According to the International Data Corp. report Internet Commerce Market Model, the value of business conducted over the Internet is expected to grow from $2.6 billion in 1996 to some $220 billion in 2001 (as long as HAL is not managing it, of course). Service providers supporting Internet e-commerce are also reporting rapid growth. The Internet Billing Co. is currently delivering e-commerce services to more than 10,000 Web sites worldwide and reports that requests to sign up grew by 20 percent a month in 1997, resulting in a record 1.3 million transactions being processed during the third quarter of 1997. Meanwhile, Priority One Electronic Commerce Corp. reported that the electronic payment transaction volume handled by the firm in January 1998 was five times higher than in January 1997.

You may never have heard of Internet Billing or Priority One. They are just two of dozens of new businesses that have sprung up in the last few years to provide infrastructure services for Web e-commerce. You probably have heard of the leading enterprise resource planning (ERP) application providers: SAP AG, Oracle Corp., PeopleSoft, and The Baan Co. These vendors provide the backoffice accounting, supply chain, payroll, and manufacturing systems that interact with e-commerce systems to process orders, ship goods, and generate payments. During 1997 all these vendors responded to customer interest in Web e-commerce by delivering new features in their already functionally broad and deep application suites. SAP also spent some of its fortune partnering with Intel to create a standalone e-commerce company called Pandesic and took an equity stake in e-commerce software company Commerce One. However, considering the pervasive effect that e-commerce is expected to have on the business process workflows and value chains managed by ERP software, the vendors have been slow to respond to the customer demand implied by the statistics quoted above. Admittedly, e-commerce is just one aspect of Web-enabling ERP packages, an effort that also encompasses self-service information access and the delivery of "push" reports and notifications via the Web.

New Web E-Commerce Workflows

Before discussing how the ERP vendors are responding to the Web e-commerce opportunity, letıs consider two fundamental ways you can use the Web to support e-commerce:

• Using the Internet as a router for e-commerce transactions and transaction-related notifications and documents between two parties.
• Using workflow to connect internal systems and external Internet service provider systems to create new types of e-commerce "value-chains" between business partners.

Electronic data interchange (EDI) and electronic funds transfer (EFT) software and service providers were delivering e-commerce long before the business world discovered the Web. The Internet has not significantly changed what either EDI or EFT software does, only how it does it. In the past, users of EDI and EFT software typically transmitted transactions between a buyer and a seller or a remitter and a bank via a privately run, value-added network (VAN). This locked in users to a particular communications infrastructure and service pricing structure. Today people increasingly use the Internet as the router for EDI and EFT transactions, replacing VANs with virtual private networks (VPNs) that use point-to-point tunneling techniques to package and encrypt EDI or EFT transactions for faster, more secure transmission of data between two parties. The fact that giant EDI users, such as the General Electric Co., have begun moving some of their EDI transaction processing onto the Internet and many banks are rolling out Internet-based online banking services seems to indicate that EDI and EFT on the Web are considered safe. Nevertheless, the industry press continues to debate whether an insecure, public wide-area network (WAN) is really the right medium or has the bandwidth capacity to handle the bulk of EDI and EFT transactions. I suspect that only when a major bank announces that its retail banking ATM network is fully Web-based (and service has not been degraded) will security and bandwidth concerns genuinely start to disappear.

The Web is affecting EDI in other areas by supporting better visibility into transaction exception handling queues, putting a friendlier front on it with Web storefronts and reducing the cost of EDI software. EDI exception handling is being improved by integrating the transmission of EDI transactions with workflow and email in order to trigger the generation of exception messages for automatic feedback to transaction originators via Web email. Initiatives at the small business end of the market also indicate that EDI is becoming friendlier and cheaper. For less than $200 you can order an EDI-based e-commerce application that integrates a Web-based electronic storefront builder and EDI transaction transmission with an accounting system (in this case Peachtreeıs Complete Accounting). This type of product means that the entry barrier to small businesses for taking advantage of EDI transmission of sales orders, for example, is largely a thing of the past, mostly because of the impact of the Web.

Apart from routing EDI and EFT transactions, Web e-commerce is also about new consumer-to-business, business-to-business, and even business-within-business commerce workflows. These workflows may involve a collection of business partners, such as buyers, sellers, shippers, distributors, salespeople, and banks, collaborating across the Internet as part of an extranet (an intranet "extended" to allow access to business partners of a corporation). The new Web-aware workflows integrate the Internet into traditional business processes as listed in Table 1.

The Web can deliver added value to any of these processes, both to user (human) and system (program) participants, as seen in Table 2. However, the scope of ERP applications means that ERP vendors face a number of challenges to deliver Web e-commerce to their customers, including:

• Where to focus their Web-enabling initiatives
• Whether to build or buy (by integrating with third-party storefront or procurement application
• The Java or ActiveX approach to delivering client access
• Allowing integration of the Web into their workflow reference models
• Delivering an architecture that can accommodate potentially significant transaction growth

Generally, the ERP vendors have faced these challenges in a consistent way. They claim to have responded to customer demand in terms of the focus of their Web-enabling effort. They have built some functionality in-house as well as using third party partners ı although it seems inevitable that ERP vendors will eventually integrate everything into their core suites. They have embraced both Java and ActiveX on the front end and began making their workflow engines Web-aware. Transaction overload does not yet seem to be a major issue in the Web e-commerce initiatives so far, but it is likely to become one as more and more customers move to an all-Web deployment of these far-reaching application suites on an enterprisewide basis.

SAP Goes Four Tier

The three-tier architecture, process-oriented functionality, and existing business APIs (BAPIs) of SAPıs R/3 suite has meant that enabling the application for Web e-commerce has probably been easier for SAP than for many other vendors. Basically, SAP had three tasks:

• To introduce a "fourth" tier to its architecture to handle interaction with the Web
• To let workflows reach out to the Internet as part of a process flow
• To adapt the presentation layer for use within a Web browser.

The SAP-built Internet Transaction Server (ITS), currently limited to running on Windows NT 4.0 servers, is the conduit for Internet-related activity processed by presentation layer clients. ITS lets Web browser clients interact with R/3 application servers to reach business processes and components using the Computing Center Management System (CCMS) and the functional BAPIs. This means CCMS can monitor and load-balance e-commerce transactions reaching R/3 from Internet sources, and these transactions can interact with functional components using the same APIs that any other external application would use. Workflow processing can now reach out to the Web and manage events that occur as a result of interacting with external Web services. The R/3 presentation layer uses ActiveX controls and JavaBean-based applets for providing access to functionality via a Web browser. The forthcoming R/3 release 4 Business Client provides on-demand delivery of these applets to PCs or NCs and includes a new HTML frame component for managing data displayed in HTML formats.

SAP is steadily integrating Web e-commerce capabilities into its suite (it has had EDI and EFT capabilities for many years) and is also working with partners to deliver other Web e-commerce solutions. Release 3.1G of R/3 (shipped December 1996) delivered Web e-commerce functionality that included product catalog access, online store building, and Web browser access to sales order creation, tracking sales order status, querying available to promise inventory, and retrieving customer account information. SAP has teamed up with Aspect Development Inc., Acquion Inc., and Cadis Inc. to supply catalog content for use in Web-based procurement applications. Meanwhile, the SAP/Intel joint venture, Pandesic LLC, bundles R/3 with other storefront-related software such as Taxware's Internet Tax System and CyberCash Inc.'s payment software, Intel-based hardware, and third-party implementation and support services to deliver a turnkey consumer-to-business Web e-commerce and accounting solution. Pandesic launched this solution with a purchase price of $25,000 coupled with a monthly transaction fee varying from 1 to 6 percent depending on volume (a business model that Pandesic is currently in the process of changing).

Baan Goes TopTier

Baan IV delivers Web e-commerce capabilities primarily for managing the sales order fulfillment process from product selection to product feedback. You can also go to a Web site (commerce.baan.com) and try out a Microsoft Site Server-based front end to Baanıs products that demonstrates a basic storefront ordering capability available to any Baan IV user. Baan IV uses both Java and ActiveX to deliver access to Baan functionality through popular desktop browsers. Baan claims that by using the Web-enabled functionality in the Baan IV suite users can manage the sales order entry and tracking process entirely via a Web browser:

1. Browse item product catalog
2. Use product configuration manager
3. Check item availability to promise
4. Enter order header/lines
5. Check credit, tax, shipment business rules
6. Commit order to database
7. Allow customer self-service access to order
8. Send status change notification emails
9. Send shipping/delivery documents by email
10. Allow customer self-service to record claims/complaints.

Another major initiative in the Web-enabling of Baan IV is the use of applications from third-party partner TopTier Software. TopTier delivers a suite of middleware tools that Web users can use to link to Baan IV for electronic commerce and self-service. This suite builds on TopTierıs patented Hyper Relational Navigation Protocol (HRNP) and includes:

• TopTier HRNP Server, used to link data sources to Web or Windows clients
• Top Tier Multiplexor, a server application used to load balance multiple HDTP servers
• TopTier Data Navigator for the Web,a browser plug-in for navigating data accessed via HDTP.

TopTier provides Web access to both Baan IV and Baan's Triton suites and requires a Windows NT-based application server with at least 64MB of RAM. TopTier accesses the Baan database subject to the same data access business rules as any other Baan client application. You can see how TopTier and Baan can work together to support Web e-commerce by trying the demo found at baan.toptiersw.com. Baan is also beta testing a Web e-commerce procurement capability that it is likely to roll out with Baan V, due in mid-1998.

Oracle Owns the Tiers

Unlike those of the rest of the top four ERP vendors, Oracleıs applications benefit from the companyıs ownership of many of the infrastructure tools required to support Web e-commerce, including, of course, a market-leading relational database. For example, you can use Oracleıs application development tool Developer/2000 to build applications deployable across the Internet from Microsoft NT- or Unix-based servers via a Java-based client interface. Developer/2000 also includes Oracle Reports 3.0, which provides HTML and Adobe portable document format (.pdf) output so you can view reports generated by Oracle Reports on the server from within a client-based Web browser. Developer/2000 and Designer/2000 (a repository and data modeling tool) and a new Java-based integrated development tool are slated to be merged into a complete Internet-ready application development suite currently dubbed "Project Valhalla."

At the end of 1997, Oracle also announced Oracle Application Server 4.0 (previously known as WebServer), Oracle Commerce Server release 1.1, and Oracle Payment Server 1.0. These products deliver server-centric, Java-based application deployment services and Web storefront building and management capabilities. Together, they represent Oracleıs shot over the bows of Microsoftıs Site Server 3.0. Oracle claims that its Commerce Server also offers seamless integration with third-party Web e-commerce service providers such as Cybercash (digital money), Verifone (digital authentication) and TanData (shipment costing and management). This integration uses Oracleıs cartridge components, an approach to integration similar to using COM-compliant objects that can be called from the order pipeline in Microsoftıs Site Server/Commerce Edition.

Because much of Oracleıs Application suite has been rewritten in Developer/2000, Oracle has been able to ship an early-to-market, fully Web-enabled version of its Oracle Application suite. Oracle claims this new version began shipping to customers at the end of 1997 after a six-month beta. It has effectively become possible to run any Oracle Application form from a Web browser. As a result, you can run any business process that Oracle Applications support piecemeal or as a whole over the Internet. This is where all the major ERP players are aiming to be by the end of 1998.

PeopleSoft In Tiers

PeopleSoftıs Web e-commerce initiatives are behind those of its competitors because the company has focused more on the self-service aspect of using the Web than on e-commerce. This makes sense given PeopleSoftıs historical focus on human resource applications. A new version of PeopleSoftıs Java-based Web client for accessing application functionality across its suite is slated for release in PeopleSoft 7.5, due mid-1998. PeopleSoft has focused some attention on delivering a richer EDI product for business-to-business interaction by including better transaction exception handling and exception notification through the use of drill-down browsers and e-mail. Trading partner profiles can drive special business rule-driven relationships that determine how workflows between those partners should be processed in the event exceptions occur (such as sending a purchase order acknowledgment document only if an order cannot be filled within a certain time frame). PeopleSoft has also preintegrated the top ANSI X12 EDI transactions (such as #810 invoice or #850 purchase order) for easier generation and reception by the software.

The First Step

Business-to-business Web e-commerce for the leading ERP vendors is still largely EDI-based, with initiatives focused on connecting Web-based storefronts and allowing Web-catalog driven procurement. Nobody really knows what the impact of an all-Web deployment of an ERP suite will be on an enterprisewide basis with full Web e-commerce. It could require significant infrastructure upgrades to handle different patterns of transaction processing and volume, for example. Many of the services required by consumer-to-business Web e-commerce, such as identity verification and credit card payment authorization, must be provided via interaction with third-party service providers and are not yet found as integrated functions within ERP vendor suites. All the ERP vendors are largely focused on the use of Java for programming Web-related server objects and delivering Web browser access to application functionality. Similarly, all have established partnerships with a variety of third-party vendors to plug functional and infrastructure gaps in their suitesı ability to deliver Web e-commerce. By contrast, in the accounting software middle market, Microsoft is once again threatening to become the partner of choice as vendors link to their Site Server product for Web storefront capability and use ActiveX controls for application access from Web browsers.

Web e-commerce has a way to go before it becomes an integral part of the functionality expected from ERP suites. An important first step for all vendors is to ensure that they can seamlessly integrate Web-based services within current application process workflows. In this way, the vendors can extend the reach of their applications beyond the boundaries of conventional functional modules to make the vision of an extended-enterprise extranet a reality for their customers.

Sidebar: Web E-Commerce and the Middle Market

Itıs not just ERP vendors that are responding to the opportunity of Web e-commerce. The middle market accounting vendors (servicing businesses of $25-$250 million annual revenues) are also rolling out new modules and alliances. ACCPAC International (Sunnyvale, California) is working with new partner The E-Commerce Company to integrate its ACCPAC for Windows suite with EDI-based EC. Initial functionality to be delivered in early 1998 is the electronic exchange of business documents and payments. Navision Software (Atlanta, Georgia) and Great Plains Software (Fargo, North Dakota) are both taking a similar approach to adding Web e-commerce to their accounting suites via integration with Microsoftıs Site Server 3.0/Commerce Edition. Both Navisionıs WebShop and Great Plains Dynamics.Commerce modules integrate a "build your own" Web storefront capability with their inventory, sales order, and accounts receivable modules for processing end-to-end consumer-to-business commerce transactions. Both Navision and Great Plains have taken an all-Microsoft technology route for integrating Web e-commerce by using Microsoft Site Server, Internet Information Server, and SQL Server as the basis for their Web e-commerce initiatives. They also take advantage of other Microsoft technology such as ActiveX controls, Active Server pages, and Active Data Objects and have integrated their own COM-compliant business logic processing components into the Commerce Server order processing pipeline to handle direct interaction with their accounting tables and business rules. However, RealWorld Corporation (Manchester, New Hampshire) is bucking this Microsoft-centric approach by working with IBM to integrate the Lotus Notes/Domino application with RealWorldıs Visual Accounting running on IBMıs DB2 RDBMS for delivering Web e-commerce capabilities. Clearly, the middle-market vendors are approaching Web e-commerce from a selling rather than buying angle first, something that certainly better reflects the needs of their customers. The buy-in for Web e-commerce at this level is also lower because self-build Web storefronts that are seamlessly integrated with back-end accounting applications can be purchased and setup for around $25,000 or less.

Table 1.

Table 1: The new Web-aware workflows integrate the Internet into traditional business processes.

Table 2:

Table 2: The Web delivers added value to traditional business processes.