financial
Services
13%
Stock
Brokers
10%
Fund Mgmt
27%
Investment
Bank
28%
Insurance
11%
No. of Employees in Company
> 5000
15%
< 10
2%
10 - 50
18%
2001- 5000
14%
51 - 250
17%
251-2000
34%
In the analysis that follows companies
have been split into small, medium or
large size organisations according to the
number of employees. Small companies
have up to 50 employees, medium have 51
to 2000 employees and large have over
2000 employees.
Code Red E-Business Trends & Success Factors
Moving up to E-business and Ecosystems
levels of deployment require significant
investment and business vision and the
level of input should not be under
estimated. Those companies who have
board level control over their e-business
strategy are likely to prosper most.
The biggest concerns in the finance market
today are the increasing rate of change
and, as companies become more
sophisticated with their use of the Internet,
the increasing reliance on IT. Closer
working relationships between the users
and IT staff and increased knowledge
transfer will be required to counter these
concerns.
While the industry is optimistic in terms of
the Return on Investment to be gained
through the use of Internet technologies,
they are far less concerned with accurately
measuring the benefits of their systems.
More attention needs to be paid to the
issues of security and flexibility in the end
systems in order to counter the concerns
over systems security and the increasing
rate of change in business life.
Page 2
Key Findings
The survey uncovered a number of interesting issues surrounding the implementation of
Internet related systems:
1.
Maximising the opportunities that
the Internet provides is seen as more
important than other business
activities, and often the most
important activity in business today.
2.
Larger companies are much further
ahead in their use of Internet
technology than smaller companies.
80% of small companies are not
engaging in any form of ecommerce or e-business and 30%
don’t even have a web site.
3.
Internet adoption and expectation
levels are very high, 50% believe
they will reach the next level of
Internet adoption within 12 months
and from a modest current
transaction level, the anticipated
level in 3 years is very high with
40% of business transaction being
handled by Internet technologies.
4.
The Internet now accounts for 1/3 of
all IT development effort.
5.
The main reasons for developing
Internet based systems are to
improving customer service or
increasing new business revenues.
However measurement of the
success of projects leaves a lot to be
desired.
6.
The main concern, apart from the
increasing rate of change, is the
higher reliance on IT. This is
particularly
true
amongst
organisations who have more
advanced Internet strategies. This
worry regarding over reliance on IT
may in part stem from IT’s lack of
understanding what is important to
users. IT people believe functional
fit is most important but users care
far more about the ease of use.
Code Red E-Business Trends & Success Factors
7.
Security is seen as the biggest
challenge in exploiting the Internet
but perversely it is the least
important area of functionality.
Flexibility is also ranked very low
in importance despite the concerns
over the increasing rate of change.
8.
The Internet being a great
opportunity for start-ups and small
companies to take on the industry
leaders would appear to be a myth.
Larger companies in the finance
industry are not concerned about
competition from start-ups and most
smaller companies are not investing
in Internet technology much beyond
email and possibly a web site.
9.
ASP adoption is greater in larger
companies, not the small ones for
which it was originally envisaged in
order to provide a cost effective
method of delivering services to
smaller companies. This may be
because the larger companies
perceive there to be added security
by keeping public access to one
particular system while smaller
companies have yet to be convinced
of the benefits.
10.
Unrealistic growth expectations in
smaller organisations are probably
being fuelled by Internet hype
Page 3
Importance of the Internet
Levels of adoption
“How important is it to maximise the
opportunities that the Internet provides,
in comparison to the other activities
within your business today?”
“Which level of Internet adoption is
your organisation currently at?”
Less
important
Irrelevant
Looking in more detail at the different
sectors of the finance industry, the
business to consumer sectors see the
internet as more important than those in
business to business markets
Financial Services attach the strongest
importance with 50% saying it is the most
important activity and a further 50%
saying it is more important than other
activities. No one in financial services puts
it on par with or less important than other
activities.
Fund Management on the other hand
are far less impressed. With the lowest
ranking 41% more important, 18% less
important. This is reflected in the fact
that Internet development accounts for
only 21% in Fund Management
organisations.
Relative Importance of the Internet
80%
70%
60%
Retail Bank
50%
Financial Services
% Adoption of Internet Levels
60%
50%
40%
30%
20%
10%
0%
Less than 250
employees
More than 250
employees
ce
EBu
sin
E
es
Ec
s
o
sy
st
em
On a par
e
Important
er
Most
important
m
0%
om
10%
D
Large
20%
EC
Medium
30%
ai
l
Small
40%
eb
sit
50%
W
60%
C
70%
Em
Importance of Internet by Company Size
B
63% state that it is more important than
other activities and only 11% believe it is
less important.
Level One - E-mail
Use of e-mail for internal and external
communication.
Level Two - Website
Using a web site to provide an electronic
shop window to the world.
Level Three - E-Commerce
Enabling your customers to purchase
products and services via your website.
Level Four - E-Business
When your business processes are
increasingly driven by Internet technology.
Your remote workers, customers and
suppliers may have access to some of
your internal systems, via the Internet.
Level Five - Ecosystem
A highly integrated infrastructure that
incorporates customers, suppliers and
other key alliance partners. Processes and
logistics are largely automated using
Internet technology.
A
Overall companies perceive the Internet is
more important than other activities with
89% saying it is as important if not more
important than other business activities.
The adoption of Internet technology by an
organisation can be categorised into one of
5 levels as defined by the Cisco Systems
model of the Internet. The levels are:
Using this level classification, an amazing
30% of companies with less than 250
employees do not yet have a web site.
And 80% of those smaller companies are
not doing any form of e-commerce or ebusiness.
Stock Brokers
40%
Investment Bank
30%
Insurance
20%
Fund Mgmt
10%
0%
Most
important
Important
On a par
Less
important
Irrelevant
Code Red E-Business Trends & Success Factors
The rate of change is anticipated to be
high though with 50% of companies
expecting to move up the adoption curve
within the next 12 months. This still leaves
over half the business with less than 250
Page 4
employees without an e-commerce or ebusiness facilities.
Expected % Adoption of Internet
Levels in 1 year's time
60%
Internet Development
“What percentage of your new IT
development work is targeted at
Internet related solutions?”
50%
Less than 250
employees
20%
Almost a 1/3 of all new development is
now targeted at Internet related systems.
More than 250
employees
10%
% of new
development
31%
21%
24%
32%
33%
35%
47%
B
A
Em
ail
W
eb
C
sit
Ee
C
om
m
e
D
rc
e
EBu
sin
E
es
Ec
s
o
sy
st
em
0%
As can be seen from the above graphs,
Internet adoption is more advanced in
companies with over 250 employees and is
set to continue in this way. The hype
about the Internet being a great leveller
and opening up markets to new or smaller
companies doesn’t appear to be applicable
in the financial markets.
Across the different sectors, the take up of
Internet processes within the business are
as follows:
Internet Adoption by Sector
120%
Financial Services
Fund Mgmt
Insurance
Investment Bank
40%
Retail Bank
20%
Stock Brokers
Internet projects as a % of new developments
W
eb
si
te
om
m
er
ce
EBu
si
ne
ss
Ec
osy
st
em
50
40
30
20
10
0
% of
development
effort
Fund
Mgmt
EC
Em
ai
l
0%
Internet Adoption by Sector
in 1 years time
120%
100%
80%
60%
40%
20%
0%
Financial Services
Fund Mgmt
Insurance
Investment Bank
Retail Bank
W
eb
sit
Ee
Co
m
m
er
ce
EBu
sin
es
s
Ec
osy
ste
m
Em
ai
l
Stock Brokers
Code Red E-Business Trends & Success Factors
Investment
Bank
60%
Looking at the different sectors,
Stockbrokers are putting the largest
proportion of their development into the
Internet systems, and Fund Management
the least.
Retail
Bank
80%
In general, the larger the organisation the
more of its development is now aimed at
the Internet. The exception to this is the
8% of small companies who are putting all
their development effort into the Internet.
For large companies (i.e. over 2000 staff )
41% of their new developments are now
Internet related.
Insurance
100%
Overall %
Fund Management
Insurance
Retail
Investment Banks
Financial Services
Stockbroker
Stock
Brokers
30%
Financial
Services
40%
“What % proportion of your Internet
related systems are met through each of
the following implementation types?”
As expected the larger the company the
more in-house development they do and
the less they rely on external contracts.
Almost half the businesses contract out
their standard web-development, however
as they move up to e-business and
ecosystems implementations, companies
take on more and more in-house.
Page 5
Transaction Levels
Interestingly
the
market for ASP
100%
applications grows
80%
with the size of
60%
company.
40%
20%
Application Service
0%
Small
Medium
Large
Provision
(ASP)
0%
3%
0%
No answer
was
originally
0%
3%
7%
ASP
8%
18%
16%
Package
conceived as a
53%
32%
25%
Contract out
mechanism
for
39%
43%
53%
In house
smaller companies
to rent powerful
Split by development type
applications which
they
couldn't
100%
80%
otherwise afford to
60%
implement
and
40%
maintain.
The
fact
20%
that
no
small
0%
eemail web
e-bus eco
comm
organisation
are
0%
0%
7%
No answer
1%
1%
8%
4%
using
them
to
ASP
28% 13% 22%
9%
Package
implement
Internet
27%
48%
28%
22%
25%
Contract out
41% 38% 37% 64% 75%
In house
systems
is
surprising.
However the larger companies have
obviously started to see the advantage of
the ASP model for
using software
particularly for their
e-commerce
requirements. Potentially this is related
Split by development type
to the high rate of change in this
technology and to security related
issues.
“Who is responsible for your
organisation’s
Internet
business
strategy?”
In the main all business that say the
Internet is important have board or
business unit heads responsible. Those
who feel it is less important have left it to
IT Director or IT staff. The authors believe
with over a 1/3 of companies leaving
Internet to IT or “no single person”, will
severely hamper their activities.
“What proportion of your transactions
is handled through the e-business now
and what proportion do you expect it to
be in 3 years time?”
% transaction as e-business
100%
80%
Now
In 3 Years
60%
40%
20%
0%
Small
Medium
Large
As can be seen by the graph, the
transaction level for email & web only
users is insignificant, and currently the
transaction levels for e-commerce, ebusiness and ecosystem are all about 20%.
% transaction as e-business
100%
80%
60%
Now
40%
20%
0%
In 3 Years
email
web
ee-bus
comm
eco
What is surprising is the level of growth
anticipated by today’s email and web
users. If companies who are have already
achieved ecosystem status, (i.e. where
their business has a highly integrated
infrastructure that incorporates customers
suppliers and other key alliance partners)
are currently only handling 20% of their
transactions through the Internet, how can
a company who currently is only using
email and has no experience of ecommerce expect to achieve 40% of
transaction through the Internet within 3
years!
The authors believe that Internet hype is
responsible for this unrealistic growth rate
at the low end.
% transaction as e-business
Code Red E-Business Trends & Success Factors
100%
80%
60%
40%
20%
0%
Insurance
Stock
Brokers
Financial
Services
Investment
Bank
Retail
Bank
Fund
Mgmt
Now
In 3 Years
Overall %
Interestingly 100% of Stockbrokers
surveyed have their Internet initiatives
under board level control and they have
the highest level of development. While
about average at the moment, stockbrokers
will have the highest level of adoption in 1
years time.
As can be seen from this graph Insurance
intends leading the way in terms of
volume of transactions in 3 years time,
despite being in 4th place with only 8% at
Page 6
the moment and having one of the lowest
proportions of new development dedicated
to Internet systems.
Objectives
“What are your main reasons for
developing Internet based solutions?”
Overall “Improving customer service” is
the most common reason followed by
“Meeting
Customer
Demands”
&
“Increasing Revenue”.
“Keep pace with competition”. “Create a
market position”, and “Enter new
markets” are next. “Avoid or displace
costs” was only mentioned by 7% of
respondents.
Looking at the two sectors with the highest
transaction rates in 3 years time, Insurance
and Stock Broking, the two sectors have
diametrically opposed reasons for
adopting e-business. Insurance companies
want to gain revenue, entering new
markets and creating a position , while
dismissing the opportunity to improving
customer service. While in stock brokers
83% want to improve service, and none
are looking to increase revenue. This
highlights the two major attitudes towards
the reason for e-business.
The main variances across the other
sectors were:
In Financial Services, the main reason was
looking to increase revenue and nobody is
looking to cut costs. In Fund management
71% wanted to improve customer service.
In Investment banking where the internet
is not as highly important, the reasons
were diverse, but the most common reason
at 33% was to keep pace with the
competition.
Measuring success
“How do you measure the success of
your e-business initiatives?”
Measuring the success of an e-business
initiative would appear to be highly
subjective as 14% do not measure at all,
and 28% use inappropriate mechanisms,
given their main reason for implementing
the system, e.g. Primary reason being
increase revenue, measure based on cost
control.
Although improving customer service was
the most common reason for developing a
Internet system, the success of such a
system was measured in terms of web site
hits or increased revenue. In Fund
Management the main measure was cost
reduction despite customer satisfaction
being the main objective. Overall, only 1
company actually measured their success
at improving customer satisfaction through
a customer satisfaction survey.
IT people are more aware of the need for
measurement. Of the users questioned
23% did not know how the success or
otherwise of their Internet initiatives was
measured.
Main Reasons for E-Business
Overall
Financial Services
Fund Mgmt
Insurance
Investment Bank
Retail Bank
Stock Brokers
Im
pr
ov
e
cu
M
st
ee
om
tc
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or
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nc
N
e
o
an
sw
er
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Code Red E-Business Trends & Success Factors
Page 7
Barriers to success
The Technical barriers
“What are the biggest barriers facing
your organisation’s implementation of
Internet and e-business services?”
The 3 largest technical barriers are
Security, Legacy Integration and Staff
Skills. The latter is particularly true in the
small to medium size organisations.
Biggest Technical Barriers
25%
20%
IT%
15%
User %
10%
5%
O
th
er
an
sw
er
ur
e
In
du
st
ry
No
in
fra
st
ru
ct
og
y
lls
ki
af
fS
St
ab
ilit
y
of
Te
ch
no
l
St
y
in
te
gr
at
Se
cu
rit
y
'n
0%
Le
ga
c
Overall customer readiness was sited as
the biggest barrier followed by business
vision and technical skills. Retail stood out
as having a lack of business vision with
43% of respondents in the retail banking
sector citing the lack of vision as the major
business barrier.
30%
Biggest Business Barriers
The Challenges
30%
25%
20%
IT%
15%
User %
10%
5%
Other
No answer
Funding
User
involvement
Understanding
of technology
Business
vision
Customer
readiness
0%
Interestingly it is the Users themselves
who believe there is lack of business
vision, with only a minority of IT people
suggesting this is a barrier.
What do you perceive is the largest
challenge that Internet is creating for
your organisation?
The largest challenge is the Increasing rate
of change at 26%. This is particularly true
in larger organisations, while not a
concern of the smaller more flexible
companies.
Biggest Challenge
Business Barriers
100%
80%
60%
Customer
readiness
Funding
20%
15%
IT%
User %
10%
5%
Competition
from start-ups
Changes in
supply chain
Increasing
regulatory
requirements
Shortage of
skilled staff
Commoditisation
of service
0%
Higher reliance
on IT
In small companies (less than 50
employees) getting users involved was a
major barrier for a third of companies.
25%
Increasing rate
of business
change
Funding was not seen as a barrier with the
exception of insurance where it came
second with 29% of respondents in
insurance companies citing funding as an
issue.
Small organisations are far more
concerned by the commoditisation of
products and services
(23% of
respondents who work in smaller
organisations) particularly in insurance
and retail.
User involvement
40%
20%
0%
Small
Medium
Large
Understanding of
technology
Business vision
Code Red E-Business Trends & Success Factors
A higher reliance on IT was the very close
second with 28% (67% in stock brokers)
perceiving it as the largest challenge. As
the Internet and e-business brings IT in to
the core processes within the business,
senior user management are becoming
more and more concerned by the reliance
on the IT department. Dependence on IT
grows in line with take up of Internet
technology; from 13% of email users to
50% of e-business and ecosystem users.
This confirms that this concern of the
higher reliance on IT relates to the level of
business handled through Internet
Page 8
processes. Stockbrokers who are investing
heavily in e-business systems are the most
concerned with their dependence to ensure
the success of future projects.
Major Challenges
40%
35%
30%
25%
20%
15%
10%
5%
0%
Small
Medium
Higher reliance
on IT
Increasing rate
of business
change
Shortage of
skilled staff
Competition
from start-ups
Commoditisation
of service
Large
Most Important Aspects
“Which aspect of your Internet systems
is most important to your internal
business users?”
Functional fit followed by ease of use
were the two most important aspects of
systems.
Most Important Aspects of System
30%
25%
20%
User %
15%
IT%
10%
5%
os
t
en
tc
de
ve
lo
pm
Lo
w
Se
cu
rit
y
en
t
y
bi
lit
ex
i
Fl
Ra
pi
d
de
pl
oy
m
an
sw
er
No
it y
co
st
al
qu
al
ru
nn
in
g
Lo
w
io
na
lf
it
te
ch
ni
c
Fu
nc
t
of
us
e
0%
Ea
se
Looking at this same issue for different
sizes of companies, the results show
marked differences.
While a higher reliance on IT is a worry
across all sizes, small companies are not
concerned with the increasing rate of
change but are worried about shortage of
staff skills and commoditisation of service.
Major Challenges
70%
60%
Fin Services
50%
Fund Mgmt
40%
Insurance
30%
Inv Bank
20%
Retail
10%
Stock Broker
Surprisingly given the challenge of
increasing rate of change and reliance on
IT the flexibility of systems only scored
7% overall. Security scored only 2%,
again surprising as it is seen as the biggest
technical barrier.
Most important aspects
Security
Low running cost
100%
Low development cost
80%
technical quality
60%
Flexibility
20%
0%
rg
e
The Return
“How quickly do you expect to see a
positive return on your e-business
investments?”
The average return on investment is
expected in 2 years 1 month, this varies
by +/- 3mths across the different sectors.
The most notable difference is according
to size of company.
Small =
Medium =
Large =
Code Red E-Business Trends & Success Factors
Functional fit
La
iu
m
Ease of use
M
ed
“Which area of your business has the
highest demand for Internet solutions?”
Trading & Customer services are the two
main areas that have the highest demand
for internet services. With payments and
settlement in demand by retail banks and
stock brokers respectively.
Rapid deployment
40%
Sm
al
l
Higher reliance
on IT
Increasing rate
of business
change
Increasing
regulatory
requirements
Commoditisation
of service
Competition
from start-ups
Shortage of
skilled staff
0%
ROI in 1 year 6 months
ROI in 2 years
ROI in 2 years 9 months
Page 9
About Code Red
Code Red’s vision is to be a premium supplier of IT solutions to organisations in the service
markets. Our aim is to become partners of choice to each of the companies that we work with,
offering a portfolio of best-in-class products and professional services. The following four
guiding principles help us measure the appropriateness of our decisions as we grow:




Business not just technology solutions,
Connecting knowledge,
Timely response, and
Our partnering philosophy.
Code Red Consultancy operates primarily in the finance sector in London and Amsterdam
with other key successes in the e-business arena. Code Red has an enviable track record based
on extensive business experience and technical expertise of the individual consultants drawn
from the top financial institutions and international consultancy firms.
We are able to provide consultants with a broad range of skills, in management and business
operations, as well as in IT. Together, the combined skill sets produce a high calibre team
who understand the demanding nature of the market and are tightly focused on delivering
results with a ‘can do’ attitude in a dynamic and responsive way.
Code Red’s clearly defined focus allows us to offer our clients a comprehensive and flexible
portfolio of professional services, which are:






Independent business and technical consulting,
Knowledge Connect
Specialist systems integration,
Application development,
Delivery management and roll-out,
Technical support.
Thank you to everyone who responded to our survey.
Every response generated a payment to one of the following charities:
RSPCA
UNICEF
British Heart Foundation
The Woodland Trust
Code Red Consultancy Ltd
60 Lombard St
London
EC3V 9EA
Tel: 020 7464 8450
Fax: 020 7464 8672
Email: info@code-red.co.uk
www.code-red.co.uk
Code Red E-Business Trends & Success Factors
Page 10