Build business on the Web

Buried under an avalanche of paper requests for insurance bids, Providence Washington Insurance Co. sometimes took weeks to reply – a delay that proved costly.

“We felt that we lost business in the past because we were too slow to get price quotations out,” says Edward N. Leveille, vice-president of systems and CIO at the East Providence, R.I., insurance firm.

The solution was a Web-based price quotation system – an extranet portal for third-party independent insurance agents – that has sped up the accurate delivery of bids for custom business insurance contracts. The project automated the sales process and saved money on internal paper-shuffling.

In a tight budget year, e-commerce IT projects haven’t lost their appeal. Computerworld (U.S.)’s Premier 100 IT Leaders ranked e-commerce projects fourth on their list of top priorities for 2003. But the rules have changed. Required-payback times are shorter, often no more than a year. E-business initiatives tend to focus on improving order or sales-lead management, tuning the sales channel or creating business partner self-service portals.

“The goal of e-commerce these days is to increase your sales volume with the same number of employees in order to bring down the cost per transaction,” says Gene Alvarez, vice-president of electronic-business strategies at Meta Group Inc. in Stamford, Conn. “If you can take phone or fax transactions and do them via the Web, you can save money.”

New York-based e-business research firm eMarketer Inc. projects that 2003 worldwide e-business IT expenditures will be US$245 billion, up 49 per cent from US$164 billion in 2002. Premier 100 IT Leaders who have reaped the benefits of e-business projects share some tips for success.

Build in buffer time

With Providence Washington’s extranet portal, independent insurance agents no longer need to submit paper bid requests to the company via fax or conventional mail. The portal also replaces the time-consuming process of keying information into the computer system. Once the portal is complete, Providence Washington will be able to make bids in minutes, vs. taking up to three weeks with the paper-based system.

In a test, agents in two states are now using the extranet portal to submit requests for bids; the goal is to expand the portal’s use to agents in 14 additional states by midyear. The 18-month project cost about US$3 million and is expected to reap a return on investment within three years, Leveille says. Payback should come from a combination of improved internal productivity and additional insurance revenue through the agents, he says.

The e-business project taught Leveille to carefully check out the financial status of vendors and to leave extra time for project completion.”[You must] accommodate problems that shouldn’t happen but will when you are interfacing multiple systems together,” he says.

Get the word out

At Tharco Inc. in San Lorenzo, Calif., a similar project allows customers to check on the availability of different types of packaging materials, create and track orders and verify order delivery on the Web.

Tharco – which makes corrugated and foam packaging materials for customers such as electronics firms, grocery stores and wineries – was looking for an interactive e-business approach that would both engage customers and cut Tharco’s internal costs. It chose a Web front end from Raleigh, N.C.-based Haht Commerce Inc. for its own SAP system. Obtaining orders over the Web reduced the company’s reliance on the customer service representatives, who typically receive orders by phone or fax and then key the orders into the computer system, says Bill Picton, Tharco’s MIS director.

“It saves money for us, and for the customers it means one less chance for error in the order. And because it’s linked to our SAP system, customers get specific, real-time pricing on every order,” Picton says.

The Web-based ordering succeeded where earlier e-business attempts had failed. One unsuccessful approach involved a non-interactive catalogue that didn’t include prices; another failure was a third-party hosting arrangement that didn’t eliminate enough paperwork, Picton says.

Tharco’s Web ordering method has proved popular with customers since it went live in March 2001, and it now accounts for about 10 per cent of the firm’s off-the-shelf packaging materials business, or about 6.5 per cent of total revenue, Picton says. That success came partly because Tharco aggressively marketed the project to its customers.

“We had to reach out to them and show the people who do the daily ordering how it works,” Picton says. “We sent our people to the customers’ facilities to train them in using it. Then we had to let customers try it out for free for a week. That was the only way that customers got into it.”

Tharco’s three-month Web project cost less than US$1 million and has already paid for itself, Picton says. “We’re waiting to show a profit,” he says. “But as the economy picks up, we will be able to support several times our current revenue with the combination of our existing customer service staff and this Web type of business approach.”

Agribusiness firm J.R. Simplot Co. in Boise, Idaho, has a similar goal. It will launch a customer self-service Web portal early this year that will allow customers to order products or check order status. The company expects the portal to increase revenue and reduce costs, allowing it to recoup its initial investment of about US$100,000 in less than a year.

“We want to differentiate ourselves in the marketplace by making it easier for customers to do business with us,” says Roger W. Parks, Simplot’s vice-president of IT and CIO. “We also think this eventually will allow us to do more business with fewer employees in order entry and customer service.”

– Alexander is a freelance writer in Edina, Minn. Contact him at [email protected].

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