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Organizational Reforms for Electronic Commerce

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Zainab Hameed
Apr 03 - 09, 2000

Electronic commerce enables firms to connect to its stakeholders and to complete transactions using electronic means instead of paper documents. This enhances the efficiency and productivity of firms and allows them to be competitive in the market. Competitive advantage of nations today depends on the electronic enablement of the government and private sector organizations. Electronic Commerce needs to be supported by a legal and regulatory framework, economic policies, and implementation of electronic infrastructure and institutional reforms.

Organizations that are interested in implementing Electronic Commerce must follow certain steps. These steps are sequential in nature and need to be followed irrespective of whether the organizations are government or private. These steps are:

Step 1: Internal automation, i.e. computerization of internal operations and implementation of automated applications.

Step 2: Integration of internal applications and functions.

Step 3: Business process reengineering of manual interface procedures that are being used to interact with the stakeholders.

Step 4: Implementation of connectivity with stakeholders through Electronic Commerce infrastructure and applications.

Steps 1, 2 and 3 actually refer to the internal reforms and procedural changes that must precede the actual implementation of Electronic Commerce. In Pakistan, the major effort that would be required in the government institutions for implementing E-Commerce would be in the areas of internal automation, internal integration, and reengineering of internal business processes, before they can consider electronic connectivity with their stakeholders. This article highlights this process.

Preparing institutions for electronic commerce

Following are the prerequisites for any organization that is embarking on E-Commerce.

Internal automation

Organizations require extensive internal automation to support E-Commerce. Operational automation as well as office automation is a prerequisite for E-Commerce.

Automation of internal operations

Both public and private sector organizations need to carry out computerization of systems that support the internal operations. Electronic commerce requires computer to computer interactions. Computer applications should be able to process the electronic messages and documents automatically without manual intervention. This assumes that institutions have already computerized their operations. For example, a buyer like Wal-Mart cannot electronically place orders with its suppliers unless its procurement application is computerized which automatically generates the purchase order when inventory level falls below the reorder point. The purchase order is sent electronically to the supplierís computer where it is processed automatically by the supplierís sales application. This assumes again that the supplierís internal sales process is computerized and it can instantaneously process the order received from Wal-Mart depending on the stock availability and credit limits. If manual paper processing is required at either end, Electronic commerce becomes meaningless.

For example, before SBP can process the electronic Form E, it first needs to have an internal application in which all paper Form E that are currently being received are entered and processed. The application should be able to automatically reconcile the Form E data with the schedules received from the banks, which summarizes the remittances. This internal automation should precede the steps planned for electronically connecting SBP with the banks. The internal reconciliation application need to be developed first, only then electronic commerce can be implemented.

Similarly, before Customs can receive an electronic Bill of Entry from the clearing or forwarding agent, internal processing of Bill of Entry needs to be completely automated. As explained later, data entry, editing and checking of paper Bill of Entry has been computerized through the service center at Customs House. However, the appraisement and examination process is still manual. This internal appraisement process needs to be first automated so that at least 90% of the Bill of Entries received can be processed automatically without manual intervention. Once this system is in place only then will it make economic sense to invest in the Electronic Commerce infrastructure for providing electronic connectivity with other stakeholders.

Similarly, EPB needs to computerize the registration process and management of the database of exporters and other traders. This is internal automation where a computer application is developed and implemented that receives the registration forms data and maintains it in the database. Once this application is running, only then EPB would have the internal capability to handle the electronic registration forms that are received from the exporters. Also, automation of the internal process of granting permissions for the requests for restricted/quota based exports must precede the implementation of the capability of electronically receiving such requests.

Office automation

Internal office automation greatly facilitates implementation of Electronic Commerce because it produces the necessary cultural change and the desired orientation for working with electronic messages rather than paper documents. Hence, office automation must precede the implementation of Electronic Commerce.

Intranets should be set up in the government organizations to increase efficiency of internal communications. Extensive use of e-mails for office communication should be encouraged. Routine internal memos should be transmitted using e-mails as it would not only save the time it takes for a memo to travel from one desk to another but also reduce the clutter of paper which is usually quite disturbing.

Use of intranets for sharing documents would bring efficiencies in the working of project teams in which team members may collaborate on a single document. Other groupware applications need to be implemented for workflow and approval processes in the organization.

Electronic notice boards, bulletin boards, should also be used to post internal notices so that the workers can access the notices at their convenience.

Internal integration of applications

After automation of various internal applications, the next step is to integrate these often stand alone systems. The applications that are developed for the individual units of the organizations should be integrated together to minimize reconciliation and re-keying of data into separate computer applications. For example, Customs applications needs to be integrated with Income Tax and Sales Tax applications. Integration of such islands of computerization is non-trivial as the experience of CBR suggests.

There is data from different sources that needs to be integrated. More importantly there are unique identification codes that need to be integrated as for example integration of National Tax Number (NTN) of Income Tax department with Tax Identification Number(TIN), and similarly the unique code used by Customs (CCI). The integration at the database and technical level, has to be followed by the integration of computer applications. This would then enable (say) the cross tabulation of income tax returns of an organization with the duties paid and the sales tax reported.

This effort is again non-trivial and would require immense effort. The computer applications typically have databases distributed over different brands of systems over geographically dispersed locations using incompatible technologies and data formats. Integration at the database level, integration at the networking level, and integration at the application level are all huge computerization efforts. Integration at these levels often take several years to complete for large organizations like CBR and may be thought of as ongoing processes because each department continues with the development of new applications while the old ones are being integrated.

Organizations that are starting computerization can plan ahead for such integration. They could have their computer applications developed in a modular, incremental fashion. This may reduce the integration effort but would not eliminate it altogether because the development takes place over time during which the underlying technologies, organizational processes, and the user requirements may change.

The need for such integration and the effort required should not be underestimated in the zeal for E-Commerce. Internal integration is a must for Electronic Commerce because the often-reported exciting statistics of efficiency improvements would become visible only after internal integration has been achieved.

Reengineering of business processes

Computerization does not mean automating the manual tasks as they are currently performed. Studies indicate that the major reason for the failure of big computerization projects undertaken by government organizations has been the lack of attention paid to the requirements for changing the existing processes and managing the change. Computerization often fails when the systems are ready to be used but the users are not ready to use them.

The line manager responsible for getting the job done in an organization should be the person made the ìmodule ownerî. He should be given the responsibility as well as the credit for the successful implementation of the project in his jurisdiction.

The project completion date should not only mean the implementation of the software and the hardware systems but should also indicate change from the manual system to the automated system. The measure of this change should be the requirement that management would no longer accept a manual report beyond a certain date.

Unless there is a commitment and involvement from the top in ensuring that the deadline for replacing a paper document with a computer generated document is met, the computerization projects can never succeed.

The new processes should empower the workers and checks and controls should be reduced. Processes should be designed such that reconciliation is minimized. The number of external customers for the processes should be decreased and the steps in the process should be performed in a natural order though not necessarily linearly.

Extensive interviews, meetings, and coordination across different departments is required to arrive at new processes.

Management of Change and Organizational Resistance

Change is not easy and workers as well as senior officers by nature resist change. It is surprising but often true that the officer who has the most to gain from the computerization would typically be the most strident opponent of change.

Managing change would require full commitment from the top management. It would also require extensive communication and involvement from the users and officers.

The writer is a faculty member of the Computer Department at the IBA. She is also a member of the IBA research team on E-Commerce. IBA is organizing an international conference on E-Commerce next month as part of its strategy to raise essential E-Commerce issues within the country.