Businesses To Drive Next Net Revolution - Page 2

Nov 8, 2001

Tom Kucharvy

Emergence of the Extended Enterprise
During the past 50 years, companies have used information technology to automate, and gradually to streamline, intra-company and (with the advent of the word processor and the PC) personal-business processes. This was good, blessed by no less than Federal Reserve Board Chairman Alan Greenspan for having increased national productivity enough to allow us to grow the economy faster than previously thought possible, without increasing inflation.

The emergence of the Internet, the creation of new generations of applications, and the type of Internet-associated architectural and application-delivery changes we have already mentioned will certainly extend these productivity gains. But, in Summit Strategies' view -after 50 years of focus on generating personal and intra-company business benefits- returns will be increasingly incremental.

The greatest productivity and business transformation gains will come from applying the power of the Internet to another class of applications that has been all but ignored in the pre-Internet age. These inter-company collaborations or, as we call them, extended-enterprise applications, are in desperate need of automation. They have been all but ignored, however, for lack of a ubiquitous, reliable, secure and affordable communications media.

Now that this media exists, we have seen explosive interest in e-marketplaces (although we are just now beginning to see viable business models), e-procurement, supply-chain management and customer-relationship management. We're also seeing budding interest in applications such as collaborative design and partner-relationship management. In short, companies increasingly recognize that the real payoffs will come from integrating these outward-facing applications into traditional applications and restructuring outdated business processes.

As this shift happens, we will begin to see dramatic (albeit initially costly and painful) improvements, as well as a fundamental change in the ways companies interact with each other.

Creation of the Always-On Employee
This sounds ominous. We are already flooded with information, new tasks to perform and continual demands on our time. The emergence of faxes, voice mail, e-mail and cell phones has made it hard enough keep up with work. Now, pervasive computing will make it all but impossible to escape. While this upheaval will certainly create many personal traumas and force difficult management trade-offs, it could make people -and entire businesses- much more efficient.

Pervasive computing, whether delivered via smart phones, wireless personal digital assistants (PDAs) or notebook computers with wireless modems - and whether connected over wireless WANs, LANs or PANs (personal area networks) — will transform business. It will allow field-sales and -services representatives to anticipate and immediately respond to customer needs. It will allow inventory or repair managers to track the location, and speed the delivery, of a critical shipment or component instantly. In fact, it will go beyond creating the always-on employee, to create the always-on company.

Evolution of the Hosted Enterprise
We all know the promise of applications hosting. It aims to free businesses from the need to develop, implement and manage their own applications and IT infrastructures. Although the transition will take longer than many had originally thought, and will probably hit most forcibly at first in enterprise departments (rather than in small and midsize businesses), it will absolutely come. It will allow businesses to implement IT solutions much faster and easier than before, and will free up enormous amounts of money and management time. Allowing resources to be applied to business needs, rather than IT requirements, will move from being an empty catchphrase to a common reality.

Although the emergence of hosting will have an important impact on businesses in general, it will propel a much more profound shift within the IT industry. This shift will occur in two primary stages. As we all know, the early stages of the hosting movement will see the IT-platform-selection process drift gradually away from IT managers and toward thousands of independent software vendors (ISVs) and ASPs. Longer term, however, capacity service providers (CSPs) will offer comprehensive, replicable hosting platforms that are far more robust, reliable and economical than individual ISVs, ASPs, systems integrators and IT managers can develop and maintain themselves.

These developers, therefore, will write applications atop wholesale-infrastructure platforms offered by a relative handful of CSPs. This will increasingly centralize vast amounts of IT selection and purchasing power in the hands of a small number of huge CSPs. Taken to its logical extreme, this trend could ultimately allow these providers to define, and possibly even acquire, the systems and software vendors that win the CSP infrastructure race.

The Revolution Continues
No, the Internet revolution that was launched in the late 1990s is not dead. But it will roll out much differently than many pundits initially projected. It will, for example, begin in business, rather than in consumer markets; and will pick up momentum primarily in departments of large enterprises, rather than in small and midsize businesses. Adoption, therefore, will be driven by solutions to pressing business problems and by hard-nosed ROI calculations, rather than by fashion or spontaneous whim.

As a result, market and industry transformation will not be like the cataclysmic collision of the huge meteor that many believe covered the earth in clouds of dust and extinguished the dinosaurs. It will be more like a high-speed replay of the tectonic shifts that created the continents - gradual, inevitable movement; intermittently jolted by massive earthquakes and volcanic eruptions; resulting in a total transformation of the entire landscape. And the coming business Internet revolution will be just as inexorable, just as powerful and just as inevitable.

Editor's note: This column first appeared on, an site.

Tom Kucharvy is President and CEO of Summit Strategies Inc., an independent market strategy, research, and consulting services firm in Boston, which he founded in 1984.

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