Leveraging It for a Competitive Advantage Case of Ebay

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LEVERAGING IT FOR A COMPETITIVE ADVANTAGE— CASE OF EBAY
Edward T. Chen, University of Massachusetts Lowell, edward_chen@uml.edu ABSTRACT eBay is a highly visible company that has been immensely successful in their implementation of a business strategy that incorporates their information strategy. It is a shining example of an Internet era company that actually turns a profit, and managed to outlast the “dotcom crash”. By remaining flexible and adaptable, the ever-changing eBay has developed a technology platform that differentiates them from their rivals. This paper analyzes the information technology strategy and information systems policy adopted by eBay to react to the business dynamics while maintaining the leading position in the industry. The company is resilient, versatile, and an excellent example of how a company can successfully leverage information technology for a competitive advantage. Keywords: business strategy, information strategy, technology platform, competitive advantage

INTRODUCTION The business strategy of eBay is exemplified in the company’s mission statement, “eBay’s mission is to provide a global trading platform where practically anyone can trade practically anything” [3]. Technology and information systems are critical to the success and future of the company. eBay does not have any physical store locations; the company’s presence is that of a marketspace. Warehouses or inventories do not exist. The business is based on community, and the marketspace is what enables this community to come together. eBay’s revenue is based on commissions received from the sales that occur in their community, so the more people they can reach and the more these people are able to buy and sell, the higher eBay’s profits. eBay may collect as little as 6 percent on each sale, but most of that is profit. It’s truly the sort of business that couldn’t exist offline [5]. eBay uses technology and information systems to help the community members buy and sell items online. First, eBay develops and acquires programs and services to help the community transact business easily, safely and more effectively, such as Buy It Now, Pay Pal, buyer protection, educational tools, and feedback ratings. Second, they are focused on providing a strong technology platform, so that customers can have reliable access the website from anywhere in the world. And lastly, eBay establishes policies and guidelines for the community to help increase safety and trust in their online marketplace. ARCHITECTURE AND INFRASTRUCTURE Founder Pierre Omidyar’s homegrown auction application was the beginning of eBay. His original application vision, which began as a two-tier application in a proprietary C++ procedural system, surprisingly managed to support the eBay business model for a considerable period [8].

Volume VI, No. 2, 2005

77

Issues in Information Systems

Leveraging IT for a Competitive Advantage—Case of eBay

Certainly, Omidyar had no idea, nor had he built his application for, how eBay would evolve into the technology platform it has become. The presentation logic was not separate from the data logic [8] and there was no significant fail over or redundancy strategy. The system was never designed to handle the growth in traffic or the various business processes required of an eBay beyond auctions. Despite these limitations, eBay Technologies president Maynard Webb spearheaded a series of minor upgrades to keep eBay viable. However, it was clear that eBay needed both a new architecture and infrastructure. While the upgrades helped to temporarily address some of the shortcomings of the architecture; flexibility, scalability, and manageability were still primary limitations. Because the original application was designed to facilitate business rules relating to auctions, it proved difficult to adopt new business strategies. This lack of flexibility was preventing eBay from moving into new markets. Scalability was a major limiting...
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