a survey of the business benefits of adopting inter
TRANSCRIPT
A SURVEY OF THE BUSINESS BENEFITS OF ADOPTING INTER-ORGANISATIONAL SYSTEMS (lOSs) IN INDUSTRIAL
MARKETS
Pete NAUDE Manchester Business School
United Kingdom email [email protected]
Chris HOLLAND Manchester Business School
United Kingdom email [email protected]
Marion SUDBURYBusiness and Market Research
United Kingdom
ABSTRACT
Business relationships are being revolutionised by the use of inter-organisational information systems which connect together separate companies' business processes. The physical value chain is now paralleled by the virtual, information chain. Detailed case studies from earlier research suggest that there are huge benefits to be gained from concepts such as EDI, shared product design databases, and shared production scheduling systems. However there is little statistical evidence of the overall usage and outcomes of IOS implementation. In this survey, IOS benefits are evaluated using marketing derived frameworks. Evidence from 89 UK based organisations, a large proportion of which are trading internationally, suggest that lOSs are becoming pervasive across different business processes and across different types of industry. The analysis reveals that marketing activities are now dominated by the management of the information along the supply chain and that significant benefits can be realised. However the time-scale for implementing such systems is of the order of 5 years and there are significant barriers to successful implementation.
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1 INTRODUCTION
About 10,000 companies in the UK currently use EDI, the electronic exchange of
pre-formatted data between co-operating organisations, and the number is said to be
growing at a rate of 20-30% per year (Cox and Ghoneim, 1994). The UK is one of the more
advanced markets in Europe in terms of EDI adoption, possibly due to sponsorship of a
move to EDI by the Department of Trade and Industry (DTI) in the late 1980s. Despite this
level of activity, however, to date there has been little quantitative primary research into the
use, implementation and benefits of EDI in the UK. The initial quantitative work was
undertaken in the USA (Williams, 1994; Banerjee and Golhar, 1994). Even case study work
(Holland, Lockett and Blackman, 1992a,; Jelassi and Figon, 1994; Krcmar et al, 1995) has
tended to focus on the US and Continental Europe rather than the UK. Recently, Imperial
College produced a UK study (Cox and Ghoneim, 1994) but this was focused at the micro
level (sectoral differences) rather than the macro level (overall UK experience of EDI).
In addition, there has been a tendency to study the systems themselves and the benefits they
bring rather than considering the wider context of the business environment. In particular
there has been little work looking at EDI in the context in which it operates - that of
industrial marketing and purchasing. The focus is rather on the fact that the introduction of
electronic technology such as EDI may have the potential to alter how marketing is carried
out. Perez and Freeman (1988), for example, suggest that information and communications
may be the fifth "Kondratiev wave", with the key technologies shaping the way that markets
develop in the late twentieth century, affecting organisational forms and interaction.
Conversely, however, changes in marketing and purchasing in recognising the role that
inter- and intra-organisational networks can play are themselves preparing the ground for
EDI, making their use seem more logical and appropriate. In short, it is important to focus
on the "complementarity" of developments in the demands of marketing and purchasing in
general with changes in technological capability. Given this viewpoint, it was felt that there
was a need for an examination of EDI in the UK, covering its usage and benefits, and to set
this in the context of industrial marketing and purchasing in the UK more generally.
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2 BACKGROUND TO EDI ADOPTION
We have defined EDI as the exchange of pre-formatted electronic information across
organisational boundaries. To this extent we are considering it as a form of relationship
between two separate organisations or companies. For most potential users it therefore
represents an interaction typically focused on a buying-selling relationship. In order to
consider the different areas of potential application for EDI, the IMP Group suggests that in
any interaction between parties there are four types of exchange: products or services,
information, finances, and social exchange (Hakansson, 1982).
Early work on the adoption of EDI in the UK by Frost and Sullivan (1988) suggested that it
was being considerably under-utilised in all four of these areas of potential application.
According to the DTI, however, following a drive in the UK in the late 1980s the UK is
now ahead of other European countries in terms of its adoption and there are 10,000 or
more users in the UK, some of them relatively sophisticated. Certain industries are
particularly well served, notably grocery retailing (where for example Tesco and Sainsbury
have organised themselves around EDI trading) and the automotive industry, with its
Automotive Transaction Highway linking "everyone" in the industry. One factor which
seems to have been notable these sectors is the backing of a strong trade body which has
ensured industry standardisation. Other industries (e.g. pharmaceutical) are less well
advanced although explanations for why this is so are rather vague and unconvincing (Cox
and Ghoneim, 1994).
Holland et al (1992a) carried out an analysis of 18 US and 7 European companies who were
leaders in the application of EDI systems in their own industries. From this they suggested
that the time that elapsed from the initiation of an EDI project to its successful completion,
when the majority of trading partners were linked electronically, was typically around five
years. In their study, those who had started EDI more than 10 years ago were moving on to
second generation systems. Other work (King, 1994; Yovovich, 1994) suggests that for
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companies where EDI is already broadly disseminated the next step is to "deepen" each
application. Rather than looking for new applications, organisations should ail to add depth
to the potential levels of data shared; giving rise to the so-called "virtual corporations" or
"extended enterprises." As argued by Keen (1991) and shown in Figure 1, it is only by
optimising both reach (to whom can we connect?) and range (what services can we share?)
that such truly open systems will result.
Figure 1
The Reach and Range of the I.T. Platform
Anyone. anywhere Customers, suppliers regardless of facility base.
Customers, suppliers depending on facility base
li iliacompany locations ~ ~ abroad
4 REACHTo whom can
__ we connect?
Internal location!
Integration path to fully "open"
RANGE What services can we share?
Standard Accessto independent Cooperate messages stored data transactors transacfons
[Source: Keen, 1991]
We believe there to be a number of factors that influence the rate of adoption of EDI
systems. These are discussed briefly below:
2.1 Product and Service Characteristics
Increasingly, it is the exchange of information, rather than of any of the other three
exchange dimensions identified by Hakansson that will determine the nature of the EDI
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relationship (Naude and Holland, 1996). Therefore, we can hypothesise where the highest
levels of EDI usage will occur. For example, companies whose products have a high
information content (e.g. newspapers) will be early adopters of EDI for transferring large
volumes of text and graphics as well as more basic paperwork such as invoicing. Equally, in
companies where the information content of the process is high (e.g. airlines, banking), we
might expect the sharing of production information to be facilitated by the adoption of EDI.
In contrast to the "information intensity" approach used above, in industrial markets,
products that are otherwise lacking in unique benefits (i.e. are verging on commodity status)
tend to be bought because of the supplier rather than the brand Typically, suppliers
differentiate themselves on service factors: efficiency, reliability, speed of delivery, ease of
ordering, all of which are factors that can be enhanced by electronic EDI.
2.2 Industrial Structure
The type of value chain a company has and its stage of development might be expected to
affect the adoption of EDI (Porter, 1980). A company which is not highly vertically
integrated but has a relatively lengthy supply chain and is thus dependent for its margin on
close relations with suppliers and dealers might be expected to need electronic
communications at an early stage.
2.3 Globalization
There is no doubt that the volume of international transactions has increased dramatically in
recent years as a consequence of, amongst others, increasing deregulation. In this context,
larger companies with numerous international sites (requiring intra-organisational
information flows), and companies trading in geographically dispersed markets (requiring
inter-organisational flows) might be expected to have seen the need to adopt EDI, given the
complexity of their interlinkages and the need for fast and effective communication across
distances and time zones.
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A number of case studies (Holland et al, 1992a) and also preliminary quantitative work in
the UK by Cox and Ghoneim (1994) bears out some of these hypotheses: the majority of
their respondents were large companies. However, the retail sector, in the UK a largely
nationally-based sector, was the largest users of EDI, and pharmaceutical companies -
generally both large and global - had been slow to adopt EDI, suggesting that there are
other factors at work.
2.4 JIT and Reduction of Supplier Base
There is much evidence of the recent move to more collaborative relations between buyers
and sellers. Imrie and Morris (1992) for example suggest that there are certain trends
militating in favour of closer-collaborations and longer-term relations between firms, and
any reader of the financial press is aware of the trend to reducing the number of suppliers.
Clearly EDI has a role to play in supporting the development of these emerging
relationships.
3 THE BENEFITS OF AND VALUE FROM IMPLEMENTING EDI
In the terms of the IMP group (Ford, 1990), there are two major areas of benefit that will
come from a closer relationship between organisations or companies. These are an
economic dimension, in terms of a reduction in transaction costs and production costs; and
a control dimension, i.e. a reduction in environmental uncertainty, the uncertainty associated
with an input or output, or by increasing control over the other company. Going further,
Wilson and Jantrania (1993) suggest a model for conceptualising relationship value along
three dimensions: economic, strategic and behavioural, as shown in Figure 2.
In this model, the strategic dimension examines compatibility in that some portion of each
partner's goals must be seen to be met through the unique features of the EDI-based
relationship, to give for example the best combination of quality and price. Key to this
dimension is therefore some congruence in goals between the company and both its
suppliers and its customers. The behavioural axis is premised on the fact that social bonding
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leads to higher levels of commitment (Mummalaneni and Wilson, 1991). The economic
dimension examines aspects such as exact meaning of the terms are not defined in their
paper, but we define concurrent engineering (the reduction that can be achieved in
production costs as a result of shared information); value engineering (the value to both
companies of re-engineering their own processes to give greater synergy); and investments
quality (superior investment decisions taken given the shared understanding of each others'
processes).
Figure 2
Creating Value in Relationships
ECONOMICConcurrent Engineering
Investments Quality
Value Engineering
Cost Reduction
STRATEGIC
Social Trust Culture 'Goals Bonding
'Time to Market 'Strategic Fit
'Core Competencies
From: D. Wilson and S. Jantrania
BEHAVIOURAL
Source: Wilson and Jantrania, 1993
In the early stages of EDI, most of the discussion in the literature was around the simple
economic benefits of reduced costs due to streamlining of administrative systems. But
recent literature (e.g. Holland et al, 1992b; Krcmar et al, 1995) has argued that the
organisations that benefit most are those that incorporate EDI into their overall business
strategy, using it as a tool to secure more, longer-term business. Furthermore, given
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evidence that in some cases EDI does not result in cost-savings versus manual systems
(Krcmar et al, 1995) it is important to consider the non-financial benefits. For example,
from a strategic perspective, we might expect technology to be used to create or support a
unique benefit versus the competition, or to create a new product or service; while from a
behavioural perspective it might be expected to deepen links with existing, valued clients.
Table 1 indicates the different types of benefit that have been identified in the literature,
organised so as to conform to the Wilson and Jantrania typology.
Table 1
Identified EDI Benefits
Financial Benefits
Improved Cash Management Holland et al(l 994)
Reduced Costs Rockart and Short (1989)
Quality improvement of data and data transfer" Krcmar etal (1995).
Just-In-Time Money Transfer EIU (1994)
Strategic Benefits
Shorter product development lifecycles Naude and Holland (1996)
Reduction in Order Cycle Balsmeier and Voisin(1996)
Value Added Information Holland etal(1992b) Krcmar etal (1995)
Ease of global trade Holland etal(1992a)
New Products and ServicesFeldman, (1988)
Behavioural Benefits
Controlling distribution channels Jelassi and Figon (1994)
Alternatives to Acquisition Konynski and McFarlan (1990)
Forward Integration Holland etal(1992a)
Increased Trust Ring and Van de Yen (1994)
3.1 Measuring Value
Value must be measured in order to be sure whether the benefits of EDI outweigh its costs,
but the process remains problematic. Wilson and Jantrania (1993) argue that "the strategic
elements of relationships are the reason for creating relationships and yet they are the
most difficult pan to measure because of the need to project the future." For example,
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economic value is defined differently by accountants (recorded value, market value,
replacement value, earnings potential); by economists (value in use, exchange value, cost
value and of course the opportunity cost of not having something); and by marketeers
(economic value to customer, value in use). Success must ultimately be measured in private
sector companies by the market share or customer satisfaction benefits that accrue and the
extra profits they bring. However, such longitudinal research has its own associated
problems and was not an option in this case.
Another approach is to use a surrogate measure. For example, we can assess whether the
EDI used by a company was considered a success or not. Remenyi and Money (1991)
claim user satisfaction is "recognised by many IT researchers as an appropriate surrogate
for IT effectiveness". However, the intention in this study was to carry out the survey
amongst IT managers. It seemed unlikely that this sample would give an objective view of
whether the implementation of EDI was successful, given the stake that they had in the
system being seen as a success. There are oblique measures, however, which might prove
effective surrogates, the most basic being whether the company is continuing, or even
expanding, its use of EDI. Our approach in this research was to assess the extent to which
the respondents considered that their EDI systems had brought them certain benefits,
measured on a simple 5-point scale. A range of 22 different benefits were identified in the
literature, and were loosely categorised as covering production and sales patterns, business
development, cost savings, trust, and strategic issues.
4 OBJECTIVES AND METHODOLOGY
The objective of this study was to contact organisations with experience of using EDI and
to identify the major benefits that have been realised. We also wished to link these to (a) the
stages in the development of the EDI systems within the companies concerned, (b) the
nature of the companies under analysis, and (c) developments in the business context in
which these companies are operating.
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The specific objectives were to:
* identify which business processes companies have converted to EDI
» quantify the business benefits to organisations, in particular looking for marketing
benefits that may have accrued
* set these in the context of developments in industrial marketing and purchasing in the
UK
A questionnaire was drawn up based on an analysis of available secondary data and was
piloted using a judgement sample of industry experts. The final version was then posted to
422 members of the EDI Association in the UK, of which 89 usable copies (21%) were
returned.
5 RESULTS
5.1 Composition of the Sample
The mix of respondents was influenced by the membership of the EDI Association, which
contained few retailers or automotive companies - sectors known to be heavy users of EDI.
The largest homogenous sectors represented were transport/shipping; construction; financial
services; government and the NHS. There were a variety of "manufacturing" respondents -
including amongst others pharmaceutical, steel, food, clothing, personal care products and
adhesives. There were also a variety of miscellaneous respondents including a utility, a
software house, a catalogue retailer, and a publisher. Details of the sample are given in
Table 2.
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Table 2 The Industries Represented
Sector
Transport/Shipping
Construction
Government
Financial Services
NHSManufacturing (various)Other
Total
No of Respondents
19
149
10
721
9
89
This sample composition gives an interesting slant to the results. For example, such high
returns from the construction industry were unexpected, as was the lack of domination by
the traditional "case study" sectors of automotive and retail. Most respondent companies
would be classified as large in terms of their numbers of employees. 81% of respondents
were from companies with more than 250 employees. Only 5% of companies turned over
less than £lm in the UK, and 54% more than £100m. When global turnover was taken into
account the large nature of many respondent companies was further emphasised: 22%
turned over more than £ 1000m.
5.2 The Importance and Use of EDI
For most of the respondents in our sample, EDI was a fairly important but not crucial part
of their business. 51% of the respondents stated that they "use EDI for some areas of our
business," and only 3 respondents claimed that the importance was such that their business
would cease to exist without EDI. The EDI systems had been in place a relatively long time
in terms of the typology set out by Holland et al (1992a): 30% were introduced more than 5
years ago and a further 37% between 3 and 5 years ago. Only 27% had been introduced in
the last 1-2 years.
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Figure 3 below indicates the areas of application, and also how effective the respondents
thought their systems were (measured on a 1-5 scale, with 5 being very effective). Two
separate sets of scores were generated, the first covering the effectiveness of the relevant
application between the respondent's company and their customers, and the second with
their suppliers. The scores in the figure are based only on the responses of those actually
using the relevant application. One of our most surprising findings was that the penetration
of EDI usage was lower than expected. Notably, hardly any type of EDI was being used
with customers by more than 50% of respondents and, other than E-mail, no more than 25%
of respondents were using any given type of EDI with suppliers.
Figure 3
The Use and Effectiveness of EDI
2345
Price & spec, quotes
Sales order processing
Product development
Production scheduling
Quality control
Distribution
Invoicing
Payment/funds transfer
t, , , , ,
* I
' ! \]
. j i 1
g Customers
* Suppliers
510
E-mail, sales order processing and invoicing were the most common areas of EDI usage,
used by 59%, 51% and 42% of respondents respectively, while 37% were using it for funds
transfer. As shown in Figure 3, these were also the areas where it was considered to be the
most effective. Very few were using it for production-related processes such as product
development, production scheduling, or quality control, reflecting the largely service-based
composition of the sample. These applications were also considered to be the least
effective. Overall, their were minor differences between the effectiveness in dealing with
suppliers or customers. As we might expect, product development and production
scheduling were seen as more effective when dealing with suppliers, while effectiveness of
quality control, distribution, and invoicing was higher when interacting with customers.
5.3 The Benefits and Value of EDI
An important aspect of this study was the quantification of which of the many benefits
claimed for EDI were seen as the most salient by its users. Using a 5 point scale,
respondents were asked to indicate the extent to which they agreed with various statements
relating to the benefits brought by their EDI systems. The results of this analysis are shown
in Figure 4.
The most interesting aspect of this figure is the ambivalent nature of the responses: most
statements were scored between 2.5 and 3.4, indicating to us that the respondents were not
exactly overwhelmed by the benefits accruing from their systems. Only two statements were
viewed particularly positively: the EDI had helped to improve service to customers, and had
helped to raise order frequency. On the other hand, there were a surprisingly high number
of statements with which the respondents did not agree. Among the most notable of these
was that EDI did not necessarily bring benefits in terms of:
* increasing supplier stability
* offering new information
* increasing global trade
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* increasing the depth of relationships
* decreasing time to market
Figure 4
The Benefits of EDI
CMertaquncy
Start tHaaOtr
SmtntocuMomr
DaftiornMonaHpa
B*tkr UM Of CMC* tta(
Improved tuppMr nMbradta
Trust nu penqiWte
TMthuhcraaM*)
This amounts to what we believe is a serious indictment of the EDI industry. If our results
are indeed representative of an industry's perceptions, the clearly EDI is failing to help
companies develop towards the deep and open systems envisaged by Keen. The one good
aspect to emerge from the study was that a lack of trust was not regarded as having been a
barrier to implementing their EDI system: it seems as if there exists a considerable amount
of latent goodwill in the industry.
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In order to determine the underlying dimensions of EDI benefits, the same dataset was
subjected to factor analysis, with the results appearing in Table 3 (only those factors with a
loading of greater than 0.4 are shown).
TableSResults of the varimax Rotated Factor Analysis
(Factor Loadings * 100)
VARIABLEOrder frequencyNew trading partnersNumber of suppliersSize of purchase orderSize of sales orderService to customerCustomer stabilitySupplier stabilityOffering new informationOffering services with other suppliersGlobal tradeMore business from current customersCosts of information handlingCoordination of production processesDepth of relationshipsBetter use of clerical staffImproved time to marketImproved customer relationshipsImproved supplier relationshipsTrust was a prerequisiteTrust has increasedLack of Trust a barrier
Fl7780797978
F2
7579
4382
4979
41
F3
89
58
83
F4
7980
47
F5
876663
F6
78
89
F7
7478
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We would suggest that these results indicate a high degree of overlap with the model
originally proposed by Wilson and Jantrania in 1993. The overlap in shown in Table 4,
where we find that our seven dimensions can all be described in terms of their original three
dimensions.
Table 4
The Underlying Dimensions of the benefits Experienced
Factor
FlF2F3F4F5F6F7
Suggested Interpretation of the Benefits
Trading/EconomicCustomer RelationsSupplier RelationsInformationTrustOperational EfficiencyEconomic
Wilson and Jantrania
CategorisationEconomicStrategicStrategic
BehaviouralBehaviouralEconomicEconomic
6 CONCLUSIONS
While this was a relatively small survey, we do feel that the results give some important
insights into an area of management that is both of increasing interest and that is also
subject to extraordinarily rapid change. This study identified a number of important trends
and perceptions that need to be highlighted, and each of these is discussed briefly below.
Although the sample size was too small to segment the data by industry type, we do add
sectoral insights below when these were felt to be of particular interest, hi additional, a
number of respondents gave us significant amounts of anecdotal information, and this is
referred to where relevant.
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6.1 Areas of EDI Application
The results indicated that EDI is most frequently adopted for purchasing and selling
functions and for funds transfer. The exchange of other sorts of information (e.g. production
data) is less common, although well developed in the transport industry (distribution
information). In terms of usage of different types of EDI, the more "glamorous" usages (for
example new informational products or an increase in global trade) were not seen as
benefits for our sample, which may suggest they are rare benefits for lucky or powerful
users. There appears still to be substantial room for the deepening of EDI to embrace
"start-to-finish" ordering, including the settling of accounts. A number of users felt they
were not yet experiencing the full benefit of EDI precisely because this was absent, with the
whole system still requiring substantial human intervention. The high initial costs seem to be
responsible for this, meaning its take-off has been slower than was hoped.
6.2 Maturity of EDI System
Previous research has indicated that the time for an EDI system to reach maturity to be
around 5 years (Holland et al, 1992a). However, our survey suggested the cycle is in many
cases longer. To make matters worse, usage of the systems in our sample were not as
"deep" as hoped for, given the length of time that the systems had been operational. Many
respondents to this survey were struggling with standards and technical issues as well as a
lack of perceived benefits. What we found was that companies that had first implemented
EDI up to 5 years ago could still be at a fairly preliminary stage of development, having
gone through a hiatus in which it appeared that the market and the technology were not yet
ready. The technological issues are of particular concern since, whilst we know that
numbers of users overall in the UK are high by European standards, it is not inconceivable
that the UK may lose this lead if another country makes a serious push - for example once
German telecommunications are deregulated this year.
In our sample, then, it seem as though companies were seeking differentiation rather than to
overcome the issues of high information content in their products or processes; and that they
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were hoping to increase the base of their trading partners rather than decreasing it through
their adoption of EDI. This is in direct contrast to what we might expect from the IMP
framework, with companies utilising EDI as a way to secure closer relationships with fewer
companies. Perhaps these emphases - particularly the former - in part explain why financial
EDI is having a slow take-off: the benefit of improved information it offers over existing
systems such as BAGS is simply not what companies are looking for when implementing
EDI.
6.3 Benefits of EDI
Turning to potential benefits, we set up a model for conceptualising relationship value along
the three dimensions outlined originally by Wilson and Jantrania (1993), and looked in
addition at some broader factors identified from the literature. In terms of benefits, our
findings do not agree with those of the Imperial College study (Cox and Ghoneim, 1994)
which found that the emphasis had moved on from customer service, reflecting what they
saw as a maturing EDI market. Customer relations and to a lesser extent supplier relations
were still firmly seen as benefits for our respondents. The more significant benefits claimed
in some case studies (increased global trade, offering of new information services based on
information databases) were not considered to be benefits of EDI by our sample. They were
also equivocal as to whether EDI locked in customers or suppliers or gave them the chance
to offer new services in conjunction with other companies.
In terms of economic benefits, simple cost reduction through the reduction of clerical staff
was seen as the most important benefit. The "relationship" benefits of closer co-ordination
were not in evidence. In line with the model by Wilson and Jantrania, respondents tended to
agree that trust was indeed a crucial pre-requisite to implementing EDI and that trust had
been increased as a result of EDI. Overall, however, potential value creation in the
relationship based on EDI experiences was lower for our sample than expected.
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6.4 Barriers to Implementing EDI
One of the most salient of our findings, and one that contradicts what is suggested in the
literature, is the extent to which technological problems are perceived as a barrier to the
successful implementation of EDI. An examination of the qualitative answers indicated that
problems concerning lack of common standards, lack of systems integration etc. and the
investment in time and money required to set up the system were between them mentioned
twice as often as lack of perceived benefits on the part of customers. With reference to
Figure 1, EDI has at present only reached the stage of being able to connect to customers
and suppliers dependent on their facility base. While EDI struggles to fulfil its promise in
terms of reach even for its limited range of standard messages and access to stored data,
alternative service providers - notably the Internet - are able to offer independent and
co-operative transactions (for example via E-mail and video-conferencing).
6.5 Measuring Value
When asked specifically how they measured the value of their EDI systems, no insightful
answers were forthcoming. However, this gives us an opportunity to test out the usefulness
of the Wilson and Jantrania model. According to the secondary literature, EDI can
contribute to many of the areas of value creation suggested by the model, via concurrent
engineering, improved time to market, increased trust etc. Yet if we look at the value our
respondents felt they were getting from their system few of these came through strongly:
* Respondents felt that "strategic value" was being created, feeling it important to
introduce EDI trading as an investment in the future of relationships with their
customers and suppliers, perhaps thereby moving closer to "shared goals". Yet in fact
they were realising few of the other strategic benefits Wilson and Jantrania would see
as adding strategic value: improved time to market, or strengthening of core
competencies. They were largely just computerising their sales ordering and payment
systems, although this did give some strategic benefit in terms of fostering
relationships with customers and suppliers.
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* Respondents were aware of the economic benefits in terms of cost reduction from
re-deployment of staff. But many saw the re-engineering side of the investment as a
cost, not a creator of value but a necessary evil.
* In terms of behavioural value, no one spontaneously referred to improved trust
between companies as a measure of the value of the relationship to them, although
when prompted many recognised that this had indeed taken place.
In conclusion, Table 5 indicates how we could tabulate our findings onto the Wilson and
Jantrania model. Overall, the level of perceived benefit is very low indeed.
Table 5
The Perceived Benefits of EDI
Axis
Strategic
Economic
Behavioural
Item
Snared Goals
Time to Market
Strategic Fit
Strengthening of Core Competencies
Concurrent Engineering
Investments Quality
Value Engineering
Cost Reduction
Social Bonding
Trust
Culture
Achieved via EDI?
Yes
No
No
No
No
No
No
Yes
No
Yes
No
7 DISCUSSION: IS EDI A SUCCESS? AND AT WHAT COST?
Is the value that was created for our sample by the introduction of EDI sufficient to justify
the investment in time and money it took? The obvious line is to argue that is dependent on
the company itself: whether they had the foresight to re-engineer, and whether or not they
chose an electronic relationship or were forced into it. However, given that some companies
will never have the vision, expertise or money to do these things, perhaps a more useful
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question for the future is to consider whether an alternative method could achieve as much
or the same as EDI for the same or less effort. We would argue that there is a very real
possibility of the Internet achieving that position in the future.
The Internet has progress to make: security of information remains a concern, as does
variable speeds of transmission. It also has some technological teething problems, with
difficulties for example facing CompuServe users attempting to send data files to Internet
users and vice versa. However, a number of recent development make rapid improvements
seem possible, however. In particular, the decision by Microsoft in December 1995 to
create products and services built on Internet standards rather than developing an alternative
on-line service, and the decision by MCI to upgrade its Internet infrastructure to give
superior speed and accuracy.
Returning to Table 5, we propose that the net has potential to at least provide the value EDI
has for our sample if not to outperform EDI on almost all of the benefits stated there. If
speed and security can be improved the net could provide all the strategic and economic
benefits offered by EDI; it could also arguably go further than traditional EDI in behavioural
terms, with the Internet providing the opportunity for some forms of electronic social
interaction. Hence, in terms of an agenda for future research our findings suggest in
particular that work is needed to look at the competitive situation of EDI - how its benefits
compare to those experienced by the limited number of companies who currently use the
Internet for the exchange of fairly sophisticated data.
The picture emerging from the UK is that although great achievements have been made, the
companies are only beginning to realise the business potential of EDI. There are
significantly more strategic, economic and behavioural value to be created than is currently
being achieved by the EDI relationships in our sample, especially when one compares the
overall position of this sample with leading edge users such as Chrysler (Mukhopadhyay et
al 1995), Motorola (Holland et al 1994) and Baxter (Short and Venkatraman 1992). These
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leading companies demonstrate the huge potential and the need for investment in IT and
organisational change over a long period of time, i.e. 10 or more years. The technical
problems experienced by the UK companies will undoubtedly become easier, given
developments in global telecommunications systems such as the internet. Changes to
business processes and industrial changes to relationships with economic partners will
continue to be a difficult and complex area, but one where the leading companies are
already enjoying significant strategic, financial and behavioural benefits.
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