Live from Boston: IBM Hits a few Bumps in Transformation to E-commerce

IBM is generating billions every year through its e-commerce business, but the road to riches was a rocky one, Pete Martinez, e-business strategy executive for IBM Global Services said yesterday during a session here at The DMA net.marketing Conference & Exhibition.

Martinez said the process to transform the corporate giant’s business into an e-commerce powerhouse began with an examination of every internal process including procurement, production, fulfillment, human resources, finance and customer relationship management and how those processes would be enabled online. “The examination produced a significant overall of all of those processes,” Martinez said. “That has to happen before the enabling if you want to get the major returns.”

By 1997, more than 4,000 Web sites were being managed by a community of over 1,000 people and content was growing at a rate of 25% per month. “We were out of control,” Martinez said.

To stop the hemorrhaging the company created a global architecture to ensure that each business unit would behave alike. The announcement brought infighting and lots of screaming and yelling, Martinez said. “Every division pulled back and said, ‘We’re not going to do that,'” Martinez said.

But once the company chairman stepped in, the conversion to a global architecture began.

IBM also quickly discovered that it could not conduct business with all of its clients in the same way. It partitioned its online infrastructure into specific audiences: influencers, employees, customers and partners and began targeting and customizing its Web sites to those groups. By 1998, each business unit had its own message.

Another insight came in 1999 when a reporter, to no avail, tried for several days to purchase an IBM computer online. He wrote an article about his experience which landed on the chairman’s desk. “We increased our focus on how to change from a selling site to a buying site,” Martinez said.

IBM overhauled 250,000 Web pages in a three-month period. Each business unit’s Web pages had to conform with specific headers and footers for consistent navigation but could use the “white” space in any way the unit wanted.

The site relaunched last year after Christmas with no discounts and no special promotions. In the first month, revenue was up over 400%. “We had the traffic all along but the customer could never get to buy the products,” Martinez said. “We were getting in their way.”

The site now averages two million hits per week. E-commerce revenue was $3.3 billion in 1998, rose to $14.8 billion in 1999 and for the first half of 2000 totals $9 billion.

Martinez said the cost of doing business online is 40% more cost effective than face-to-face sales, and it has implemented tactics to capitalize on those savings. For example, last year the company required all of its office product’s suppliers to conduct business with IBM electronically. The move saves the company $600 million annually.

In closing, Martinez offered the following five lessons in moving from bricks and mortar, to bricks and clicks:

* Senior management drives e-business.

* E-business affects everyone in the company.

* Focus on the audiences.

* Understand what’s new about the ‘e’.

* Speed is paramount.

The net.marketing conference ended yesterday. Attendance was about 1,500 with 115 exhibitors, down slightly from the spring conference in Seattle, WA, which attracted 2,000 attendees. This marks the first time the net.marketing conference was held twice per year. The next conference will be held in Seattle Feb. 26 through 28.