We can safely conclude that policy makers in all fields, not just in IS, are forced into ill-considered conclusions and recommendations because they still view their management strategies in pre-internet terms. Moreover, they are still constrained by statistical calculations based on outmoded and obsolete classification approaches, as well as on invalid assumptions about the fundamental sources of profit and capital formation.
Recent evidence shows that European business continues to lose important sectors of the economy to international competition because senior managers have been slow to modify and rethink business strategy and management in Post-Net-Era versus Pre-Net-Era. Seen in this light, the emergence of the ASP business model has had and will continue to have pronounced impacts on business management and strategy.
Through the skilful use of new 'intellectual technology' such as more efficient broadband utility, better and more integrated systems, automated reporting processes, combined with new uses of computers, wireless technology, and computer numerical control devices, the productivity of research and development (R&D) in business strategy is changing in the ASP industry. Any argument that the ASP industry is in decline seriously misreads the nature of the transformations occurring. Indeed, rather than wringing one's hands about the demise of the ASP industry, it is more appropriate to perceive that the ASP industry is leading to a more mature stage of business model development using new ideas and new technologies as critical factors of service provision.
IS staff members are important stakeholders in most ASP solutions since they are responsible for system operation and enhancement. As professionals in the field, they have a deeper understanding than business professionals about what it takes to build and maintain a solid ASP solution. They also have a clearer view of the technical relationships between different systems and of policies and practices related to systems. Business professionals in intelligent enterprises shouldn't ignore the technical infrastructure and context issues identified above, but rather should also realize that IS staff are usually much more aware of the technical structure and rationale in both areas.
While 'the more the merrier' almost always applies for some characteristics of ASP solutions such as customer satisfaction and information quality, the right levels of many other characteristics such as capacity, security, and flexibility should be a compromise between problems of excess and problems of deficiency. There are often instances when too much capacity means less could have been spent, whereas too little capacity limits departmental process output. Likewise, too much consistency may mean IS departmental staff cannot use their creativity to respond to changes, whereas too little makes the business process inefficient and the results chaotic.
The pressure of the new business environment in the 21st century has resulted in time-based competition. Such competition takes place where those first to market have a chance to pre-empt the competition. This does not only mean developing a new product faster than your competitors, but also requires the associated delivery mechanism: first to give a quote on the product price, first to develop an agile manufacturing system to instantaneously move the assembly line to a different product, or first to deliver the product to the customer.
ASP is one of the main sources of competitive advantage for intelligent enterprises in the 21st century. It can lower costs through scale or experience. ASP can also contribute to the differentiation of the organization's products or services, becoming the foundation of a differentiation strategy enabling the firm to avoid direct price competition. Lastly, ASP technological change plays a crucial role in new-game strategies where firms deliberately change the rules to their advantage by modifying the forces shaping competition in the industry. ASP plays a significant role in strategy-making, and selection of technologies by the intelligent enterprise is a task which must be done with great care.
Another noticeable reason for implementing ASP solutions is oriented to the business objective of gaining competitive advantage in business units and corporate strategies and not exclusively to cost-effective management of information resources and technologies. The primary focus here is on business-unit strategy and direction and on integrating the business unit's external and internal environments. An important factor to be considered is the quality of the intelligence analysis and information collection and processing performed by managers and staff rather than on the use of the information tools.
Infrastructure is something that an intelligent enterprise needs. An investment in ASP infrastructure is an investment for the future; it provides the resources needed to take advantage of future opportunities. A substantial portion of an intelligent enterprise's ASP budget may be devoted to infrastructure, which means that it will be difficult to show a return on this investment.
The Internet represents a major infrastructure that is available to individuals, businesses, and governments around the world. The Department of Defence and the National Science Foundation subsidized the development of this network; currently users of the Net finance it. I doubt that one could obtain the date or evaluate the pound value of the impact of the Net to do a return-on-investment calculation for this investment. It seems clear that the Internet has provided many different kinds of value to its users, which is what one hopes for in making infrastructure investments.
Two key points of this chapter are that not all investments in ASP should be expected to show a measurable return and investments can have value to an intelligent enterprise even without demonstrable financial return. In many organizations, there seems to be a strong belief that every investment is made with the expectation of a positive return.
Obtaining value from IS is important for intelligent enterprises to survive and flourish in the highly competitive economy of the 21st century. Many of us believe that the information system holds the key to success as companies develop systems that provide them with a competitive advantage. IS also lets managers create dynamic, new organization structures to compete more effectively. Intelligent enterprises that create value through information systems will be the winners in the 21st century.
Of course, it is not always the case that the consumer is the only winner from strategic investments in ASP. We have seen that the airline CRS vendors gained significant direct and indirect revenue from deploying their systems to travel agents. It is also possible that a strategic application can result in greater sales for an entire industry. It will be interesting to see if ASP increases sales for the telecommunications infrastructure providers industries that participate in it by making it easier for consumers to order their products and services.
Value can be said to have many different definitions when looking at ASP investments, which are not always easy to estimate or measure. Such a complex investment problem means that mangers have to gather information and consider a variety of factors in making their decisions about allocating resources to ASP initiatives. Upon making the decision to allocate, they have to monitor carefully the conversion of the investment into an ASP solution, as creating value is a major challenge that requires significant management effort and attention.
It is important for an intelligent enterprise to have a strategy, plan, and vision for ASP solution. The down turn of the first phase has clearly shown, in some cases, that businesses' overall strategies were more important in deciding to implement an ASP solution than was the economic analysis for the investment. It would seem unethical to provide a formula for combining all the criteria mentioned in this chapter to come up with a decision to implement an ASP solution. Readers would notice some of the issues touched on are quantitative while others are qualitative. Organizations that came through ASP's first phase somehow successfully made wise decisions about investments in ASP implementation. Managers in these businesses view ASP solution as an asset and believe that their ASP investments produce value for the organization. Not only can you see that they had strategy and vision for the technology but also that they are actively managing their ASP solution. The resulting effect is they do not sit around and look for value from ASP solution; rather, they create value from ASP solution.
We hope this paper has presented sufficient evidence to establish that:
There is value from investing in ASP;
Each type of investment has a potentially different opportunity for a payoff, and for some applications, we may not be able to show a quantitative return;
The process of moving from the investment to an actual IT initiative is filtered by conversion effectiveness; there have been widely varying degrees of success in developing applications from IT investments.
Consider the possible upside benefits that might come from an ASP investment. This approach is both quantitative and qualitative. For some types of ASP investments, you will have to rely more on qualitative arguments because potential benefits are hard to measure and to estimate. In other cases, there are well-known capital budgeting approaches one can apply to provide some guidance on the investment.
The manager of an intelligent enterprise needs to keep the above-mentioned findings in mind. They suggest that in making decisions about ASP investment, you should:
Determine the type of investment, e.g., infrastructure or competitive necessity;
Estimate the likely return from the investment given its type;
Estimate the probability that there will be a return;
Estimate the probability of successfully converting the investment into an application.
Information systems in the 21st century virtually enable not only all business processes but also the coordination of multiple processes for intelligent enterprises. Business process here refers to a set of related tasks performed to provide a defined work output, a newly designed product, a customized order delivered to the buyer, or a business plan, which should deliver a well-defined value to either an internal or external customer. Many processes in a traditional business could be radically changed to take advantage of the capabilities offered by ASP. The greater the scope of the process innovation, the larger the benefits that may be expected which obviously means the greater the risk to the project. While many process innovations fail, those that succeed tend to dramatically improve the performance of the enterprise.
The purpose of this chapter has been to provide a view of the historical evolution of the ASP phenomenon as a prelude to defining a conceptual framework for understanding IS strategy for intelligent enterprise in the 21st century. The reader has also been provided with the major steps in evaluating the strategic value of implementing an ASP solution in the context of improving the overall business performance and competitive advantage.
Such initial success in the development of business relationships, outside the traditional lines of outsourcing, fuelled the expansion and wide diffusion of the capacity of ASP vendors to have far-reaching implications for many aspects of the service industry. Whether or not the ASP industry could be part of the future of every Intelligent Enterprise depends in part on its history, management, current capabilities, and on the directions it might develop.
Rethinking your business in terms of Internet economy, formulating new strategies for gaining competitive advantage, and raising the level of awareness of people throughout your enterprise to the notion information itself can and should be looked upon as a strategic corporate asset, are great steps but only the first steps for success in the 21st century. In addition, both structural and procedural changes must take place for an intelligent enterprise to put its convictions into operation. Could ASP provide you with such necessary tool thereby directing your focus into the reality of a 21st century intelligent organization?