Vous êtes sur la page 1sur 49

Recent Trends in Enterprise Information Systems and Application Delivery Models

Ji Voek
Department of IT University of Economics, Prague vorisek@vse.cz nb.vse.cz/~vorisek
1

Agenda

Does ICT matter? Is the significance of ICT the same for all industries? Enterprise Application Delivery - Historical Perspective Current situation in Enterprise Application Delivery User perspective Provider perspective Business and technological factors for change Sourcing variants Comparison of software license model with ASP model Prerequisites for efficient deployment of ASP model Impact on ICT landscape and user organisations Impact on labour market and ICT education
2

prof. Voek

Does ICT Matter ?


Capital expenditures of US companies to ICT: 1965 5%, 1980 15%, 1990 30%, 2000 50%
Nicholas Carr [Carr, 2003]: When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides. Think of electricity. Today, no company builds its business strategy around its electricity usage, but even a brief lapse in supply can be devastating

IT doesnt matter and cant bring strategic advantage at present Spend less Follow, don't lead Focus on vulnerabilities, not on opportunities
prof. Voek

Does IT Matter ?
We believe that

Unique alignment of ICT with business model and with business processes and social capital of the enterprise can bring strategic advantage Alignment of business processes with ICT services will be one of the most important requirements in the near future

prof. Voek

Case Study 1 Food Sales

a small chandlery (several local suppliers, tens of customers per day, personal service) self-service shop (higher efficiency but loss of customers acquaintance) supermarket (many suppliers from all over the world, pressure to suppliers, hundred thousands of customers, detailed acquaintance of customer and his habit customers card). Qualitative levels of goods ordering:
optical check of the racks and manual ordering computer monitoring of sales (bar code) manual ordering computer monitoring of sales automated ordering direct connection of a supplier into the information system of the seller (the supplier is responsible for the identification of goods delivery time)
5

prof. Voek

Case Study 2 How a capable management changed a florist

Initial situation
a small gardening with a store SWOT (-) a small group of customers (-) seasonality of sales (the greenhouses have been cancelled because of expensive heating) (-) limitation to the local flowers (+) creative management (owner)

florist (garden, store)

customers

prof. Voek

Case Study 2 How a capable management changed a florist

Main ideas of a new business strategy


the target to increase multiply the turnover and profit within a year period to use opportunities of the current age cooperation, joining the supply chain, ICT, vision a new model of business
orders through the Internet participation of the customer on creation of bouquet (types of flowers, design of the bouquet, packaging, wish card, place and time of delivery) to offer prepared design of bouquet for less creative customers to hire an external designer to cancel the gardening to buy flowers abroad (Dutch wholesaler) to use an external partner for the deliveries to the customers (esk pota, FedEx,...) and for the payments (Bank)

prof. Voek

Case Study 2 How a capable management changed a florist


WWW provider

Flower wholesalers

Florist (garten, store)

Bank

Customers

Postal service (Fedex)

prof. Voek

Is the significance of ICT the same for all industries?

prof. Voek

Different Significance of ICT for Different Industries


(Coonan, H.H. et. all: Building Australian ICT Skills - Report of the ICT skills foresighting working group, Australian Government, Department of Communications, Information Technology and the Arts., May 2006, ISSN 0 642 75354 7 )

Industry

ICT Capital Expenditure Share 2003-04 3.9% 7.7% 15.8% 16.2% 16.3% 21.6% 25.5% 26.1% 26.6% 33.6%

ICT Employment for Industry (Share of total %) 2005 4,250 (1.3%)

ICT R&D Expenditure Share of Total R&D 2002-03 0.2% * 31% 16% 16% 33% np 41% np 63%

Mining Agriculture, forestry and fishing Transport and storage Manufacturing Construction Retail Trade Health and community services Wholesale trade Accommodation, cafes and restaurants Property and business services

540 (0.16%) 7,650 22,390 12,880 14,920 6,420 13,960 380 (2.3%) (6.7%) (3.9%) (4.5%) (2%) (4.2%) (0.1%)

124,030 (37.2%)

Personal and other services


Government administration and defence Education Cultural and recreational services Electricity, gas and water supply Communication services Finance and insurance

35.0%
42.0% 43.7% 44.4% 68.4% 89.1% 90.1%

2,720
25,620 16,300 6,660 9,460

(0.8%)
(7.7%) (4.5%) (2%) (2.8%)

np
52% 83% np 39% 42% 77%

42,580 (12.8%) 22,810 (6.8%)

All prof. Voek industries

26.7%

333,560

10

Enterprise Application Delivery - Historical Perspective

2005 Application Services (Software-as-a-service, Utility computing)

1990s ERP Applications (SW License Model)

= !?

1960s Data Processing Bureau

1970-80s In-house Development The end of 90s-2004 Traditional Outsourcing


prof. Voek

11

Current Situation - User Perspective


Traditional software license model:
ERP Application Vendor Implementation and Consulting Organisations End User Organization

End User Organization:


owns and maintain all ICT infrastructure and associated HR

prof. Voek

12

Current Situation - User Perspective

Cost of IT projects
big global banks spend 15-20% of operating budget on IT [Gartner, 2002] despite long experience many projects significantly exceed their original budgets and planned implementation time research of 117 US companies [CW, 2002]:
25% exceeded their budgets 20% were abandoned before completion 40% failed to achieve business objectives

Traditional model leads to high TCO and is associated with significant risks
prof. Voek

13

Current Situation - User Perspective

Complexity of ERP systems


difficult customization high complexity of operation even in situations where the corresponding business process is simple low utilization of the overall functionality by end users high cost of training of end users due to complexity of the systems and documentation Increased cost of the ERP solution that the organizations are no longer willing to bear

prof. Voek

14

Current Situation - User Perspective

Fast rate of technology change


Fast SW obsolescence (? software ownership) New versions of SW released approximately once a year version management (!? costs, integration) End-user organizations are unable to absorb new technologies at the rate that vendors produce them New technologies may not lead to any business benefit

prof. Voek

15

Current Situation - User Perspective

High demand on IT specialists


Traditional model is associated with high demand on IT skills Shortage of IT specialists leads to high cost Many organizations cannot afford to maintain their own internal IT staff

prof. Voek

16

Current Situation - User Perspective

The structure of investments leads to unsatisfactory overhead costs and to low flexibility [Inside, 2002]
Structure of Investments
Structure of Operating Costs

Services 19%

Communication Costs 16% Internal running expences 47% External services 37%

HW 50% SW 31%

prof. Voek

17

Current Situation - User Perspective

Traditional outsourcing
Outsourcing organizations often use the same implementation approach as end user organizations : Support individual client organizations using separate implementations sites and highly customized applications (1 : 1 relation) Minimal reuse of resources leads to high costs

Traditional outsourcing does not solve the cost of ownership problem


(Coca-Cola Amatil)
prof. Voek

18

Current Situation - Provider Perspective

Sales of new licenses for enterprise application software have stagnated and in some cases declined
rok 1999 Licence Oracle 41% 24% 38% 62% Support 27% 74% 23% 38% rok 2003 Licence 34% 24% 31% 36% Support 44% 76% 37% 64%

PeopleSoft SAP AG. Siebel

prof. Voek

19

Current Situation - Provider Perspective

Major ERP vendors are changing their revenue model to decrease their reliance on new software licenses towards income generated from upgrades and product support It motivates many user organizations towards alternatives such as outsourcing and application servicing Recently a number of important ICT vendors have reconfirmed their commitment to application servicing in the context of the Utility Computing approach

prof. Voek

20

Important business factors for change

Standardization of business environment (e.g. EU)


Globalization of enterprise applications - same application to all users over the world

Management acceptance of outsourcing


Service Level Agreements (SLA) provide legally enforceable guarantee
SLA

prof. Voek

21

Important technological factors for change

Emergence of Utility Computing


Computing grid provides an ideal infrastructure for application servicing It can host a large number of ASP applications in a scalable and reliable manner Provides a more cost effective solution for hosting enterprise applications than a set of independent servers each dedicated to a specific application

Role of Web Services


Web services are regarded as the enabling technology for the integration of ASP applications, and for delivery of low-granularity application services

Servicing of large amount of customers from single data centre is both: technologically possible and economically preferable
prof. Voek

23

Sourcing Variants
What are the alternatives of traditional model: In-house service delivery & In-house IT operations?

Goal optimal combination of: enterprise resources and competences with competences and resources of reliable partners What is the optimum? (extremes are unlikely to be optimal)

Framework supporting this approach needed it has to identify necessary services, processes, and resources

prof. Voek

24

Framework for outsourcing of IS/ICT Services, Processes, and Resources


Business processes

ICT Services

IS/ICT
ICT Processes

Customizat ion

Middleware Operating system (OS) Telecommunications and Internet connection LAN and WAN Hardware (HW)

Who should own the resources ?


prof. Voek

Technological infrastructure for application running

Which processes/ resources has to be operated internally and which externally ?

Application software (ASW) Database (DB)

I n t e g r a t i o n

ICT Resources
Data Tools for design, development and operations

O p e r a t i o n s - Service Delivery

Development and maintenance

What ICT services are necessary for business processes support ?

Management of IS/ICT development and operations

Development / Purchase / Lease

HR & knowledge Material and energy

25

Basic Types of Outsourcing


1.
2. 3.

Business factors importance


4.

Application service (ASP) ICT process outsourcing ICT resource outsourcing

Application development outsourcing


Make yourself !?

ICT factors importance


26

Business process outsourcing (BPO) Complete (complex) IS/ICT outsourcing Selective IS/ICT outsourcing

prof. Voek

Business Process Outsourcing


Business process "1" Business process "p"

SLA and its metrics


Supporting process / Non ICT service

ICT Service "1"

ICT Service "s"

ICT Process "1"

ICT Process "2"

ICT Process "j"

Resource "1"
prof. Voek

Resource "2" Outsourced

Resource "r"

27

Outsourcing of Complex IS/ICT


Business process "1" Business process "p"

Supporting process / Non ICT service

Outsourced

ICT Service "1"

ICT Service "s"

ICT Process "1"

ICT Process "2"

ICT Process "j"

Resource "1"
prof. Voek

Resource "2"

Resource "r"

28

Selective IS/ICT Outsourcing


Business process "1" Business process "p"

Business process "1" Business process "p"

Business process "1" Business process "p"

Supporting process / Non ICT service

Supporting process / Non ICT service

Supporting process / Non ICT service

ICT Service "1"

ICT Service "s"

ICT Service "1"

ICT Service "s" ICT Service "1" ICT Service "s"

ICT Process "1"

ICT Process "2"

ICT Process "j"

ICT Process "1"

ICT Process "2"

ICT Process "j"

ICT Process "1"

ICT Process "2"

ICT Process "j"

Resource "1"

Resource "2" Outsourced

Resource "r"

Resource "1"

Resource "2"

Resource "r" Outsourced

Resource "1"

Resource "2"

Resource "r" Outsourced

ICT resource and its maintenance outsourcing e.g. Data center outsourcing Experts hiring
prof. Voek

ICT process outsourcing

ICT service outsourcing (ASP)

e.g. ERP implementation outsourcing Systems integration outsourcing

e.g. CRM outsourcing

29

Outsourcing Variants - Conclusions

Collaboration of specialized partners is more and more common for IS/ICT development and operation Many variants of outsourcing can be considered Each outsourcing scenario needs to be considered separately Each variant has different CSF and requires different SLA Variant selection (sourcing strategy) has to be part of strategic management

prof. Voek

30

Comparison of traditional software license model with ASP model


Differentiator
Main characteristics

ASP (SW as Service)


Application service provider controls all necessary ICT infrastructure (HW+SW) and delivers application functionality as a service to many customers.

Traditional Approach (SW as License)


Software vendor develops the application; the application is implemented on customers HW and customer is responsible for the operations.

Design and Technology Issues


Design Designed from the outset for Designed for implementation delivery as Internet-based by specialist and for customer service for a large number of to operate and maintain. customers (HW+SW architectures, business model).
31

prof. Voek

Design and Technology Issues


Technological architecture Multi-tenant architecture designed to run thousands of users from different user organizations on a scalable technological infrastructure. Applications with embedded service management, monitoring metering and security capabilities. Frequent (every 3-6 month) upgrades possible. All customers are upgraded simultaneously resulting in significant cost reductions. Architecture suitable for deployment by individual company on a dedicated ICT infrastructure. Typically must add service management, monitoring and metering features subsequent to product development. Infrequent, major updates (every 12-24 months). Both, provider and customer, have to implement version management process.

Service management

Upgrades

prof. Voek

32

Business Issues
Readiness of the service Short implementation cycle. Long implementation cycle due to complex implementation of HW, SW, and knowledge transfer to customer sites. Could be limited to single organization via intranet or client/server interface. Configuration needs to support peak requirements, and cannot be scaled down. Extensive customization possible, but expensive.

Availability of the service Scalability

The service is available from any location (globally). The volume of the services delivered (i.e. number of users supported, number of transactions) can be scaled (up or down). Typically limited.

Customization Internal sources utilization (people, technology, etc.)

prof. Voek

Only few internal sources used Many internal sources used for ICT processes support. Most for ICT processes support. of the company sources are used for core business processes.

33

Business Issues
Costs of ICT Predictable, no investments required - operating costs only. The costs are highly correlated with the volume of services. Both investments and operating costs. High overhead costs given by depreciation and amortizing of investments. The costs may not be correlated with volume of service delivered.

ICT management Issues


ICT sources utilization ICT sources of the provider (HW, SW, ICT specialists) are used across all customers; provider has advantages of economies of scale. How to use ICT for competitiveness enhancement, available services at ICT market, SLA structure, and management of service delivery. ICT sources are used only for one organization.

ICT knowledge required at customer site


prof. Voek

The same plus: wide spectrum of ICT knowledge. The required ICT knowledge is dependent on number of platforms and types of application used.

34

ICT management Issues


Evaluation The application can be evaluated of an before the purchase. application Problem and change management procedures Risks Short feedback cycle procedures enable almost immediate feedback. Support staff or programmers can directly identify and fix problems. Fixing a problem for one customer fixes it for everyone, which reduces support costs. Loss of knowledge that could be useful in the future. Stability of the provider (Exit strategy). Systems integration who should be responsible for? Unsatisfactory customisation. Application is evaluated after purchase, installation and customization. Problem solving is often indirect via intermediaries (VARs, SIs, etc). Patches and upgrades are implemented at individual customer sites. Costly and unreliable, as customers often delay installation of patches and upgrades. Stability of the provider but not to the same extent as for ASP. Technology backwardness. High TCO (Total Cost of Ownership).

prof. Voek

35

Comparison of software licensed model with ASP model

The comparison makes a compelling argument for the ASP model as the next logical step in the IS/ICT evolution.
ASP model: faster cheaper more flexible
prof. Voek
2005 Application Services (Software-as-a-service, Utility computing) 1990s ERP Applications

= !?

1960s Data Processing Bureau

1970-80s In-house Development The end of 90s-2004 Traditional Outsourcing

36

Prerequisites for efficient deployment of ASP model

Unique

alignment of ASP with business processes!

The IDC study [IDC, 2002] indicated that ASP implementations can generate ROI above 1000%. What are the prerequisites for efficient ASP model deployment ?

prof. Voek

37

Prerequisites for efficient deployment of ASP model (Critical Success Factors)

Effective management of business and ICT processes and resources Close link between business, ICT, and sourcing strategies Well-designed serviced oriented application and technology architectures Optimal granularity of outsourcing solutions IS/ICT Integration Detailed information about ICT market. Proper provider selection criteria Control of IS/ICT and service costs
38

prof. Voek

Effective management of business and ICT processes and resources - SPSPR Model
Business, IT and Sourcing Strategies goals, products and services, types of customers, partners,...

Strategic Management Layer

"S"
Custmers

Suppliers for Core Processes Core Process 1 Market of Products and Services Product/ Service 1

Core Process "p"

Product/ Service "p"

Business Processes Layer

Market of company products

"P"

Support Process 1

Support Process "pp"

Market of ICT Services

ICT Service 1

ICT Service 2

ICT Service "s"

ICT Services Layer

"S"

Market of ICT Services

ICT Process1

ICT Process 2

ICT Process j

ICT Processes Layer

"P" "R"
Market of ICT Resources

Market of ICT Resources

ICT Resource 1

ICT Resource 2

ICT Resource 3

ICT Resource "r"

ICT Resources Layer

Lease / sale of supefluous resources

prof. Voek

39

Effective management of business and ICT processes and resources - SPSPR Model
TOP management Process Requirements - product/service - customers - partners Process Managers ICT Service definition (SLA): - content - volume - quality - price CIO Who will deliver? In-house
Market of IS/ICT Services

Process Outcomes

Service Order

Delivered Service

Business and IS/ICT integration and dimensioning

Outsourcing /ASP

ICT processes creation

ICT Process Managers

Resource Order

Resource requirement: - content (type) - volume - quality - price Resource manager 1 Resource manager 2

How sophisticated process to create?

Delivered Resource

prof. Voek

40

Close link between business, ICT, and sourcing strategies


Sourcing strategy (which component "in" and which "out")
Suppliers for Core Processes Market of Products and Services

Business, IT and Sourcing Strategies goals, products and services, types of customers, partners,...

"S"
Custmers

Partner selection, relationship mng, evaluation, changes


Support Process 1

Core Process 1

Product/ Service 1 Market of company products

Core Process "p"

Product/ Service "p"

"P"

Support Process "pp"

Main decisions:
Market of ICT Services

- who owns?
ICT Service 1 ICT Service 2 ICT Service "s"

"S"

- who operates? - who does maintenance, and upgrades?


Market of ICT Resources
ICT Process1 ICT Process 2 ICT Process j

Market of ICT Services

"P" "R"
Market of ICT Resources

- price/costs, funding?

Resource 1

Resource 2

Resource 3

Resource "r"

Lease / sale of supefluous resources

prof. Voek

41

Mature serviced oriented application and technology architectures


Not all applications suitable for ASP Coexistence of different model requires mature architecture
Application software 2 (ASW 2)
CV
CV

Application software 1 (ASW 1)

...
CV

Application software n (ASW n)

Application software 1 (ASW 1)


CV

Application software 2 (ASW 2)


CV

...
Worst Case

Application software n (ASW n)


CV

Database (DB) Middleware Best Case Operating system (OS) Telecommunication s and Internet connection LAN and WAN Hardware (HW)

Database (DB1) Middleware1 Operating system 1 (OS1) Telecommunication s and Internet connection 1 LAN and WAN Hardware1 (HW1)

Database (DB2) Middleware2 Operating system 2 (OS2) Telecommunication s and Internet connection 2 LAN and WAN Hardware2 (HW2)

Database (DBn) Middlewaren Operating system n (OSn) Telecommunication s and Internet connection 2 LAN and WAN Hardwaren (HWn)

prof. Voek

42

Impact on ICT landscape


What will happen if ASP model become the prevalent model of ICT service delivery ?
HW, SW and Telco products will return back to their producers. They will provide services not products. The reduction in the size of the traditional software license market, reduced demand for on-site implementation and the corresponding increase in demand for application services will lead to further rationalization of the ICT vendor market. Will many SW vendors, implementators, and SI disappear?

prof. Voek

43

Impact on ICT landscape

prof. Voek

44

Impact on ICT landscape

2000 HW and SW Services

2004 HW and SW Services

IBM
HP Sun

55,3%
84,3% 85,3%

43,0%
16,0% 14,6%

48,0%
81,2% 65,7%

50,6%
19,6% 34,2%

prof. Voek

45

Impact on labour market and ICT education

Reduction of demand for in-house ICT specialists will lead to the restructuring of the ICT labor market
ACS and Philipson March 2, 2004: unemployment in the IT industry at more than 10 per cent, around twice the national average of 5.7 per cent Many of these came from displaced programmers, who have the highest unemployment rate (18 per cent) IT industry is healthy, and will always offer many interesting jobs, but the industry has changed The key to success is adapting to those changes

Education specialists with following knowledge:

integration of business and ICT processes (by means of ICT services) design of efficient services, application, and technology infrastructures development and realization of sourcing strategy management of service delivery high-tech for vendor development specialists prof. Voek

46

Literature
Obligatory: [Feuerlicht, Vorisek, 2002] Feuerlicht, G., Voek, J.: Delivering Application Services: Who will Benefit?, Proceedings of Systems Integration 2002 conference, VE, Praha, 2002, 31-41, ISBN 80-2450300-x [Feuerlicht, Vorisek, 2003] Feuerlicht, G., Voek, J.: Key Success Factors for Delivering Application Services, Proceedings of Systems Integration 2003 conference, VE, Praha, 2003, 274-282, ISBN 80-245-0522-3 [Feuerlicht, Vorisek, 2004] Feuerlicht, G., Voek, J.: Utility Computing: ASP by another name, or a new trend?, Proceedings of Systems Integration 2004 conference, VE, Praha, 2004, Facultative: [Carr, 2003] Carr, N.G.: IT Doesn't Matter , Harvard Business Review, Vol. 81, No. 5, May 2003 (http://hbswk.hbs.edu/item.jhtml?id=3520&t=technology ) [Cohen, 2004] Cohen, P.: Twelve Technical and Business Trends Shaping the Year Ahead, http://www.babsoninsight.com/contentmgr/showdetails.php/id/687
prof. Voek

47

Topics for Essay


1)

2)

3)

4)

5)

6)

Compare the approach of RightNow, SalesForce and one Czech company to CRM delivery (process of delivery, evaluation, SLA,) Compare according to annual reports the results of important ISW in last 3-5 years (structure of revenue - new license, upgrades, support,.) Analysis of IT product and services supply: worlds statistics, trends (including the changes in supply chain), provider CSFs Analysis of ASP supply: the biggest providers (name, residence, the year of set up, offered services, No of customers, No of users,) Evaluation of application delivered by ASPs (application choice, data collection, analysis) Methods of IS/ICT costs and benefits evaluation

prof. Voek

48

Questions for Exam


1) Is ICT the tool of competitiveness? Is the significance of ICT the same in all industries ? Give and comment the examples 2) Enterprise Application Delivery, variants and their CSF User perspective Provider perspective 3) Business and technological factors for change 4) Sourcing variants and their CSF 5) Comparison of software license model with ASP model 6) Prerequisites for efficient deployment of ASP model 7) Impact of recent trends on ICT landscape, labour market and ICT education
prof. Voek

49

Thank you for your attention

prof. Voek

50