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E-biz on Demand

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DQI Bureau
New Update

Can you think of the common thread that runs between things as diverse as

water, gas, telephones, and electricity? A clue. Are you thirsty? Get the water

tap running. It’s dark snap on the light switch. Today we take these

facilities for granted. But they brought about a paradigm shift when they became

essentials of civilized life from being mere luxuries. They had a profound

effect on human civilization and soon became safe, reliable, and easily

accessible. Of course the research behind inventing these is long forgotten, as

they have become the basic ingredients of daily life.

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The stages of development in methods of power generation are ancient history

now. During the days of electric turbines, if any business unit needed

electricity, it had to build a power generation plant to meet that need. It did

not have too many options. Today, the dynamics has changed to ‘pay according

to use’ or the utility model. IBM is banking on the same utility model to take

IT to the next stage, namely e-business on demand. And the market size is

estimated to be huge. Today, esourcing is a $6 billion business, most of which

lies in simple Web hosting. But by 2003, it’s projected to grow into a $55

billion market. And as it takes off almost all the growth will be in the

high-end value-added segments.

The U-model



The use of an outsourcing model has almost become a cliché these days.

Today companies across the globe are embracing the outsourcing option with open

arms and converting fixed cost like systems, manpower and electricity into

variable costs and focusing on their core business as someone else tends to

their IT complexities.

IBM is now taking outsourcing to its logical extension - esourcing. It is

only a matter of time before ‘the delivery of standardized processes,

applications and infrastructure over the network, as a service with both

business and IT functionality’ becomes a reality. In e-esourcing you have

on-demand delivery of infrastructure, applications, and business processes in a

security-rich, shared, scalable and standards based computer environment over

the Internet for a fee. Seems a lot like the ASP model. So is IBM getting back

on the ASP bandwagon? Counters IBM Global Service’s general manager for

e-Business hosting, Albert Lee Han Kiat "The original ASP models ran into

difficulty as they did not offer customized enterprise wide solutions and

integration with their existing legacy system. We have tied up with a number of

strategic partners and their application to become web enabled and follow the

remotely hosted model."

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Why e-biz on demand



While the first wave of the ASPs failed, IBM has launched a major ebusiness

on demand initiative. IBM believes that the demand for such services will be

driven by the ever-falling bandwidth prices. This trend will allow an enterprise’s

virtual private network to economically support more load sharing and

distributed architecture across data centers. The result: Network delivery of

enterprise applications and computing power becomes ever more feasible. However

in the Asia Pacific region and especially in countries like India, problems of

internal bandwidth will hamper the growth of esourcing. The second driver here

is the rise of distributed architectures. As more and more content presentation

and delivery migrates from centralized servers to distributed networks of

servers, companies will request for video streaming and other media rich

applications. And finally there is the advent of server and storage

virtualization. Increasingly companies are realizing that rather than investing

in dedicated physical computing and storage resources, they can have limitless

‘virtual’ capacity on a pay as per usage model. Companies are fast realizing

that these trends will convert IT to the utility model. No need to own the

generating plant if you get as much as you want and when you want.

IT

Capabilities

  Important/Very

Important to customer 
Would

you use a utility
 Security

Management
78% 75%
 Storage

Services
68% 83%
 System

Management
65% 71%
 Web

Hosting
58% 93%
 e-mail

Management
42% 88%

Business

Capabilities

  Important/Very

Important to customer
Would

you use a utility
CRM

Functions
65% 94%
Sales

Force Automation
64% 73%
e-commerce

Function
60% 90%
Supply

Chain Functions
45% 61%
Vertical

Business Functions
45% 76%
Collaborative

Functions
39% 90%
To

cater to the growing ‘e-business on demand’, IBM is investing $4

billion to build up its Web-hosting capabilities
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The strategy



The IBM e-business on demand model depends on three key elements viz.

Infrastructure on demand, business process on demand and know-how.

Infrastructure on demand is at the bottom layer of the strategy and aims at

providing capacity on demand for issues like processing, storage and bandwidth

as well as the management services to operate, optimize and administer a shared,

scalable, underlying technical platform.

Comments Kiat, "Infrastructure on demand helps to keep you from gambling

on unfamiliar technology. Our objective is that our customers should concentrate

on their core competency and leave the technology management to us."

Thai

Masala
Thailand

is a tourist delight. Apart from the famed nightlife, there is a lot to

see during the daytime as well. During the brief sight-seeing sojourn in

Phuket, we were sold elephant and bullock cart rides (imagine getting an

Indian to try these out in a foreign land!) and visits to a cashew factory

and departmental stores. The simple principle the Thais follow is to sell

everything. And there’s no dearth of buyers. We saw some white tourists

taking the bullock cart rides and clicking away at the countryside for

posterity. However, the most eagerly awaited visit was something quite out

of the world! The nightlife in Patong Beach has no semblance to the day

life. Most of the IBM conference delegates were eager to visit the same

including us presswallahs. In fact, a Delhi-based CIO was overheard

remarking, "I guess the last IBM session is happening on Patong

Beach!"
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The second layers - business process on demand - strengthen the basic flaws

of the ASP model. Web based integrated software from IBM and its business

partners help them to design and deploy e-business applications as well as

entire business processes (for example, e-procurement). All this is enveloped by

IBM’s repository of know how and expertise acquired from decades of

outsourcing and service experience.

The question is whether companies will fall for this bait. In early March

this year, American Express signed a seven-year £2.8 bn deal with IBM to use

its computing resources on a utility basis. As per the deal IBM will provide

data centers and computer services from Amex facilities, support the company’s

systems and web sites, and provide technical support services globally. It seems

like a win-win situation for both the companies. For instance, during the

Christmas shopping period, Amex handles many transactions and can simply scale

resources up or down according to peak pressures rather than adding new

capacities, which might be redundant after the peak loads.

IBM is serious about its e-business on demand initiative. While it is already

one of the world’s largest hosting businesses, IBM is further investing about

$4 billion to build out this capability. The potential — a $55 billion market

by 2003. And that is just the tip of the iceberg as hosting is a very primitive

version of the sophisticated computing services that customers will be able to

rent in the future. And if IBM is right on this trend, it could be laughing all

the way to the bank.

Yograj Varma in Phuket, Thailand

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