A Mori/Cranfield survey for Microsoft finds that in spite of industry enthusiasm and investment, the UK financial services sector is failing to deliver on B2B e-business hype.
Sixty-three per cent of banking expect greater disintermediation as a direct consequence of the growth in B2B e-business activities. However the research also finds that only an average four per cent of business-to-business transactions are currently Web-based.
The survey, conducted by Mori and Cranfield School of Management and sponsored by Microsoft, interviewed senior executives from 400 UK organisations, 60 of which were from the UK’s major financial services companies.
Despite the apparent lack of progress, financial services organisations lead other UK industries in the business-to-business arena. Over three-quarters of UK financial services organisations are currently engaged in B2B projects, 88% have B2B on the board agenda and three in four have appointed an e-business manager/director. Fifty-eight per cent have implemented an organisation-wide B2B strategy compared with 45% of manufacturers, 40% of retailers and 33% of public sector companies. Financial services organisations are also currently investing the most money in B2B initiatives and this investment will increase over the next two years with one in ten planning to spend upwards of 11% (as a percentage of turnover) on such activities.
Although still leading other industries, paper/email-based transactions currently represent an estimated average of 67% of total transactions in the financial services industry. EDI accounts for 17% and only four per cent of transactions are Web-based.
Where investment has been made in expensive proprietary networks, growth in EDI is set to continue with 26% of transactions using this method by 2002. Nevertheless it is Web-based transactions that will experience the biggest growth as B2B investment matures, with financial services organisations predicting a six-fold increase to one in four transactions by 2002.
Richard Horsfield, financial services industry manager at Microsoft, comments: "The massive potential of B2B e-business has been well documented, but at the moment current activity is not living up to the hype and expectation surrounding its potential."
Electronic fulfilment is shown to be the biggest growth area for financial services companies as they aim to slash administration costs over the next two years. Currently 38% of financial services organisations are engaged in automating fulfilment with their business partners – this figure is set to rise to 72% by 2002. Other B2B e-business activities receiving attention include online collaboration, business intermediation and portal services.
Banks are taking a hard-nosed approach, with executives looking for a fast return on investment (ROI). One in three financial services organisations need to see a quantified return on investment within 12 months in order to sign-off IT spend. Almost half (47%) would measure this return by looking for direct impact on profitability and one in four would need to see an increase in sales. Even so, financial services organisations are taking a longer term view compared with their counterparts in other industries; 46% of financial services organisations are willing to wait over 19 months for financial return compared with 29% of retailers, 28% in the public sector and 25% of manufacturers.
The main barriers to successful B2B e-business are cited as budgetary constraints (25%), IT integration (18%) and lack of collaborative culture (12%). Security issues feature relatively low on the scale with only 8%.