The Portable MBA in Finance and Accounting, 3rd Edition

128 Understanding the Numbers

Books “ ” Us will update Customer A’s buying profile (or open a new one) in
order to better serve that person in the future. Books “ ” Us’s focus is on retail
sales and Web-site design; this is the key to its success. The transaction process-
ing is a necessary evil. In order to do this, Web merchants typically, purchase
three to four software systems—one each for credit and payment processing, in-
ventory management and fulfillment, tracking, and customer-information stor-
age and mining. All these systems must talk to one another, which means that
interfaces must be maintained. This interfacing is a nightmare because updates
for each of these software systems are constantly being brought to market, re-
quiring all interfaces to be rewritten. IT personnel in this area are highly valued,
and retention is a major issue, especially for the smaller Web merchants.
This nightmare blossomed into a business opportunity during a golf
match. Carol was complaining about a new assignment—setting up a server
farm.^1 She was given the task of transforming her company from a provider of
“boxes” (servers) to a provider of the services embedded in the box. This
meant that her company had to get closer to customers, understand their com-
puting needs, and meet those needs with a bundle of services delivered by the
“server farm” she would be running. Basically this was a hardware outsourcing
service similar to an offering of one of Dave’s sister divisions. Although he
understood the move, and although servers were becoming commodified and
margins were falling, he doubted that Carol could change the culture of her
company. Maintaining customer relationships was expensive, much like the re-
quired maintenance on any hardware system; but unlike hardware mainte-
nance they also required a unique set of people skills.
On the next hole it was Dave’s turn to complain about his customers and
how he had to hold their hands every time one of their transaction processing
systems needed updating—every day the same thing only a different customer
and a different software system. Eric laughed at this since he had much the
same problems within his software applications group. Yet all three realized

R

R

EXHIBIT 4.1 E-Commerce transaction detail.

Customer A #1

#2

#3

#4

#5

#6

Web-merchant

Fulfiller

Shipper

Credit company

Credit company

Summary from ETN/W

to Web-merchant

Update customer profile Batch

process

ETN/W Real-time