THE ROLE OF E-COMMERCE SYSTEMS FOR THE CONSTRUCTION INDUSTRY

multimedia segments) Static (Picture, text) Dynamic (Video and voice) Table 2 Interactive service attribute matrix (Sloan and Low 2000) number of structured and standardized transactions. Obviously the exceptions to these general rules are applications used for video conferencing or virtual team meetings. While it may be difficult for Australian practitioners to appreciate how the construction profession may participate in current e-commerce developments, practitioners could offer much of the contract documentation in electronic form, by implementing higher levels of electronic communication and by increasing the levels of electronic lodgement for claims and other documentation. The “www.BuildOnline.com” and “www.VirtualSTEP.com” collaborative web sites provide examples of these systems from the UK and USA respectively. Drivers of e-business In the past five years the use of ebusiness systems has increased, and these systems are becoming more common in business and private transactions. There is no single driver for these developments, and the following table lists a number of these drivers. As can be seen in table 3, the major changes in consumer expectations derive from automation of processes and the integration of services. The remaining drivers apply to B2B transactions, and these focus on automation, process and informational improvements. Many of the service/process and organisational trends can be related directly to the construction industry. However if we were to review the enterprise technology trends in the context of the same industry then it is evident that a number of these have yet to impact on an industry that lags the technology levels of other industry sectors. For example the convergence of infrastructure can be seen in some of the major companies but is lacking in many of the smaller companies. The integration of computer, telephony and voice recognition is uncommon as is the application of wireless applications. Therefore the impact of these trends is likely to be localised and delayed until companies adopt these technologies more widely.


Introduction
E-commerce is being used extensively in other sectors of the economy, and examples include airline booking systems, Internet banking and online shopping malls.Some of these applications are more obvious to the public such as electronic banking.Banking on the Internet has grown rapidly, and customers can now access services such as balances, account transfers, bill payment, loan applications and investment planning.These developments have relied on the existence of a large market, a variety of services, and a need to store and communicate consumer data without having to rely on third parties.Obviously the market place in which our profession operates is not a mass market but the remaining two drivers have important implications for the profession.A recent report in the UK suggests that if the construction industry adopted ebusiness then they could expect to save up to 2.3% of building costs and reduce completion times by 15% (BuildOnline 2000).If savings of this magnitude could be realised in Australia then it would deliver significant benefits for contractors, professionals and other stakeholders.
There are two areas in which ecommerce systems are being utilised, firstly in the business to consumer (B2C) marketplace and secondly with business to business (B2B) transactions.The value of Business to Business activities exceeds Business to Consumer transactions by a ratio of 5:1, and this hints at the potential for B2B ecommerce transactions in the construction industry.These ecommerce systems require reengineered processes, revised work practices, a re-skilling of staff, computer hardware and software and finally a connection to the Internet.A company also needs a clear strategy and marketing approach to ensure that the systems deliver the desired level of returns.
While a range of IT systems can be found in most construction companies these normally include only fragments of the current range of e-commerce systems.The reasons for this include the high levels of investment required to operate these systems, the uncertainty of returns arising from these systems and the new skill sets required of staff.It is clear however that it will be necessary for these inhibitors to be overcome as e-commerce systems become more deeply embedded in the construction industry.As was suggested earlier the benefits are considerable, and they will flow to all of the stakeholders.Another likely outcome of the use of e-commerce in the construction industry is the creation of an information management role for one or more of the professional groups.The construction profession needs to be proactive in securing such a role, as there will be many others seeking to secure this management role.
The following sections of this paper will explain how the development of the Internet has supported application integration and the development of ecommerce systems, and how ecommerce systems are fundamentally changing the way in which businesses and customers are interacting.A number of examples will then be offered to show that e-commerce is not just a new technology, but also one that acts as a stimulus to seeking new ways of undertaking business.In a final section of this paper it will be argued that ecommerce systems will need to be embraced to secure an ongoing or expanded role for the construction profession.

The distinction between e-commerce and e-business
It is important to define the terms ecommerce and e-business since their use is often interchanged."E-commerce" is normally associated with buying and selling transactions that use some form of digital media.E-commerce data is transferred in a number of forms including legal documents, corporate data, project data, financial data and knowledge.Companies normally attempt to limit the distribution of this data to a specific set of recipients, and to prevent disclosure of this data to their competitors.Therefore e-commerce provides new ways to deliver information, services, financial and other business transactions.
While the use of e-commerce in Australia is still relatively low, financial institutions are now making changes to lower the transactions costs and to increase the security for transactions.Clearly financial transactions require an appropriate legal environment for the security of all parties, and similar concerns were overcome when the facsimile gained wide use.The Commonwealth Government has moved to address these issues in the Electronic Transactions Bill 1999.While it is not intended that this paper cover these issues in any great detail it will be shown that the intent of this legislation is to put electronic commerce and paper-based commerce on the same legal footing."E-business" encompasses more than ecommerce transactions, as it demands a review and redefinition of business models and a greater use of IT to maximise the value delivered to customers.This would normally require that an organisation review existing processes, develop new skill sets, modify corporate culture, accept a new level of risk taking, acquire new technologies and build new customer and business relationships.
These information, services and business transactions can be business to business (B2B) or business to customer (B2C).However it has been found that for every dollar spent on business to consumer, business to business e-commerce spends five more.Therefore the focus of many companies is on ensuring the B2B transactions are operating effectively.Sloan and Low (2000) suggest there are three key stages of business-to-business e-commerce and these are provision of information, exchange of legally binding documents and electronic payments.As a company moves to a higher level of electronic transactions it is argued that business value is increased.Therefore ecommerce can be seen as a subset of a greater move towards improved business processes and the development of new services.

From software fragmentation to integration
Before examining e-commerce in more detail, it is necessary to understand how the evolution of personal computers and the Internet has provided a framework for business activities.The origins of the Internet can be traced back to the late 1960's when the US government funded a network of computers that would be used by researchers, government workers and defence contractors.The network protocol was named ARPAnet and this reflects the agency within the Department of Defence that provided the funding.In the 1970's ARPAnet was replaced with the TCP/IP protocol suite and this continues to be used for the Internet.The network grew the number of users, and electronic mail was a major application used in the early years.Cunningham (2000) suggests that the Internet has effectively been available for just fourteen years.
In the past two decades we have experienced substantial changes in IT, moving from a centralised model where computing power and applications were controlled and distributed to users, to one where the personal computer provided the user with control and flexibility in choice of applications, to a stage now where we appear to be cycling back towards a scenario with more powerful computing power at server level, and less powerful workstations.The last change has also delivered LAN's, WAN's and connections to the Internet to users.
The fragmentation of software applications has effectively created 'islands of computing' and the computer industry has responded by building networking and data translation software.Bjork (1987) has described these developments in terms of islands of automation, and he contends that developments in the past decades are focussed in distinct discipline based groups, and that over time integration of these applications will be achieved.Initially it was achieved by software bridges, and data exchange standards however the building product model was seen to be a major integration mechanism.

Figure 1 Islands of automation (Bjork 1987)
All of the islands described in his model including architectural design, engineering design and construction existed, and many of the applications can be recognised on typical construction projects.The model conveys an impression of evolution, a series of professional boundaries and integration, both horizontal and vertical, of all applications associated with each island.
It is evident that the fragmentation of professional roles has also generated a fragmentation of applications, and that the integration of applications is tenuous and relies on rigid data exchange standards.In the past decade computer users and software development companies have sought to introduce a number of integrating applications.Most computer users will be familiar with the integrated office suites, which are now being linked directly to web browsers and associated editors.A number of construction applications such as Timberline demonstrate higher levels of application integration.The internet is also being used for integrating software applications and there are a number of web based project management systems and the BuildOnline web site (www.buildonline.com) is an example of this type of resource.In the past year two consortiums have announced the development of similar web based ecommerce hubs for use by companies in Australia.

The growth in Internet and e-commerce use in Australia
Obviously the use of e-business and ecommerce applications is limited unless there is an available communications and technology infrastructure in place.In this section the current uses of the Internet and e-commerce will be discussed.
In the past ten years the Internet has been widely used by business and private users and it undoubtedly provides business with a considerable public communications infrastructure and a range of business applications.Recent  The figures show that there was a relatively large number of companies using the Internet, and that the uses centred on communication and data transfer.A similar survey that measured the business use of IT reported that the proportion of businesses using computers rose to 63% in June 1997 (ABS 1999).
While all large businesses (200 or more employees) and 94% of medium sized businesses (20-199 employees) used computers, the proportion for all small businesses (less than 20 employees) was 60%, and for 'micro' businesses (less than five employees) 56%.One in three businesses had used computers for five years or more, and one in ten had used them for less than two years.(ABS 1999) Another report (NOIE 2000) suggested that large Australian businesses have nearly reached saturation point in terms of Internet adoption and are nearing saturation in home pages.It was also reported that 21% of Small Manufacturing Enterprises (SMEs) connected to the Internet were engaged in Internet based sales, and 22% were actively placing orders for goods and services.It was found that small businesses in Australia had much lower levels of connections to the Internet, at 48%, than medium size firms at 82%.All companies with 100 or more employees were using computers, and of these 87% have access to the Internet, and 58% have a home page.
Companies with incomes exceeding $500 million are all using computers and have access to the Internet.Most of these companies also have an Internet presence that included a home page.
The building and construction industry lags other industries with 80% of companies using computers, and only 43% of companies had Internet access and less than 14% of construction companies had a home page.This may be explained by the complex nature of communication on construction projects where only limited agreement and adoption of electronic data standards and systems has been achieved.For example the documentation of projects is often undertaken using a variety of CAD systems, and something as simple as the layering standards and description of objects continues to limit the exchange of drawing data.
Other  number of structured and standardized transactions.Obviously the exceptions to these general rules are applications used for video conferencing or virtual team meetings.
While it may be difficult for Australian practitioners to appreciate how the construction profession may participate in current e-commerce developments, practitioners could offer much of the contract documentation in electronic form, by implementing higher levels of electronic communication and by increasing the levels of electronic lodgement for claims and other documentation.The "www.BuildOnline.com"and "www.VirtualSTEP.com"collaborative web sites provide examples of these systems from the UK and USA respectively.

Drivers of e-business
In the past five years the use of ebusiness systems has increased, and these systems are becoming more common in business and private transactions.There is no single driver for these developments, and the following table lists a number of these drivers.
As can be seen in table 3, the major changes in consumer expectations derive from automation of processes and the integration of services.The remaining drivers apply to B2B transactions, and these focus on automation, process and informational improvements.Many of the service/process and organisational trends can be related directly to the construction industry.However if we were to review the enterprise technology trends in the context of the same industry then it is evident that a number of these have yet to impact on an industry that lags the technology levels of other industry sectors.For example the convergence of infrastructure can be seen in some of the major companies but is lacking in many of the smaller companies.The integration of computer, telephony and voice recognition is uncommon as is the application of wireless applications.Therefore the impact of these trends is likely to be localised and delayed until companies adopt these technologies more widely.

E-business designs
The adoption of e-business systems is often undertaken with a focus on maximizing value and reducing the risks associated with implementation.There are essentially three basic e-business designs that can be used:

Table 4 New business models of e-commerce (Sloan and Low 2000)
these can deal with physical and virtual products.The physical products have a requirement to transform raw materials into a product using some form of production process.The virtual product could be a financial transaction or arrangement such as a mortgage or reprocessed information.There can be both physical and virtual processes used in generating these products.
The example for DETR and BRE illustrates a construction related ebusiness design where a physical product (surplus and secondhand materials) is traded using a virtual marketplace, using both physical and virtual processes.This application demonstrates a hybrid model where both physical and virtual components contribute to an improved business design.Other examples that construction professions will be familiar with include web based project management systems, the provision of cost data and advice and electronic tendering portals.
There have been two recent announcements of B2B e-commerce services in Australia and each is supported by a number of major construction companies and associated finance and consulting organizations.The drivers for these developments appear to have come from the need to share the costs of development and to provide companies with the opportunity to electronically procure goods and services.Both of these initiatives include supplier and sub contractor representatives and other industry stakeholders.Similar announcements have also bee made in the UK, Europe and these also seek to deliver a range services to a virtual construction community.It should also be recognised that these systems are by their nature "borderless" and that companies with offices and projects in different geographic locations, as well as global competitors can make use of these services.The types of services in the systems include:

and • Online information services
One major assumption of these new ebusiness systems is that existing processes will be reviewed and reengineered to make use of the benefits of new technologies.

Transforming a traditional process design into an e-business design
The opportunity to derive competitive advantage from strategic IT systems is higher in industries where IT infrastructures of competitors are less developed or when they are not seen as a core competence.Weill and Broadbent (1998) suggest that competitive advantages will be sustained for only two to three years before competitors copy or improve the innovation.These periods will obviously depend on the nature of the IT systems, the extent to which competitors can source similar applications and the willingness of staff to adopt new business processes.Porter (1985) suggests that the phrase "technology diffusion" could be used to describe the duration of the leadtime for other companies to take up new technologies.Technologies that incorporate these links or separately developed proprietary technologies slow diffusion rates and enhance long-term competitive advantage.Therefore the initial users of IT have advantages, although other users can dissipate these advantages through aggressive investments.Advantages for initial users include: the ability to create and control the development of standards for the technology; the achievement of legal protection for proprietary systems and early profit taking.Companies who adopt the same or similar IT systems may have to invest heavily to neutralise the first mover advantages.The disadvantages associated with first movers are normally associated with costs and risks relating to user acceptance and reduced costs of technology as it matures.
The issue of seeking to attain technological leadership is also an important decision for companies.Hansen and Tatum (1989) contend that every company is either a technological leader or follower, and that the choice is determined by a combination of three factors, the sustainability of technological lead, first mover advantages and first mover disadvantages.The value of these new IT systems comes from the enabling of new applications that in turn create business value.There are a number of examples of construction companies who have sought technological leadership (Construct IT 1997) however it is clear that these companies have also introduced re-engineered processes.Some construction companies in Australia have also committed to a continuing investment in technological advancement and organisational change (DISR 1998).Many of these companies have succeeded in staying ahead of their competitors by moving beyond automation of existing processes to a position where they reengineer their organisation as well.
The following steps can be used when considering which processes could be transformed to generate increase value.It is important to ensure that you understand what customers value or care about, as it will be increased value that will help to deliver increased competitive advantage.Once this has been established then it will be important to review the range of existing and emerging technologies, and the ways in which these can be used to re-engineer existing business processes.Many of these new technologies will require substantial levels of process change, and it is imperative that the company makes a realistic assessment of the feasibility of these changes.The next step is to decide what business designs will deliver higher levels of value to the major customer groups, and what resources are required to create these experiences.Once the new processes have been identified it is necessary to examine the extent of organizational change required if these new processes are to be successfully adopted.The final step is then to plan the implementation of these changes and to ensure that adequate levels of resources are provided.

Examples of IT being used for competitive advantage
A recent report (DISR 1998) provides two examples of companies who have used IT to achieve competitive advantage, and these are Flower and Samios and National Engineering.Flower and Samios have re-engineered its business processes to obtain maximum benefits from the technology: "By developing and maintaining a 3D model of the design from the outset, relevant drawings and documentation can be 'peeled off' the model at different stages without further work.Designs are easily amended, with instantaneous updating of elements of the model.Integrated use of multimedia packages has meant ease of communication of designs to customers.Furthermore, the combination of land modelling, measurement and costing capabilities in their systems has meant that they are not only faster, more efficient and more accurate, but that there are enhanced capabilities to manage and control the contracting and project administration process.Communications with suppliers and consultants is increasingly electronic, with e-mailed CAD drawings and documents now the norm."(DISR 1998) Future developments are likely to have a far greater impact on the company and the other companies they work with: "John Flower foresees that in the near future, those external consultants involved in a project will access the 3D model of the project on the firm's server, and will undertake their specialist component of the design work on-line, while having read-only access to the rest of the model."When all the parties are working concurrently on a project in this way," John comments, "they will transform the industry.""(DISR 1998) The second example provided in the report comes from the construction contracting sector and it describes a substantial communication based development.National Engineering has developed IT systems to enable rapid communications and exchange of information while increasing value in the design, manufacture and construction processes.In one area the company uses CAD-CAM (computer-aided design and manufacture) systems to manufacture complex steel structures.Steel cutting and robotic welding machines are able to derive the measurement and shape information from the CAD drawings.
Drawings and many other documents are stored and transmitted electronically and this both improved productivity while removing delays in distributing information to a geographically dispersed project team.
The BuildOnline web site provides a series of case studies that can be used to illustrate the competitive advantage of adopting e-business systems.One of the cases relates to project collaboration and it describes the exchange of contract documentation with a geographically dispersed design team.The major benefits realised by the project team were: • A substantial increase in the speed of communication associated with the electronic transfer of documents • Increased accuracy of communications with reduced errors and rework costs.• Substantial reductions in travel costs that would have been high given the dispersion of consultants.• Reduced copy for reproduction of hardcopy documents, distribution and storage.
The second case study from BuildOnline related to the letting of a scaffolding contract, and it describes how e-business systems were used to electronically tender this work with five potential suppliers.Photographs and a detailed description of the works were provided on the web site, and suppliers were able to view these documents and respond to the RFQ.The benefits included reduced time for tendering the project, and reduced costs for suppliers to bid on the project.

Benefits of adopting e-commerce
All of the stakeholders in the construction process can benefit in some manner from the introduction of e-commerce.These benefits will be described in more detail in this section of the paper.Firstly the NOIE report included a number of macro economic forecasts relating to the higher use of e-commerce, and the key benefits for the economy were: • An increase in national output (GDP) by 2.7%; This report (NOIE 2000) also forecast that the greatest usage of the internet by business will be between businesses, since e-commerce offers savings in inventories, shipping, reporting, sales transaction and customer support.It has been also forecast that the number of companies in Australia who are active in e-business will increase up to five times and this will result in more than 40,000 companies using e-business by 2005 (NOIE 2000).Howarth and Skotniki (2000) also suggest that e-business alters business value since it offers increased transactional speed and eliminates many manual activities.
"In general, e-commerce seems to offer the prospect of moving economic activity closer to some of the ideals of perfect competition: low transaction costs, low barriers to entry, and improved access to information for the consumer.It may significantly lower prices while improving quality.In doing so, e-commerce may significantly improve the efficiency of economies, enhance their competitiveness, improve the allocation of resources and increase long-term growth".(DOCITA 2000) Many of these outcomes would in turn deliver the construction industry increased levels of activity and profitability.A wide range of benefits for stakeholders in the construction industry have been suggested (BuildOnline 2000) and these include: • Lenders -improved project transparency and improved risk management

Internal and external impacts of ecommerce
There are essentially two major categories of impact, internal effects such as the replacement of manual processes and external effects such as the flattening of marketing and sales structures.It is argued that these effects can offer up to a 30% cost savings for business (Howarth and Skotniki 2000).The potential impact of e-business on employment levels is not clear as the employment levels in the banking and finance sector have been mostly static while the sector has increased its share of GDP from 6.6% to 7.6%.Given that many sectors of the economy have high employment levels, the introduction of these technologies could result in reduced employment levels.These views are countered by supporters of e-commerce suggest that it will lift aggregate employment and productivity gains will raise real wages.
The NOIE (2000) report argues that the greatest usage of the Internet is likely to be between businesses (B2B), and that business to customer (B2C) levels will be significantly less.There are a number of examples of e-business systems introduced by Australian companies and the system introduced by Mosaic E-Commerce Solutions offers an online marketplace for companies to offer procurement contracts to tender (Foreshew 2000).Lend lease, an Australian property development company, has also launched a financial product on the Internet which offers personal portfolio services (Kirby 2000).Therefore IT strategies including the use of the Internet and e-commerce are becoming essential ingredients in a competitive strategy, given that they can offer sustained competitive advantage.

Summary
It has been shown that e-commerce is now becoming widespread in its use and a number of stakeholders in the construction industry have also commenced developments in this area.The growth in the use of Internet and e-commerce in Australia suggests that the construction industry will become users of these technologies, and that when this occurs it will have a significant impact on the manner in which production takes place.
The drivers of e-business were show to be predominantly service/process, organizational and enterprise technology trends.A number of e-business designs were described and examples were provided to show how e-business opportunities could be mapped into a process and product matrix.Companies in the construction industry can therefore use these tools to identify e-business opportunities for their specific areas of operation.A process for transforming a traditional business design into an ebusiness design was discussed and again construction companies can use this.It is however important that before any new business application is developed that the value framework of the client be reviewed, to identify potential technologies.Once this is complete it is necessary to review the capacity of the company to introduce these new systems.
While it is currently the larger companies that are championing these developments, it is clear that the many stakeholders will engage with e-commerce systems in the future.While the wider use of e-commerce exchanges could lead to a polarization of stakeholder communities, and threaten the roles of middlemen, Sloan and Low (2000) suggest that these developments may offer new strategic opportunities that could be used by current intermediaries to strengthen their position.

Table 1 Proportion of businesses using the Internet, by size (ABS 1999)
forecasts suggest that Internet usage around the world is expected to grow to 268 million users by the end of 2001.The use of the Internet has also increased substantially in Australia and the ABS has published data that showed: