Information Technology and the Firm 555of the consumer, only an authorization number from the credit card clearance
house. The tracking of the merchandise, as well as the payment, not to mention
the processes for handling customer returns and credits, will present signifi-
cant angst for the auditors and controllers of these firms.
Nonetheless, the financial services industry has embraced e-commerce
and now offers most of its products over the Internet. Online services include,
among others, the purchase of stocks and bonds, online mortgages, and life
insurance and online banking. Because they are nontangible, these products
and services lend themselves well to e-commerce. The Internet works well in
many cases, because, while it is not delivering the product itself, it is delivering
information about the product, often in levels of detail and consistency that
were never available in the physical world.
As noted earlier, the real action is and will be in B2B e-commerce. Com-
panies of every shape and size are realizing the opportunities for both ordering
and selling their products over the Internet. Businesses are or will be using the
Internet for both the purchasing of direct and indirect materials and MRO
(maintenance, repair, and operations). General Electric runs its own auction
site on which suppliers bid to provide GE’s operating divisions with millions
of dollars of materials per day. Their private e-auction is squeezing hundreds of
millions of dollars out ofpurchases annually and opening their purchasing to
many new vendors. Some companies, such as W. W. Grainger, long known as a
supplier of MRO materials through its network of physical distribution cen-
ters, have established a giant Internet presence for the sale of MRO materials
called Total MRO. They are attempting to supply any nondirect material a
company could use, including office equipment and supplies.
Other marketplaces have been created to offer products for specific in-
dustries (vertical marketplaces) or across industries (horizontal marketplaces).
These marketplaces provide not just buying opportunities, but selling opportu-
nities as well. Many utilize auctions or reverse auctions. Hundreds of millions
of dollars are or will be changing hands on a daily basis, totally electronically.
As per legislation passed by the U.S. government in 2000, it is now possible to
electronically sign purchase commitments and contracts over the Internet.
Some companies are using their Internet site to process orders, create and
price custom configurations (similar to what Dell Computer is doing on its
site), track orders, and assist with customer service. Some industries are creat-
ing their own marketplaces for the cooperative purchase of goods and ser-
vices. The most notable of these marketplaces, Covisint, is an online auto parts
exchange created by major automobile manufacturers Ford, GM, and Daimler-
Chrysler. There are multitudes of B2B marketplaces and exchanges. Some are
vertical, servicing specific industries like Metalsite.com for the steel industry,
retailexchange.com for the retail industry, or paperexchange.com for the paper
industry. Others are horizontal marketplaces, like staples.com or wwgrainger
.com. There are also some hybrid models, like Verticalnet.com, that address
multiple industries. Companies like Ariba and Commerce One provide the
necessary software that facilitates these marketplaces and exchanges.