E-Commerce Lesson: Success Gets a Yawn, Failure Takes a Beating

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Event Summary

With the Internet quickly shaping up as the major battleground in the ERP arena, SAP's formal announcement might have been earthshaking. It takes an early lead among the ERP vendors and positions itself to meet growing challenges from such software component manufacturers as Ariba, Commerce One and Concur. However, neither the stock market nor news analysts seemed to care very much. Almost simultaneously, Best Buy announced second quarter earnings of $59 million (28 cents per share) which were up 34 percent from its Q2 earnings ($44.1 million; 21 cents per share) of a year ago. However, the company also noted that its Internet strategy would not be implemented in time for the holiday buying season. Best Buy's stock fell about 10%.

Market Impact

Both of these announcements are important in themselves. We believe that a strong Internet presence is crucial for ERP vendors to demonstrate in a fairly short time. By rolling out a solution on time, and ahead of the competition, SAP has established itself as a credible player in the future ERP playing field. Best Buy is a hot company, and any stumble will show up on the analysts' radar screens. But one might have expected more cheers for their financial success. While missing the holiday buying frenzy on the Internet is not good news, Internet buying is still a tiny piece of the consumer market. Furthermore, the company's claims that they prefer to get it right rather than rush to the Internet with something less than solid will certainly find approval from IT professionals, even if market analysts and investors still haven't gotten the picture.

User Recommendations

The moral is a familiar one. There is a magnifying glass focused on any E-Commerce project, and company after company is learning how difficult it can be to launch a major Internet initiative. (For years SAP has been developing architectures for its desktop projects which have been especially conducive to being extended to the Web). While we don't know what problems Best Buy may be facing, it's not hard to imagine that they have encountered both technical difficulties and the challenge of a moving target, as the business strategy changed in response to the fast-moving Web. There is no magic bullet, but it is clearly more important than ever for IT and the business side to work together in evolving strategies and schedules.

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