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Understanding IBM's On Demand Transformation Strategy, Part 2

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In last week's column, we took a look at the challenges IBM was facing after the collapse of the IT industry. It was clear that the big boom years of IT investment were over and that corporate management had abandoned IT's strategic role and returned it to the position of an infrastructural expense. The weak economy also meant that IBM needed to focus on gaining market share. But to overcome these challenges, IBM needed a new message to communicate a broader vision to its customers and partners. This message had to, in IBM's view, position its products and services in a light that its customers could easily grasp, understand, and embrace. Last year's unveiling of IBM's On Demand computing initiative was exactly such a vision.

The On Demand Journey

To better clarify IBM's vision of an On Demand business environment, its executives often use the schematic below to explain the trajectory that companies follow as they evolve toward an On Demand environment.

http://www.mcpressonline.com/articles/images/2002/Understanding%20IBMs%20On%20Demand%20Initiative%20part%202%20V300.png

(Click images to enlarge.)

The X coordinates of this chart represent the journey that a company's business processes undergo. The Y coordinates represent the path of increasing IT sophistication that is needed to support the business process evolution.

In the lower left quadrant of the graph, companies develop individual solutions to optimize individual business processes. IT perhaps builds an application, purchases a packaged piece of software, or plugs the organization into a preexisting service. The "point solutions" are individual automation tasks that help optimize the individual processes that business needs.

As the level of business process sophistication is enhanced, so too is the level of IT sophistication supporting the business processes. In the diagram, a business optimizes its business process using the infrastructure of IT, which in turn begins a process of consolidation and integration. The islands of individual point solutions become organized into larger IT information structures.

For example, throughout the last iteration of automation, most companies created individual informational Web sites throughout the years of Internet expansion in order to meet the demands of customers or suppliers. These individual sites are "point solutions" solving specific needs. However, their unique natures--using different technologies and having different purposes--may make them appear as a confusing mishmash of services to the uninitiated. So, currently within the industry, IT shops are pulling these sites together using portal technology to provide an overall conformance of look and feel, while hiding some of the intricacies of the technologies that lie beneath each site. In the process of integrating, IT may consolidate some of the sites onto single computing platforms to reduce cost and complexity.

Getting Beyond the Access Phase

IBM calls this phase of the On Demand journey the "Access" phase: making the resources of e-business more accessible. But what comes next? If, as IBM believes, we are stuck partway in our On Demand journey, what's holding us up?

Part of the delay is technological, according to IBM: Technologies such as the Internet are still in the early stages of maturity. Security is also an issue. But, according to IBM, the largest obstacle by far is the culture of the business organizations themselves, cultures that reinforce the status quo, traditional ways of thinking, and silos of authority that have yet to be broken. Within a company, this might include an entrenched production department, a recalcitrant accounting department, or a lazy, behind-the-times human resources department. Within an industry, it might include entire segments of supply chains that are too technologically scattered to operate in a cohesive manner.

Making a move into this second phase is a laborious and expensive process for companies, because it necessitates that they re-think the manner by which they've traditionally done business. It's a cultural shift that, as yet, most organizations have not yet mastered.

Achieving Balance

So, by way of explanation, IBM often throws up a chart to show the real driving forces of the On Demand architecture.

http://www.mcpressonline.com/articles/images/2002/Understanding%20IBMs%20On%20Demand%20Initiative%20part%202%20V301.png

According to IBM, the real mechanism driving On Demand success is the transformation of the business culture itself--breaking down the silos and allowing the vision of the On Demand computing model to lead the organization to its goals. It's a balance that must be achieved between business process and IT evolution, in which the users themselves act as a pivot point.

In other words, if we're stuck in our current position in the On Demand evolution, it's because our users are focused on internal processes instead of long-term organizational goals. The potential of these users to collaborate in a productive manner is held captive by silos of authority and technical islands of automation. Break down these silos and, according to IBM, the resulting explosion in productivity will propel true cross-departmental/cross-organizational collaboration.

For instance, to make the On Demand e-business model work, individual departments within a corporation must come together into new collaborative teams to create new collaborated solutions using the technologies that are being offered. Likewise, individual corporations must join forces into comprehensive supply chains to mesh their offerings into more cost-effective industry-wide production and delivery systems. The goals of these efforts should be to provide services that are responsive, variable to demand, focused upon customer results, and resilient to the marketplace.

Open Source and Standards

But how do we achieve this? For a long period in the past, IBM stressed "superior solutions" or "strategic platforms" as the key toward integrating and consolidating silos: Choose the right platform (AS/400, RS/6000, or mainframe), and you'll be safe and prepared for the wave of collaborating applications that will propel your company's future. However, it's since become clear that choosing a single platform--or even a single vendor--is no longer a guarantee of success. There are too many good "point solutions" out there, and they're using too many different technologies.

Yet, if collaboration is the key, how do you achieve it with multiple vendors, each touting the superiority of its solutions? From IBM's perspective, open-source technologies that adhere to recognized international standards is one significant part of the answer. If all the systems a company chooses abide by open standards and provide for open source, the organization will be better positioned to collaborate internally and externally, across platforms.

Consolidation and Integration: A Stair-Step Approach

But, in the real world, companies are not about to throw out a perfectly good "point solution" just because it doesn't adhere to international or open-source standards. (For instance, nobody is going to kick out Microsoft, just because it's a proprietary solution.) So the second part of IBM's strategy relies upon the savings that can be achieved through the consolidation of services and resources.

"You can almost always save some money by consolidating something in IT," one IBM executive says. "The advances in storage and CPU power are continuing to accelerate, while the costs of replacing older technologies are continuing to fall. If you apply these IT consolidation savings toward business-process re-engineering, you can 'stair-step' your way toward the On Demand environment."

In other words, as IBM and other vendors provide consolidating technologies in software and hardware, a customer can and should choose the open technologies over the proprietary ones whenever possible. This strategy will move the customer toward the On Demand environment while providing significant cost-savings in the short run.

http://www.mcpressonline.com/articles/images/2002/Understanding%20IBMs%20On%20Demand%20Initiative%20part%202%20V302.png

In this stair-step consolidation/integration scheme, the Wave 1 of automation advances the business process focus, increasing the competitive edge that the organization needs. Wave 2 expands the Access through the use of things like portals to make the technologies more useable by larger numbers of users. It also begins to allow users to share the information while hiding some of the underlying complexities.

Then, according to IBM, as we exhaust the ability of Access technologies to provide productivity, our companies will focus on internal integration and consolidation of IT resources and business processes using the open technologies that IBM (and others) provide (Wave 3).

This is where server consolidation will save significant operational costs, while software infrastructure solutions like WebSphere can tie together the back-end into cohesive, integrated enterprise-wide application platforms.

Meanwhile, over time, the continued savings from the consolidation effort should, in IBM's view, be applied to re-engineering the business processes to move the culture of the organization into the On Demand environment (Wave 4).

Re-engineering the Business Culture

What is this re-engineering? IBM says it's re-educating the user base to take advantage of the integrated and consolidated IT resources.

For instance, as an example, companies should begin training their employees to work with the new systems to seek out new ways to collaborate or partner with other organizations. In a supply chain, this might mean collaborating through UCCNet to transform company product numbers to a standardized, collaborative system, to make all of the company's products available for rapid e-business supply-chain re-order. In the service arena, it may mean opening new partnerships with complementary organizations, sharing leads and bundling services to provide the customer with a soup-to-nuts service profile.

This is the "culture" shift that IBM advocates. Instead of focusing on internal processes within a department or a single organization, the new tools provided by IT should help the user become outwardly focused through collaboration with other departments and organizations to deliver better results to customers.

Idle Theory or Practical Roadmap?

All of this is, according to IBM, not idle theory, and it points to its own success: transforming IBM's 325,000 employees in 25 countries from islands of automation and silos of authority into a "responsive, focused, and resilient" On Demand organization.

Next week, in the final part of this article, we'll apply this On Demand methodology to some realistic cases and give a final picture of what--in practice--IBM believes is the current state-of-the-art model for an On Demand IT computing architecture.

Thomas M. Stockwell is Editor in Chief of MC Press, LLC.

Thomas Stockwell

Thomas M. Stockwell is an independent IT analyst and writer. He is the former Editor in Chief of MC Press Online and Midrange Computing magazine and has over 20 years of experience as a programmer, systems engineer, IT director, industry analyst, author, speaker, consultant, and editor.  

 

Tom works from his home in the Napa Valley in California. He can be reached at ITincendiary.com.

 

 

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