E-SERVICES: Next Generation Ebusiness

E-services are internet-based applications that communicate with one another, fulfilling requests and triggering other e-services that, in turn, carry out their parts of some complex workflow or transaction. There are several key
differences between today’s web-based applications and tomorrow’s e-services. They are: 

  • You don’t have to go to a website to trigger an e-service. An application running in any device–on or off the net–can request an e-service. Once the request is received, the appropriate e-services will kick into action. 

  • E-services are self-contained, modular, mix-and-match applications. They act as resources to other applications. E-services can be performed, initiated, scheduled or committed by software with or without human intervention. 

  • E-services are self-describing applications. Each e-service knows what functions it is capable of performing, what inputs it requires, what outputs it produces and what its attributes are. 

  • E-services are highly visible and manageable. They are instrumented so that they can be monitored by external application management and workflow systems. An e-service may be running on a system you don’t own or control, running on an operating system you know nothing about or written in a programming language you aren’t familiar with. But you can detect and manage the state of the e-services application and the status of its outcome. 

  • E-services can be brokered and auctioned. Once a request is received by an e-services broker or directory service, different e-services applications may vie for the opportunity to perform the requested functions, based on their attributes and their current state of availability. 

Importance of e-services
Whenever there’s a new wrinkle in technology, the people responsible for bringing these new capabilities to market want us to believe that their particular contribution is going to change the way we do business. But the fact of the matter is that, among all the technologies that come to market each day, there are only a few each decade that actually change the way we run our businesses and think about our industries. The mobile phone was one such technology. The internet combined with the web has proved to be equally profound. We believe that once e-services come to fruition, they too will be the start of a major business transformation. Think about it this way. A business is a set of people and business processes that provide products and services that customers need. The business processes that make up your business are based on implicit or explicit sets of understandings and agreements. All of the business processes that constitute your particular business and make it unique and valuable rely upon services that are provided by employees, computer systems, suppliers and partners. Products are developed. Marketing campaigns are designed and executed. Credit checks are run. Customers’ phone calls and emails are answered. Products are sold and delivered. Bills are sent. Money is collected. Technical support is provided. And so on. What if each of these services were identified and unbundled and if some of them were farmed out to businesses or computer systems that specialize in just that service? 

Business and e-services
In order to decide whether e-services are likely to change your business or your industry within the next several years, ask yourself the following questions:

COMPETITION: What if a low-cost provider offered your customers equal quality, faster delivery, commodity pricing and exquisite customer service? Would your customers switch? 

NEW PRODUCTS: What if your highest value products and services no longer met your customers’ needs? How would you revamp your product line overnight to keep your customers and win new ones while keeping your margins intact?

SMARTER CUSTOMERS: What if new intelligent, electronic agents found your customers better deals than what you’re offering and you never even knew your customers were looking?

LOWER-COST STRUCTURES: What if your competitors could dramatically lower their costs by outsourcing major functions to trusted third parties?

PIGGYBACKING: What if your competitors could benefit from services you spend millions to provide without having to pay for those services? 

CHANNELS-TO-MARKET: What if your dealers and distributors found it easier to do business with your competitors than with you and took your customers with them? 

You don’t want your company to experience any of these scenarios. Yet, the e-services revolution is going to enable these and many more. Soon, the competitors you know and many you’ve never heard of will be providing surprisingly flexible, low-cost, high-quality products and services by linking up in real time with a startling variety of new players, as well as with familiar players with new capabilities. Let’s take a look at the assumptions underlying each of the aforementioned questions. 

COMPETITION: How could a rival company beat your prices while offering equal quality, better service and faster delivery? Well, what if that rival were able to slash its overhead costs by outsourcing most of its operations and administration, as well as sales, customer service, manufacturing and delivery?

What core competencies would your competitor keep in house? Undoubtedly, this rival company would want to maintain its own customer database with detailed customer preferences. Perhaps it would do all of its own product design and development, and it would definitely want to have a real-time pipeline of information direct from customers. This information pipeline would give your rival an early warning system for all quality issues. A flexible brokering and outsourcing capability would allow your competitor to switch suppliers and partners on the fly to optimize efficiencies. Costs would be contained because everything would be paid for on a per transaction basis. 

NEW PRODUCTS: How would you revamp your product line overnight if you had to? What if you were able to design a new solution set without worrying about your existing products or about all the business process changes you’ll need to make to handle it? Assume you are designing a new company from scratch. Now, focus on delivering the highest possible value to your existing customers and those you would like to attract. Think of all the services you would want to wrap around the products you offer to provide a really complete solution. Then assume that you can procure all of those products and services elsewhere at commodity prices. And assume that there is little overhead involved in procuring those products and services and managing those partners. If you realize that e-services will shortly be available to transform your business, you can start designing your new product portfolio and solution set today. 

SMARTER CUSTOMERS: We have to assume that we will soon no longer be able to pull the wool over customers’ eyes. Arbitrary price differences based on geography, distribution channel or product bundling will be quickly uncovered by intelligent comparison shopping agents. Our product differentiation will have to be real, not artificially inflated by marketing smoke and mirrors or sales tactics. In order for your products to stand up in this world of ruthless competitive scrutiny, their features and attributes will have to be even more transparent, accessible and searchable. You may find that additional information, like location and availability, become more crucial factors in the decision-making process than price alone. In order to play in this game, you will need to be sure that the attributes of all of your products and services are so clearly articulated that they can be assessed by electronic comparison-shopping robots. You will need to expose your products and services to the scrutiny of e-services that are on a search and procure mission. 

LOWER COST STRUCTURES: The e-services revolution will enable lower cost structures. Today, some large companies outsource certain functions–notably the management of their legacy computing infrastructure or their networking operations. Some smaller firms also outsource many parts of their operations. Payroll processing, website development and hosting, and credit card processing are examples of activities that many companies leave to the experts today. Soon, many more services will be outsourced to companies that specialize in performing certain functions cost-effectively. For example, bill presentment and reconciliation, credit checking, freight forwarding, customs clearance, field service, inventory management and supply replenishment are all services that can be easily procured today from a variety of service providers. Tomorrow, even more capabilities will be available from focused third parties. For example, what if you didn’t have to have an IT department at all? What if all your IT functions–from email to ERP–were simply purchased by the transaction or by the employee or by the customer? What if all of your procurement functions were outsourced? What if all your customer service functions were outsourced? What if all your marketing functions were outsourced? What if every single function that your organization needed could be purchased more cost-effectively than you could do it yourself, with no loss of timeliness, customization, control or quality? Wouldn’t you strip even more functions out of your organization’s overhead and simply buy the services you needed on a per transaction basis? 

PIGGYBACKING: Today, a number of companies and industries have new competitors that benefit from the investments that preexisting players have made. For example, in most countries, established telecommunications companies must give new competitive entrants access to their services infrastructure at low rates. Banks provide check clearing and trade settlement services that many competing non-bank financial institutions now use at competitive prices. Utilities are providing energy that competitors can now resell to businesses and consumers at lower cost. This piggybacking of new competing services on top of existing services infrastructures is the way the game is played in the deregulated world. But why will this phenomenon stop with deregulating industries? What if a valuable service that your company provides was suddenly available to all comers at competitive prices? For example, what if you offer valued design services to your customers–design services that are currently bundled in with your higher-margin products? Perhaps, after analyzing the returns, you will realize that you could make more money by unbundling those design services and making them available separately. At that point, low-margin competitors would suddenly be able to offer your design services along with their products. Yet, your company would be providing the higher margin service that it’s really good at and known for, you would have many more customers, and a good fraction of that total customer base would still opt to buy your products. Instead of hiding your core competencies inside your products and services, you will be looking to expose each of the services you provide so that you can exploit any or all of them for the largest possible audience.

CHANNELS-TO-MARKET: Today, many companies are worried about alienating their distribution partners by selling direct over the internet. These companies realize how much they rely on the agents, brokers, distributors and retailers to sell their products. What if your channel partners could find identical products and services at lower prices and higher margins to sell to your joint customers? What if they could provide each customer with a custom-designed product with no extra cost, time or overhead? Why would they stay loyal to you? I believe we have to assume that our channel partners will have many more choices and a lot more information about competing products and services in the near future. We also need to assume that our mutual end customers will have access to the same information. How do we keep our partners from defecting to the other guy’s products? Traditional lock-ins will begin to lose their efficacy in an e-services world. We need to retain the loyalty of our channel partners and our end customers by making it easy for them to do business with us. We need to turn our own arcane business processes into easy-to-use e-services that will let our partners quickly customize and configure our products for each end customer. We can also take advantage of others’ e-services to add value to our own products by making it easy for our partners to snap together a total solution that meets each customer’s needs. At the same time that we make it easier for our distribution partners to procure, customize and add value to our products and services, we should be able to expand the ways we reach the market. New ‘infomediaries’ and aggregators are emerging. Many of these are potential new channels for our products and services, particularly when we package these up as e-services that can be discovered, examined, auctioned off or brokered with little or no human intervention. Today’s competitors may even become tomorrow’s partners, as customers snap together e-services from a variety of suppliers in order to fulfill their unique scenarios. 

How soon will e-services be real? 
E-services are already alive and well on the internet. The difference is that we now have a convenient name for them. And we have a better idea of where we are going. Many examples of e-services are on the market today. Many more will turn up. Here are a few.

  • AN E-SERVICE EMBEDDED IN A WEBSITE: If you have ever used the web, to help find out how to get from where you are to where you want to go, the chances are that you have used Mapquest’s mapping service. As soon as you re-quest directions, the Mapquest e-service is launched and returns the results. The Mapquest application typically runs on the Mapquest server elsewhere on the net. But, from the customer’s standpoint, it feels as if it’s right there. 

  • AN E-SERVICE THAT SITS BEHIND A WEB APPLICATION: There are many other applications you may have used on the web that you never actually see. For example, when you order a product online and taxes are calculated, the chances are pretty good that the tax calculation is being performed behind the scenes, in real time, by Taxware, an e-services application that can be plugged into any internet-based application. Or, if you bank online and avail yourself of a billing service, that service is the one that’s probably presenting you with your bills electronically.

  • THE E-SERVICES EVOLUTION: What’s really different here? You could say that we’re simply describing a new generation of outsourcing opportunities. That’s certainly one way to look at the e-services wave. But we think that the e-services revolution is a bit more seductive than simple outsourcing. First, remember
    that these early examples are not yet taking advantage of much of the technology that is just now being brought to bear on the optimization of e-services. Today, we tend to use these internet-based applications the way we would do business with any partner to whom we outsourced a key function. We select each partner carefully. We put service-level agreements in place. We monitor processes and quality carefully. We spend a lot of time honing our partnering relationships. This takes a good deal of time and effort and limits the number of partners we can have. Tomorrow, as the e-services infrastructure evolves, it will be much easier to link in e-services almost on-the-fly. Each service will have its own service-level agreements, monitored processes and quality controls. End-to-end application management will ensure that customers’ transactions never get lost.

    Highly granular security will prevent mishaps. There seems to be a tornado brewing around the concept of e-services. While HP is popularizing the notion, Oracle has also been singing a similar tune, suggesting that its customers think about leaving their applications with Oracle and simply running and accessing them remotely. Both Oracle and HP are busily acquiring and investing in companies that supply e-services offerings, like travel reservation companies and others. We expect that IBM, Microsoft, Sun and many others will quickly climb on the e-services bandwagon. They will all bless the concept and show how they and their customers are already providing e-services of various kinds. There’s also a whole slew of internet veterans and startups that are launching e-services businesses. The e-services revolution appears to be gaining ground. 

New business models
Part of the appeal of e-services for technology companies is the opportunity they afford to try out a new business model. Once upon a time, you could sell computer hardware with a nice profit margin. Then software became attractive because of its low cost of goods sold and resulting higher margins. Now that both hardware and software have become commoditized, every technology company is beefing up its higher margin professional services organization.

E-services is the next logical step on the evolutionary ladder. Don not focus on hardware, software or bodies. Instead, sell a utility that people will pay for every time they use it. We expect to see a lot of creativity being exercised as companies launch their own e-services strategies. Gone are the days of simply buying software on a license basis. Soon, we will be packaging up our core competencies and making these available to all comers on a per transaction basis. Instead of buying hardware and software, it will be given to companies in exchange for a cut of the action. Instead of buying each other, companies will be investing in one another in order to receive a cut of the down-stream profits as traffic and momentum build. We are going to see a lot of interesting ‘coopetitive’ deals as companies test a variety of new business models. 

Excerpted from Preparing for the 
E-Services Revolution 
By Patricia B Seybold 
Courtesy: Hewlett-Packard

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