In this age of - accountants 

Are you E - enabled?

INTERFACE      NO. OF YEARS

Telephone                38
Cable TV                 25
Fax machine             22
Microwave               13
VCR                        11
Cellular phone           09
PC                           07
CD Rom                  06

E-commerce means conducting any form of business transactions electronically, using the Internet. Such transactions could occur between companies, between companies and their customers or between individuals.

With the rapid development of mobile devices and the growing competitiveness of global commerce, it has now become imperative to use the Internet whilst on the move, i.e. the concept of 'Freedom to work at any location' is building up. This is paving the way for mobile commerce. 

In order to make mobile commerce successful and accepted by the end users and the administrators the whole cycle of the commercial transaction should be transparent and accountable. In this aspect the Accountants would play a pivotal role. To ease the burden on accountants, an e-enabled Enterprise Resource Planning (ERP) backbone will have to be used to trap all transactions of a single business cycle.

This is the concept that will be discussed with focus on practical use at the CIMA seminar to be conducted on the 2nd November. This seminar is targeted at senior executives in the corporate sector, especially key decision-makers in the finance. The theme of the seminar is "Mobile Commerce - Transactions on the move: Opportunities for Accountants".

The resource person for the seminar is Jayantha De Silva, Vice President, IFS South Asia and the seminar will be on 2nd November 2000 at the Galadari Hotel from 2.45 p.m. to 5.00 p.m.

By Jayantha de Silva, Vice President, IFS South Asia.

No industry will remain unaffected by changes created by the explosive development of the Internet.

E-commerce is much more than the Internet. Electronic commerce as a general concept covers any form of business transaction that is conducted electronically, using telecommunications networks. Such transactions occur between companies, between companies and their customers or between companies and public administrations.

Electronic commerce encompasses a broad range of activities. The core component is addressing the commercial transaction cycle. Electronic commerce includes electronic trading of physical goods and services and of electronic material.

With the rapid development of mobile devices, which are capable of using Internet functions, the concept of 'Freedom to work at any location' is building up. This will pave the way to mobile commerce. In order to make e-commerce or mobile commerce successful and accepted by the end users and the administrators the whole cycle of the commercial transaction should be transparent and accountable. In this aspect the Accountants would play a pivotal role. To ease the burden on accountants, an e-enabled ERP backbone will have to be used to trap all transactions of a single business cycle.

Today's business environment is complex and very unpredictable and is unable to cater to the high expectations of the customers. In order to retain the competitive edge, companies are compelled to change their traditional way of doing business.

One of the most significant changes in the world of business is the use of Internet in their day to day activities. Internet has led to a huge level of participation of business and consumers to handle their commerce electronically. As a result of this new electronic environment referred to as electronic commerce, many global enterprises are beginning to develop strategies to use e-commerce technologies in their traditional business environment. 

Electronic commerce is a technology for change. Companies that choose to regard it only as an "add on" to their existing ways of doing business will gain only limited benefit. The major benefits will accrue to those companies that are willing to change their organisations and business processes to fully exploit the opportunities offered by electronic commerce.

As any other technology some are skeptical about the success of e-commerce. The same was said regarding other technological innovations too. 

For instance, in1943 Thomas J. Watson, Chairman, IBM said 

* "I think there is a world market for about five computers". 

And in 1977 Ken Olson, President of Digital Equipment Corp., said

* "There is no reason for any individual to have a computer in their home". 

It is quite apparent what happened since then.

Electronic technology has been a major driver of change in the twentieth century. The table below depicts the increasing speed the new technologies have changed our lives.

Source: Info Tech, Pac Tel Cellular, Coopers & Lybrand.

Success stories:

It is very important to look at some of the success stories of few companies whom we are familiar with. Already there are number of companies who are beginning to emerge as the leaders in the e-commerce business.

Dell

Dell bypasses the traditional channels and is aggressively taking the advantage of the electronic media. 

In 1997 Dell's turnover reached $7.8 billion which was a 47% increase from the previous year. By 1999 it has reached the amazing $18 billion mark! 

Dell is selling $3 million-plus worth of computer products a day over the Internet.

Tesco

Amazon.com

Forecasting the future:

*"Electronic retailing will grow inexorably over the next decade. By 2010 it may account for as many as 25% of US retail sales." 

(Professors Louis W. Stern and Barton A. Weitz)

*"Products which traditionally need to be touched, tasted or smelled are prima facie less likely to sell well on line. But products and services without those characteristics or where they are of low importance will have electronic appeal."

(CSC Kalchas research)

* "$8 billion worth of entertainment and travel tickets will be bought on line in the US in 2001."

(Jupiter Communications research)

* The Internet has become a convenient and easy-to-use tool for the hearing impaired to do some shopping. The Internet can accommodate many different customers than might venture into a store. E-mail has been a helpful way for buyers to communicate with sellers.

(USA Today, April 27, 1999)

* Analysts and executives have agreed that a vast majority of e-commerce sites are secure, but many speculate that a trend may be heading in the opposite direction. It is obvious that some companies lack the technical knowledge to use security safeguards, while others claim they can not afford security products and advice. Experts claim that those most vulnerable to security flaws are small and medium-sized sites.

(The New York Times, May 3, 1999)

Open issues on E-commerce

It is worth to note what William M. Daley, Secretary of Commerce said on this.

* "The federal government has rules. Every state has rules. Every country does, too. So, the question is, how do we adapt the rules to the new medium? In the Internet world, we need the private sector to take the lead in developing effective consumer protection practices."

Many countries have already identified the importance of e-commerce. The governments worldwide also spend heavily on goods and services. Therefore they too would be a potential user of e-commerce. It was estimated that in year 2000, the governments worldwide spent $50 billion on services like maintenance, repairs etc. It is obvious countries and organisations like United Nations, World Bank would use e-commerce heavily in their h%ture day to day activities.

Mobile commerce

Many large mobile telephone companies have already teamed up to build new strategies in mobile commerce. Ericsson, Motorolla and Nokia have joined to develop a common framework for electronic commerce. They aim to create a 'personal trusted device' by integrating security and transaction application into mobile terminal platform. In the future there will be many other e-enabled mobile devices, which would support the cause of mobile commerce.

Success stories - mobile commerce.

Japan Airlines is providing increasing connectivity to a host of services via mobile phones and hand held devices. This has already proved a success and JAL passengers are able to access services such as domestic travel reservations, confirmation of reservations, cancellations, seat availability, mileage status etc.

Value-Direct (electrical retailer)

Value-Direct is offering its full range of web site products through Internet-enabled WAP mobile phones. The company claims to be the pioneer in this sector to offer such services.

Abbey National

Abbey National is already providing on-line banking facility. With the launch of On-line banking in May 2000, within the first month 120,000 customers have already signed for on-line banking. The bank expects a million customers within the next 12 months. The bank expects $61 million in saving, in terms of Bank's Annual Procument Bill.

Challenges, threats and concerns

As already discussed there are many open issues to be resolved to realise, the full potential of electronic commerce. 

A Few of the important ones are addressed below:

Reliable and high-speed communication links.

This specially applies to our South Asian region. Users would be discouraged to do business electronically in the absence of good communication facilities. Today the goverments in the region understanding the great potential of e-commerce are pumping huge doesof money to build the necessary infra-structure.

Privacy and Security

E-commerce, which transacts over open networks, demands effective and reliable mechanisms for privacy and security. Security, which is a very complex topic, cannot be addressed in detail in this paper. 

This issue is being addressed by many concerned organisations and more reliable and accepted security systems are being incorporated to the e-commerce environment.

Contractual and financial issues

Transactions over the internet run across geographical boundaries. Countries with different cultural and political backgrounds obviously will have their own regulations. It will be quite interesting to know at which point the contract was established and which rules applies to the transaction. How would be the taxes and other charges monitored and collected? 

Today, these transactions are done using the traditional payment methods, regulations and practices. In order to derive the true potential of e-commerce it is very essential that these issues should be discussed openly and proper formal methodology adopted.

Deployment

Traditionally it has been the role of accountants to handle most of the above aspects. The challenges for the accountants in the new e-commerce environment are going to be even more demanding. New methodologies and new accounting indicators have to be developed to make e-commerce related information and transactions to be more meaningful. CEOs and managers would demand new costing indicators for products and services commerce through the Internet. There will be a major challenge to accountants to translate basic e-commerce transaction data to meaningful accounting indicators. Some of these indicators have already been identified.

Eg:

* Cost per thousand:a standard measure to compare advertising costs of reaching target consumers.

* Cost per click: a new way of evaluating advertising based on the Internet surfer clicking on response to a displayed ad.

* Cost per head: 

measures only those people who respond to an ad with personalised information such as an e-mail address or other details about themselves enabling the company to follow-up.

What Bob Wehling, Vice President of Procter & & Gamble said to the advertising industry is very relevant to today's forward looking accountants. 

He said "we need to establish clear, broadly-accepted standards for measuring cost effectiveness. We have no doubt the Web can be a highly cost effective marketing medium but to become truly valuable it must demonstrate it is highly efficient. We need accurate and reliable measure to guage that efficiency. The measurement systems today are nowhere near accurate and reliable enough".

Conclusion

The impact of electronic commerce will be pervasive both on companies and on society as a whole. 

But yet it is important to say that e-commerce or mobile commerce is another way of doing business, where you use the Internet to deliver products or services. One thing that will not change is that you still need to support the logical processes and satisfy the needs of customer service departments, marketing departments etc. 

The success of e-commerce depends heavily on the confidence factor of its users. In order to build this confidence, it is necessary that all transaction points are captured and the information be transparent to the users and the necessary authorities. 

A traditional ERP backbone system would not be capable of trapping this information. This necessity has given birth to a new generation of ERP which analysts call eERP or e-enabled ERP.

Markets

Money Market Update First Capital Ltd.

The inter-bank call money market and the Overnight repo market

Central Bank open market operations

Treasury bill auction.

Treasury bond auction

The uncertainty prevailing in the economy sustained the rising momentum of the treasury bond yields. 

The spread between 2-year's and 3-year's yields remains very close, we expect it to be corrected in the forthcoming auctions. The secondary market activities remained at a lethargic note.

Foreign exchange - dollar spot movement

The spot trading that started at Rs. 79.15~Rs.79.23 closed at Rs. 79.42~Rs. 79.46. However, the weekly spot average lowered to Rs. 79.39 from the Rs. 79.52 of the previous week, as the week started much lower. 

Three months forward was quoted at Rs.81.60 to Rs.81.75, while six months was at Rs.83.20 to Rs. 83.40.
 
 
 

	91Days	182 Days	364 Days
Last Week	15.50	15.74	15.96
This Week	15.74	15.82	15.98
Change	0.24%	0.08%	0.02%

 

Maturity	15-Oct-02	15-Oct-03
Coupon	10.75%	11.00%
Amount offered Rs.Mn	2500	2500
Amount Accepted Rs.Mn	2500	2500
Weighted Average	16.89 %	16.93%
Change	0.49%	0.49%

Traditional marketing: Will it survive?

This launch evening meeting is titled: "Traditional marketing, will it survive. Introducing MTI's model to Sri Lanka". International marketing expert and CEO of MTI's global operations Hilmy Cader is expected in Sri Lanka to address this program, a media release said.

The presentation will question the validity of traditional marketing tools, given the rapidly changing business environment. Participants will then have the opportunity of appreciating MTI's 8s strategic marketing process model, which is now used by clients in USA, Mexico, South America, Philippines, Bahrain, Spain, Italy and Poland.The presentation will merge theory and practice, using a blend of local and international examples.
Market Report

Colombo safe haven in regional storm

The All Share Price Index fell 12.2 points to 499 while the Milanka Price Index dipped 26.5 points to register 808.6. Average turnover during the week was Rs. 16.1 mn. Net foreign outflows during the week was Rs.800.000.

The interest rate structure has changed from the beginning of the year and people investing in fixed income securities and very short term maturities will be definite winners, Fund Manager, Namal, Prabodha Samarasekera said. "Don't be too disheartened its not only the Sri Lankan market which is crashing, Korea crashed 46 per cent from the beginning of the year, Bangkok 42 per cent and Manila 40 per cent, " he said. 

Jakarta fell 38 per cent, Taipei 29 per cent, Bombay 27 per cent while Colombo came down 11 per cent. The only markets performing better are Sidney, China and Karachi, Samarasekera said.

"Sri Lanka's isolation from the rest of Asia as a result of its tiny size has served the market well in recent months as it has been unaffected by sharp falls seen in other Asian markets," Head of research, Jardine Fleming HNB Securities, Amal Sanderatne said. "This safe haven status reflected in Sri Lanka's data compared with the Financial Times world index of negative 1.1," he said.

Alliance Finance to diversify

During the financial year the company participated in two real estate projects with a return of 35 per cent per annum. Plans are afoot to develop this line of business into a constant and consistent source of profits.

As a part of its diversification efforts the company has formed a collaboration with Uni Walkers Ltd for the import and sale of Daihatsu vehicles in Sri Lanka. The company is in the process of building the image and establishing the re-emergence of Daihatsu in the market.

Meanwhile Alliance Tech Trading has shown considerable profit potential. The addition of a new line, office furniture is envisaged by the company. "The combination of furniture for office and living has distinct advantages as it caters to corporate clients and retail domestic consumers," de Silva told shareholders. The products will be launched at an outlet in Havelock Road shortly.

The company has drawn up a strategic plan and intends concentrating more on corporate clients in order to reduce risk in its core business.

TFC records Rs. 3bn turnover 

The Finance Company has a 60 year history, and is a part of the country's largest conglomerate, Ceylinco Consolidated, which has a combined turnover of Rs. 40 billion (3% of GDP). 

According to Mrs. Padmini Karunanayake, Deputy Managing Director/Chief Executive Officer, TFC continued to innovate by launching the first ever credit card for fixed deposit holders. "The TFC Trust Card" can be used by deposit holders for medium term credit. It also prepares customers to make use of technological changes taking place in the environment". "Taking advantage of Ceylinco Consolidated's leadership and expertise in this area, we are continuing to invest in improvements, in management information and communications system," said Mrs. Karunanayake. 

Other financial highlights are the growth of total reserves from Rs. 591 to Rs. 624 mn. Increase of earnings per share from Rs. 4.50 to Rs. 4.81 increase in return on average shareholder's funds from 7.29% to 7.39% increase in dividend cover from 2.27 times to 2.4 times, dividend yield increase from 13.33% to 14.81 % and increase in earnings yield from 30.20 % to 35.63%. 

More Business

Return to Business Contents