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Enterprise Impact Simulation Alliances - At The Core Of EIS

Written By: William Walton
Published On: March 7 2001

Alliance-driven IT

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 it belongs.

Successful 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.

This 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.

This 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.

Alliance-driven Challenges

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.

Processes 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 in store.

One 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 or systems.

The 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.

Testing, 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.

The 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.

Alliance-driven Value

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.

The 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.

The 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.

The 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.

The 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."

Perhaps 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.

The 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.

A 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.

As 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.

The 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 becomes apparent.

IT 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.

Summary

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 member business.

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.

About The Author

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.

 
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