TECH TALK: Software SMEs: Software’s Challenge and Opportunity

A lot of software is still handcrafted. Complexity is a part of life and business. This is what software tries to model and replicate. So, while great progress has been made across many industries, software, in the words of Brad Cox, “remains intractable; immune to the organizational innovations that make us think of computer manufacturing as a mature industrial age enterprise.” Gary Chapman takes this ahead to its logical conclusion:

One problem is that software projects begin with a nearly limitless number of possible approaches; on top of that, software has to work with so many different and uncontrollable variables, such as other software, hardware of unimaginable variety and users with wide variations in skills.

On the user end, repeated experiences with software glitches tend to narrow one’s use of computers to the familiar and routine. Studies have shown that most users rely on less than 10% of the features of common programs such as Microsoft Word or Netscape Communicator. It takes a high tolerance for frustration and failure to explore beyond the boundaries of one’s own comfort level. This adds to the exasperation of tech-support personnel, who often don’t understand why users are reluctant to venture into the unfamiliar features of a program. It also calls into question how much money and energy we spend on new software features that most people don’t use or even know about.

But few people are talking about how to make technology easier to use. There’s a universal assumption that people will have to adjust to the rampant, irrational and escalating complexity of a hyper-technologized society–or fall into the ranks of the losers and the ignorant. This split is likely to characterize modern life in the 21st century.

Steve Lohr, writing in the New York Times, discusses the solutions to the software crisis:

The two main answers, according to computer scientists, are new tools that will make programmers more productive and new technology that will enable more people who use software to program for themselves. And simple economics should speed the process along, they predict, because there could be a handsome payoff for any solutions.

As the Internet makes it easier to share work around the world, software will be increasingly procured from a global market, just as sophisticated manufactured products are now. A personal computer is made of components from dozens of countries. And there is not a lot of silicon being baked in Silicon Valley anymore, though the Valley remains a hub of innovation for the chip industry. Software, experts say, will probably follow the same pattern with much research, design and early-stage development centered in America but production shifting overseas. The outsourcing of software today from places like India is just the beginning, they predict. The trend will be accelerated by the spread of high-speed Internet connections internationally and the growing share of the world’s programmers trained abroad.

The challenge for Indian companies is to not just strengthen the services base (at some point of time, they will just not be able to double workforces every year) but to move into creating intellectual property through software components and platforms.

TECH TALK: Software SMEs: The Art of Software

The software industry is large — from Operating Systems (Microsoft’s NT, Sun’s Solaris, Linux] to Desktop Applications [Microsoft’s Office Suite] to Building Blocks [Oracle’s Database, IBM’s DB2, Rational’s Development tools] to Enterprise Applications [SAP’s R/3 and MySAP.com, Siebel’s Sales Force Automation and CRM suite, i2’s Supply Chain Management Software]. Then, there is the embedded software which goes into cellphones, chips and cars. Today, as companies talk about integrating front- and back-office, the challenge is as much about integrating disparate software systems as about re-engineering business processes.

Software is at the heart of the challenge we face today. Writing Perfect Software is inherently difficult. A path-breaking paper written in 1986 [http://www.student.math.uwaterloo.ca/
~cs212/resource/Articles/SilverBullet.html
] entitled “No Silver Bullet : Essence and Accidents of Software Engineering” by Frederick P. Brooks, Jr. discusses why software is still much of an art:

Not only are there no silver bullets now in view, the very nature of software makes it unlikely that there will be any–no inventions that will do for software productivity, reliability, and simplicity what electronics, transistors, and large-scale integration did for computer hardware. We cannot expect ever to see twofold gains every two years.

First, one must observe that the anomaly is not that software progress is so slow, but that computer hardware progress is so fast. No other technology since civilization began has seen six orders of magnitude in performance price gain in 30 years. In no other technology can one choose to take the gain in either improved performance or in reduced costs. These gains flow from the transformation of computer manufacture from an assembly industry into a process industry.

Second, to see what rate of progress one can expect in software technology, let us examine the difficulties of that technology. Following Aristotle, I divide them into essence, the difficulties inherent in the nature of software, and accidents, those difficulties that today attend its production but are not inherent.

The essence of a software entity is a construct of interlocking concepts: data sets, relationships among data items, algorithms, and invocations of functions. This essence is abstract in that such a conceptual construct is the same under many different representations. It is nonetheless highly precise and richly detailed.

I believe the hard part of building software to be the specification, design, and testing of this conceptual construct, not the labor of representing it and testing the fidelity of the representation. We still make syntax errors, to be sure; but they are fuzz compared with the conceptual errors in most systems.

If this is true, building software will always be hard. There is inherently no silver bullet.

The longer software stays an art, the greater is the opportunity for India and her software companies.

TECH TALK: Software SMEs: The Magic of Software

Computers and the Internet have been the biggest revolutions in the past 20 years. While advances in semiconductors and networking have powered these changes, it is software that has been the invisible factor which has been common to both. Software has become the new physical infrastructure of the information age.

Software is there in everything around us: from the computers we use to the systems that produce the telephone bills to the embedded software in the TV that we watch. More than anything, it is the magic of software which has made the dramatic improvements in functionality in devices that we see around us. Software is also which is the key to India’s emergence as a key component in the transformation that information technology is bringing about world. And yet, the challenges ahead are vast.

Why is it that our computer crashes so often and we live with it? Why is it that it takes us a few minutes to start our computers while a car starts up immediately? Why is it that we still have so little intelligence in the messaging software that we use? Why is it that we still have to spend so much time searching for information? Why are there still so many forms we need to fill? Why can’t we still work effectively with people and share information easily? Why can’t systems learn what we are doing and help us do it better and faster? Why has technology still not made us many times more productive?

Software may be that magical quality is our lives, but there is still a long way to go. Yet, the biggest opportunities of tomorrow lie around software. The enterprise software industry is worth USD 80 billion, and will reach USD 200 billion by 2004, according to Merrill Lynch. Yes, as Steve Lohr writes in the New York Times, the challenges remain:

As Internet technology spreads across the economy, the pace may be uneven and the impact uncertain for companies large and small. Yet at least one thing is certain: there will be a huge demand for more software and more reliable software.

Given that writing software remains as much art as science – irritatingly immune to the automation that computing itself has brought to other endeavors – the looming software challenge is stirring concern.

In the next few columns, we will explore the world of software. We end today with some history.

It may be hard to believe, but the origins of the word “software” date back to only 43 years. Software was first mentioned in a January 1958 article by Princeton statistician John Tukey, co-inventor of the fast Fourier transform, a mathematical technique. In the American Mathematical Monthly, Tukey wrote: “Today the ‘software’ comprising the carefully planned interpretive routines, compilers, and other aspects of automative programming are at least as important to the modern electronic calculator as its ‘hardware’ of tubes, transistors, wires, tapes, and the like.” A detailed history of software is available at the Software History Center Home Page [http://www.softwarehistory.org].

TECH TALK: Business to e-Business: 10 Transformations: Products to Services

Time was when a customer bought a product and that was it. Things are changing now. Customers want solutions to problems. This means the integration of product and service. The first interaction with a customer may not be the last, but the start of a lifelong association which could benefit both buyer and seller. For the seller, it offers an opportunity to generate additional revenues from the same (hopefully, satisfied) customer. Each sale is not therefore to a new customer, and every customer is not the same. From the buyer’s point of view, a seller who understands the customer can now offer better and more personalised products and services. Loyalty has its advantages – both for individual customers and enterprises, as deeper relationships can be now built between buyers and sellers.

In the last decade, as companies have implemented ERP, CRM and SCM solutions, they have not just been the products from the software companies, but also consultation, re-engineering and implementation services from various specialised organisations. Oracle has thousands of consultants which help in implementing its platform across a company. Just the ability to sell a product is not good enough to effect the sale to enterprises; what is needed is a bundled solution.

This combination of product and service has been there in the past too. For example, when we bought a car, we were also sold insurance as a service. A TV without the cable service was unthinkable. The cellphone is useless without the accompanying wireless service. The PC industry was in many ways insulated from this – people bought a computer, and then loaded it with various software packages. This is where the change is likely to happen in the future as software becomes a service. Application Service Providers (ASPs) are the first generation of IT utility companies. Mohanbir Sawhney and Deval Parikh offer this view on services:

In a connected world, intelligence can float freely like molecules in the ether, coalescing around temporary problems whenever and wherever needed to solve customer problems. In the knowledge economy, firms need knowledge and intelligence to compete, but where the intelligence is physically located may be irrelevant. In the absence of a network, software and computing power need to be located within a company’s boundaries. But in the networked world, they have become services that can be delivered over the Internet.As the Internet becomes more reliable, Dell’s customers may simply buy computing, not computers.

This shift from products to services is extremely favourable for people-rich countries like India, who now have the opportunity to emerge as the next capital providers to the world – in this case, the capital is intellectual people through people. The move towards services also means that companies will tend to outsource to experts in the area, thus forcing the creation of closer “supply networks”. It also creates opportunities for new intermediaries in the new service-centric computing environment.

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TECH TALK: Business to e-Business: 10 Transformations: From Hierarchy to Business Processes

The major theme driving much of the investments into IT infrastructure is business process integration. So far, businesses were well organized around clusters. The back-office took care of the internal enterprise functions, while the front-office handled (separately) customers and suppliers. The new realization now is that for organizations to be effective and efficient in its dealings with customers, suppliers and employees there needs to be an integration of the front- and back-office applications. This is what the shift to e-business is all about: hierarchy implies inefficiency, the process becomes the corporation, and the management of information becomes the successful corporation’s core competency. IT is no longer at the periphery, it becomes the core around which business and its processes are architected.

Forrester’s report on “The Death of IT” outlines this dynamic integration between internal and external business processes:

  • e-Businesses will operate at the process level: Vertical pillars dissolve into horizontal core competencies, “Internet Speed” makes vertical companies too slow to react to changing market requirements
  • External Partners will be primary owners of technology: Do one thing, do it really well
  • Hardware and Software Channels gradually consolidate: The emphasis is on Solutions
  • Processes reconfigure dynamically: This enable businesses to respond to changing market conditions and seize new market opportunities

Ravi Kalalota and Marcia Robinson put the change being wrought about by e-business in perspective in their book “e-Business: Roadmap for Success”:

The forces of e-business are creating a structural upheaval in business processes, a social shift that rearranges customers’ lives more than mere hardware and software can…Creating an e-business strategy means more than simply acting faster or creating a differentiated market offer. Companies must ensure that various parts of their operations – marketing, sales, manufacturing, product development, and finance – are tightly integrated so that when decisions are made, the parts come together quickly to form a cohesive whole that meets customer expectations in real time.

The new priority, therefore, for organizations is to rethink organizational structure and redesign core business processes with a focus on integrating internal processes, leveraging technology and the Internet, and focused strongly on customers. “Internet Speed” only gets faster! A recent Merrill Lynch report on the Enterprise Software market summarises this shift:

As with any fundamental software shift, users are experiencing an entirely new set of IT challenges. The focus of application software has shifted to e-commerce. More specifically, rather than cutting costs by automating back-office functionality which drove the ERP boom, companies are now looking to drive revenue growth as well…Beyond the cost savings associated with leveraging an existing software infrastructure, the ability to communicate electronically with trading partners accomplishes the holy grail of computing: top-line growth and bottom-line savings. This pervasive adoption of new technology compounded by growth of application software into ever-broader markets is moving the corporate work towards a singular, networked computing environment.

TECH TALK: Business to e-Business: 10 Transformations: The Future of Work

We all work, and we all realize that technology and the Internet are changing the way we work. Work is no longer something we go to from 9 to 5. Work is all around and over us! The distinction between work and leisure, or work and family life, is also blurring. As the pace of business has increased, so have the demands on us in the workplace. The combination of email, cellphone, voice mail, PDAs and the global marketplace is ensuring that work has become a continuum. We no longer “go to work” at specific locations and times, but do work all the time and wherever we are, and fit the rest of our lives around work.

Aryae Coopersmith writes about some of the trends impacting work in the San Jose Mercury News:

  • Talent has replaced capital and natural resources as the primary source of wealth
  • Technical workers have become the athletes in a global free-agent job economy
  • Globalisation has created a growing army of nomads and expats and a multicultural workforce.
  • The gap between the number of new workers with the most critical, and highly paid, skills and the number needed by high tech companies is still growing
  • The stock option gold rush has created major economic and social discontinuities
  • Housing prices, and the difficulties in getting workers to live here [Silicon Valley], have accelerated the trend toward a distributed, virtual workplace

Perhaps, the single biggest challenge in the workplace today is how to be more effective with email. Writes Louise Kahn in the Financial Times on email overload:

Office workers now receive an average of 30 e-mails a day and spend about two hours reading, forwarding and replying to them, according to a research report published last year by David Ferris of Ferris Research in San Francisco. “On average, people spend more than five minutes to process each message. Do the math. By 2002, corporate staff will use over four hours each day just on e-mail,” Mr Ferris says.

While on one hand email has perhaps been a great productivity enhancer in terms of interactions with co-workers, it has also increased the information that makes our way, since it is so easy to be cc-ed on various emails. Also, unlike post which would arrive once a day, email comes round-the-clock, and demands a near-instantaneous response. wireless devices like Research In Motion’s Blackberry are filling in to minimise “dead time” – when one is not connected to the network.

While the future for email management may belong to Jeeves-like digital butlers, the immediate solution is to make better use of filters and other email management tools available in programs like Outlook Express.

In today’s networked global village, the need for senior management to travel has also become greater, not less. Competition is global and so is the market. The driver in this is the need to be closer to customers, and for many businesses, customers are everywhere. This also means keeping up-to-date with information from many different sources, and being able to react faster to developments. What this implies is that we need to manage by exception, such that the more mundane, routine tasks can be automated. This is what is driving the huge growth in investments in business automation software which helps companies better manage relationships with customers and suppliers.

Hopefully, we will be able to use technology to better manage our time and work. An optimistic scenario of work in the future is presented by Michel Andrieu of International Futures Programme:

Increased prosperity brought about by progress in information technology will result in a major increase in leisure time, which in turn will translate into more fulfilling lives. Not only will individuals have more time out for themselves and more money to enjoy it with, but also work itself will become more rewarding. Indeed, for some workers the distinction between work and leisure will become blurred as they find they are able to work at what they enjoy doing. This is because “intelligent” machines and systems will do the dirty, dreary work, replacing manual labour and some of the more mundane intellectual work too. Decision support programmes will provide essential help for more complex intellectual work, allowing individuals to focus on the most satisfying tasks. In this vision of the future, work will increasingly become a means to satisfy higher order needs, part of one’s self-fulfillment. In other words, work could become a hobby for more and more people.

Tomorrow’s organisation may never sleep. The big question is, will that extend to its workers?!

TECH TALK: Business to e-Business: 10 Transformations: Client-Server to Peer-to-Peer

The network is the computer, so said Sun many years ago. This vision is finally being fulfilled as a mix of affordable, always-on network connectivity (at least in some parts of the world!), cheap storage and plentiful processing power distributes intelligence across the network. A perspective on Peer-to-Peer (P2P) computing by Kevin Werbach in Release 1.0:

P2P applications rely on independent and intelligent peers at the edge of the network instead to take the place of central servers. P2P links together three distinct classes of applications that already existed by the end of 1999: distributed file sharing (Napster, Gnutella and Freenet), instant messaging (ICQ, AOL Instant Messenger) and distributed computing (Seti@Home, Distributed.net)Software that lives on the Net must work like the Net, in all its ragged glory. It must thrive on chaos and uncertainty, take advantage of network effects and give each user the power of an administrator.

The combination of bandwidth, storage and processing power makes possible a shift from the client-server models of the past to the new P2P architecture. The Internet has been the quintessential P2P network, working in a distributed network. No single entity has been in charge, and yet the Internet has been resilient and has scaled up excellently as millions of host computers have gotten connected to it. Into this world came Napster, the free digital music which helped convert hard disks into music servers and by reaching over 30 million users brought the P2P phenomenon to the fore. Write Lee Gomes and Lisa Bransten in the Wall Street Journal (WSJ):

Peer-to-peer computing makes it theoretically possible to unlock the files and data residing on every personal computer connected to the InternetA peer-to-peer search, in theory, could be more current and reach non-Web sources, such as databases maintained by companies or individuals.

Participants in a peer-to-peer network would decide what, exactly, they wanted to share on the network. An individual user, for example, might allow one of the folders on a hard drive to be scanned by network users, as happens with Napster. Or, a computer running a database could allow requests coming over the network to make direct queries of the database, and then report back the answer.

Thomas Weber (WSJ) describes one practical example of how P2P technology is being used by Rumor, a new anti-virus and security system from myCIO, a unit of Network Associates, to update corporate computers with the latest anti-virus software.

A company installs the Rumor software on all of its PCs. Then each day the first PC to sign onto the company network checks with myCIO’s Web site and downloads an anti-virus update if available. When each subsequent PC signs on, it asks the other computers on the network if any of them has an anti-virus update. If the answer is yes, it grabs the update directly from that machine. The tactic avoids the bottleneck that could result from many machines tying up a company’s connection to the Internet. It also circumvents the need to maintain an internal server to parcel out the updates.

Many challenges still remain for P2P to become mainstream. But no technology has in recent times caught the imagination of so many in so short a time as this. It is built on the paradigm of the Internet itself – of openness rather than restrictions, of distribution rather than centralization, of equality rather than hierarchy.

For e-business, this trio of Conversation, Publish-Subscribe and Peer-to-Peer offers a fundamentally new way to think not just about communications, but also business processes.

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TECH TALK: Business to e-Business: 10 Transformations: Request-Reply to Publish-Subscribe

Information is the key driver for all decision-making. Software and networks today can ensure that information can be available across the organisation. From a manager’s point of view, there is perhaps too much information available. How does one ensure that the manager has the right information to make the decision?

The conventional way has been to use a “request-reply” approach. This “pull” approach fits in well with the client-server architecture. The client makes a request to a server, and the server responds with the appropriate information. For this to work effectively, it means that the client needs to keep polling the server, and perhaps set up trigger software for alerts when specific conditions are met. The problem with this approach is that if 100 people make a query for the same information, the server needs to send that information out to all 100 of them.

As the Internet makes possible a distributed architecture, a new technique can be used for delivering just the information a manager needs at the right time. This “publish-subscribe” approach ensures that information is just published once (multicast) on a network, and all those who have subscribed to receive that information can now do so. Writes Pete Loshin in Byte:

Sometimes referred to as pull software or smart-push software, publish-and-subscribe (PS) middleware enables information consumers to subscribe to particular messages (sometimes known as data events, to distinguish them from e-mail-type messages) while making it easy for information producers to publish data events. PS products can keep a lid on network traffic, even when there’s lots of data and many subscribers, by using message routers and multicast transmission to distribute information.

Publish-subscribe messaging is a many-to-many paradigm. It is ideal when there are multiple applications/clients to receive the same message or when a group of applications want to notify each other. In the networked world, this is going to be the norm.

An example of the two technologies is how we query for stock prices. Request-reply is how we are getting the stock quotes, even in personalized portfolios. At best, the browser can be set up to update the page frequently (through polling). With publish-subscribe, the computer will subscribe once to the stock price and will now receive all events that are published on the network whenever the stock price changes. Vivek Ranadive, CEO of Tibco, which pioneered the publish-subscribe technology, compares the two technologies:

In contrast to the passive “query-me” client/server technology, active publish/subscribe technology allows information about business events to be distributed in real-time across private and public networks.It can instantly and automatically deliver to everyone in your company’s environment the information each person needs to create maximum value for your customers.

Place your finger on a red-hot stove. If our nervous systems were request-reply, you’d learn the stove’s temperature the next time your nerves polled the stovetop. Fortunately, our nervous systems are event-driven, and they report the stove’s temperature instantly. Which nervous system would you want for your company?

TECH TALK: Business to e-Business: 10 Transformations: Conversation to Conference

Communication has always been a part of our lives. So far, only two forms of communications were possible: a one-to-one conversation or a one-to-many broadcast. What the Internet is doing is enabling many-to-many communications for perhaps the first time in human history. This ability to conference together people in geographically different parts of the world, allowing them to share ideas, collaborate or just chat simultaneously is changing conversation, and may just be the most powerful e-business enabler.

Right from paintings in cave walls to print, radio and television, information has been delivered in a broadcast capability to a mass market audience. The telephone enabled a person-to-person conversation in real-time and was the first real distance bridge. Then, with the Internet, along came email. It was suddenly possible to have near real-time conversations with many different people. It is little wonder that for a society as communicative as ours email has emerged as the killer app on the Internet.

The many-to-many conferencing traces its Net history to the Usenet newsgroups. People could post queries, and strangers would write back. For many, it was an excellent way to get solutions to problems – on the premise that someone somewhere else in the world had faced the same problem (and had solved it). Email lists also made it easier to send out messages to multiple people easily. Distance was no longer a barrier for collaboration among teams of people.

Internet chat rooms and instant messaging have become very popular. These same basic technologies can be used by businesses for communicating. The next step is sharing a common workspace with family, friends, team members or affinity groups. Napster gave a glimpse of what this can be achieved with its file-sharing software. What is needed is a mechanism to easily and seamlessly build virtual collaborative workspaces. “People work best, when they can self-organise, cooperating spontaneously in free-form ways”, according to Ray Ozzie, the creator of Lotus Notes and founder of Groove Networks.

Such a workspace would comprise of a whiteboard, email sharing, meeting rooms, scheduler, file-sharing. This needs to be combined with the sharing of multimedia information – sharing of pictures, webcams for video conferencing, indexed audio files for having minutes of meetings which go beyond text. The technologies and networks for putting it all together now exist. Examples of such groupware technologies are Lotus Notes and the recently launched Groove.

It takes years and many different business models to fail before the right one emerges. David Wessel, writing in the Wall Street Journal, compares the emergence of the radio to the Internet:

Applications of the technology evolved in a way unanticipated by the inventors. It took years for a viable business model to emerge. And the model that emerged wasn’t the immediately obvious one. Radio began as a way for one person to communicate with another. Radio Corporation of America, formed in 1919, charged a fee to sender or recipient, and prospered by undercutting the price of telegrams.

Ads were tough to sell — and controversial. In the 1920s, Herbert Hoover, then secretary of commerce, said it was “inconceivable that we should allow so great a possibility for service to be drowned in advertising chatter.” Advertising took off only after the creation of national radio networks.

The technology is new. The pattern is not. The 1922 radio hype was followed by a shakeout. Of the 48 stations [in the US] that were first in their states, 27 were out of business by 1924. Only then did a new business model emerge.

The Net is still in its infancy, and throwing up new business models and creating new changes all the time. One such change is definitely happening in the way communications between people is taking place.

TECH TALK: Business to e-Business: 10 Transformations: Virtual Integration

Historically, the trend among companies in the manufacturing sector has been to do everything in-house, to be “vertically integrated”. This model is being challenged, driven largely by the need for economies of scale and greater asset utilisation, and the need to be on-time in the market with products. This need has created specialized companies across various horizontal layers. The Internet is helping tie-in these companies into closer companies, to create “virtually integrated” companies.

It is this virtual integration across the supply chain which helps companies like Dell and Cisco outsource much of their manufacturing, and focus primarily on design and marketing. BancBoston Robertson Stephens writes about this trend with reference to the Supply Chain Management in Electronics Manufacturing:

As competition has intensified over the past twenty years, we have witnessed a dramatic shift in the structure of the electronic equipment industry. Historically, original equipment manufacturers (OEMs) were largely vertically integrated, internally designing and fabricating the components and assembling and testing the final products. However, as the need to accelerate time-to-market and lower total costs has increased, we believe a much different business model is emerging today. We refer to this model as “virtual integration”.

This has spawned a relatively new industry called Electronic Manufacturing Services (EMS). EMS companies offer a vast array of products and services to accelerate time to market and time to volume for a broad range of OEMs. In doing so, EMS companies allow OEMs to reduce total costs, increase cash flow, conserve capital and focus on their own core competencies such as product design and marketing.

The Internet has cut geographical barriers to do business, and with supply chain management and optimization software made virtual integration easier. To succeed, companies need to become transparent and open with their systems. The onus to keep shelves in a supermarket stocked is now with the distributor, since its database can now be updated each time a sale is made at the supermarket. In this world, inventory is the result of lack of information across the supply chain.

Michael Dell describes the principles needed for successful virtual integration:

  • First, seek to establish direct relationships that close the gap between customer, manufacturer and supplier.
  • Second, define your own company’s value-add very tightly. Create partnerships for capital-intensive and labor-intensive services, and keep your own focus on doing what you do best.
  • Third, choose best-of-breed partners and allow them to be part of your business — hold them to the same performance standards and quality metrics that you employ in your own business.
  • Finally, think of the Internet not as an add-on to your business, but as an integral part of your company’s strategy. Only then can you use it to cross traditional company-to-company boundaries, to achieve virtual integration.

Thanks to virtual integration, closed business systems are giving way to collaborative relationships. B2B ecommerce is not just about finding the cheapest supplier halfway across the world; it is about using technology to build trust with suppliers, and deepening relationships with these trusted parties. In tomorrow’s world, competitive advantage will come from leveraging knowledge and process innovation.

TECH TALK: Business to e-Business: 10 Transformations: Mass Customisation

The Internet makes it possible to reach markets of size one. Just look at Amazon.com and the personalized page and the periodic emails that you get based on your past purchasing (or browsing) history. It is possible to order custom-made computers, music CDs or even dolls. In many ways, it is like going back in history! An extract from Gerber Scientific’s Mass Customization website [http://www.mass-customization.com]:

During the early days of humankind, everything was custom-made. In those days it was known as a craft. As humans’ inventiveness improved and the industrial revolution occurred, the world moved towards mass production. Now, craft and mass-production come together in a computerized, digital-based world via a trend known as mass customization.

Most websites currently still have no context when we visit them. For example, when we do a search, it would be useful to have the search engine remember what we have previously searched for and clicked on and thus understand the context (either interest or geography) so as to give us more relevant results. This way, we can think of the search engine becoming “My Search Engine” – learning with everything that we do. The switching cost now becomes very high, since we would have to re-train another search engine all over again. Thus, out of customisation and learning is born customer loyalty.

In manufacturing companies like Dell, it is important to have the building blocks to deliver quickly what the customer wants. Write Don Peppers and Martha Rogers in “Enterprise One-to-One: Tools for Competing in the Interactive Age”:

Customization occurs when an individually tailored product is delivered to a customer. Mass customization occurs when the process of customizing products becomes a routine. In order to become a mass customizer, a business must modularize its processes, so that it is not so much engaged in producing an end product or service as it is in producing elements of the product or service than can then be assembled in different combinations, based on what individual customers requestVisualize the process as the assembly of premanufactured units, not unlike Lego blocks.

On the software side, what makes this possible is a Configurator. It uses rules to continually update the options (restricting choice) based on what the customer is selecting. This in turn puts a great deal of pressure on the entire virtual supply chain, making it even more important to have information and transparency across the supply network. Options may need to be modified based on the availability (or non-availability) of certain parts in the chain in real-time, thus creating a “dynamic artery”. The ability to offer mass customisation can thus become a powerful weapon in e-business.

TECH TALK: Business to e-Business: 10 Transformations: The Information Economy

The 20th century was all about manufacturing and distribution. Well, at least most of it. Goods had to be produced, they had to be stored in warehouses, then they had to be distributed across a chain into the hands of the end-consumer. Over the years, manufacturing technology has grown to just-in-time, so as to reduce the bane of profits, inventory. The change which has made this possible has been the flow of information across the chain.

When a customer buys a shampoo at a retailer, that information is now sent across to the distributor (and perhaps the manufacturer) so that when levels fall below a trigger point, re-stocking can take place. Even though goods need to be manufactured (you cannot have virtual shampoos — perhaps you could if you had virtual hair!), competitive advantage in business today becomes from the management and analysis of information. Somewhere towards the end of the last century, thanks to the combination of computers and networks, we transitioned from the Manufacturing Economy to the Information Economy.

Write Philip Evans and Thomas Wurster in “Blown to Bits”:

The physical world of manufacturing is shaped by information. Information dominates processes as well as products. It is hard to imagine how even low-tech manufacturers could compete without such information-intensive functions as market research, logistics and advertising. Inventory is merely the physical correlate of deficient information.

When we picture value and supply chains, we tend to visualize a linear flow of physical activities. But it is information, in the broadest sense of the word, that flows across these activities and binds them together. Information flows ultimately determine what is inside and what outside the business unit, value chain, supply chain, consumer franchise, and organization.

Whatever business you are in, the key differentiating factor is going to be how information “ores” can be refined into knowledge, and how this knowledge can empower decision makers. One can never eliminate change — the aim is to anticipate change, and be on top of it. We must learn to thrive in a world of chaos.

Perhaps the biggest change that the Internet has made to our lives is in access to information. Email and the Web have ensured that it does not really make a difference whether we are living in Mumbai or San Jose. Yes, the buzz and hyper-activity of the Silicon Valley may not be there in Mumbai, but the ability to access information in real-time has given an entire generation in India the courage to think of markets beyond the borders of a city, state or even country. Today’s competition is not limited by geography, so why should one’s imagination and business?

For corporates, it means that technology is enabling action – in real-time. Writes Christopher Meyer in “Relentless Growth: How Silicon Valley Strategies Can Work In Your Business”:

In traditional organizations, information becomes currency that is hoarded at each succeeding level of hierarchy. [But] in an economy based on knowledge, those without information can’t contribute responsibly. Those with information find themselves compelled to act.”

TECH TALK: Business to e-Business: 10 Transformations: Business to e-Business

As change accelerates, technology is making a big difference to our personal and business lives. Let us summarise the trends that we are seeing.
Broad Trends

  • A Pervasive, Ubiquitous computing environment with always-on connectivity: broadband, wireless (optics, 2.5/3G) at low prices, IP networks, data everywhere
  • Distributed Computing: power at the edge, little difference between LAN and WAN, P2P
  • Multimedia: event and experiential web, voice – input/output/transmission, streaming
  • Software: increasing need for it, along with a requirement to speed up development via tools/building blocks, people needed for development and support/solutions

Derivative Trends

  • Connected, Communicative Consumer (C3): Wireless Devices, Interactive Entertainment, Home Networks
  • Extended, Electronic, Enterprise (E3): eBusiness Networks, Enterprise Applications (from messaging to supply chain management), Analytics, Outsourced Management and Services

What was once in abundance (time, people, management attention) is now scarce, and what was once scarce (money, computing resources, service providers) is now abundant. Companies are making significant investments in Internet-based technologies. In just six years, we have gone from Mosaic to ICQ to Napster, and a world of over 300 million Internet users. In December 2000, sales of PCs in the US dipped 24% year-on-year. Yahoo’s sales will be flat in 2001.

The first phase of the Internet euphoria is now giving way to a more deeper understanding of its potential for change and its ability to transform business. The building blocks for the next revolution – the standardisation of enterprise software and the transformation of every business to an e-business — are now in place. Writes Philip Manchester in the Financial Times:

The IT industry went through a fundamental change in the 1990s; it finally recognized the power of standardization to create huge marketsStandardization crept relentlessly up the hierarchy of information technology – from the commodity microprocessors used in every computer, to the operating systems software that makes them work. Internet connectivity even standardized communications between different computers – a long overdue pre-requisite for e-commerce.

Now it is the turn of applications – with Enterprise Resource Planning (ERP) leading the way. ERP also extends the principle of standardization beyond technology into business processes and promotes standardized “best practice”. Packaged customer relationship management (CRM) and supply chain management (SCM) are built on the operational standardization provided by ERP.

In the coming columns, we will delve deeper into this change, embodied by 10 transformations being brought by information technology:

  • Manufacturing Economy to Information Economy
  • Mass Production to Mass Customisation
  • Vertical Integration to Virtual Integration
  • Internal teams to Outsourcing
  • Conversation to Conference
  • Request-reply to Publish-subscribe
  • Client-Server to Peer-to-Peer
  • Going to work to Doing work
  • Hierarchy to Business Process
  • Products to Services

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: Corporate Portal

For many of us, portals like Yahoo, MSN and Excite are our first introductions to the Internet. These sites aggregate information from across the Internet and present it in a unified, personalisable window to us. Similarly, within organizations, corporate portals (or enterprise information portals) can be used to provide information, applications and services to employees. It creates a single Web destination to give everyone in the company a complete view of the business. Writes Mark Gibbs of Network World:

Perhaps the best way to think of a corporate business-to-employee portal is as a dynamic corporate knowledge aggregation platform that encompasses data mining, application integration, automated searching and metasearching, and workflowSo, what are corporations using business-to-employee solutions for? According to a survey by The Delphi Group of 300 Fortune 500 companies, corporate portals are a mechanism to share information and work methods (21.2%), an internal self-service desktop (20.6%), a vehicle for local subject-matter experts (19.6%), a way to reduce “infoglut” (18.6%) and a professional function-centered desktop (16.2%).

An excerpt from the Delphi Report:

Corporate Portals reflect a fundamental transformation in our view of enterprise information management from a series of isolated tasks, to the coordinated integration of knowledge. The incredible influx of readily accessible, yet completely disconnected, sources and streams of information has made it clear that the means for navigating, organizing, and linking information with underlying business processes is woefully inadequate in most organisations. It is in this “middle office” space that Corporate Portals promise to have the greatest impact.

The Corporate Portal would provide every employee with a personalized home page so that it only shows the information and services most relevant to the employee’s responsibilities. All the organisation’s information would be maintained in a knowledge database. The components of such a database could be a mix of internal and external content – from the customer, supplier and partner information to a mix of news, stock quotes, industry updates and shopping deals. In fact, by aggregating the buying power of its employees, a corporate can also help generate savings for all of them. Going ahead, employees will have real-time access to information through multiple devices and alerts.

Corporate Portals also become the cornerstone around which teams (communities) of employees can be created by offering collaboration tools like shared calendar, bulletin boards, project management, threaded conversations and document sharing.

In the words of Vivek Ranadive (in his book The Power of Now), corporate portals “make it easier to bring the Internet into your business and to move your business out over the Internet.”

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: e-Employees

We have seen how the Internet can impact relationships with customers and suppliers. These two areas of Customer Relationship Management and Supply Chain Management are being transformed with the Internet. In the coming year, the Business-to-Employee (B2E) sector will become hot. According to IDC, “Investment in Intranets have lagged those in Internets and Extranets, accounting for less than 15% of total eBusiness investment (in the US). In 2000 many companies provided Intranet access to employees — that access will drive increased investment.”

Employees are at the heart of every organisation. How they interact with each other, how they leverage information and how they make decisions directly impacts the business. Writes the Economist:

The Internet’s uses turn out to dovetail beautifully with current trends. As companies become more fragmented and their workers more geographically dispersed, managers need a way to rally the troops. In particular, they need a way to build a corporate culture: that intangible something that binds employees together and teaches them to understand instinctively the defining qualities of the business and the appropriate way to respond to any issue that confronts them. The Internet provides the means to do this.

Let us look at the applications which can make a big difference within organisations:

Messaging: Email has been and continues to remain the killer app on the Internet. Along with Instant Messaging, the Internet has helped dramatically bring down the cost of the communications, and simultaneously, speed up its pace. A few years ago, a turn-around time of 3-4 days in communications may have been acceptable. But today, one expects replies in near near-time, or at most, a few hours. The challenge going ahead (which unified messaging aims to address) is to ensure reachability in a manner convenient to the end user wherever the person is. This will also mean that the number of messages we will each be handling will go up quite dramatically.

Collaboration: We are inherently dependent on others to get our work done, so this means that we need to interact with others, we need to communicate with other, share information and ideas – in many cases, across different offices. The Internet is the perfect medium to make this happen. There is now a greater emphasis on teamwork on getting tasks done. Technologies like e-Rooms help groups to store documents, plans and correspondence related to a specific project on a website in a secure manner. Combined with bulletin boards, they also create a mechanism to tap into the pool of knowledge among employees.

Training: There is a need for continuous retraining of employees. By making available courses on the Intranet which employees can take in modules based on their skill levels and whenever they have time, organisations can better absorb new technologies down the line faster.

Administration: There are a lot of routine tasks which employees do that are ideally suited to an Intranet — filling in expense forms, booking internal conference rooms, planning travel, checking internal policies. By moving these to a forms-driven system on the internal Web, companies can not only better monitor what is happening, but also cut down processing overheads.

The Corporate Portal (or the Enterprise Information Portal) helps put all of this together.

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: The Future of Supply Chain Management

The key to success in supply chain management lies in the sharing of information. Writes the Economist:

Suppliers benefit greatly when they can see their customers’ production schedules and sales data, because they can then plan ahead for the volume and timing of the orders. They can react at once, rather than waiting for news to trickle down. The Internet (along with its associated technologies) allows such communications to take place among many suppliers, big and small. It also makes information available simultaneously all the way along the supply chain. Once this happens (and it is only just starting), it becomes more appropriate to think in terms of a supply network than a chain.

Hau Lee, director of the Global Supply Chain Management Forum at Stanford Business School sees companies moving through four stages (as described in the Economist): exchanging information to allow better planning, exchanging of knowledge, exchanging the right to take decisions, and finally, exchanging work and roles.

How does all of this help the organization? In the words of Intelligent Enterprise:

Supply chain management begins with the simple notion that processes interact: and that to reduce costs, improve service, build higher revenues, and bring ideas into the commercial marketplace faster, businesses must understand the interactions… Intelligent SCM fits nicely with the concept of “agile” manufacturing, where companies support mass customization with short, easily changed production runs. Advanced SCM, agile manufacturing, and fast logistics increasingly depend on a closed information loop that provides immediate visibility into interacting processes. The ultimate vision is to bring front office, high-touch e-Customer Relationship Management (eCRM) applications into the loop, to create highly responsive end-to-end chains.

A view of the future of e-business comes from Ray Lane, former president of Oracle Corp. and now a general partner at venture capital firm Kleiner Perkins Caufield Byers: “Supply chains of the future will ‘own’ the companies, not vice versa. Companies will be asking themselves: ‘What’s my role in that supply chain? What do I bring to it?’ ”

Summarises Nuala Moran in the Financial Times, “The supply chain will become a dynamic artery, feeding through information in response to customer demands, telling the manufacturer if the chain has the ability to produce the goods, at what price, and in what timescale.”

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: Supply Networks

The Internet is enabling companies to connect their operations with those of their suppliers and customers. As a result, the traditional, linear supply chain is being transformed. Armed with information technology and the Internet, the move is, in the words of Penelope Ody of the Financial Times, “towards supply networks, parallel chains, enhanced concurrent activities and supply models, cutting inventory and lead-times throughout the pipeline still further. The new supply chain model demands seamless integration of software systems and visibility throughout the network to all trading partners.”

Roy Shapiro of Harvard Business School elaborates on the supply network:
If you look at business-to-business exchanges as one form of new business-to-business models on the Internet, the whole notion is to open up a vast quantity of information that is available in real time to all players in a particular supply chain-or more accurately, supply network. So everyone can see the whole picture simultaneously-what people need, what’s available, what’s in inventory, what capabilities each player brings to the table, and so forth.

An example of efficient supply chain management comes from Dell. Customers can order exactly the computer they want (think of this as mass customization). Dell holds less than a week’s inventory. It collects its money from retail customers when they order and from corporate customers within 30 days of shipping, while paying its suppliers after 45 days, thus operating in “negative cashflow”. Dell has about 200 suppliers, with 30 companies accounting for nearly 80% of its total purchasing. When a customer places an order on Dell, its suppliers can see it and thus make the appropriate parts, turning Dell into a “sort of portal through which orders arrive for redistribution among suppliers”.

E-business is all about competing through speed — satisfying changing customer needs quickly, accurately, profitably and in a customized manner. The ideal supply chain is one that conforms to the sell-one/make-one model, somewhat in the Dell mould.

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: Supply Chain Management

“e-Business has leveled the playing field – every corporation, customer, and the institution now has an equal opportunity in the Internet economy. The new differentiator is an intelligence-driven e-business strategy. Those who capitalize on this opportunity will emerge as tomorrow’s market leaders”, according to Bernard Liautaud of Business Objects.

The biggest benefits of the Internet for enterprises are in supply chain management (SCM), enabling them to cut costs by better managing inventories, described by Dell’s Dick Hunter as “a substitute for information: you buy them, because you are not sure of the reliability of your supplier or the demand of your customer.” In the perfect world, inventory will only exist in transit.

What is a supply chain, and why is it important to look at managing it? An extract from a paper by Ram Ganeshan and Terry P. Harrison provides the perspective:

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.

Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing’s objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns.

The result of these factors is that there is not a single, integrated plan for the organization — there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.

The Internet is now enabling companies to connect their operations with their suppliers and customers, creating supply networks.

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: Customer-Centric Thinking

An enterprise needs to put the customer at the centre of its thinking. This will allow it to identify a customer’s specific needs and offer 1:1 personalised marketing (“mass customisation”), deliver efficient and standardized customer service and be able to identify its most profitable customers. All of this should help increase customer retention, which in turn should cut costs and boost revenue.

What are the technologies which make CRM possible?

  • Data Warehousing: A centralized database is needed to store all customer data and provide detailed and unified customer views
  • Personalisation: Messages sent out to customers need to be tailored – by content, channel and time.
  • Email Marketing: Email is perhaps the most cost-effective way to send out messages. The enterprise needs to send out millions of messages regularly to customers, and yet respect their privacy.
  • Campaign Management: Analysing the responses from a campaign can help in boosting success rates, and providing a positive feedback loop to the marketing process.
  • Reporting and Analysis: This rapidly-growing area of e-business analytics helps companies leverage the internal and external data stores by using sophisticated statistical techniques and algorithms.
  • Call Centre: Many customers will still want to communicate with the enterprise. At these times, it is important to provide an integrated view of the customer to the service representative.

An enterprise needs to build/adapt its processes around customers. Technology can only be an enabler – the bigger challenge lies within. Enterprises need to truly understand where value lies. This clarity will help in defining the business rules to respond to specific events relating to the customer.

An excerpt from a recent Economist survey on E-Management on lessons learnt by companies that want to use the Internet to manage customer relations:

One [lesson] is that companies which thought of every sale as a separate transaction will increasingly make money not from a first sale but from repeat business. This implies creating a continuing relationship with the customer, such as service providers usually enjoy. A second lesson is the importance of being able to involve the customer in development, design and market research. A third is the need for speed: the Internet, with its round-the-clock, round-the-week availability, raises customer expectationsThe close contact with the customer fostered by the Internet is the most valuable commercial advantage a business can have.

TECH TALK:The Intelligent Enterprise: Integrating CRM, SCM, EIP: Connecting Customers

Business is about managing employees, customers and suppliers. In the next set of columns, we will explore how the Internet is changing relationships in this eco-system, starting with customers.

A Forrester Research survey of 60 global companies showed up some astounding facts:

  • Only 48% of firms know about a problem before the customer does
  • Only 43% offer better service to profitable customers
  • Only 37% know if they share a customer with another division
  • Only 20% know if a customer has visited the website

Every customer is not equal. Some are more profitable than others. Do you know which ones are? Are you in a position to offer these customers something different, something special? When a customer calls, do you spend 30 seconds or 30 minutes with the customer? What is the life-time value of your profitable customers? Can you create different marketing messages for the various customer segments? Can you monitor the effectiveness of these strategies? Which of your customers are likely to defect to a competitor? Which of them can you trial your new product with? Welcome to the world of CRM.

“Customer relationship management (CRM) is a strategic business and process issue, not a technology solution”, writes Rod Newing of the Financial Times.

CRM is defined by the Gartner Group as “a business strategy designed to optimize profitability, revenue and customer satisfaction.” At the end of day, business is about acquiring new customers and retaining existing customers, and treating each customer as an individual. The Internet is a very powerful tool to help your enterprise do just that.

Writes Scott Phillips of Merrill Lynch:

As companies embrace the e-commerce business model, they are forced to offer their products and services through multiple channels. The natural result is that customers are empowered. Customers now dictate the channel and medium through which they’ll buyThe challenge of making the sale is outweighed by the complexity of keeping the customer.

An enterprise has various customer “touch points” – telephone, letters, fax, email, website, relationship managers, sales persons, help desk, call centres, interactive voice response systems, kiosks. Customers are now in a position to decide how they want to interact with the enterprise. It is therefore critical to consolidate all the customer information across the organisation, and make it available to the front-office so that the enterprise sees a unified view of the customer. Similarly, the customer also needs to see a single view of the enterprise. For example, a customer may place an order on the website and then call up on the phone to check or make some changes – at that “moment of truth” asking the customer to give all the order details again is a sure way of not building loyalty! The best customers are those who are money-rich but time-poor, and they want consistency.