E-business (electronic business) is the conduct of business processes on the internet. These e-business processes include buying and selling goods and services, servicing customers, processing payments, managing production control, collaborating with business partners, sharing information, running automated employee services, recruiting; and more.
E-business can comprise a range of functions and services. They range from the development of intranets and extranets to the provision of e-services over the internet by application service providers.
Today, as corporations continuously rethink their businesses in terms of the internet -- specifically, the internet's availability, reach and ever-changing capabilities -- they are conducting e-business to buy parts and supplies from other companies, collaborate on sales promotions, and conduct joint research.
The growth of e-business in recent decades has given rise to new business requirements. On the customer front, consumers expect organizations to offer self-service options for conducting transactions; they expect personalized experiences; and they want speedy, secure interactions. On the regulatory front, new laws and best practices for keeping electronic data secure have been instated. As e-commerce accelerated, companies have adopted stringent security protocols and tools, including encryption and digital certificates, to protect against hackers, fraud and theft.
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With the security built into browsers and with digital certificates now available for individuals and companies from various vendors providing cybersecurity tools and technologies, cybersecurity has become ingrained in e-business. However, the security of business transactions on the web remains a pressing issue for consumers and enterprises alike, even as that concern has not slowed the growth of e-business.
IBM was one of the first companies to use the term e-business when, in October 1997, it launched a thematic campaign to address the confusion many consumers had about internet-based businesses. The company spent approximately $500 million on an advertising and marketing campaign to demonstrate the value of the e-business model and to show that IBM had the "talent, the services and the products to help customers capture the benefits of this new way of doing business," according to the company website. By 2000, IBM's e-business revenue had grown to more than $88 billion from $64 billion in 1994, and net income had nearly tripled.
There are several types of e-business models. In the business-to-consumer (B2C) model, sellers offer products and services directly to consumers online, and the buyer purchases them via the internet.
Under the business-to-business (B2B) model, companies use the internet to conduct transactions with one another. Unlike B2C transactions, B2B transactions usually involve multiple online transactions at each step of the supply chain.
The consumer-to-business (C2B) model defines a type of e-business where consumers create their own value and demand for goods and services. Reverse online auctions are examples of C2B e-business models, as are airline ticket websites, like Priceline.
Under the consumer-to-consumer (C2C) e-business model, consumers are both buyers and sellers via third-party-facilitated online marketplaces, such as eBay. These C2C e-business models generate revenue through personal ad fees, charging for memberships and subscriptions, and collecting transaction fees.
Examples of e-businesses include both older companies that successfully transformed themselves for the digital age, as well as newer, born-digital entities. The latter are organizations that advisory firm Gartner has defined as starting after 1995 and as having "operating models and capabilities [that] are based on exploiting internet-era information and digital technologies as a core competency."
The most notable e-business example is Amazon, which, as the world's largest e-commerce marketplace and largest internet company based on revenue, has used its e-business model to disrupt numerous established industries, from publishing to supermarkets.
Uber and Lyft, both of which built businesses that match drivers with people needing rides, are other examples. Uber Eats, Uber's food ordering and delivery platform launched in 2014, is an example of how an e-business can expand in the digital age.
Travel sites like Expedia, Travelocity and TripAdvisor that enable consumers to research, plan and book all or pieces of their trips based on personalized criteria, such as price, consumer ratings, locations and more, are other e-business model examples.
Meanwhile, Schindler Group, a Switzerland-based elevator company that started in 1874, is an example of how a legacy company is incorporating e-business into its organization, as it uses IoT and other digital services to transform the products and services it offers beyond elevators and escalators into internet and mobility services.
Advantages of e-business
E-business has drastically changed how corporations -- as well as nonprofits, government agencies and other such institutions -- operate, allowing them to increase productivity, lower costs and move more quickly.
For example, electronic invoicing, automated billing and digital payment systems decrease the time workers must devote to these tasks, which many businesses handled manually just a few decades ago. As a result of the time savings, businesses can either decrease their head count or shift worker time to higher-value tasks. Additionally, such digital systems reduce the time between invoicing and payment, thereby improving cash flow for the business.
Electronic communication systems, such as email, video conferencing and online collaboration platforms that incorporate the dynamics of social media, likewise increase productivity by decreasing delays between inquiries and responses. That's true whether the communication is between employees, employees and external business partners, or employees and customers.
The increased speed also results in faster decision-making, making companies more agile and responsive to stakeholder needs and market demands overall. Electronic communication systems also save money by eliminating, in some cases, employee travel for collaboration purposes, while also supporting more open, collaborative cultures by making it easier for employees in any position, in any department and wherever they're physically based to contribute ideas.
The digital systems that power e-business can also extend an organization's reach beyond its brick-and-mortar walls. Cloud-based business applications enable workers to perform their jobs from home and other remote locations, such as client sites. Similarly, cloud-based applications and the 24/7 nature of the internet allows business transactions to continue around the clock and around the globe, giving even solo practitioners and small businesses the ability to be global enterprises.
Digital systems, and particularly emerging technologies such as machine learning and artificial intelligence, have also improved the ease, speed and effectiveness of numerous e-business tasks, such as archiving information, searching stored data for insights, recording financial transactions and connecting with customers with personalized messaging.
More importantly, however, the rise of advanced e-commerce software and services have delivered new capabilities to organizations, such as email marketing, and created new avenues to sell their goods and services, such as online stores. E-commerce software has enabled the creation of entirely new business models, such as eBay's capacity for consumer-to-consumer and business-to-consumer sales and social networking sites such as Facebook. The e-commerce platform Shopify offers people the ability to create online stores by providing the infrastructure and e-commerce software to sell their own goods.
Types of e-business
Most organizations today have at least some e-business capabilities to support their core competencies or ancillary functions.
However, the amount of e-business happening within an enterprise varies. Some organizations have limited e-business capabilities: A small business that processes payments using a mobile payment service such as Square, but uses no other digital services, would be such a business. On the other end of the spectrum are those companies whose business model is fully empowered by electronic and digital services. Rocket Mortgage, an online and mobile-friendly loan product from Quicken Loans, would be an example of that type of e-business.
Although organizations are increasingly using digital services to support a host of functions and capabilities, even those organizations that could be classified as e-commerce entities or fully powered e-business tend to be categorized in traditional terms.
Business and digital authorities still frequently classify e-business as B2B, B2C, C2C and C2B. Some offer additional classes of e-business, such as business-to-government and business-to-employee.
Challenges of e-business
The level and types of challenges with electronic business vary from one organization to the next, depending on a host of factors -- from whether they use digital services to enable e-business in only parts of their operations, to whether digital services power their core value proposition, to whether they have legacy technology infrastructure or were born digital.
However, some common challenges exist. Those challenges include the following:
- securing e-business services against cyberattacks;
- scaling services fast enough to meet demand without jeopardizing performance;
- evolving their technologies fast enough to keep pace with changing market dynamics;
- finding and training workers who can keep pace with skills that constantly need to evolve; and
- keeping pace with e-business capabilities that, by their electronic nature, are always on.
Additionally, many companies struggle to progress from siloed instances of e-business within their organization to integrating e-business services and using them to transform themselves into digital operations, where the various e-business elements converge and work seamlessly together.
Security and risks
E-business tactics offer advantages such as reaching a wider customer base and faster transactions, but they also come with associated risks. For example, e-business creates huge data security risks, because customers are often required to provide sensitive information, such as contact information and credit card numbers, during e-business transactions. This information is enticing to hackers and particularly vulnerable to data breaches, so e-business website owners are responsible for incorporating methods, such as data encryption, to ensure secure transactions. Failure to ensure data integrity and incorporate appropriate data security measures creates the risk of fines and the loss of customer loyalty.
Because successful e-business relies on swift, secure online transactions, even something as simple as a bad web hosting service creates a financial risk for these companies. Crashed servers and insufficient bandwidth lead to persistent website downtime and customer dissatisfaction, so companies must invest in well-known, reliable hosting providers that can, in turn, drive up the costs associated with running a successful e-business.
There are marketing risks when it comes to e-business, as well. All types of businesses rely on effective marketing to drive growth and sales, but online marketing techniques are much different from traditional, offline ones. Without an effective marketing campaign specifically tailored to promote e-business, an organization creates huge financial risk by investing in marketing resources that do not drive consumer traffic to the transaction websites. E-businesses are also vulnerable to systematic risk that influences the entire online market segment. For example, the dot-com crash of 2000 to 2001 began after several e-business startups went public and were purchased by other e-businesses. These e-businesses had little cash flow, and many valued growth over financial stability. This created an unsustainable economic bubble that ultimately put many of these companies out of business when it burst.
E-business vs. e-commerce
E-commerce and e-business are similar, but not synonymous, as e-commerce refers narrowly to buying and selling products online, whereas e-business defines a wider range of business processes by including aspects such as supply chain management, electronic order processing and customer relationship management designed to help the company operate more effectively and efficiently. Thus, e-commerce should be seen as a subset of e-business.
E-business processes can be handled in-house through a company's own network or outsourced to providers that specialize in these specific aspects of the transaction. In contrast, the e-commerce definition is much clearer and basically describes any part of the processes via which online orders are made and paid for. For example, a customer making an online order but picking it up at the brick-and-mortar store is an example of an e-commerce transaction.