Doing Business Online

Thirty years ago, the Internet was a little-known U.S. Department of Defense communications tool used to share information with and among researchers. Today, it's an expansive business vehicle presenting a range of opportunities for businesses of all sizes around the globe.

In 1996, an India-based retailer, offering a selection of literature, music, and other products, went online and two years later began accepting electronic payments. Within the first six months, revenue from online trade at Rediff.com reached 40 percent of total revenue.

From Webpages to E-Business

It is that sort of success that is prompting more and more businesses to launch an online presence. Forrester Research estimates that online commerce, or e-business as it also is known, will account for $3.2 trillion in worldwide corporate revenue by 2003. Admittedly, that's a lot of money and opportunity. But what exactly are the opportunities?

In the simplest and purest sense, e-business involves the buying and selling of goods and services on the Internet. An online business, on the other hand, can be as simple as a website used as a marketing and advertising tool, or as complex as an Electronic Data Interchange (EDI) network, such as that used by Wal-Mart, which allows a business and its vendors to electronically exchange information, invoices and stock reorders. At Wal-Mart, an item is taken from the shelf, paid for, and the vendor is electronically notified to include the item into the next reorder, thereby, allowing for better and more effective control of inventory.

The early adopters of e-business consisted primarily of the Fortune 500 companies, which represent slightly more than 10 percent of the Gross National Product. the next wave of growth will occur as businesses that make up the other 90 percent begin to launch e-business services. Included among the early e-business adopters are the Big Five, which have utilized the Internet both to market their services and to establish themselves as a source that businesses can turn to in launching and enhancing an e-business presence.

At Deloitte & Touche LLP, e-business consulting services first took root when firm professionals began teaching themselves to meet the need of clients looking to establish an e-business component. Today, Deloitte provides comprehensive e-business training for its consultants and offers a range of e-business services from website development, to the set up of secure e-business infrastructures. PricewaterhouseCoopers LLP reports that its e-business consulting services are growing at a rate of 400 percent this fiscal year. In January, KPMG announced the incorporation of KPMG Consulting to further build upon its position as a global leader of e-business services. And in April, Arthur Andersen LLP announced that it has formed a stategic alliance with FreeMarkets, Inc., the world's leading business-to-business electronic marketplace, to deliver web-based sourcing solutions to Global 1000 and mid-sized customers.

Included among the wide range of online and e-business services provided by Ernst & Young LLP is "Ernie" (www.ernie.ey.com), an electronic business consultant that allows clients to communicate with E&Y professionals on topics such as information technology, human resources, strategic business planning, personal finance, and federal income tax issues.

The above is but a small sampling of the extent to which the Big Five have begun to capture the e-business market. But what about the opportunities for other CPAs?

The Opportunities for CPAs

Three of the great advantages offered by the Internet are its ability to market businesses to a wide and targeted audience, to gather information on clients and prospective customers, and to create value-added relationships. Placing an ad about your firm or business in the newspaper or on television admittedly will reach people. But will the ad reach those people most likely to take advantage of your services? Maybe and maybe not. A carefully designed and properly registered website, on the other hand, not only can prompt the right clients to come to you, it can allow you to gather data so you can better match your services to their needs and interests.

Each day, the web portal Yahoo! Inc. collects some 400 billion bytes of information about where visitors click on its site with the goal of determining what ads and products will most appeal to its visitors. Similarly, by knowing the needs and interest of your clients through such means as online surveys and data-collection tools, you can alert them to specific services.

For example, if you find a large segment of your tax or financial planning clients concerned about saving for a college education, you can alert them to the services you provide to meet those goals. Another idea for CPAs in public practice is to develop an online consulting service that allows clients to ask and obtain answers from firm professionals on financial and operational questions they have. Or you could offer periodic electronic newsletters on emerging issues to clients based on their interest areas. Yet another example is offered here at the New Jersey Society of CPAs where the information collected from Member Profile forms is being electronically converted into a system that will allow you to be notified of conferences, seminars and other programs that meet your specific needs and interests.

Rich Richardson, CPA and president of Richardson Media and Technologies in New Cannan, CT, notes that developing an online business practice provides CPAs with a new and different means for increasing profit margins.

"The exciting part of this business model is that it is not based on hours times fee," remarked Richardson in the January/February edition of the American Institute of CPA's InfoTech Update. "The opportunities to be more productive and value bill for service and information will be enormous."

But marketing, advertising and service development are just a few of the areas where CPAs can benefit. As professionals experienced at gathering and verifying information, CPAs are in a unique position to transfer those skills into an e-business consulting practice for their clients, customers and employers. With their broad based business perspective, in-depth knowledge of specific industries, and ability to focus in on business processes that can lead to improvements, CPAs are the trusted advisors for recommending and assessing new business plans.

According to IBM's e-business website (www.ibm.com/e-business), there are several important issues that need to be considered before a business launches an online presence. Those include:

• Determining the market, including what customers should be targeted and how the business needs to prepare itself to meet market demand;
• Planning out the finances, including outlining expenses and return on investments;
• Implementing the technology, including design of the necessary data centers and the hiring or obtaining of expert help.

The GartnerGroup, an organization providing research and analysis on information technology, estimates that 75 percent of e-businesses will fail because their owners do not fully understand the technologies behind such strategies and do not adequately plan their initiatives. Obviously, there are a lot of businesses that would be well served by advanced planning.

James Metzler, author of "How to Build a Million Dollar Technology Consulting Practice," notes that connecting backoffice accounting systems to web pages is yet another area of opportunity for CPAs. Other potential e-business engagements cited by Metzler include creating websites and the content for businesses, registering clients' website addresses with the appropriate search engines, and building email systems for clients.

A generation ago, many could not imagine a world without television and telephones. Today, it's a generation that has grown up with the Internet who cannot imagine life without the instant access and resources provided through technology. They order CDs, check out car and insurance rates, and search for rare products and services all on the Internet. Online commerce is not just the wave of the future. It's already here.

Internet Resources

http://smallbusiness.netscape.com/smallbusiness/main.tmpl - E-business basics featuring seven simple steps to a successful business online.
http://www.ibm.com/e-business - E-business resource offering case studies, a reference center on managing customer relations, and an e-business solution finder.
www.alw.nih.gov/Security/security.html - A resource guide for security on the Internet.
www.webmaster-resources.com - A variety of resources for webmasters.
www.goto.com - The plain language search engine.
< a="" href="http://www.bizland.com">www.bizland.com - A variety of resources for small business.

E-business Terms to Know

Agent: Software that acts as an intermediary for a person by performing some activity and which can learn individual preferences.
Application Service Provider (ASP): ASPs aggregate, facilitate and broker IT services to deliver IT-enabled business solutions across a network via subscription-based pricing.
Business-to-Business Commerce (B2B): Electronic interactions conducted among business, typically as a result of formal, contractual arrangements.
Business Intelligence (BI): An interactive process of analyzing structured, domain-specific information to discern trends. BI domains include customers, products, services and competitors.
Competitive Intelligence (CI): Analysis of an enterprise's marketplace to understand what is happening, what will happen, and what it means.
Customer Relationship Management (CRM): A technology-enabled strategy to convert data-driven decisions into business actions in response to, and in anticipation of, actual customer behavior.
Electronic Data Interchange (EDI): The electronic exchange of documents (e.g. invoices and orders) to enable e-commerce.
Knowledge Management (KM): A business process to leverage an organization's intellectual assets. KM promotes a collaborative and integrative approach to the creation, capture, organization, access and use of information assets.
Personalization: The use of continually adjusted user profiles to match content or services to individuals.
Portal: A high-traffic, broadly appealing website with a wide-range of content, services and vendor links. Portals typically include services such as email, community and chat.
Uniform Resource Locator (URL): The character string or web address that identifies an Internet document's name and location.