CMPE 484 IT Industry Trends and Directions February 22, 2001

2001, MphasiS. All rights reserved. Ayşe Başar Bener

CMPE 484 IT Industry Trends and

Directions February 22, 2001


1. What key trends and events will drive new business investments in IT?

2. What technology advances and changes will have the most significant impact on IT deployment decisions?

3. How can organizations harness and exploit IT despite ever-increasing complexity and volatility?

IT Driving IT Driving BusinessBusiness

Business Business Driving ITDriving IT

E-BusinessE-Business


Business Drivers of the New Economy

Global financial interdependencies Deregulation Unrestricted capital flows Global workforce sourcing Digitization Global communication and

transportation systems New geopolitical realities

E-Business: Drivers and ResponsesKey Business Challenges: Agility and speed Focus on core competencies and processes Customer centricity Mass customization Geographic scalability Flexible IT architectures Interoperability of infrastructure and applications portfolios

New Business Models andStructures: Aggregators Portals Info-mediaries E-tailers Hybrids Virtually integrated Mega-mergers

E-BusinessIntegration


Key Technology Discontinuities

S/360Mainframe

PC-Client/Server

Web-Internet

1960 1970 1980 1990 2000 2010

10.0%

5.0%

0%AcceleratingBusiness UnitSpending

North America

Western Europe

Asia/Pacific (Dev. Economies)

Total IT Spending as a Percent of Revenue

(Central IS Budget plus Business Unit and “Hidden” IT Spend)

IT Capital Spending as a Percent of Corporate Capital Budget (U.S.-Only)

Fin./Banking 7.70% $26.8K 76% Telecom 7.27 29.5K 70Hospitals 4.10 2.9K 72Insurance 3.57 38.6K 66Services 3.51 8.8K 78Transportation 2.11 2.6K 77Manufacturing 1.80 3.6K 75Utilities 1.32 4.5K 70Retail/Wholesale 1.11 2.4K 73

Central Central IT Baseline/ IS Budget IS Budget Infrastructure % Revenue Per Employee as % IS Budget50%

5%

10%15%20%25%30%35%40%45%

90 1095 00 05


Increasing Application Cost

Additional Features• Intranet Applications• Interactivity• Personalization• Basic search • Linked sites

Features• Marketing information• Brochures

Additional Features• E-Commerce Integration w/existing processes & systems

• Communities • Streaming Media

• Customer Data Aggregation• Decision Support Architectures

Additional Features• Optimized e-business models• Mass customization• Industry-specific e-process models• DTV Exploited

• Advanced Digital Set-Top Box Apps. • Data Mining • Agent Technologies • Advanced Personalization

1996-1999Presence(CyberspacePlaceholder)

1998-2003Transaction

(Channel Development)

2000-2005Transformation(Channel Exploitation)

IncreasingBusinessValue 1997-2000

Interaction(Channel Exploration)

Phase IIIPhase II Phase IVPhase I

New Media Changes MarketsWeb-Enabled E-Business: Four Phases

Tactical Strategic


Transactions Not Enabled

Transactions Are Enabled

Low Impact

B2B E-Market Maker Types

HighImpact

Content & Community Portal

ChannelEnabler

DynamicMarketplace

EfficientCommerce Hub

BuyerAdvocate

SellerAdvocate

NeutralExchange

- Prepares the Existing Channel for

E-Commerce

-Brings Together Communities of Buyers/Sellers

- Streamlines the Process Surrounding

E-Commerce Transactions

- Builds Efficient Markets and Assists in Market/Price Discovery

Tra

ns

ac

tio

n E

na

ble

me

nt

Impact on Pricing & Sales Models


Degree of Possible “Webification”

Book Travel (e-tickets)

BusinessValue

(and difficulty of “Webification”)

Physical Products

Local Services

Digital Products/ServicesIndustry/Product E-Business Benefits

Process Healthcare Claims

Download Music

Conduct Financial Transactions

Order Prescription Drugs

Media Transmittal

Order Grocery Delivery

Schedule Haircut

Schedule Auto Maintenance

Attend Online University

Schedule Surgery

Order Books

Renew Driver’s License

Retail GroceriesRetail Brokerage

Music

Extremely HighVery Low

Indep. Travel Agency

Opportunity/Threat Model

Vote Online


Comfort

Challenge

Embryonicor Early

Emerging Growth Mature Declining

SalesVolume

Market Maturity Stage

Web-Enabled Mobile Phones

Wireless LANs

PCs

PDAs

Voice Recognition

Notebooks

XML

2-Tier Client/Server

Terminals

Browser-as-

platform

JAVA

ERP

ClientServer

IT Challenge and Comfort Zones


NowNow 20032003 20062006

NLP & NLP & RetrievalRetrievalWireless Wireless

WebWeb

SpeechSpeechRecognitionRecognition

XMLXML

E-E-PaymentPayment

Image/VideoImage/VideoAnalysisAnalysis

BluetoothBluetoothBiometricsBiometrics

DigitalDigitalAuthorizationAuthorization

Flex. & LEP Flex. & LEP DisplaysDisplays

2010201020072007

2003200320012001

20022002

20052005

TextTextAnalysisAnalysis

AffectiveAffectiveComputingComputing

Synthetic Synthetic Characters/ Characters/

AvatarsAvatars

ASPsASPs

WearablesWearables

Voice Voice PortalsPortalsWebtopsWebtops

Enterprise Enterprise Application Application integrationintegration

EnterpriseEnterprisePortalsPortals

Voice Voice over IPover IP

Smart Smart CardsCards

2010201020072007

2003200320012001

20022002

20052005

60% +

50%

40%

50%

40%

30%

<20%

30%

<20%

TechnologyPrevalence

(% of Companies that really need to care)

Take-off Point(Inflection)

Emerging Technology Radar Screen


Potential

2005 Forecast (P=0.7) Implications Surprises (P=0.3)Client - One primary business prof. - Continued shift from “cost of - MSFT broken up (P=0.35);

device (2-spindle Wintel laptop) purchase” to “cost to support” - Non-MSFT or browser-- Palm/OS share drops below - TCO continues to rise based clients grab 30%+ 50%; multiple alternatives - 100% of wireless devices market shareaddress unique needs (voice) have Internet connectivity - Network computing becoming - MADs success in consumerprevalent; 3rd Gen NCs succeed segment hits enterprises

Server - “Big 4” (IBM, HP, CPQ, Dell) - Technology and price are - Linux achieves 15% +retain 80%+ Wintel server mkt. no longer key decision criteria market share- mainframe vendors look - Users must find alternative - W2K meets the needsfor scale means for support of 90% of enterprise

application requirements

Network - Policy-based networks - Major network vendors/carriers - Wireless grows from lessimprove network mgt. must source professional svc’s than 5% of traffic in ‘99 to

for policy implementation to 15% in ‘04- Converged data, voice, video - Multivendor networking - Telecommuting backlashservices save 20%, but declines; 6-7 major telcos and low penetration rates at desktop 4 major equipment camps

Storage - Enterprise “Virtual I/O” -SANs are critical pipelines for - Fibre is displaced is still an illusive dream. e-commerce channel - SAN deployment stalls (P=0.2)- Most external storage networked -Disk space (rather than tape) - Disk capacity doubles per year becomes primary backup media- Shared file systems mainstream - Proprietary lock-in issues

Technology Directions: Platform Infrastructure

2000-2005


Technology Directions: Application Infrastructure 2000-2005

Potential

2005 Forecast (P=0.7) Implications Surprises (P=0.3)Electronic - Platform adjustment & “follow - Authentication issues - 50% of med/large enterp.

Workplace me” profiles emerge for nomads - Infrastructure, Infrastructure! recentralize personal apps; - No single uniform authorization - Human impact (info glut, (P=0.2)!method for access to bus. apps queue mgmt.) - Bleaching the blue collar- Intuitive design supercedes -Integration with enterprise - Internet implodes under content richness for New Media apps an imperative its own weight (P=0.1)

Application - 70% of AD performed by ESPs - No AD silver bullet - Backlash against “vanilla”Developmt. - Internal AD skills: 3GLs 40%; - “Mass or focus” defines packages/templates; return

4GLs 30%; OO/Java/Web 30% enterprise AD strategy to “build” strategy (60% - Integration is the new AD - Procurement/contract mgmt. share of AD) - Regulation and new acct. rules key AD competencyrewrite AD economics

Middleware - 75% of new apps use off-the- - Big growth in real-time integ., - End user rebellion as jobDatabase shelf integration middleware accelerate business processes creativity diminishes (P=0.2)

- RDBMS acquisitions merge - Zero latency moves to a - OODBMS replace RDBMSs with OS, apps and app servers must-have-to-stay-in-business for Internet apps (P=0.1) strategy

Enterprise - 70% of strat. biz app decisions - Big get bigger; share of top 5 - SAP implodesBusiness are front-office/value chain/CRM ERP ISVs grows to 80%; but - MSFT aggressively entersApps. - New players emerge to can’t be all things to all clients low-end enterprise apps

address trading partner systems - ERP market leadership market (HR, financial acct),- 20% of large enterprises defined by vertical expertise gaining 15% shareimplement a front-office suite to - ERP vendors stumble, but - Siebel becomes ERP/CRMenable a CRM strategy eventually competitive in CRM powerhouse (via acquisition)


Business Process Sourcing and Integration

C-Commerce

Front Office / CRM

Back Office / ERP

Source

PackageApplication

SubscriptionBuiltTemplate / Component

Configured Package

Supply Chain Mgmt. / B2B

Business to Consumer

Process Scope

Enterprise-wide

Market-wide

MoreCustomized

More Commoditized

ERP ‘99ERP ‘05

CRM ‘99

CRM ‘99

CRM ‘05

“PureWeb” ‘99

Type A Type B

TypeC

SCM ‘99SCM ‘05

Integration Intensity

Low

HighSCM ‘05

“PureWeb”‘05


Connection and Application Paradigm Evolution

ApplicationIntegration

Point-to-PointPoint-to-Point Pre-BuiltPre-BuiltIntegrationIntegration

XML/EAI XML/EAI AdaptersAdapters

Weeks/DaysWeeks/Days Hours/MinutesHours/Minutes Seconds/Real-timeSeconds/Real-timeInfo. Latency

UserUserProductivityProductivity

Collaborative Collaborative InteractionInteraction

E-CommerceE-CommerceTransactionsTransactions

ApplicationParadigm

C-CommerceC-CommerceE-CommerceE-CommerceDomain AppsDomain Apps

EnterpriseEnterprise Trading PartnersTrading Partners Cyber-MarketCyber-Market

InteractionModel

One-to-OneOne-to-One One-to-ManyOne-to-Many One-to-AnyOne-to-Any

CommerceModel

Channel Partners w/ Channel Partners w/ Risk sharingRisk sharing

Channel MasterChannel Masterw/Supplier Slavesw/Supplier Slaves

Channel Master w/ Channel Master w/ Preferred SuppliersPreferred Suppliers

ConnectionParadigm


2. Envisioning Business Systems

1. Leadership For Fusion

3. Relationship Building

9. Contract Facilitation

8. Business Improvement Management

7. Informed Buying

5. MakingTechnologyWork

4. Information Management

6. Architecture Planning

10. Resource/Skills Management

11. Contract Monitoring

12. Vendor Development

Business and IT Vision

Designing IT Architecture

Delivering IS Services

Critical IS Capabilities and Competencies


Evolution of CIO Role and Enterprise Governance

Mainframe Era:Mainframe Era:Conventional PlusConventional Plus

• Functional Head • Operational Manager

• Deliver on Promises

• Advisor on ‘How to’ Not ‘What to do’

• On-Time delivery • Reliable operations

• Automate for Efficiency

• Alert Line-Mgmt. to IT Investment Opportunities

Distributed Era:Distributed Era:Transitional, ShiftingTransitional, Shifting

• Strategic Partner• Expectation Manager• Technology Advisor

• Align IT with Business

• Access to the Executive Invited ‘Seat at Table’

• Manage IT Department • Provide Infrastructure• Manage vendors

• Reduce Business Process Cycle-time

• Set Direction and Secure Benefits from “Selective” Outsourcing

Web-based Era:Web-based Era:Hybrid, EmergentHybrid, Emergent

• Business Visionary• Technology Opportunist

• Drive Channel Strat.

• Member of Executive Team or Assumed ‘Seat’

• Jointly Develop Bus./ IT Model; Leverage Extra-structure

• Integrate Client/ Supplier Value-Chain

• Define Office-of-the Future; Lead effort to Customer-centricity

CIO Role

KeyResponsibility

BusinessInput

Major Tasks

System Objective

Leadership


Workforce Trends Collaborative JIT work styles Team empowerment/performance External focus, customer focus Knowledge vs. task centricity Dispersed and mobile Employability vs. long-term employment Balanced risks and rewards Greater diversity Business-technology savvy

Workplace Trends More collaborative work spaces Universal connectivity Flexible interiors and furnishings Emphasis on functionality Alternative workplace solutions: - Hoteling - Hot desking - Shared offices - Telecommuting

Workforce -Workplace Trends

The workplace is morphing into a blend of spaces and cyber-spaces.

Business processes and connectivity form the new

work ecology!


Sourcing Strategies

A “Step-by-Step” Approach

• Establish clear goals with strong consensus• Create “supporting” terms and conditions• Define “relative” service level agreements• Develop effective measurements and metrics• Conduct periodic performance audits• Demand continuous improvement!• Aggressively monitor and manage

What’s In? (Retained Internally)

Leveraging ESPs

CIO

N . . 3 2 1

RetainedInternal ISCompetencies

ESP PrimeContractor(s)

Best-of-BreedSubcontractors

IT Management& Governance

Multisourcing• Integrating Business-to-IT Strategy• Business/IT Risk Management• IT Planning, Architecture and Standards• Security Strategy, Intellectual Property• Relationship and Vendor Management• Sourcing Strategies• Skills Management• Financial/Contract Management

• Enabling IT Infrastructure - Data Center Hardware/Software Platform - Desktop Hardware/Software Platform - WAN and LAN Network - Help Desk• Enterprise Administrative Applications• Noncore Business Processes• E-Business Development/Platform• Security Administration/Support

What’s Out? (Commonly Outsourced)


Business Trends• E-business becomes the primary driver of IT investment; B2B e-commerce reaches $7.3 trillion by 2004, representing 6.9 percent of the global economy• “Hybrid” e-businesses become the dominant enterprise business model, with service quality and fulfillment, rather than cost, the key success factors• 75 percent of enterprises will under-budget e-business transformation costs by 50 percent or more, especially when trading partner related

Technology Directions • Industry consolidation continues: 3-5 dominant vendors control 70 (+) percent market share in virtually all enabling technology markets/segments• Application integration becomes a critical IT core competency, and one of the most important factors to achieve end-to-end e-business success• High availability, security and privacy become critical issues when deploying new e-business applications and infrastructure• Collaborative commerce becomes the primary objective of enterprise application initiatives

Summary and Action Items


Summary and Action Items

IT Management Directions• Information exploitation and interenterprise operability drive IT management strategies, rather than traditional efficiency/effectiveness metrics/methods• Business processes and connectivity form the basis of the new work ecology• While selective outsourcing remains the dominant IT organizational model, 20 percent of enterprises choose a general contractor to manage the ESP chaos• The fusion of business and IT is about enabling greater enterprise speed, innovation, adeptness and customer centricity

Documents

CMPE 484 IT Industry Trends and Directions February 22, 2001