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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?

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slide2

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?

Business

Driving IT

E-Business

IT Driving

Business

slide3

E-Business: Drivers and Responses

Key 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

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

E-Business

Integration

slide4

Total IT Spending as a Percent of Revenue(Central IS Budget plus Business Unit and “Hidden” IT Spend)

10.0%

5.0%

0%

Web-

Internet

North America

Key Technology

Discontinuities

Western Europe

PC-

Client/

Server

Asia/Pacific (Dev.

Economies)

S/360

Mainframe

Accelerating

Business Unit

Spending

1960 1970 1980 1990 2000 2010

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

Central Central IT Baseline/

IS Budget IS Budget Infrastructure

% RevenuePer Employeeas % IS Budget

50%

45%

Fin./Banking 7.70% $26.8K 76%

Telecom 7.27 29.5K 70

Hospitals 4.10 2.9K 72

Insurance 3.57 38.6K 66

Services 3.51 8.8K 78

Transportation 2.11 2.6K 77

Manufacturing 1.80 3.6K 75

Utilities 1.32 4.5K 70

Retail/Wholesale 1.11 2.4K 73

40%

35%

30%

25%

20%

15%

10%

5%

90

95

00

05

10

slide5

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

Strategic

Tactical

2000-2005

Transformation

(Channel Exploitation)

1998-2003

Transaction

(Channel Development)

Increasing

Business

Value

  • 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

1997-2000

Interaction

(Channel Exploration)

  • Additional Features• E-Commerce Integration w/existing processes & systems • Communities
  • Streaming Media • Customer Data Aggregation• Decision Support Architectures

1996-1999

Presence

(Cyberspace

Placeholder)

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

Features• Marketing information• Brochures

Phase IV

Phase I

Phase II

Phase III

Increasing Application Cost

slide6

B2B E-Market Maker Types

Transactions

Are Enabled

Dynamic

Marketplace

Efficient

Commerce Hub

- Builds Efficient Markets and Assists in Market/Price Discovery

- Streamlines the Process Surrounding E-Commerce Transactions

Neutral

Exchange

Buyer

Advocate

Seller

Advocate

Transaction Enablement

Channel

Enabler

Content & Community Portal

  • Prepares the Existing Channel forE-Commerce
  • Brings Together Communities of Buyers/Sellers

Transactions

Not Enabled

Low

Impact

High

Impact

Impact on Pricing & Sales Models

slide7

Industry/Product E-Business Benefits

Digital Products/Services

Business

Value

(and difficulty of “Webification”)

Attend Online University

Physical Products

Vote Online

Conduct Financial Transactions

Local Services

Order Prescription Drugs

Process Healthcare Claims

Order Grocery Delivery

Schedule Surgery

Media Transmittal

Order Books

Schedule Auto Maintenance

Download Music

Renew Driver’s License

Book Travel (e-tickets)

Schedule Haircut

Degree of Possible “Webification”

Opportunity/Threat Model

Indep. Travel Agency

Retail Groceries

Retail Brokerage

Music

Very Low

Extremely High

slide8

Comfort

IT Challenge and Comfort Zones

Sales

Volume

PCs

Challenge

ERP

Browser

-as-

platform

2-Tier

Client/Server

Terminals

Notebooks

Client

Server

Voice

Recognition

Wireless

LANs

JAVA

Web-Enabled

Mobile Phones

PDAs

XML

Growth

Mature

Declining

Emerging

Embryonic

or Early

Market Maturity Stage

slide9

60% +

50%

50%

40%

40%

30%

30%

2001

2001

2002

2002

2003

2003

2005

2005

<20%

<20%

2007

2007

2010

2010

Emerging Technology Radar Screen

Technology

Prevalence

(% of Companies that really need to care)

Digital

Authorization

Enterprise Application integration

Wearables

E-Payment

Text

Analysis

ASPs

Flex. & LEP Displays

Now

2003

2006

Speech

Recognition

Biometrics

Smart Cards

Bluetooth

Wireless Web

NLP & Retrieval

Voice

over IP

Voice Portals

Synthetic Characters/ Avatars

Webtops

XML

Enterprise

Portals

Affective

Computing

Image/Video

Analysis

Take-off Point

(Inflection)

technology directions platform infrastructure 2000 2005
Technology Directions: Platform Infrastructure 2000-2005

Potential

2005 Forecast(P=0.7)ImplicationsSurprises (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 risebased clients grab 30%+ 50%; multiple alternatives - 100% of wireless devices market share

address unique needs (voice) have Internet connectivity

- Network computing becoming - MADs success in consumer

prevalent; 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 needs

for scale means for support of 90% of enterprise

application requirements

Network- Policy-based networks - Major network vendors/carriers - Wireless grows from less

improve 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 backlash

services 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 application infrastructure 2000 2005
Technology Directions: Application Infrastructure2000-2005

Potential

2005 Forecast(P=0.7)ImplicationsSurprises (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 competency

rewrite AD economics

Middleware - 75% of new apps use off-the- - Big growth in real-time integ., - End user rebellion as job

Database 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 implodes

Business are front-office/value chain/CRM ERP ISVs grows to 80%; but - MSFT aggressively enters

Apps.- 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% share

implement a front-office suite to - ERP vendors stumble, but - Siebel becomes ERP/CRM

enable a CRM strategy eventually competitive in CRM powerhouse (via acquisition)

business process sourcing and integration
Business Process Sourcing and Integration

Type B

Market-wide

Type A

High

C-Commerce

SCM ‘05

Type

C

“Pure

Web”

‘99

Business to Consumer

CRM ‘05

“Pure

Web”

‘05

Front Office / CRM

CRM ‘99

CRM ‘99

Process Scope

Integration Intensity

Supply Chain Mgmt. / B2B

SCM ‘99

SCM ‘05

ERP ‘05

Back Office / ERP

ERP ‘99

Enterprise-wide

Low

Template / Component

Application Subscription

Configured Package

Built

Package

More

Customized

More Commoditized

Source

slide13

Connection and Application Paradigm Evolution

Domain Apps

E-Commerce

C-Commerce

Connection

Paradigm

Trading Partners

Enterprise

Cyber-Market

Interaction

Model

One-to-One

One-to-Many

One-to-Any

Commerce

Model

Channel Masterw/Supplier Slaves

Channel Master w/ Preferred Suppliers

Channel Partners w/

Risk sharing

Application

Paradigm

User

Productivity

E-CommerceTransactions

Collaborative Interaction

Application

Integration

Point-to-Point

Pre-Built

Integration

XML/EAI

Adapters

Weeks/Days

Hours/Minutes

Seconds/Real-time

Info. Latency

slide14

Critical IS Capabilities and Competencies

Business and IT Vision

2. Envisioning

Business Systems

8. Business

Improvement

Management

1. Leadership

For Fusion

3. Relationship

Building

7. Informed

Buying

4. Information

Management

9. Contract

Facilitation

5. Making

Technology

Work

10. Resource/Skills

Management

6. Architecture

Planning

11. Contract

Monitoring

12. Vendor

Development

Designing IT

Architecture

Delivering IS Services

slide15

Evolution of CIO Role and Enterprise Governance

  • Mainframe Era:
  • Conventional 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:
  • Transitional, 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:
  • Hybrid, 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

Key

Responsibility

Business

Input

Major Tasks

System

Objective

Leadership

slide16

Workforce -Workplace Trends

  • 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

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

Business processes and

connectivity form the new

work ecology!

slide17

Sourcing Strategies

  • 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

CIO

IT Management

& Governance

ESP Prime

Contractor(s)

Retained

Internal IS

Competencies

N . . 3 2 1

Best-of-Breed

Subcontractors

A “Step-by-Step” Approach

Multisourcing

Leveraging ESPs

  • 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
  • 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

What’s In? (Retained Internally)

What’s Out? (Commonly Outsourced)

slide18

Summary and Action Items

  • 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
slide19

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