The key demand driver for the predictive capabilities of Enterprise Impact
Simulation (EIS) is c-commerce and the alliance-based business model that
results. Accurate, coherent, comprehensive blueprints of our IT systems
form the foundation of EIS; the ability to accurately predict the impact
proposed changes to the business will have on the IT infrastructure and
vice-versa. This predictive capability is needed to reliably and repeatedly
implement changes to IT systems on time, with all required functionality
and without negative impacts to the business or the alliance to which
participation in the alliance model requires this predictive capability.
We must be able to accurately predict the impact of change so that modifications
intended only for the alliance don't cause negative impact to the other
elements of the business, and vice-versa. We must also be able to accurately
predict the schedule for implementing these changes. The alliance as a
whole will need to implement changes in lock step to being new functionality
to the network. Members who cannot accurately implement change on schedule
will hold back the entire alliance. As a result, information about our
IT systems becomes more valuable than the systems themselves. That information
is our entry fee to the alliance, and admission to the alliance is a prerequisite
for survival of the business.
is a new value proposition for IT organizations. The value of the IT organization
is shifting from the delivery of software systems to the delivery of information
about those systems that enables the business' successful participation
in the alliance model. This shift poses many challenges for today's IT
organizations, but the value offered by c-commerce alliances make the
shift unavoidable. Successful IT organizations will rise to the challenge
and begin developing EIS capabilities now; before their absence becomes
a limiting factor on the success of the business.
article is the second of three in a series. The first
introduced EIS, identified the technology breakthrough in software test
automation that makes it possible, and identified the c-commerce alliance
model as the key demand driver for EIS' predictive capabilities. The intent
of this article is to explore the c-commerce alliance model, the challenges
it poses for the IT organization, and the value it promises for the consumer
and for alliance members in more detail. The last article in the series
will develop the operating model that delivers EIS' predictive capabilities
to businesses competing for membership in a successful c-commerce alliance.
Achieving the benefits of c-commerce requires system-to-system communication
between collaborating businesses. GartnerGroup predicts that "[i]n
a collaborative world, enterprises must compete not only on the availability,
cost and quality of their products and services, but also on the quality
of the information they can publish for consumption by collaborating partners."
"ERP is Dead - Long Live ERP II" Oct. 4, 2000. The first information collaborating
partners will need to share is their IT blueprints. They contain the information
needed to establish the system-to-system communication that forms the
basis for the alliance. Companies that already have those IT blueprints
in place will be able to implement that communication more quickly than
those that do not. This will put them in a preferred position when it's
time to pick alliance members.
that guarantee the continued maintenance of those blueprints will also
be required. IT systems are going to change for c-commerce and, in most
cases, they're going to change repeatedly. In fact, the more proactive
a company was in the early days of ERP, the earlier it got in the game,
the more change it will likely suffer in the months and years ahead. In
the paper cited above, GartnerGroup also predicts that "most users will
evolve to [c-commerce] systems via multiple upgrades of existing ERP systems.
As vendors provide these upgrades, users will find sustained business
process and system stability all but impossible to attain." The early,
silo-oriented ERP systems are not just ill suited for service in the new
business model. Their monolithic, mainframe-based architecture is irrelevant
and obsolete from an architectural perspective. Major modifications are
of the critical success factors for an alliance will be the ability of
its members to make modifications to their IT systems without unintended
impacts to their business or to the alliance. This capability will depend
on the ability to predict the impacts of change; on EIS capabilities based
on the underlying IT blueprints. Information about how the systems work,
how they work together and how the business, its customers and trading
partners use them will be key to implementing changes for one set of users
without negatively impacting others. This capability will be critical
under the alliance model. Changes intended for use within a business or
business unit must be contained. Impacts must not be allowed to leak into
other user communities unintentionally. The same is true of changes targeted
for use by the alliance but not intended to impact internal processes
ability to make these modifications on a timely basis and to stay in synch
with the rest of the alliance will also depend on EIS' predictive capabilities
and the underlying IT blueprints. Forty to eighty percent of most IT projects
time is spent in analysis/design and testing. Analysis/design time can
be greatly improved, reduced by at least half in most cases, by eliminating
the need for the programming staff to go into the source code to rediscover
or validate the workings of the system at the beginning of a project.
where failures in the requirements and design are often first discovered,
will be the biggest beneficiary of the existence and use of IT blueprints.
Testing can become much more focused, eliminating unnecessary regression
testing that happens today because of uncertainty about the workings of
our systems. Testing time will also be reduced as rework and retest activities
required today because of missed requirements or designs that fail to
comprehend all requirements are eliminated. Where the introduction of
new functionality requires all members of the alliance to make changes,
members who have IT blueprints in place will finish much more quickly
than those who do not. Tolerance for members who cause the alliance to
be delayed in these efforts will diminish quickly. The ability to establish
and maintain EIS capabilities and the underlying IT blueprints could easily
become the key requirement for ongoing membership in a successful alliance.
connected, chain-like nature of the c-commerce alliance model means that
problems in one member's IT systems, or in their IT delivery process,
can easily disrupt the overall network. Temporary outages of existing
functionality are one predictable result. Worse, one member's inability
to reliably implement change can cause the alliance as a whole to be delayed
in introducing improved functionality to the network. Successful Alliances
will choose their members carefully. Reliable, repeatable, reusable IT
delivery processes that deliver EIS capabilities and maintain the company's
IT blueprints could become the deciding factor in who gets a seat on the
alliance and who gets left out.
The value of c-commerce alliances is compelling on three fronts: cost,
competitive position and customer satisfaction. "For every on-line buy-and-sell
transaction, there are 15 to 20 other transactions associated with it
If you can achieve electronic collaboration among these processes, the
cost savings go from 20 percent to 80 percent." "Success through Collaboration"
SAPInfo Magazine, Sept. 18, 2000. But the value of c-commerce
alliances in improving its members' competitive position relative to non-members
and in achieving higher levels of customer satisfaction and loyalty could
be even more important in the long run.
alliance model is already firmly established in some industries. The airline
industry was one of the first to move to the alliance model. The One World
Alliance allows American Airlines to offer AAdvantage vacation
packages at lower cost to the consumer than they could possibly achieve
buying the individual pieces themselves. Even setting cost aside, the
alliance model offers compelling value to the consumer. On the one hand,
a customer can arrange the entire trip with one transaction through AAdvantage
Vacations. On the other hand, they could arrange air transportation with
two or three separate carriers, ground transportation, and hotel or resort
reservations separately. One transaction versus four or five. And if,
heaven forbid, something goes wrong during the trip? On the one hand,
the alliance takes responsibility for the trip and the members work together
to deliver end-to-end service. On the other? Each transaction stands on
its own and the "ripple effect" of a problem in any segment of the trip
is entirely the customer's problem.
value of the alliance model to its members is particularly easy to see
in this travel scenario. Imagine a vacation to the islands and the competitive
advantage membership in the alliance offers to the resort. The worldwide
marketing effort of AAdvantage Vacations extends the audience of the participating
resort far beyond what individually competing resorts could realistically
afford. At the same time, marketing costs per customer are reduced and
volume increased as AA funnels vacationers to the member resort to the
exclusion of its competitors.
appeal of the alliance model extends well beyond the industries traditionally
recognized as information intensive. Jonathan W. Ayers, CEO of the air-conditioning
manufacturer Carrier Corp., detailed some of that value
in a recent article in Fast Company magazine. Carrier reduced
costs by $100 million dollars last year utilizing the web. Most of those
savings were delivered via simple e-commerce reverse auctions. C-commerce
can multiply those savings four to five times.
possibility of putting an extra half a billion dollars on the bottom line
is enough to ensure the initiative will move forward. But Ayers goes on
to articulate two other components of the value equation. Talking about
their Brazilian operation, he notes that "[t]he time required to get an
order entered and confirmed by our channel partners has gone from six
days to six minutes. Customer satisfaction is way up."
even more compelling, however, is an impact that has the potential to
deliver long term strategic advantage to Carrier. Ayers noted that their
initial use of the web substantially expanded the number of suppliers
who competed to do business with Carrier. An interesting thing happened
next. Having identified the world's most competitive suppliers, Carrier's
c-commerce initiative then tends to make them unavailable to Carrier's
competitors. "We're usually the first company to go to our suppliers and
say that we want to put them on a Web-based procurement system. ... When
their second biggest customer comes along and says, 'We'd like you to
use our Web-based purchasing system,' they say, 'We're already using Carrier's
system, and we don't want to juggle two.' So first-mover advantage with
suppliers is a big deal..." "How I Saved $100 Million on the Web." Fast
Company, February 2000. The lock-in affect of the c-commerce alliance
model has the potential to deliver long-term strategic advantage to the
businesses that achieve these capabilities first.
compelling value proposition offered by c-commerce value drives a fundamental
and unavoidable change in the nature of business competition. Businesses
cease to compete on an individual basis and begin to compete as members
of alliance groups. Alliances hold the brand. Access to customers, market
share, is a function of alliance membership. Members' costs and margins,
their profitability, is a function of the alliance to which they belong.
The survival of the business, especially for the small to mid-sized enterprises
that participate at the discretion of the alliance leader, depends on
membership in a successful alliance. Alliances improve the value equation
for the customer, improve the competitive model for Alliance members,
and demand a new value proposition from the members' IT organizations.
new IT Value Proposition
The value proposition for IT organizations is shifting. The change in
the value equation will happen very quickly once it begins. IT organizations
should begin the development of their blueprints now. Waiting until they're
needed as part of a bid for a position in a newly formed alliance puts
the business at risk of being left out.
a result of the compelling value of c-commerce and the alliance-based
model it drives, the value companies require from the IT organization
is shifting. The delivery of software becomes a given. The delivery of
information about that software becomes the new value proposition. Success
begins to be defined not as the delivery of change, but as the delivery
of change readiness. The completion of the current project must result
in an increased readiness for the beginning of the next. That change readiness
comes in the form of IT blueprints that allow organizations to move forward
with IT change immediately, without reverting to an examination of the
systems' source code to rediscover or validate the systems' current workings.
change in the value equation will happen very quickly for most IT organizations.
As alliances begin to form, the readiness of the individual members to
begin electronic collaboration will, in many cases, determine which alliance
wins the race to be first to market. As Carrier's CEO noted, being first
to market could be a very big deal in c-commerce. Whether or not the IT
organization already has its IT blueprints in place, and the organizational
capability to maintain them, could be the key factor in determining whether
or not the company gets a chance to participate in a successful alliance.
The expectations the business leaders have of the IT organization will
change just as quickly as the value of participating in the alliance model
organizations should move to quickly put these blueprints in place. They
are key to improving the company's chances of success at being included
in the first alliance to be formed in their industry. The exclusionary
nature of the alliance model for late comers, as noted in the Fast
Company article about Carrier Corp., is real. On Internet time,
being first is an important element of success. Admission to the alliance
model is a prerequisite for survival. IT organizations should focus their
current efforts on putting the requirements in place that will help ensure
their company doesn't get left out.
The challenges the c-commerce alliance model poses for the IT organization
are daunting. Its value, however, is compelling. That means the challenges
must be met and overcome. The key challenge is the development of IT blueprints
that enable the predictive capabilities of Enterprise Impact Simulation.
Each member of an alliance must be able to make changes to its IT systems
for its own benefit without those changes leaking out into the alliance
network. Similarly, changes made for the benefit of the alliance must
be contained and not allowed to negatively impact the functioning of the
ability to predict the impact that proposed changes to the business, including
its role in a c-commerce alliance, will have on the IT infrastructure,
and vice-versa is critical to the effective functioning of an alliance.
Successful IT organizations will move quickly to implement their IT blueprints,
anticipating rather than waiting for the demand.
Bill Walton has 15 years of IT experience including development, QA/Testing,
and management positions with IBM, Compaq Computer, and Sabre, Inc. His
background includes support of Engineering and Manufacturing as well as
back office functions. His breadth of experience gives him unique insight
into the problems facing IT today. His views on the most pressing of these
problems and their solution can be found on his web site at http://www.jstats.com.