Transform, Build, Run and Leverage

one hand, there is IBM’s vast repertoire of hardware and software products,
not to mention its exhaustive suite of services. On the other, there is
IBM’s ‘ebusiness’–a word that has now become a brand, thanks to its relentless
evangelization on how ‘ebusiness’ will revolutionize the conventional
business world. IBM Global Services’ which run on hype around e-business
nearly obliterated IBM’s hardware and software and services business.
The software-cum-consulting division of IBM was created by Lou Gerstner
to separately focus and consolidate the hardware and software services
and consultancy business.

In fact,
that’s the story of IBM. Ever since CEO Lou Gerstner prophesied that the
world would become net centric, IBM has moved rapidly along the path converting
all its products–from its infinity range of servers to its S390 systems–and
services to fit in with this net-centric model. This in turn is centered
around the IBM belief that the ebusiness world will be a server-centric
world. To give an example of how well product strategies in IBM are orchestrated
to match the new world, today server consolidation is not just about consolidating
a distributed client/server computing environment which forced companies
to have servers in different locations to a few powerful servers enabling
easy management. It is about being able to consolidate large volumes of
data–a direct result of doing business on the web–in a manageable way
and make it possible for companies to respond rapidly.

Obviously, this cannot
be achieved by systems that do not have proven capabilities of reliability,
scalability and redundancy. Now superimpose this on the four fundamentals
of doing business on the web: handling unpredictability, assuring availability,
guaranteeing security and masking the complexity for users. For years,
IBM systems have boasted of the above–starting with its AS/400 to RS 6000
to S390–not to mention its services now offered by IBM Global Services.
This symbiotic relationship between IBM’s hardware and software products
and services and the emerging new world driven by the internet and web
technologies was unravelled by senior IBM researchers from its various
offices in New York State and North Carolina. While its product strategies
and future directions were revealed, what was also clearly spelt out was
IBM’s operating model called
e-business cycle
(see box on page 146)–the holy grail of IBM’s e-business initiatives.

Enabling the ebusiness

An important
result of IBM’s reengineering process and that of working with customers
over the last three years, one of the key underpinnings of ‘the e-business
cycle’ is this: having a perspective is critical in business. Therefore,
the e-business cycle does not have a start or a finish. It is a continuous
cycle which is based on the theory of dynamic reengneering. It is based
on what John Patrick, VP, Internet Technology, terms as the sense and
response theory. In his opinion, any company that works with an 18-month
plan to start, develop and build a project will not exist. They have to
"think outside in" all the time and be able to respond to changing
market needs dynamically if they have to exist in this new world. Hence,
transform, build, run and leverage in one continuous motion.

There is really no right
and wrong place to enter the cycle. It is entirely up to a company to
choose at which point of the cycle they would like to get in and the order
in which they would like to move in. The point is to first make companies
get comfortable with the idea that their business is about to change and
then help them manage the various aspects of change through the process.
Therefore a company can be in two or more parts of the cycle at any given
time depending on the time cycles of various applications and their deployment.
According to Robert LeBlanc, VP, software solutions, "The

realities of e-business is
all about having to do something in months as opposed to years, about
building relationships, mass customization, creating traffic to the site
and providing quality service time and again." All of these in internet

The end
reengineering where the process of building an application, running it
in a reliable and secure environment and leveraging on the data and information
thus generated and transforming the organization will be a continuous
one which will be responsive as opposed to reactive. Of course, it is
easier said than done. It is not easy for companies to rebuild their existing
applications to the web. Worse, not many companies are able to see in
what ways new internet technologies and the web will wreak havoc on their
existing businesses.

As for supply
chain, the supply and demand planning time reduced from 45 plus days to
20 days; ‘pull’ replenishment improved dramatically–from 0 to more than
80%; the on-time delivery improved from 30-60% to 77-95%; cycle time of
order entry to delivery reduced from 27 and 44 days to between 2 and 23
days. Total cumulative savings: $1.7 billion. In its second phase, it
moved into the second aspect of its business model–web enabling its core
business processes (see box3). Procurement and customer care was enabled
and simultaneously made easy for customers to do business with IBM.

Said Ric Telford, Director,
e-business Technology, "By reengineering internal procurement processes,
using new tools to reduce supplier prices and costs, strategically sourcing
services, and increasing the web based purchasing–up from $600 million
in December 1998 to $12 billion in 1999–IBM has successfully managed to
save several millions of dollars thus far. In this financial year, our
savings is expected to be an estimated $240 million."

In 1998,
IBM transacted 14 million self service user transactions on the Net, avoiding
close to $300 million in call center and field specialists support cost.
This is expected to double in 1999. Likewise, in 1988, 15% of IBM’s internal
training was done through web-based distance learning. The same is expected
to double this year bringing an anticipated savings of $100 million. By
automating the millions of emails received via the website, IBM has been
saving nearly $2 million annually even as they have been improving responsiveness.
All of these were achieved using S/390, SP2, Netfinity servers, IBM middleware
and software, including Net.Commerce, WebSphere, Java, Notes/Domino and
DB/2 universal database.

Holistic approach and

Of course,
IBM has an obvious advantage over other competitors–that of having the
largest installed base of IBM systems, both large, small and medium sized.
Its other advantages–consulting and software services–are aspects which
few others can boast of. Armed with all these, IBM rarely stops at giving
a one-off solution. Its suite of ebusiness and commerce services covers
return on web investment (that is, creating a business case, setting up
a measurement system and measuring return on investment), web selling
services (that is, understanding your brand and positioning it), security
and privacy services (starting with assessment and planning, architecture
and design, implementation and security management) to EDI and web EDI
services (setting up payments gateway, eprocurement services and skills
transformation services).

Against popular
belief, these services are offered across segments including the small
and medium business (SMB) segment. In terms of size, small would be less
than 50 employees and medium would be less than 500 employees. That the
less than 50 category is the fastest growing segment in the world in terms
of adopting and using information technologies is definitely not lost
on IBM. Its technologies such as Quality Collaborative Services (QCS)
and Home Page Creator have been created specifically for this segment.
While allowing small companies to participate in creating a supply chain
in the new environment without having to own all parts of the chain, Home
Page allows them to set up their web business easily. Besides the SMB,
companies whose business model is based on the internet is another category
which is focused on by IBM.

IBM has quite
a few small companies under its belt. To name a few–eSeeds, an internet-based
company into selling gardening products, Bonnie Ott Promotions and Rediff
On the Net. For IBM, the road to communicating that ebusiness is not about
ecommerce but about how to manage inventory, about transforming the business
and leveraging the network, about transforming the business processes,
about building long-term relationships is still many miles away.


in New York.

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