E-business models and systems integration at Lenovo and HP

¶ … Lenovo and HP Websites

Comparing Two Business Websites

The intent of this document is to review the e-business models, channel utilities and conflicts, security strategies, payment processes and initiatives to instill trust in the Hewlett-Packard and Lenovo websites. Each of these websites sort a product customization strategy that includes build-to-order of laptops, personal computers and servers, in addition to the selling of services to support these specific activities. The need for tight integration of systems across all areas of the website including order capture, order management, catalogs, and pre-sales content in the form of brochures and literature, even post-sales applications including the use of Return Materials Authorization (RMA) requests are together redefining the e-business models of all companies in the PC industry. For Hewlett-Packard and Lenovo, the number and complexity of integrations to make their website operate at peak levels of functionality is significantly higher than many of their competitors. For HP, especially following their acquisition of Compaq, the need for tight systems integration and a more thorough review of just how their combined business model would operate became critical. A comparable, yet less intensive level of analysis was completed when Lenovo acquired the IBM PC Company from IBM. As part of the acquisition the need for ensuring the highest levels of customer and channel service through electronic means became tantamount to the company's direction. With integration as the foundation of each of these company's approaches to enabling their e-business strategies, both companies have readily seen the fact that the greater the level of integration, the higher the level of Return on Investment (ROI) and Return on Invested Capital (ROIC). This also is specifically addressed in the research (Columbus, 2002) points to research results showing that the higher the level of integration between systems the greater the long-term improvement in both ROI and ROIC.

Hewlett-Packard

Has completely supported their e-business model through the use of a pervasive SOA platform, enabling processes that rely on both the selling services and products. Further, the e-business model is organized into dominant process workflows that enable those purchase orders captured online to be routed for fulfillment depending on their requirements. HP's use of an SOA platform to uniquely support the many specific requirements of selling a combination of services and products is what makes their global e-business strategy highly unique. AMR Research (2003) makes the point that the use of integration as the basis for supporting product customization strategies is a best practice.

Lenovo

The Lenovo e-business model is one that stresses supply chain and production efficiency including the ability to quickly respond to customer demands through tight integration to their supply chains. The role of the SOA platform in the context of the Lenovo business model is to focus first on how to streamline the impact of orders, both off-the-shelf, and customized, on the global supply chain. Also highly unique to this business model is the managing of pricing data and its optimal use for defining pricing and services strategies. While Lenovo also offers services, they are not nearly as sophisticated in their approach as HP is.

Website example from HP:

Source:

http://welcome.hp.com/country/us/en/solutions.html

Website example from Lenovo:

Notice the heavy focus on product content and pricing - two sure signs the company is very focused on its supply chain as a competitive weapon.

Source:

http://shop.lenovo.com/SEUILibrary/controller/systemconfig.runtime.workflow:LoadRuntimeTree?sb=:00000025:00000073:&smid=33BE5A810C284B02888CE73C889458DE

Channel Utilities and Conflicts

Both HP and Lenovo have complex indirect channel structures in addition to globally focused direct selling organizations to the Fortune 1,000 level of companies who purchase each company's enterprise products. For HP, the added challenge of integrating their many channel strategies and architectures with Compaq's following the acquisition is a case in point. Further, HP relies on an extensive portal-based strategy specifically for creating their Partner Relationship Management (PRM) strategy. Figure 4 shows how HP organizes their portals, portlets or portal enablers, Data Web Services, and Enterprise Repositories to accomplish the goal of providing each separate channel with the specific information they need over the many websites the company maintains. Collectively these are the PRM strategies that HP relies on to create loyalty and trust with its channel partners. Askegar and Columbus (2002) make the point that order workflows through indirect channels rely on a shared order management process workflow.

Figure 4: HP's use of Portals as the basis of their PRM strategies

HPs' strategy in using portals to support their PRM strategies is to supply the necessary application tools for resellers to complete sales cycles on their products and services. Applications include lead generation, lead management, contact center integration for follow-up, price exception management and special pricing requests, and service request forms. These collectively create a very high level of loyalty in the HP reseller base. HP uses lead management and escalation logic in their applications, delivered via portals, to circumvent and cut down on channel conflict overall. This approach to escalating urgent sales opportunities to the best performing resellers is making a major difference in their ability to electronically alleviate channel conflicts.

Lenovo's channel management strategies have relied on indirect channels primarily, and have become orders of magnitude more complex given the acquisition of the IBM laptop business earlier in the decade. The focus within Lenovo from an electronic enablement of their channel strategies is similar to HP yet it focuses more on and relies on their SOA platform for generating both internal metrics of performance in addition to measures of performance throughout their channels. Do accomplish this Lenovo relies on the SAP NetWeaver platform along with key integration points to deliver Manufacturing Intelligence Dashboards. The structure shown in Figure 5 indicates how Lenovo is relying on the SAP architecture to track the efficiency of their internal systems in serving their channels.

Figure 5: Lenovo's approach to managing channels starts with measuring production metrics as they relate to serving the channel

Figure 6: Lenovo's scorecard approach to making sure internal systems meet external needs

Figure 6 provides a greater level of detail into the metrics that Lenovo uses in managing their internal systems to be as responsive as possible to channel needs. Columbus (2003) states that Special Pricing Requests (SPR) processing can yield triple digit ROIs over time, as it saves significant time in responding to customers' unique pricing needs.

Website

Channel Utilities and Conflicts

Hewlett-Packard

HP has a world class Partner Relationship Management System complete with applications for lead management and escalation, channel training, special pricing request analysis and completion, and also mitigating channel conflict through the use of lead escalation strategies included in application logic. Columbus (2001) make the point that channel-based selling tools allow for the sales of high velocity, low margin products, using the PRM platforms supporting them as the foundation for portals.

Lenovo

Lenovo is entirely focused on the effiency and speed of their supply chain as it relates to fulfilling customer demand, and focuses on making their entire channel more effective at forecasting and demand management. Lenovo is also more focused on a pick/pack/ship model as it relates to fulfilling orders from resellers. This has been a disadvantage for the company as it has curtailed the depth of configuration logic that HP uses in conjunction with its payment logic workflows, which is presented later in this paper.

Website example from HP:

Website example from Lenovo:

Security

In terms of security, both companies have adopted as part of their SOA architectures, a layered and highly effective approach to managing security at the website, portal, and individual transaction level. Beginning with HP, Figure 7 shows a stacked diagram of their approach to defining where security fits within the context of their authentication approach, integrating this approach right before payment and tax are calculated on a per order basis. Figure 7 operates in much the same manner as an OSI model.

Figure 7: HP's approach to security is to embed it as part of their overall stack of functions in their

SOA Architecture

Lenovo relies on IBM Websphere Commerce Suite for transaction validation in addition to SAP NetWeaver platform integration. IBM has not published any schematics of how this specific integration works publicly, yet insists that pricing and price exception management are handled through a secured Kerberos Gateway. For Lenovo the most critical security areas are in the integration to supply chain suppliers globally and the need for cutting down on theft and corruption in their Chinese suppliers. The validation of shipments and quantities is a critical security concern, as are the many challenges the company has of keeping their suppliers coordination and accountable for shipment and quantity levels.

Website

Security

Hewlett-Packard

Excellent levels of security built into their protocol stack specifically in their implementation of their SOA platforms strategies. This has given HP a decided competitive advantage in accomplishing their key process area performance objectives.

Lenovo

Security levels for suppliers are critical for Lenovo. Their approach to supply chain velocity and synchronization are critical to their core e-business model. Lenovo relies on IBM WebSphere integration to SAP's NetWeaver platform.

Website example from HP:

Website example from Lenovo:

Lenovo has not published any of their internal screens for use

Payment

The workflows specifically on payment processes are integrated into the product configuration processes for HP's core e-business model. Figure 8 shows the workflow for integrating product customization and payment processes at the same time.

Figure 8: HP's approach to integrating payment and transactions

Lenovo's approach payment management is through the IBM WebSphere Commerce platform using the web screen shown below for modeling the process itself. Lenovo relies on their approach as shown in Figures 2 and 3 to make the payment process an integral part of the enterprise workflow.

Website

Payment

Hewlett-Packard

HP integrates their order payment processes directly into their order capture and management workflows, and relies on the SOA platform to specifically manage these tasks. Their approach to generating metrics of performance is also focused on creating visibility across all channels as to order status, order management, and order fulfillment.

Lenovo

Lenovo uses a Business Process Management (BPM) approach to integrating order capture and payment, as is shown in the following screen capture of their internal system for designing order process workflows.

Website example from HP:

Website example from Lenovo:

Using a BPM application to define payment workflows is one of the strengths of the Lenovo order payment system.

Trust

As trust is earned from customers and there isn't specifically a website page or application that generates it (it is earned) there are no specific tools to show that can guarantee its development. Trust takes a long time to create with customers and can be lost very quickly and as a result the entire process of creating it is more stepwise and less of a binary (on/off) type of accomplishment. Factors that tend to create trust are high levels of security and fulfilling orders on or before delivery dates. The concept of trust is also one that requires high levels of security while at the same time delivering a high level of authenticity as well.

In terms of accomplishing trust, HP relies on their ability to ship both customized and configured products to the right customer, at the right time, for the correct price. The combination of HP's SOA platform allows for this to happen. HP's brand is also very well-known and trusted from the standpoint of high quality, engineering-centric products.

Lenovo's reputation is not as solid, and requires more of a focus on execution and strength of supply chain integration and development. Lenovo's biggest unknown is their approach to managing channels and specifically growing the use of the IBM PC Company indirect channels that were part of the broader acquisition.

Ultimately the level of trust in either of these companies rest more on their ability to integrate systems, deliver supply chain visibility and synchronization, and build customer relationships through execution. The table below comments on the extent to which both of these websites foster and sustain trust through their use of applications:

Website

Trust

Hewlett-Packard

HP's many applications online including order status, order management, lead generation and escalation for indirect channel partners, and the use of dashboards internally all serve to deliver exceptional high levels of visibility both inside and outside the company. Ultimately the ability of the company to create trust through making and keeping commitments, even for complex products, are the critical path to creating trust. Columbus and Murphy (2002) state that Enterprise Content Management (ECM) is the basis of a lasting competitive advantage and requires a high level of commitment in organizations to sustain its creation and use. The commitment to content is pervasive throughout HP as is illustrated by the depth of product knowledge and solution sets throughout the website.

Lenovo

Of the two companies, Lenovo has by far the greater challenge in creating trust, as their systems rely on an integration of the IBM WebSphere application suite and the SAP NetWeaver platform overall. The need for creating and sustaining trust with the existing platform relies on supply chain integration and visibility, and the ability to be demand-driven from a customer standpoint.