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CMPE 484 IT Industry Trends and Directions February 22, 2001

CMPE 484 IT Industry Trends and Directions February 22, 2001. 1. What key trends and events will drive new business investments in IT? 2. What technology advances and changes will have the most significant impact on IT deployment decisions?

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CMPE 484 IT Industry Trends and Directions February 22, 2001

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  1. CMPE 484IT Industry Trends and DirectionsFebruary 22, 2001

  2. 1. What key trends and events will drive new business investments in IT? 2. What technology advances and changes will have the most significant impact on IT deployment decisions? 3. How can organizations harness and exploit IT despite ever-increasing complexity and volatility? Business Driving IT E-Business IT Driving Business

  3. E-Business: Drivers and Responses Key Business Challenges: • Agility and speed • Focus on core competencies and processes • Customer centricity • Mass customization • Geographic scalability • Flexible IT architectures • Interoperability of infrastructure and applications portfolios Business Drivers of the New Economy • Global financial interdependencies • Deregulation • Unrestricted capital flows • Global workforce sourcing • Digitization • Global communication and transportation systems • New geopolitical realities • New Business Models and • Structures: • Aggregators • Portals • Info-mediaries • E-tailers • Hybrids • Virtually integrated • Mega-mergers E-Business Integration

  4. Total IT Spending as a Percent of Revenue(Central IS Budget plus Business Unit and “Hidden” IT Spend) 10.0% 5.0% 0% Web- Internet North America Key Technology Discontinuities Western Europe PC- Client/ Server Asia/Pacific (Dev. Economies) S/360 Mainframe Accelerating Business Unit Spending 1960 1970 1980 1990 2000 2010 IT Capital Spending as a Percent of Corporate Capital Budget (U.S.-Only) Central Central IT Baseline/ IS Budget IS Budget Infrastructure % RevenuePer Employeeas % IS Budget 50% 45% Fin./Banking 7.70% $26.8K 76% Telecom 7.27 29.5K 70 Hospitals 4.10 2.9K 72 Insurance 3.57 38.6K 66 Services 3.51 8.8K 78 Transportation 2.11 2.6K 77 Manufacturing 1.80 3.6K 75 Utilities 1.32 4.5K 70 Retail/Wholesale 1.11 2.4K 73 40% 35% 30% 25% 20% 15% 10% 5% 90 95 00 05 10

  5. New Media Changes MarketsWeb-Enabled E-Business: Four Phases Strategic Tactical 2000-2005 Transformation (Channel Exploitation) 1998-2003 Transaction (Channel Development) Increasing Business Value • Additional Features• Optimized e-business models• Mass customization• Industry-specific e-process models • DTV Exploited • Advanced Digital Set-Top Box Apps. • Data Mining • Agent Technologies • Advanced Personalization 1997-2000 Interaction (Channel Exploration) • Additional Features• E-Commerce Integration w/existing processes & systems • Communities • Streaming Media • Customer Data Aggregation• Decision Support Architectures 1996-1999 Presence (Cyberspace Placeholder) • Additional Features• Intranet Applications • Interactivity• Personalization• Basic search • Linked sites Features• Marketing information• Brochures Phase IV Phase I Phase II Phase III Increasing Application Cost

  6. B2B E-Market Maker Types Transactions Are Enabled Dynamic Marketplace Efficient Commerce Hub - Builds Efficient Markets and Assists in Market/Price Discovery - Streamlines the Process Surrounding E-Commerce Transactions Neutral Exchange Buyer Advocate Seller Advocate Transaction Enablement Channel Enabler Content & Community Portal • Prepares the Existing Channel forE-Commerce • Brings Together Communities of Buyers/Sellers Transactions Not Enabled Low Impact High Impact Impact on Pricing & Sales Models

  7. Industry/Product E-Business Benefits Digital Products/Services Business Value (and difficulty of “Webification”) Attend Online University Physical Products Vote Online Conduct Financial Transactions Local Services Order Prescription Drugs Process Healthcare Claims Order Grocery Delivery Schedule Surgery Media Transmittal Order Books Schedule Auto Maintenance Download Music Renew Driver’s License Book Travel (e-tickets) Schedule Haircut Degree of Possible “Webification” Opportunity/Threat Model Indep. Travel Agency Retail Groceries Retail Brokerage Music Very Low Extremely High

  8. Comfort IT Challenge and Comfort Zones Sales Volume PCs Challenge ERP Browser -as- platform 2-Tier Client/Server Terminals Notebooks Client Server Voice Recognition Wireless LANs JAVA Web-Enabled Mobile Phones PDAs XML Growth Mature Declining Emerging Embryonic or Early Market Maturity Stage

  9. 60% + 50% 50% 40% 40% 30% 30% 2001 2001 2002 2002 2003 2003 2005 2005 <20% <20% 2007 2007 2010 2010 Emerging Technology Radar Screen Technology Prevalence (% of Companies that really need to care) Digital Authorization Enterprise Application integration Wearables E-Payment Text Analysis ASPs Flex. & LEP Displays Now 2003 2006 Speech Recognition Biometrics Smart Cards Bluetooth Wireless Web NLP & Retrieval Voice over IP Voice Portals Synthetic Characters/ Avatars Webtops XML Enterprise Portals Affective Computing Image/Video Analysis Take-off Point (Inflection)

  10. Technology Directions: Platform Infrastructure 2000-2005 Potential 2005 Forecast(P=0.7)ImplicationsSurprises (P=0.3) Client - One primary business prof. - Continued shift from “cost of - MSFT broken up (P=0.35); device (2-spindle Wintel laptop) purchase” to “cost to support” - Non-MSFT or browser- - Palm/OS share drops below - TCO continues to risebased clients grab 30%+ 50%; multiple alternatives - 100% of wireless devices market share address unique needs (voice) have Internet connectivity - Network computing becoming - MADs success in consumer prevalent; 3rd Gen NCs succeed segment hits enterprises Server - “Big 4” (IBM, HP, CPQ, Dell) - Technology and price are - Linux achieves 15% + retain 80%+ Wintel server mkt. no longer key decision criteria market share - mainframe vendors look - Users must find alternative - W2K meets the needs for scale means for support of 90% of enterprise application requirements Network- Policy-based networks - Major network vendors/carriers - Wireless grows from less improve network mgt. must source professional svc’s than 5% of traffic in ‘99 to for policy implementation to 15% in ‘04 - Converged data, voice, video - Multivendor networking - Telecommuting backlash services save 20%, but declines; 6-7 major telcos and low penetration rates at desktop 4 major equipment camps Storage - Enterprise “Virtual I/O” -SANs are critical pipelines for - Fibre is displaced is still an illusive dream. e-commerce channel - SAN deployment stalls (P=0.2) - Most external storage networked -Disk space (rather than tape) - Disk capacity doubles per year becomes primary backup media - Shared file systems mainstream - Proprietary lock-in issues

  11. Technology Directions: Application Infrastructure2000-2005 Potential 2005 Forecast(P=0.7)ImplicationsSurprises (P=0.3) Electronic- Platform adjustment & “follow - Authentication issues - 50% of med/large enterp. Workplace me” profiles emerge for nomads - Infrastructure, Infrastructure! recentralize personal apps; - No single uniform authorization - Human impact (info glut, (P=0.2)! method for access to bus. apps queue mgmt.) - Bleaching the blue collar - Intuitive design supercedes -Integration with enterprise - Internet implodes under content richness for New Media apps an imperative its own weight (P=0.1) Application- 70% of AD performed by ESPs - No AD silver bullet - Backlash against “vanilla” Developmt. - Internal AD skills: 3GLs 40%; - “Mass or focus” defines packages/templates; return 4GLs 30%; OO/Java/Web 30% enterprise AD strategy to “build” strategy (60% - Integration is the new AD - Procurement/contract mgmt. share of AD) - Regulation and new acct. rules key AD competency rewrite AD economics Middleware - 75% of new apps use off-the- - Big growth in real-time integ., - End user rebellion as job Database shelf integration middleware accelerate business processes creativity diminishes (P=0.2) - RDBMS acquisitions merge - Zero latency moves to a - OODBMS replace RDBMSs with OS, apps and app servers must-have-to-stay-in-business for Internet apps (P=0.1) strategy Enterprise- 70% of strat. biz app decisions - Big get bigger; share of top 5 - SAP implodes Business are front-office/value chain/CRM ERP ISVs grows to 80%; but - MSFT aggressively enters Apps.- New players emerge to can’t be all things to all clients low-end enterprise apps address trading partner systems - ERP market leadership market (HR, financial acct), - 20% of large enterprises defined by vertical expertise gaining 15% share implement a front-office suite to - ERP vendors stumble, but - Siebel becomes ERP/CRM enable a CRM strategy eventually competitive in CRM powerhouse (via acquisition)

  12. Business Process Sourcing and Integration Type B Market-wide Type A High C-Commerce SCM ‘05 Type C “Pure Web” ‘99 Business to Consumer CRM ‘05 “Pure Web” ‘05 Front Office / CRM CRM ‘99 CRM ‘99 Process Scope Integration Intensity Supply Chain Mgmt. / B2B SCM ‘99 SCM ‘05 ERP ‘05 Back Office / ERP ERP ‘99 Enterprise-wide Low Template / Component Application Subscription Configured Package Built Package More Customized More Commoditized Source

  13. Connection and Application Paradigm Evolution Domain Apps E-Commerce C-Commerce Connection Paradigm Trading Partners Enterprise Cyber-Market Interaction Model One-to-One One-to-Many One-to-Any Commerce Model Channel Masterw/Supplier Slaves Channel Master w/ Preferred Suppliers Channel Partners w/ Risk sharing Application Paradigm User Productivity E-CommerceTransactions Collaborative Interaction Application Integration Point-to-Point Pre-Built Integration XML/EAI Adapters Weeks/Days Hours/Minutes Seconds/Real-time Info. Latency

  14. Critical IS Capabilities and Competencies Business and IT Vision 2. Envisioning Business Systems 8. Business Improvement Management 1. Leadership For Fusion 3. Relationship Building 7. Informed Buying 4. Information Management 9. Contract Facilitation 5. Making Technology Work 10. Resource/Skills Management 6. Architecture Planning 11. Contract Monitoring 12. Vendor Development Designing IT Architecture Delivering IS Services

  15. Evolution of CIO Role and Enterprise Governance • Mainframe Era: • Conventional Plus • Functional Head • Operational Manager • Deliver on Promises • Advisor on ‘How to’ Not ‘What to do’ • On-Time delivery • Reliable operations • Automate for Efficiency • Alert Line-Mgmt. to IT Investment Opportunities • Distributed Era: • Transitional, Shifting • Strategic Partner • Expectation Manager • Technology Advisor • Align IT with Business • Access to the Executive Invited ‘Seat at Table’ • Manage IT Department • Provide Infrastructure • Manage vendors • Reduce Business Process Cycle-time • Set Direction and Secure Benefits from “Selective” Outsourcing • Web-based Era: • Hybrid, Emergent • Business Visionary • Technology Opportunist • Drive Channel Strat. • Member of Executive Team or Assumed ‘Seat’ • Jointly Develop Bus./ IT Model; Leverage Extra-structure • Integrate Client/ Supplier Value-Chain • Define Office-of-the Future; Lead effort to Customer-centricity CIO Role Key Responsibility Business Input Major Tasks System Objective Leadership

  16. Workforce -Workplace Trends • Workforce Trends • Collaborative JIT work styles • Team empowerment/performance • External focus, customer focus • Knowledge vs. task centricity • Dispersed and mobile • Employability vs. long-term employment • Balanced risks and rewards • Greater diversity • Business-technology savvy • Workplace Trends • More collaborative work spaces • Universal connectivity • Flexible interiors and furnishings • Emphasis on functionality • Alternative workplace solutions: • - Hoteling • - Hot desking • - Shared offices • - Telecommuting The workplace is morphing into a blend of spaces and cyber-spaces. Business processes and connectivity form the new work ecology!

  17. Sourcing Strategies • Establish clear goals with strong consensus • Create “supporting” terms and conditions • Define “relative” service level agreements • Develop effective measurements and metrics • Conduct periodic performance audits • Demand continuous improvement! • Aggressively monitor and manage CIO IT Management & Governance ESP Prime Contractor(s) Retained Internal IS Competencies N . . 3 2 1 Best-of-Breed Subcontractors A “Step-by-Step” Approach Multisourcing Leveraging ESPs • Enabling IT Infrastructure - Data Center Hardware/Software Platform - Desktop Hardware/Software Platform • - WAN and LAN Network - Help Desk • Enterprise Administrative Applications • Noncore Business Processes • E-Business Development/Platform • Security Administration/Support • Integrating Business-to-IT Strategy • Business/IT Risk Management • IT Planning, Architecture and Standards • Security Strategy, Intellectual Property • Relationship and Vendor Management • Sourcing Strategies • Skills Management • Financial/Contract Management What’s In? (Retained Internally) What’s Out? (Commonly Outsourced)

  18. Summary and Action Items • Business Trends • E-business becomes the primary driver of IT investment; B2B e-commerce reaches $7.3 trillion by 2004, representing 6.9 percent of the global economy • “Hybrid” e-businesses become the dominant enterprise business model, with service quality and fulfillment, rather than cost, the key success factors • 75 percent of enterprises will under-budget e-business transformation costs by 50 percent or more, especially when trading partner related • Technology Directions • Industry consolidation continues: 3-5 dominant vendors control 70 (+) percent market share in virtually all enabling technology markets/segments • Application integration becomes a critical IT core competency, and one of the most important factors to achieve end-to-end e-business success • High availability, security and privacy become critical issues when deploying new e-business applications and infrastructure • Collaborative commerce becomes the primary objective of enterprise application initiatives

  19. Summary and Action Items • IT Management Directions • Information exploitation and interenterprise operability drive IT management strategies, rather than traditional efficiency/effectiveness metrics/methods • Business processes and connectivity form the basis of the new work ecology • While selective outsourcing remains the dominant IT organizational model, 20 percent of enterprises choose a general contractor to manage the ESP chaos • The fusion of business and IT is about enabling greater enterprise speed, innovation, adeptness and customer centricity

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