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Internet and E- business Transformation Mostafa Mehrabani

Internet and E-business Transformation Mostafa Mehrabani

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Internet and E-business Transformation

Mostafa Mehrabani

2

Our World Has Become More Complex

Mainframe+

Terminals

Old World Order New World (Dis)Order

RISC

Directory Service

Terminals

WorkstationsGUI

File Service

ProtocolsClient/Server

Object Messaging

LANs

Internet

Print Service

Multimedia

Mail Service

Distr. DBMS

Applications

Security

Lines+

Modems

PCs

Mainframe

Portability

Distr. OLTP

E-Commerce

Euro

Telecommunications

E-Business

3

Years to Reach 50 Million Users

• Radio 38

• TV 13

• Cable 10

• Internet <5

4

• First, it’s OK to be confused!

“If you’re not confused, you don’t know what’s going on!

Jack WelchGE CEO

...perspectives on e-Business

5

E-Business Trends

6

… the analysts are predicting an enormous growth in business to business transactionsover the Internet

Value of transactions

in $B

Business to Consumer (B2C)(Sales of travel services and retail goods)

Business to Business (B2B)(Inter-company trade of hard goods over the Internet)

1998 1999 2000 2001 2002 2003 2004

200

400

600

800

1000

1200

1400

… these predictions have recently been backed up by major e-Business initiativesannounced by Ford and GM

7

Major Trends

70s 80s 90s 00s70s 80s 90s 00s

Cost Reduction

Quality

Reengineering

Speed

Internet

8

e-Business Evolution

70s 80s 90s 00s

Cost center

StrategicEnabler

ProductivityTool

Business

Impact

9

Major Trends

• Digital Economy

• Globalization

• New Workforce -- Reverse mentoring

• Virtual Enterprise (community)

• Internet As a Platform for Design, Manufacturing, Supply-chain Integration

Success is no longer about big beating the small….It is about fast beating the slow

10

Major Trends

• By 2005, 100 million Europeans will spend 173 billion euros shopping online

• The advent of a mobile, wireless, data-communications infrastructure marks a new phase of the Internet -- Supernet

• A B2B e-marketplace is an enterprise that brings buyers and sellers within an industry, geographic region or affinity group together for the purpose of commerce

• Technologies must be flexible to allow “anytime, anywhere” work.

• Continuous learning must be institutionalized to fuel constant renewal, discovery and innovation.

• Work processes must be easily adjusted, extended and retrenched across organizational

• The businesses will change more in the next decade than it has in the last five decade

11

Leadership Model

Focused on strategy Focused on execution

Constrained by money Constrained by time

Cautious Paranoid

Has a preference for comfort Insists on truth

Market driven Customer driven

Focused on retention Focused on recruitment

Traditional Leadership E-Business Leadership

12

… ‘Enterprises that integrate business-to-business and business-to-consumer technology infrastructures by year-end 2000 will gain a 25 percent to 50 percent competitive advantage over enterprises that manage these technologies separately.’ (Gartner)

DynamicSupply ChainManagement

DistributionExtranets

'CDI-XML'Automation

CustomerRelationshipManagement

Self-ServeApplications

Procurement Automation

Corporate Portal

CollaborativeCommerce

DirectSell Sites

C-Marketplaces

Auction Sites

Source: Gartner Group

13

E-Business Perspective

14

What Does e-Business Mean

InformationTechnology

Knowledge Workers

Business Processes

e-Business

Custo

mer

s Suppliers

Partners

15

Global Internet Business Model

EmployeesEmployees

PartnersPartners SuppliersSuppliers

CustomersCustomersInformationInformation

EnterpriseEnterprise

• Higher customer satisfaction

• Competitive agility

• Accelerated time to market

• Managed costs

• Higher employee efficiency

Ubiquitous ConnectivityUbiquitous Connectivitywhere the Business where the Business

Runs on the NetworkRuns on the Network

16

Perspectives on e-Business• Changes in the opportunity set and threat environment creates the need to review and

enhance core business strategies

e-Strategy = e-enablement of current strategy

• e-Commerce is not the same thing as e-Business– Transactions on the web versus internet-enabled enterprise

– ‘Transformation’ to e-enabled business models provides best opportunitiesfor lasting competitive advantage

Incr

easi

ng r

isk

/ re

turn

Level 2Level 3

Level 1

Level 4Basic Networking

Enterprise Integration

Value ChainRe-engineering

Transformation

Increasing strategic input & change of business model

17

What Is e-Business?

e-Business is … Online and traditional business activities that use Internet technologies to support communications, collaboration, service and trade

e-Business is about using technology to integrate, streamline and increase communication from customers to suppliers

1. Buy Side1. Buy Side 2. Inside2. Inside 3. Sell side3. Sell side

To

day

To

mo

rro

w

18

STAGE 1: Passive infoSTAGE 1: Passive info(e.g.,on-line brochure)

STAGE 2: Interactive infoSTAGE 2: Interactive info(e.g., interactive ads, recruiting, locators)

STAGE 3: e-CommerceSTAGE 3: e-Commerce(e.g., purchase goods, on-line registry,

customer self-service)

STAGE 4: e-BusinessSTAGE 4: e-Business(e.g., automated distribution,

customized service,incentives)

Broadly, there are four stages in e-Business sophistication

Those who have gone all the way to redefine and integrate processes with a cogent e-Business strategy are very satisfied with the results

23% of Fortune 500

29% of Fortune 500

40% of Fortune 500

6% of Fortune 500

2% of Fortune 500No Site

19

Mass Production Era

Productivity/ Quality

Era

Virtual Customer Era

Local markets Availability Economies of

Scale

Exporting Cost per

unit Conformanc

e Reliability Durability

Global presence Value-added

solutions Superior delivery

in“zero time”

Production quantity of “one”

Customized services

TQL ISO14000 TQM

QS9000 ISO9000 QAF

As business evolves, the critical factors of the new era will be dictated by e-Business

Customers are increasingly deciding what, when, where and how they will purchase goods and services, and demanding them in zero time.

20

• Competitive race amongst OEMs

• Opportunity for increased value capture for OEMs

5-Day Vehicle

• Transparency through entire supply/delivery chain

• Speed and efficiency of information transfer

• Integrated supply chain

• Perfect systems coordination

• Minimal (or zero) finished goods inventories

Requirement for“5-day Vehicle”

• Reduced inventories, reduced assets

• Less working capital

• Increased return on assets

• Growth opportunity for industry/OEM

Benefits to OverallSupply Chain • Dissatisfied with

inventory choices in dealers lot

• Unmet needs:– made to order– Reasonable

delivery time– Reasonable

price

Customer

e-Enabled

The “5-day vehicle”, powered by internet enablers, will transform the entire value chain

Ford/Oracle Alliance

GM/CommerceOne Alliance

21

Multiple E-business Model and Example

Covisint Amazon

E-BayPriceLine

22

How the Internet is transforming businesses

Suppliers Enterprise Customers/Distributors Consumers

SupplySide

DemandSide

B2B B2CInternet

Extranet

Intranet

Impact on MarketImpact on Market

Market boundaries are dramatically expanded or eliminated altogether

Transaction costs are reduced, often by orders of magnitude

Transparency of market information is greatly enhanced

Pricing mechanisms become more efficient

Market liquidity is improved

1. Buy Side1. Buy Side 2. Inside2. Inside 3. Sell side3. Sell side

E-Business spans the complete value chain

23

… ‘By year-end 2000, less than 20 percent of all enterprises will be ready to implement an enterprise wide e-strategy, because they will not have made the necessary business model, management and technology changes to support it.’ (Gartner)

...As of 1H99, while leading IT users (Type A companies) are at or ahead of thee-business readiness criteria, most midsize and international enterprises are still operating at the levels that we noted in Type A companies in 1994–1996.

EDI ManagerIn the

IT Dept

InternetSteering

Committee

E-CommerceManagers & SC

Managers inConflict

BusinessUnit E-

CommerceDirectors

E-BusinessSVP or

Director

SeparateBusiness Unit

or Spin-off

Organization

Typology

Applications

Technology

ProprietaryHub Spoke

Internet/IntranetChannelMaster

Extranet

VerticalE-Marketplace

Collaboration

EDI P.O.S.Invoices

etc.

ERPCustomer Sell -

Service &Order Mgmt.

Integrated/Extended

ERP

Integrated SupplyChain &

CollaborativeEngineering

EDI &E-mail

EDI/Internet

CGI/HTML

ActiveX/Com/DCOM

COBRAIIOP XML

DistributedObjects

1994 1996 1998 2000 2002 2004

= Type A Cos. In 1999 = Type A Cos. In 2000Source: Gartner Group

Summary: E-Business “Readiness” Metrics

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…‘Through year-end 2001, more than 70 percent of multinational enterprises will have failed to plan a coherent approach to electronic business, leading to a significant loss of competitiveness.’ (Gartner)

…‘Investigate, validate and plan for e-Business

E-Business Planning: The Five PointsE-Vision:

Ensure the CEO communicatesthe strategic e-business vision

E-Management:Create new structures to co-ordinate e-business activities

E-Plans:Write individual business plans for each e-business market application

E-Review: Constantly review all e-business investments

E-Competition: Account for cyber- competition in the business- planning process

Source: Gartner Group

25

… ‘E-business will go through the hype cycle into the trough of disillusionment, finally to emerge as optimized e-business, then to “just” business. Organizations must recognize what is hype and what is real to ensure that they focus on adding real value.’ (Gartner)

Beware the Hype

Visibility

Year1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

2006-2008E-Business

Ends

InternetWWW

Dot.ComStarts

U.S. IPOs1997/8

U.S. Christmas1998

European IPOs1999

“c” is best

Dot.Com ShareFall-out

Investor Disillusionment

Brick-and-Mortar Failures

Dot.ComShake-out

PublicizedE-Failures

BusinessDisillusionment

“True”E-Business

Emerges

OptimizedE-Business

Businesses

TechnologyTrigger

Peak ofInflated

ExpectationsTrough of

DisillusionmentSlope of

EnlightenmentPlateau of

Profitability

Source: Gartner Group

26

TraditionalTraditional e-Businesse-Business

Market Mind

Stable Evolving, with changes in technology,customer requirements, etc.

Linear, regional models possible Global process model required

Conservative planning, use ofproven applications

Strategy to leapfrog to next availabletechnology

80% fixed, 20% variable 80% variable, 20% fixed

Lost sales (product on shelf) Not penetrating new distributionchannels decreased barriers to entry

Predictable, forecasted Difficult to estimate

Periodic Continuous

Typically on shift, five days 24/7 environment is mandatory

Local or regional Everyone has access to your web site

Elements of Business Model

Elements of Business Model

e-Enabled companies need to adopt new business paradigms

Share Measurement

Business Model

Process Model

Technology

Resource Usage

Opportunity Costs

Technology Costs

Training

Service Availability

Customer Visibility

27

B-to-B dominates on-line trade

39 64 101 143 185

717

1,167

2,696

1,823

406

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2000 2001 2002 2003 2004

Business-to-Consumer

Business-to-Business

US eCommerce($ billions)

28

B2B dominates Europe as well

9 22 55123

232164

357

1,318

728

74

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2000 2001 2002 2003 2004

Business-to-Consumer

Business-to-Business

European eCommerce(€ billions)

IT Architecture

30

Customers SuppliersPartners Employees

OPERATIONS

SECURITY

Security

Internet Infostructure

Enterprise Applications

Business Information

Computing Environment

“e” Enabled IT Architecture

Intelligent Network

Critical Elements of the Enterprise IT Architecture

31

The Old Rules are Changing

n Network is now mission critical

n 80/20 traffic rule no longer applies

n “Power User” base is changing

n Location no longer a factor

n Video conferencing has become widely accepted

n Voice services are a commodity

n Low cost/high bandwidth data services

Changing Use of the Network

n Merging of voice, video, and data

n Network access to customer information is becoming a requirement

n Mobile/wireless computing

n Distributed client/server applications

n Multimedia

n Desktop video

n Integration of voice-mail, fax, and e-mail (Universal Mailbox)

n Internet/intranet

You can’t play the new game with the old rules

Industry Trends/DriversIndustry Trends/Drivers

32

“e” Enabled IT Architecture (Business Information)

DATA MODEL

DOC

962

KNOWLEDGE MODEL

SOURCE A

SOURCE B

SOURCE C

SOU

RCE N

INFORMATION MODEL

INFO USE AINFO USE B

INFO USE N

PIS

EIS

EUIS

INTERFACE MODELS

Enterprise Portal Views• PIS - Personal Information System

- User Customizable View• EIS - Executive Information System

- A community view based on location, functional area, executive level, or membership in a workgroup or other common interest

• EUIS - End User Information System- Provides a general integrated interface to ‘drill-down’ to specific information ‘Sources’ and ‘Uses’

• Knowledge ‘Use’ View - A comprehensive view of a topic area from across multiple information sources that helps form the context(s) for which it can be used - “Information-Based Decision Making”

• Information ‘Source’ View - Sets of information or data items defined by concepts or facts, often by the source attributes

• Data View - A discreet item or object, an entry in a database field, an image or a document

Operational data is brought together to form

• Strategic data (e.g., customer strategies, commodity strategies)

• Overall performance data (e.g., ppm, ontime delivery, program status)

• Best practice/benchmark data (e.g., engineering data, legal training, employee classification)

• Company-wide reporting data (e.g., financial, tax return, market share)

from which information and knowledge evolve

Data: The Foundation for Information-Based Decision Making

33

Architecture and Change

Architectures and Changes

34

Offshore Outsourcing

35

Why Off-shore?

• To reduce cost– We anticipate that overall cost for services delivered through the off-shore model

(vs. internal cost) will save us 25-35%; vs. contracting will save even more

• To meet the world-wide staffing challenges– Recruitment and retention in the key IS and Engineering areas are tough

– Current shortfall of IS personnel (~1M), and is projected to get bigger

– India produces more engineers on an annual basis than any other country

• Provide new critical skills quickly– High investment in training gives the client access to new skills quickly

• Improve quality– The better companies have SEI-CMM Level 4 or 5 certifications

• Expanded support– Companies are willing to work 2 or 3 shifts, to allow for round-the-clock support

36

• 74% said they are being asked to get applications up and running faster than ever before

• 85% said their biggest challenge is responding to unpredictable customer demand generated by the Internet

• 73% said there have never been more pressure on the IT infrastructure• 77% said that security is a major concern• Only 34% said they had been successful integrating enterprise-wide

applications with Internet data.

Recent Survey ResultsRecent Survey Results

According to a recent survey in ComputerWorld magazine of 1,000 senior IT Managers:

37

Typical IT Solutions

38

Change Impact Analysis

Design

Integration/System TestingCoding & Unit Testing

Change Identification and Approval

Change Management

Production Move

Version Control

Offshore’s Scope Customer’s Scope

Business Analysis /Consulting

Maintenance/Enhancement OutsourcingCurrent Scenario of Support

Production Support

39

Change Impact Analysis

Design

Integration/System Testing

Coding & Unit Testing

Change Identification and Approval

Change Management

Production Move

Version Control

Offshore’s Scope Customer’s Scope

Business Analysis /Consulting

Production Support

Maintenance/Enhancement Outsourcing

Emerging Scenario

Monitor The SLA

40

Years

2000

1,2751,275

2,4932,493

4,0404,040

1997 1998 1999

6,0006,000

1000

2000

3000

4000

5000

6000

Example of Outsourcing in India -- Satyam Computer servicesExample of Outsourcing in India -- Satyam Computer services

• Low attrition rate = 11.2%* • High moral• Extreme pride• Continuous training

–Mandatory - 80 hours of training per year

• Core values • Embrace diversity• Chairman awarded “E&Y’s Entrepreneur of the Year for Services,” 1999

*As of April 1, 2000

41

Critical Success Factors

• Senior Level Support– Commitment from the top

• Sell the total package– This is not about ‘temporary low cost labor’. It is a relationship that must be

forged

– Off-shore to be a part of the fabric of how we do our functions

• Select a partner that has staying power– Many companies are going off-shore. Need to select one that will continue to

be a preferred company for people to work for, and has the financial backing to sustain any upcoming consolidation in the market place

42

Conclusions

43

The pace of change in e-Business requires an organization that moves quickly

Be FirstDays and hours count (not years

and months)

Be RightSelect the right partners and value

fulfillment model

Be AdaptableLearn fast, move fast

Extremely fast paced

Early movers are rewarded handsomely

Mistakes are penalized quickly

Transparent and often easily imitated

Extremely fast paced

Early movers are rewarded handsomely

Mistakes are penalized quickly

Transparent and often easily imitated

44

Current and Future Issues

• Wireless interactive services

• Agent based e-Commerce– Software agent based search, pricing, and

negotiation

• Distributed Marketplace– Multi attribute search, pricing, and negotiation

• Next generation technology intermediaries– negotiation platform, exchange platform, etc

45

Critical Success Factors• Senior management/officials buy-in and commitment

• Reliable, available, and, flexible network infrastructure

• Robust Computing (hardware and software) environment

• Process re-engineering expertise

• Technical and technology superiority

• FAST response to changing environment

• Establish yourself as a viable international player:– Skill and knowledge of advanced technology– Cost– Project management– Speed– Language

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