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Jack Zhong's column Enterprise Information in China

The pervasive development of e-business, more than ever, is becoming accepted worldwide.

To this point, e-business has been most successfully and efficiently conducted in developed counties, but Internet trading is becoming more acceptable by the day outside the developed world. In the United States in 1995, purchases via the Internet were valued at US$500 million, but rose to US$13.7 billion in the fourth quarter of 2002 alone. B2B (business-to-business) sales volume was valued at US$145 billion in the United States in 1999, US$433 billion in 2000, and US$1.9 trillion in 2002. The above figures reflect the rapid development of e-business, but there are other figures that indicate the maturing B2B business world is poised for greater expansion, and that non-US B2B trade will play a bigger part in the global picture.

But, if we compare China with developed countries, we realize China has serious problems in its e-commerce sector that should not be ignored.

A key issue is "enterprise informatization," which lags behind world standards and ill-serves the needs of China's e-business environment. Low-level informatization is now a barrier to e-business development, which also suffers from a lack of unified standards. Related government departments seldom negotiate and communicate about these matters which means problems are not solved in good time. Because of this, China faces a lot of challenges in the enterprise information field. These challenges will not fade away if they are not met but will simply get worse and worse as time goes by.

What Kinds of Challenges Can Enterprises Expect to See?

Among the top 500 global enterprises, traditional enterprises such as Wal-Mart and EMS have joined IT giants such as Microsoft, Dell, and CISCO in upgrading their enterprise information systems. Because some traditional enterprises in China, such as electrical generation or clothing manufacturing companies, have weak enterprise information systems they can expect to suffer great difficulties when they encounter the competition and constant changes found in world markets.

Manufacturing

With its accession to the World Trade Organization, China expects to become the manufacturing centre for the world. China has great opportunities and potential for development, but only by improving its management capacities rapidly and by adopting Enterprise Resource Planning (EPR) can manufacturing genuinely expect to succeed on the world stage.

After 20 years' of market development in China, manufacturing has, in fact, become more competitive. But in key technologies, product design and management capacities, Chinese manufacturers have a long way to go to reach world standards. So along with the development of globalization and worldwide information systems, we can see that improving management capacities is an efficient way to strengthen competitiveness.

Service Industry

The service industry is one of the most competitive fields in the world. Therefore, informatization is important in enterprises involved in finance, telecommunications, medicine, high-technology development, real estate and especially in banking, the negotiable securities, funds and insurance industries. Centralized management systems are needed to control costs, reduce risks and to improve service levels and competitive capabilities.

Providing custom-tailored services to individuals is a key element of this strategy. For instance, mobile telephony with Internet access and games or news, weather and stock-market reports may make a lot of sense for a business user, but these features may make no sense at all for common cell-phone users. This is the charm of individual service.

Logistics

Improved, informatization-enabled logistics operations will rival the importance of information in the future. Currently, about 70 percent-80 percent of trade in China is local. But, according to a report by McKinsey and Company, logistics improvements coupled with information will dominate consumer service, third-party transfers, chain-store sales and other industries. The entire structure of the retail industry will be affected, and in China, within three to five years, 60 percent of retail trade will be controlled by international retail traders, 30 percent by national-level organizations and only 10 percent by the local owner-operators. We can see that big challenges exist for the local traders.

Public Utilities

Traditional public utilities and service industries, such as energy, transportation, or education, will face severe challenges and change. Electrical utilities were formerly concerned with producing and supplying electricity only, but in the future they will have to consider how their markets are changing and how to approach them in their electricity sales.

No matter what size enterprise you own, no matter which development stage your operation or career is in, there is no doubt that you will be confronted by changes stemming from globalization and developments in information technology.

This is the business environment confronting Chinese enterprises today.

What is the key aspect of enterprise informatization?

Informatization is an efficient weapon enterprises may use to improve their competiveness. Different enterprises have different core businesses. But, in large enterprises, reasonable and efficient financial management is necessary even though the key companies under an enterprise may be involved in business activities of varying scopes and magnitudes.

For instance, important considerations for an up-stream manufacturing enterprise include obtaining customer resources and dependable supply chains. Down-stream enterprises, on the other hand, may worry more about production, so these integrated enterprises need a set of perfect EPR strategies to control costs and to ensure high operating efficiencies.

This suggests that informatization of an enterprise should begin in a key business.

How to deploy and apply EPR for the enterprises

An important task in enterprise informatization in China is the correct deployment and application of EPR.

There are many products such as EPR, SCM (Supply Chain Management), CRM (Customer Relationship Management), EAM (Enterprise Assets Management) available. But enterprises must select which of these products they want to employ, and then install software and implement the programme.

These kinds of things are far from being widely accepted or implemented in Chinese enterprises, and informatization has a long road ahead of it in China.

But we can also see that the information industry in China has a bright future.