A BRIEF HISTORY OF E-BUSINESS ON DEMAND By the mid-1990s, IBM recognized that advances in network technology were going to fundamentally change the way companies could manage their core business processes. Companies quickly realized that the Internet's value was not in fancy Web pages, but in exploiting the technology to make business processes more efficient—what IBM calls e-business. Companies have since invested heavily in process reengineering, applying network technologies to traditionally labor-and paper-intensive processes to make them faster, cheaper, and more direct. While this has been beneficial, we need to do more. We need e-business on demand. Business Transformation Begins Today, companies are recognizing another benefit of e-business: The real value in applying network technology to business processes is not in merely automating them in isolation, but in gaining a greater understanding of how the processes relate to one another. With that insight, companies can reconfigure their existing IT assets to streamline their operations. They can start managing their processes horizontally to improve performance throughout the enterprise instead of in organizational silos. They can find and exploit the hidden value in their operations by building flexible, integrated business process systems that can anticipate, accommodate, and quickly adapt to new conditions to improve performance and productivity. A manufacturing company, for example, might develop a touchless process, from the time an order is received until the product hits the loading dock. A financial services company could offer straight-through processing. These companies would become e-business on demand enterprises. Optimizing an IT infrastructure and creating an integrated business process model are challenging tasks, in themselves. Managers are being held accountable for the performance of their particular lines of business. So they have chosen business processes and IT infrastructures designed to boost the performance of their isolated units. The result? Single enterprises operate multiple business processes on disconnected applications, middleware, servers, and operating systems—an ad hoc collection sometimes too complex to fathom, and another example of complexity gone mad. But now companies are starting to overcome that complexity. Many of IBM's customers are asking for help in integrating their existing IT assets. They are tapping into IBM's knowledge to look at their business processes in concert and revise their business models. Always with an eye on return on investment, they are partnering with IBM on many levels, from complete outsourcing and application management to hosting and utility computing services. Taking a step-by-step approach to improving the IT infrastructure and processes they already have, these companies are building businesses that are almost intuitive in their responsiveness to changes in demand, supply, pricing, labor, capital markets, and customer needs. With the savings that accrue from restructuring their existing IT assets, they are often self-funding their e-business on demand journeys; bottom-line benefits derived from streamlining operations can be reapplied to new initiatives. Integrating the Retail Supply Chain For example, IBM is working with some of the world's largest retailers and manufacturers on pilot versions of integrated business process networks. The networks, which use open standards to ensure communication across systems, enable those companies to automatically respond to the tiniest variables throughout their supply chains. Products are tagged with radio frequency sensors, and there are tag readers in the factory, on the truck, at the distribution center, in the store, and at the checkout. So at any time, every participant in the network can view the location of every product in the supply chain. They can respond to variables like customer demand, parts delays, traffic accidents, floods, fires, or even strikes. The same technology can enable the customer to check out by simply walking the shopping cart through a tag reader. The reader detects all of the products in the shopping cart and bills the customer's credit or debit card. The retailer, in turn, gains information on the buying habits of individuals or groups, which can be used to predict and respond to demand runs. In total, this pilot has integrated the core business processes—supply chain, customer care, and payment systems—in a real-time network that enables all participants to respond to demand and other variables automatically. It's a pilot that demonstrates the potential power—not to mention return on investment—of this business model. Making Insurance an E-Business on Demand Service Another emerging technology is serving as the catalyst for business process integration in the insurance industry. Telematics technology, which has become commonplace in cars for navigation systems, automatic credit card payments at tollbooths, and even remote engine diagnostics, may become a common way to determine insurance rates. A leading insurance company is working with IBM to build a voluntary auto insurance program with telematics as a key enabler. A chip will measure the exact usage of a car—where and when it is driven and where it is parked. In doing so, the company can gain an exact risk profile for the customer, and drivers can pay for variable policies that reflect their precise risk profiles. Insurance premiums can even be paid on a daily basis as risk is incurred, with the chip debiting payment in the same way it would for tollbooth fees. The insurance company is using new technologies to integrate customer care and payment system business processes. It can offer a service that will enable greater business efficiency in understanding and profiting from risk variables, while providing demand-based flexibility for its consumers. Transforming the Pharmaceutical Industry In the pharmaceutical industry, IBM predicts that advances in medical technology over the next 10 years will usher in an era of customized drug treatments. IBM is at the forefront of this technology movement with its Blue Gene program. Advances in genomic research, drug discovery, and manufacturing capabilities will enable a treatment-on-demand scenario; whereby doctors, according to patients' unique requirements, prescribe increasingly customized drug programs. This vision will require integrating genetic-data computing systems, data systems that manage patient data in real time, and possibly, dynamic payment systems. As the pharmaceutical industry comes under increasing cost pressure to reduce product development times and research investments, this type of treatment system may become an economic necessity rather than just a vision. Flexibility and Adaptability Are Key Companies are looking to become more flexible and adaptive in response to the tremendously competitive international economic environment. They need to be able to respond immediately to variables in their marketplaces. But they also need to focus on their own core competencies, to maximize efficiency, exploit opportunity, and minimize risk. This approach can only be accomplished by optimizing IT infrastructures and integrating business processes in a way that enables the enterprise to respond automatically to internal and external variables. Utility computing—which eliminates up-front infrastructure investments and limits long-term costs—is another key; customers pay only for the IT capacity they use, enabling them to meet peak demand without having to maintain such a high level of readiness. In each of the examples above, emerging technology is the catalyst for business process integration and, ultimately, business transformation. Some companies are taking it a step further by outsourcing their new, integrated business processes. One of the world's largest energy companies, for example, has built a comprehensive analytics tool that provides an enterprise-wide view of business process performance. The company then outsourced the management of that analytics process, and the financial management responsibility for all of its business units and processes, to IBM. This type of transformation requires a keen business insight, married to a deep understanding of the kinds of technology that will make these systems possible. IBM is a technology leader in grid, autonomic, research, and utility computing—all the technology and infrastructure elements necessary to dynamically link core business processes. IBM has experience in industries ranging from financial services to health care. To further support change within its clients' organizations, IBM made a change within our own. IBM recently established a formal research group that will work with IBM consulting teams to help customers realize the true value of business process integration. Through this team, IBM will be able to provide customers access to the world's most advanced research labs and the world's largest patent portfolio. If the prospect of becoming an e-business on demand business sounds good, take the first step: Consider how you might benefit from optimizing your IT assets or improving your business processes. |
