| 1st Edition BrainStorm Group’s eBusiness Bulletin March 2000 Welcome to the premier issue of BrainStorm Group's e-Business Bulletin! Our goal is to provide you with a quarterly update on the latest e-Business Strategy, Sourcing and Integration Services and Solutions. In this issue:
Welcome to the premier issue of BrainStorm Group's e-Business Bulletin! Our goal is to provide you with a quarterly update on the latest e-Business Strategy, Sourcing and Integration Services and Solutions. We will tap our vast network of resources including leading practitioners, analysts, authors, and solution providers with whom we work - and pass this valuable information along to our subscribers. We will also provide a preview of upcoming BrainStorm events where you can meet with these experts face to face. I welcome your comments and feedback. Gregg V. Rock About BrainStorm Group: BrainStorm Group remains committed to providing you with unbiased information on the most pressing challenges facing today's business and IT leaders: e-Business Strategy, Sourcing and Integration. Behind all the headlines, a new economics of information is emerging. There is a fundamental sense in which information is the ‘glue’ that defines businesses and binds together supply chains, consumer franchises and organizational structures. Under the impact of qualitatively new technology, that glue is melting. Information flows are separating from physical flows. The trade-off between richness and reach, which has shaped the way we use information, is being blown up. This new economics of information is driving the ‘deconstruction’ of business relationships, with massive implications for the structure of industries and for competitive advantage. Branded goods manufacturers disintermediate their retailers and try to reach the consumer directly. But both are threatened by electronic retailers and by ‘navigators’ that are not party to the transaction, such as Yahoo!, CarPoint, or Quicken. Navigators of all types compete with each other for affiliation with the customer. Asymmetries of information between buyer and seller collapse. Power tilts from sellers to buyers. Hierarchical supply chains evolve into fluid alliances. ‘Pull’ substitutes for ‘push.’ Some brands become stronger while others are commoditized. Loose networks of small companies out-compete large corporations. Hierarchical organization becomes obsolete. In his keynote presentation in Orlando, Philip Evans, Senior Vice President of Boston Consulting Group, will draw on his book
Blown to Bits to discuss how this new economics of information defines the managerial agenda for the coming decade. Traditional enterprises that can develop and implement e-business strategies will be able to leverage existing advantages in infrastructure, financial stability, supplier relationships, and customer relationships into successful competition against 'dot-com' companies. But most traditional enterprises do not yet have the experience or skills necessary to implement technology that will support an e-business strategy, nor do they have the real time 24x7x365 operations culture needed to run an e-business. If traditional business is to reinvent itself, those sets of skills will have to come from staff retraining, recruitment, and the use external sources. Some companies will look to traditional systems integrators for these skills. But others are skeptical of the ability of these firms to deliver new e-business services quickly. Instead, they are beginning to look to the emerging Internet IT services firms for the necessary capabilities. But buyers need to beware, not all Internet IT services firms are created equal. Most do not have the breadth of skills necessary -- strategy consulting, creative design, internet architecture, application development, legacy integration, and operations outsourcing – to develop and support the overall e-business needs of traditional enterprises. Rather the majority have expertise in one or two areas, making each vendor very different in terms of their capabilities and making few of them appropriate for the total e-business enablement project. Potential customers of these firms must be able to distinguish between the design/creative-focused players; the technology-focused firms; and the firms that are building a broad set of capabilities across strategy, technology, and design. Most traditional enterprises will be looking for a mix of skills, but it doesn't automatically follow that having all these various capabilities inside of a single firm is the right approach. Some are going to ally with like-minded partners, because it will be very difficult to provide all things to all customers. Specialization will be a successful strategy for services providers; selecting best-of-breed suppliers will be a successful strategy for customers. Companies seeking assistance with e-business strategy and implementations should be seeking answers to the following questions:
The bottom line is that in the majority of cases, brick and mortar will have to assemble a mix of vendors and internal resources to execute large-scale e-business development projects that integrate legacy information systems and take advantage of new technologies. Within the industry, a new outsourcing is emerging. From the initial focused initiatives all the way to today’s mega-deals, the scope of solutions, services and products has evolved radically. Outsourcing moved from a back office, cost cutting to a method of delivering the right services at the right point to make a business successful. That’s what the new outsourcing is all about. It’s a story of how people can work together as a team to make companies more competitive and profitable — and to bring about meaningful changes that benefit customers, employees, and shareholders. People, teamwork, and communications make it happen. Deals are not cookie cutter arrangements with forced solutions, they involve really listening and developing innovative ways to meet needs. Partnering is very important, and working closely with management to help reach their goals. Caring for the people we hire is crucial, providing them with new and exciting career opportunities — because people make all the difference in building shareholder value. Automobile manufacturers don’t make the entire car — they outsource the production of many of the auto parts, components, and assemblies. Petroleum companies don’t drill all of their own oil wells — they outsource the drilling to oil field service companies. Food processors don’t grow all of their own crops — they outsource crop production to agricultural cooperatives and independent growers. Indeed, companies in many industries are outsourcing more of their business processes to outside service providers that are leaders in their fields, and that can provide best-in-class systems and servic. This allows management to focus more of their time and attention on the company’s core business — to improve corporate performance and profitability and to gain The outsourcing marketplace is responding to this change in business vision. Business Process outsourcing (BPO), Application Outsourcing Services (AOS) and Infrastructure Technology Outsourcing (ITO) are being offered as integrated solutions, customized to meet an individual company’s needs and strategic intent. One of the newest outsourcing models being adopted by the industry is AOS. PricewaterhouseCoopers defines Application Outsourcing Services (AOS) as a multiyear contract/relationship for managing application support and maintenance. AOS allows firms to build shareholder value by allowing companies to focus on what they do best. Application Outsourcing Services are becoming the new business model for managing corporate change and growth. It enables companies to shatter the boundaries of their traditional businesses, and to build long-term strategic partnerships with outside professional service firms for managing in the new millennium. AOS is about transforming a company into a more effective organization — one that is more competitive and profitable, one that continually builds shareholder value. Toward this end, application support is transformed into a more productive customer-focused service centre. By taking responsibility for people, systems, technology, and processes; applying investments in people, organization, and technology, a Centre of Excellence is created that better supports business units. PricewaterhouseCoopers formally established its Global Business Process Outsourcing and Application Outsourcing Services in 1996, building on our organizations. Under the direction of a World Leadership Council, the Application Outsourcing Services group is organized on a global basis, and operates as one cohesive network of professionals with centralized management, proprietary methodologies, and leading-edge technologies. The group is also organized as a separate service line with full-time professionals who are dedicated to managing client operations. No company wants to overlook such a powerful tool to create value. Those committed to success must recognize and realize the potential benefits while choosing the outsourced services wisely, transforming software development and support from a burden to be managed, into a cost effective, business enabling initiative. Outsourcing is at a pivot point between cost and delivering value and the benefits are there for those with the initiative to seize them. PricewaterhouseCoopers Contact Info: Benny Popek, East Region
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