There are no two ways about it: the Internet is the biggest opportunity of a lifetime. The fun and games of doing consumer-oriented websites targeting a niche audience are over. The first phase of the Internet revolution is over. The last 5 years have seen an incredible pace of innovation which has compressed the change of a generation. And yet, this is only the beginning. The next phase of the Internet revolution will see investments made by the world’s corporations – small, medium and large. They face the competition – not necessarily from start-ups but other companies like them. They are the ones who have the cash and the customers.
Three pointers need to be kept in mind while we consider where the opportunities of tomorrow lie:
- The largest inefficiencies lie in interactions between enterprises in an industry.
- Communications and information are critical to interactions among enterprises.
- The Internet’s biggest influence is on business process innovation, and reducing communication and interaction costs within and between enterprises.
The enabler for this is Internet-enabled enterprise software. This software is 3-tier, separating data, application and client. It is real-time, event-driven, standards-based. It is a continuation of the revolution which began with ERP (Enterprise Resource Planning) in the 1990s. What we are seeing now is the start of a 10-year business cycle in enterprise software.
Goldman Sachs, in a recent report on B2B eCommerce, puts this in context:
Ever since the Internet began to take hold with companies in the late 1990s, we have believed that it will have a major influence on the direction of enterprise software. The world of enterprise software is tied to the world of business process innovation. In the early 1990s, as businesses were busy reinventing themselves, they focused on reorienting their departmental functions (finance, accounting, order entry, purchasing, etc.) into enterprise business processes (customer management, supplier management, product management, etc.).
This process, known as reengineering, depended on new enterprise software products that had the ability to share data on customers, products, and suppliers with all members of the enterprise. The rise of enterprise resource planning (ERP) software and relational databases was in direct response to this need.
We believe that Web-based technology is encouraging companies to consider changing their business processes yet again. However, now the focus is on making an organization’s extended networks of suppliers and distributors more efficient. Other than some experiments with electronic data interchange (EDI) in the 1980s and 1990s, this is the first time that most businesses have actively engaged non-related businesses in their reengineering initiatives. The reason to do so is clear. The largest inefficiencies in the economy exist in the interactions between non-related organizations in an industry. Most of these interactions are manual and involve sending and receiving paper documents. Processing paper is time consuming and therefore establishes a minimum latency time that organizations cannot improve upon. Enabling transactions to be electronically disseminated to third-party organizations can reduce this minimum latency time by as much as 80% or 90%. Therefore, we believe that the move to electronic transactions from paper-based transactions is inevitable.
Creating enterprise software which is built around the Internet and providing business process consulting and outsourcing is the single largest opportunity ahead for Indian companies. The starting point for this is not just software services, but creating branded software to take on the leaders in the field (like Siebel, SAP, JD Edwards, Oracle, Peoplesoft and i2).