IBM’s Next Transition

Management is about making the right shifts at the right time. IBM executed an important transition in the 1990s under Gerstner. Now, it is making yet another shift – to services and eBusiness-on-demand under Palmisano. Financial Times writes:

If the 1990s were about automating functions and departments, the next decade will be about trying to integrate these “islands of automation” so that information flows more easily through, and between, corporations.

Under Sam Palmisano, chairman and chief executive, IBM is investing billions of dollars in research and acquisitions under the banner of “e-business on demand”.

The scope of Big Blue’s ambition is breathtaking. Executives admit that IBM now sees itself as competing not only for the $1,000bn a year that companies spend each year on IT but also for the billions spent on processes of the kind outsourced by P&G – which last month signed a $400m, 10-year contract with IBM.

“‘On demand’ is a statement of flexibility. It doesn’t start with technology, it starts with business model and operations,” says Steve Mills, head of IBM’s software division. “The aim is to achieve smoothness of processing, from demand to delivery.”

IBM now encompasses financial services; software in a multitude of flavours (operating systems, databases, collaboration tools and middleware); hardware, ranging from mainframes to notebook computers; and the design and manufacture of microprocessors. Now Mr Palmisano’s move into management consulting and business process outsourcing has taken IBM into activities that are not one step but two steps removed from the old, core business of building computers.

There is more to this than empire-building. Bruce Harreld, the former Boston Chicke n executive hired by Mr Gerstner to head IBM’s strategy unit, points out that profits in the IT industry have been migrating away from makers of components – such as disc drives, microchips and operating systems – towards suppliers of software, services and consultancy.

The only notable exceptions to this trend are the two manufacturers with tremendous market power: Microsoft and Intel.

A related story discusses re-engineering:

“The leap to the next level of productivity won’t come from just making the same business processes more efficient. It will involve another wave of process re-engineering, no question,” says Doug Elix, who runs IBM’s global services division.

Looking at companies as collections of business processes (order entry, fulfilment or billing) rather than functional departments (marketing, manufacturing or customer care) makes sense. Breaking down boundaries between departments to ensure smooth operations is also a legitimate goal.

The objective now is to use industry standard technologies – such as the internet and XML, a kind of lingua franca that enables computers to understand each other regardless of the software they run – to bring more flexibility and transparency to companies’ operations.

We have to become the IBM for SMEs.

P2P Networks

WSJ features an article from technology Review to how peer-to-peer networking approach can bring about a more relaible network:

One of the weakest points of the Internet right now is the domain name system, which is run by a loose confederation of name servers. Running DNS on top of a peer-to-peer system instead could dramatically improve its reliability.

Today, if your business runs a small Web server and the site suddenly gets very popular, the server can crash from all of the extra traffic. But if all of the computers on the Internet were part of a global peer-to-peer Web cache, then small companies and individuals could publish their material to the multitudes. A good system would even prevent malicious modification of the Web page contents when they were served off other machines.

In the event of a terrorist attack on the Internet’s infrastructure, a peer-to-peer system would be far more likely to recover than a system that depended on top-down control.

Closely associated with the idea of peer-to-peer is the concept of an “overlay network.” These are networks of computers that operate above the Internet, with direct links between computers that might be geographically distant on the Internet itself. Gnutella, Kasaa, and Morpheus are all overlay networks, as is the global network of Web servers operated by Akamai.

Overlay networks force the Internet to route packets differently by moving them between specific computers. For example, you might have an overlay network that consists of a computer in Washington, another in San Francisco, and another in Tokyo. By sending the packets from one of your computers to the next, you could defy your ISP’s routing policy, and force your packets to go along a path of your choosing.

US Anti-Free-Trade Movement

The outsourcing backlash is rising. WSJ reports that “a new anti-free-trade movement is emerging in the U.S., comprising highly skilled workers who once figured they would be big winners in the globalized economy but now see their white-collar jobs moving overseas in growing numbers.”

The new free-trade opponents include design engineers, skilled machinists, information-technology experts, and chief executives of specialized manufacturing concerns, among others. They long believed they were largely protected from foreign competition because of their advanced degrees, English language skills and the supposed necessity of dealing face-to-face with customers. But now they worry their jobs are at risk.

At the focus of their ire are big U.S. companies that have shifted business to China and India, which are becoming increasingly successful at nabbing service, information technology and high-end manufacturing work that until recently have been the preserve of U.S. firms. Companies seeking to lower their costs have either moved operations abroad or have contracted with foreign companies to supply essential services.

A message to Indians in the US: think about returning to India. The opportunities are there, the country is finally beginning to move ahead on many fronts. This winter, make a trip to India and travel to some of the cities and towns and see the changes.

BRIC

The Economist writes about Brazil, Russia, India and China (BRIC) as the new, rising stars of the world economy, based on a Goldman Sachs study:

Today their combined GDP (at market exchange rates) is one-eighth of the output of the G6 (Goldman leaves out Canada, which accounts for only 3% of the G7’s GDP) But the study concludes that the total output of the four economies will overtake that of the G6 in less than 40 years. Of today’s G6, only America and Japan would then still be among the world’s six biggest economies.

China is tipped to overtake Germany by 2007, Japan by 2015 and America by 2041. India could overtake Japan by 2032. All four BRICs will be bigger than any western European economy by 2036. For firms looking where to invest, the most striking result is that, by 2009, the annual increase in total dollar spending in the BRICs could be greater than that in the G6. By 2025, spending could be increasing twice as fast in the BRICs.