INTRODUCING AN OPERATIONAL AND TECHONOLOGICAL
E-COMMERCE FRAMEWORK FOR EUROPEAN SMES
Designing regional and interegional e-commerce zones for SMEs in four Less
Favoured European Regions (LFRs) based on Re
quest Based Virtual
Organisation (RBVO) concept
Achilleas Balatos, Kostas Petropoulos
01 Pliroforiki S.A., Acharnon Str.438 , 111 43, Athens,Greece
Ioannis Ignatiadis
Centre for Research and Technology Hellas – Informatics and Telematics Institute,
1st km Thermi-Panorama , 57001, Thermi-Thessaloniki
, Greece
Vladislav Jivkov
Applied Research and Communications Fund (ARC Fund) ,
6 Gurko Street , 1000, Sofia, Bulgaria
Markus Lüken
Otto von Guericke Universität Magdeburg ,Institut für Arbeitswissenschaft, Fabrikautomatisierung und Fabrikbetrieb
(IAF), Universitätsplatz 2, 3910
6,, Magdeburg, Germany
Keywords: Business-to-business (B2B),
e-commerce, service level agreement (SLA), virtual organisations.
Abstract: Small and Medium Enterprises (SMEs) represent the driving force for local development and growth in
European Less Favoured Regions (LFRs); geographical isolated areas characterized by poor business
performance and a less developed and privileged economy. The introduction of e-commerce is considered
as an essential element for improvement of local SME’s competitiveness and position in the Global Market,
supporting simultaneously these regions to overcome their geographical limitations and follow up
international business trends. In the context of the IST-2001-33251 LAURA project, the potential for
regional and interregional e-commerce development has been analysed in four European LFRs (Epirus,
Messinia, Saxony-Anhalt, and South Central Bulgaria). Based on these results and adopting the notion of a
specific type of Virtual Organisation taxonomy (Request Based Virtual Organisation - RBVO), we present
an operational and technological e-commerce framework adapted to the specific context of LFRs. The paper
outlines the core identified factors that will influence the introduction and the effect of e-commerce in Less
Favoured Regions.
1 INTRODUCTION
The advent of IT and Internet usage provide a new
business paradigm for European companies and
signified a far-reaching and fundamental change in
global trading patterns. Nowadays, e-commerce has
emerged as an integral part of business strategy
offering a range of services and opportunities for
electronic trading in the global marketplace (Alcock,
Cooper and Lawson, 2001). However, the degree of
e-commerce adoption in Europe is differentiated
from company to company accordingly to two main
“digital divides” factors (E-Business W@tch, 2002):
309
Balatos A., Petropoulos K., Ignatiadis I., Jivkov V. and Lüken M. (2004).
INTRODUCING AN OPERATIONAL AND TECHONOLOGICAL E-COMMERCE FRAMEWORK FOR EUROPEAN SMES - Designing regional and
interegional e-commerce zones for SMEs in four Less Favoured European Regions (LFRs) based on Request Based Virtual Organisation (RBVO)
concept.
In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 309-315
DOI: 10.5220/0002631403090315
Copyright
c
SciTePress
The regional digital divide arising from the
different rates of progress in e-business
development within the EU Member States,
The digital divide by company size arising
from the significant “gaps” between SMEs
and larger enterprises.
The effect of both digital divides factors is
cumulative for SMEs in European LFRs, expanding
the e-commerce gaps and posing extra difficulties in
adopting these technologies even in their primary
forms.
European Union (EU) has already realised the
importance of this issue on its effort “to become the
most competitive and dynamic knowledge-based
economy in the world” and has set the acceleration
of e-commerce growth among SMEs as one of the
major priorities of European e-business initiatives
(E-business Policy Group, 2002).
The e-business evolution of LFRs in accordance
with Community policies forms the main objective
of our work. On this purpose, adaptive regional and
interregional electronic commerce zones have been
conceptually designed and will be physically
developed in four European LFRs (Epirus, Messinia,
Saxony-Anhalt, South Central Bulgaria).
Starting from the description of current business
environment and information technology diffusion
in LFRs, as this has been identified through surveys,
this paper presents the proposed operational and
technological e-commerce conceptual framework
which will support the operation of regional and
interregional e-commerce zones.
2 ANALYSIS OF LESS FAVOURED
REGIONS (LFRS)
The analysis of LFRs environment from a business
and a technological perspective was the first priority
for our work. As soon as the interoperability of the
developing framework depends on subtle issues such
as the way business is carried out in each region, the
technological capabilities of the companies and the
SMEs actual requirements, we adopted a concrete
strategy to elucidate the LFRs reality involving both
qualitative and quantitative data collection
techniques for the following industrial sectors:
Agriculture and Food industry;
Constructions and Building Materials
industry;
Tourism;
Wood-processing and Furniture industry.
These are common or related business sectors in
the four participating regions, in order to reassure
the establishment of commercial transactions in an
interregional level.
The strategy included both direct surveys (face-
to-face-interviews, questionnaires) of key regional
stakeholders and exploitation of existing sources of
information such as national surveys and reports or
available on-line databases. The direct survey was
carried out with a sample of 244 businesses in the
four regions.
In the end of the analysis phases, LAURA
consortium had collected all the necessary
information in order to understand the regional
business environment and to evaluate the e-
commerce opportunities and capabilities within the
particular local and national business context
(cultural, regulatory/legislation, market, etc).
2.1 LFRs’ Business Environment
The analysis of survey’s results from a business
perspective revealed large sectorial and regional
variations, verifying that the “digital divide”
between the Western (Saxony Anhalt region) and the
Southern European countries (Epirus, Messinia,
South Central Bulgaria regions) it is not only a
matter of regional technological capabilities but
even more it is a matter of regional variations in
entrepreneurial culture and attitude.
For this reason, in this paper LAURA
participating Greek and Bulgaria regions, which are
quite similar, are presented separately from German
region of Saxony-Anhalt.
2.1.1 Greek and Bulgarian LFRs
The majority of SMEs in these three LFRs (Epirus,
Messinia, South Central Bulgaria) did not manage to
follow up the rapid ICT and e-business development
during the last decade, adhered to past business
practises. Most of them are family owned companies
which preferred to keep on doing their business in a
traditional manner. Unfortunately, this static
environment does not stimulate the adoption of new
and alternative business models and technologies,
protracting and amplifying regional SMEs problems
such as:
Regions geographical isolation.
Low competitiveness capabilities resulting to
a very weak market potential. For
approximately 70% of surveyed SMEs,
regional market is the major area that they are
activated, while only 30% of the surveyed
SMEs have an international presence.
Fierce competition in local market, especially
from low-wage economies. Around 60% of
regional SMEs identified increased
competition as a very important (possible the
ICEIS 2004 - SOFTWARE AGENTS AND INTERNET COMPUTING
310
major) threat for the accomplishment of their
objectives.
Lack of new investments.
Complicated legal and administrative
environment.
Difficulties in finding appropriate partners for
construction of cooperative business
connections.
The key factors that function as main inhibitors
for the development of regional business community
are:
Companies’ tension to resist to any changes
reflected as an “induction of new patterns of
action, belief and attitudes” (Burnes, 2000).
They are accustomed to have a functional,
hierarchical responsibility structure with
managers who are not very integrative and
often “resist” the incorporation of new
methods, since such methods signals to them
the loss of authenticity and changes in the
framework of intense cooperation (Gallo and
Sveen,1991).
Firms negative attitude towards innovation as
an additional burden and cost, rather than an
opportunity and an investment for the future.
Slow introduction of Information and
Communication Technologies in SMEs
business procedures. For example, SMEs
communication with trading partners is
conducted mainly through Fax (51%) or other
paper based procedures (43%) while only
25% of the firms make use of email.
The costs of innovative ICT systems, training
and user-effort necessary to make the
technology adoption successful are
prohibitively high, while return-on-
investment is long term, and often SMEs are
looking for immediate or short-term benefits
(Weiss, 2002).
Lack of the necessary skills and knowledge
(especially complicated sometimes) among
SMEs personnel (managerial and technical).
For example, only 18% of SMEs have
declared that they are familiar with the e-
commerce terms and issues. On the contrary,
above half of the companies surveyed stated
that they are less or not at all familiar with e-
commerce concepts.
Limited awareness and feeling of
international commercial environment.
Regional companies enclaved within the local
business reality, could not anticipate their
actual needs under a global context.
Nevertheless, the surveys results point out that
the firms are starting to realise the necessity of
Information and Communications Technology as the
roadmap for the accomplishment of their main
business objectives (increase customer base,
expansion into new markets) and over-passing
external threats.
Therefore, the potential for introduction of e-
commerce practices in these regions exist but they
should be exploited through a carefully applied and
transparent e-business strategy based on well
defined business concepts.
2.1.2 German LFR
The Saxony Anhalt region is situated in the former
eastern part of Germany. Therefore, most of the
larger SMEs were developed from old East-German
collective combines and if they are not owned by
West-German companies, they are independent with
a lot of difficulties in the market. The advantage
here is, the companies are familiar with international
businesses especially with niche markets (e.g. in
Asia with Arabic Emirates or others).
The smaller SMEs in the sectors were traditional
firms (transferred to the owner in 1990 after the
change), family owned firms or new firms with
greater problems with the sales of physical products
than the large ones. In this case, the majority of
problems are concentrated around the market field.
Even if the companies from all relevant sectors have
reasonable local or regional sales, there is still a lack
of national or even international sales activities.
There are actually some e-commerce initiatives
running or were finished in the past and therefore a
big proportion (40%) of SMEs is rather familiar with
the concepts and requirements of e-commerce. They
connect this with experiences from e-marketplaces,
on-line product catalogues as well as electronic
order procedures.
However, most of these e-commerce projects do
not have any actual benefits for the companies
because either of their failure to respond to SMEs
specific needs or of e-commerce systems’ functional
drawbacks. So a lot companies were very reserved
regarding the outcomes of e-commerce projects in
general, given their experience of running similar
initiatives.
2.2 Information Technology and
Internet Adoption Level
In order to define the technological part of the
LAURA framework, it was necessary to ascertain
the technological readiness of regional companies
for the introduction of an e-commerce solution
through the LAURA survey.
The surveys’ results were in fully compliance
with the several national and European reports and
studies on IT and e-business in European SMEs.
INTRODUCING AN OPERATIONAL AND TECHONOLOGICAL E-COMMERCE FRAMEWORK FOR EUROPEAN
SMES: Designing regional and interegional e-commerce zones for SMEs in four Less Favoured European Regions (LFRs)
based on Request Based Virtual Organisation (RBVO) concept
311
Most of the small firms are still in the very early
stages of IT and Internet adoption and very few
show any inclination to proceed and invest in more
advanced forms of IT and electronic commerce.
More specific, our survey results reveal that the
most commonly applied software solutions are
office applications (83.83%), accounting
applications (58.62%) and in-house databases
(26%). On the other hand, the engagement of more
advanced IT solutions such as Enterprise Resource
Planning (ERP) solutions was very low (e.g. only
5.86% for ERP).
The majority (76.7%) of the companies surveyed
reported that they do not have a network
infrastructure, while a minority (21.72%) indicated
that they have a LAN network in place. Regarding
Internet access, most firms (68.2%) have some form
of Internet access, whether PSTN, ISDN, Leased
Lines or Wireless but very few make use of a
broadband connection.
The participation in e-commerce projects
generally proved an uncommon practice for the
companies surveyed as long as only 8% of the SMEs
are already participating in such a project.
Finally, regarding the number of IT-literate
individuals that surveyed companies employ, this is
relatively low (1 or 2 IT employers) in most cases
(39.76%), whilst almost 50% of the surveyed
companies do not employ any IT employee. Looking
at whether companies have a formal education
scheme for IT staff, this is in most cases negative
(87.48%).
The above statistics have been estimated for
Epirus, Messinia and South Central Bulgaria regions
and do not include the German region of Saxony
Anhalt.
3 SMES’ PRIORITIES
In addition to regional business environment, the
envisaged LAURA framework should address the
actual SMEs operational and functional
requirements, in order to support in the best possible
way its interactions with the target audience (most
importantly the SMEs).
For this reason, we adopted a solid requirements
managements approach for eliciting, organising,
communicating and managing these requirements.
Based on the conducted survey, all the necessary
information has been collected by the consortium
and the frameworks’ first high-level requirements
has been extracted in accordance to SMEs priorities
in organisational, operational and functional level.
3.1 Operational and Organisational
Priorities
The term “operational and organizational” refers
mainly to specific operations or services that
expected to be provided within the LAURA
established “electronic commerce zones” to SMEs
of participating regions.
These organisational and operational
requirements could be grouped under four main
headings:
E-commerce Promotional Activities. One key
priority for European LFRs is to raise
awareness of SMEs and stimulate their
interest in e-commerce. Basic terms,
opportunities, benefits, solutions, case
studies, good practices and references will
constitute the promotional content.
Training Services for SMEs. SMEs training
should concentrate on subjects such as e-
commerce concepts and technologies, new
emerging business models, business
opportunities, etc. The training should be
preferably organized and supported by a
regional organization with direct access and
interest for the local community.
Business Consulting Services. The surveys’
results identify the need for changes in
SMEs’ current business and trading practices
in order to respond to emerged e-commerce
models and increased market competition.
The SMEs participating in an e-commerce
effort, similar to that of LAURA project,
should have the appropriate assistance and
guidance for adoption of the appropriate
trading practices and of a real entrepreneurial
culture. A local organisation entity should be
able to provide effective consulting services,
when this is required, that will help SMEs to
create and implement a realistic e-business
strategy and overcome related problems.
These services should be commercially
independent, impartial and business focused.
Undertake an administrative role Finally, the
need for an organisational entity that should
undertake an administrative role in the
established e-commerce zones has been
identified during the survey. This
organisation should (i) operate as the
intermediate in the process of introducing and
supporting new business networks and
synergies among the participating companies;
(ii) undertake the assessment of e-commerce
impact on the regions or the industrial
sectors. It should identify barriers and
enablers to the greater uptake of e-commerce
ICEIS 2004 - SOFTWARE AGENTS AND INTERNET COMPUTING
312
within the region or sector; (iii) secure
alignment with e-Europe priorities at the
regional level; (iv) provide collaboration with
other complementary programmes or
projects.
3.2 Functional Priorities
In the context of establishing the necessary IT
infrastructure pursued by surveys results, the SMEs’
high-level priorities and functional requirements for
regional and interregional e-commerce have been
identified and they are presented in
Table 1.
Table 1: SMEs’ Functional Priorities and
Requirements
Requirement Description
System
Language
English being the base language of the
system, with the possibility of local
customisation for each country.
Service Level
Agreements
The system should allow creation and
negotiation of Service Level
Agreements between trading parties,
where all the details of their trading
and collaboration arrangements are
recorded.
Search Engine The system should support advanced
searching for products/services.
Joint Product
Development
The system should allow companies to
join their forces in order to jointly
create a product or supply a service.
Marketing
Campaign
Management
The system should allow targeted
marketing campaigns and joint
marketing activities.
Purchase
Orders
The system should allow the user to
create, change, delete, etc, purchase
orders. It should also allow a user to
accept or reject such an order, query
the status of an order, distribute this
status to relevant parties, etc.
Invoices The system should allow the user to
create invoices, match them with
orders received, check and amend the
payment status for a product or service,
process the payments received, etc.
Post-Sales The system should allow the user to
specify warranties, service packages,
etc, for the products or services bought.
Logistics The system should allow a user to
examine the status of a shipment that is
to be delivered.
4 E-COMMERCE ZONES
FRAMEWORK OPERATION
Considering the results derived by regions detailed
analysis and SMEs priorities, we proceed proposing
the establishment of “Adaptive E-Commerce Zones”
(EC zones) that will support electronic trading in
inter-regional and intra-regional level. These e-
commerce zones are being built upon the concept of
a specific type of the Virtual Organisation taxonomy
that is the “Request-Based Virtual Organizations”
(RBVOs).
4.1 E-commerce Zones’ Actors
These e-commerce zones include various types of
actors that are classified upon the notion of
“Electronic Commerce Kernels” and “Electronic
Commerce Shells” (Figure 1).
4.1.1 Electronic Commerce Shells
The Electronic Commerce Shells (EC Shells) are
actually forming the regional repository of SMEs
that the proposed e-commerce framework is meant
for. This broad population of SMEs will cover all
the local business sectors (e.g. agriculture, tourism)
of primary, secondary and tertiary activities.
EC Kernel
Business
Organisations
EC Shell
SME
SME
Support
Centers
SME
Local – Regional - National
IT Provider
EC Kernel
Business
Organisations
EC Shell
SME
SME
Support
Centers
SME
Local – Regional - National
IT Provider
Figure 1: Regional e-Commerce Actors
4.1.2 Electronic Commerce Kernels
Electronic Commerce Kernels (EC Kernels) have a
rather supportive role providing e-commerce support
services to SMEs for business cooperation, conduct
of commercial operations and synergies
development. The following different actors are
identified within the context of EC Kernels:
a) Support Centres (SCs). The LAURA
operational framework proposes the
establishment of regional Support Centres,
organisations that will undertake the
introduction of e-commerce capabilities to local
SMEs and actually operate the regional and
INTRODUCING AN OPERATIONAL AND TECHONOLOGICAL E-COMMERCE FRAMEWORK FOR EUROPEAN
SMES: Designing regional and interegional e-commerce zones for SMEs in four Less Favoured European Regions (LFRs)
based on Request Based Virtual Organisation (RBVO) concept
313
interregional e-commerce zones. Specifically,
they will provide the supportive services
(consulting, promotional, training) and operate
the actual e-commerce platform. The
establishment and supervising of these support
centres will be assigned to the local business
organisations.
b) Business Organisations. SMEs in European
countries have access to a number of business
organisations, such as Chamber of Commerce
and professional institutions. As long as these
organisations are skilled at representing the
interests of SMEs, for example in political
lobbying and trade negotiations, they have the
potential, under the proposed organizational
scheme, to truly act as intermediaries in the
introduction of new technologies and innovative
business management solutions (E-business
Policy Group, 2002).
c) IT Providers. The role of the IT provider is to
provide the necessary technical support
(technical advices, ICT infrastructure, training,
etc.) for the establishment of e-commerce zones.
In conclusion, EC Kernels’ actors will undertake
to accomplish the largest proportion of SMEs’
organisational and operational requirements.
Besides the EC Kernels and EC Shells actors,
there are external actors such as Financial
Organisations or Transport/Distribution Companies,
which should also be considered.
4.2 Business and Operational
Framework
Our framework is based on the four distinct phases
of VOs life cycle (Strader, Lin and Shaw. 1998):
Identification, Formation, Operation and
Termination. Specifically, activities accomplished
within each phase are:
1. Identification. Identification of possible
RBVO entities will be aided including
search capabilities in the system and
enabling the exploitation of RBVO
opportunities. Support Centres have the
responsibility of identifying potential
market opportunities and communicate
them to e-Commerce Shells.
2. Formation. The actual formation of such
RBVO entities will be triggered by the
establishment of SLAs; integral contracting
schemes that co-ordinate B2B relationships
and collaboration within these entities.
Support Centres will help RBVO
participants to avoid conflicts during the
SLA negotiation face, ensuring the smooth
completion of the formation process.
Moreover, records of the resources and the
core business of each participant should be
stored in a system repository contributing to
the right selection of partners.
3. Operation. The operational phase of
RBVOs includes the accomplishment of
financial / marketing / design /
manufacturing arrangements, the
distribution of products / services, etc. In
this phase, Support Centres contribute by
recording participants’ performance and by
helping SMEs to confront unanticipated
obstacles. A special functional characteristic
of the system to this respect is an alerting
mechanism for the indication of
misalignment with the strictly defined rules
of a contract.
4. Termination. Finally, once a RBVO is
terminated, the relative SLAs will be used
for evaluation of companies’ performance
within this RBVO entity. Support Centres
supervise the fair asset dispersal and the
system repository is updated based on the
results and performance of each participant
within the RBVO operation context. So, this
method of monitoring performance and
measuring against SLAs, secures the
managing and improving of service quality
in inter-enterprise operations within a
collaborative network of enterprises. A VO
has several individual enterprises-suppliers
communicating with one another, fulfilling
customer requests and/or triggering e-
services that carry out their parts of some
complex workflow of transaction. Without
the right tools, a VO has no way of knowing
if it meets commitments to the customer,
user and supplier.
Figure 2 provides an overview of the business
and operational framework of the proposed EC
zones.
e- Co mmer c e
Shell
VO
Formati on
Opportuni ty
Identification
& Selection
Operat ion Termination Operation
VO
Formati on
Opportuni ty
Identification
& Selection
Dynamic Web A Dynamic Web B
EC Ker nel
e- Co mmer c e
Shel l
EC Kernel
Figure 2: Business and Operational Framework
Our approach is generic in terms of adaptivity
not only to regional characteristics but also to
peculiarities of different business sectors.
ICEIS 2004 - SOFTWARE AGENTS AND INTERNET COMPUTING
314
4.3 E-commerce Zones Interleaving
One of the most apparent advantages of conducting
e-commerce is the ‘demolition’ of the regional and
national borders. This feature is extremely valuable
for companies in LFRs, which do not have the
opportunity to conduct business outside a strictly
defined area around their physical location. The
organisational pool is the sum of all organisations
linked together with the LAURA proposed
infrastructure. Our infrastructure enables the SMEs
to conduct business and especially collaborative
commerce with other SMEs even located in another
country. Most importantly, this collaboration seems
like a normal intra-regional collaboration. The
LAURA framework provides the flexibility,
interoperability, and openness needed for the
successful evolution of e-commerce at a
transregional level.
Furthermore the EC zones that are implemented
within the LAURA project provide Supported
Activities and Functions accomplishing the high
level functional nrequirements delivered directly by
SMEs.
5 CONCLUSIONS
Our surveys results have revealed a number of
problems related with the business performance of
SMEs in European Less Favoured Regions (LFRs).
Such factors as geographical isolation, slow
introduction of ICT and change hesitance obstruct
the development of the regional business community
within a global context.
However, the introduction of e-commerce
technologies in accordance to a coherent operational
framework, similar to that proposed in this paper,
may provide the necessary impulse to regional
SMEs in order to assert a dynamic presence in the
European Market.
Based on the paper proposed framework, we are
establishing EC Zones in four LFRs, involving a
small number of regional firms that will
experimentally perform business transactions over a
prototype e-commerce infrastructure. The outcomes
of this experimental phase will enable the evaluation
and evolution of e-commerce zones.
ACKNOWLEDGEMENTS
The work presented in this paper was supported by
European Commission IST programme through IST-
2001-33251 LAURA project.
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INTRODUCING AN OPERATIONAL AND TECHONOLOGICAL E-COMMERCE FRAMEWORK FOR EUROPEAN
SMES: Designing regional and interegional e-commerce zones for SMEs in four Less Favoured European Regions (LFRs)
based on Request Based Virtual Organisation (RBVO) concept
315