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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
24
…‘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
46
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