소프트웨어 산업의 가치사슬 : SCM 관점

1. 소프트웨어 산업의 가치사슬: SCM 관점 미래 소프트웨어 연구 모임 2002년 12월 12일

2. Background and Motivation • Offline guy goes to ‘Teheran Valley’ • The only thing he had was so-called “SCM perspective” • What they were interested in was the questions like: • What would be the next IT/SW thing in next several years? • How can Korean software industry survive and grow in coming years? • What would be the roles and ways for the industry leaders like SDS to focus on? • Challenges • What are the winning factors of competition in software industry? • How have they evolved to current state and where are they going? • Is it technology or marketing, strategy or implementation, standard or lock-in? speed or quality? Questions go on and on…

3. Personal Experience and Biases • Research and consulting experiences in manufacturing and service operations, and supply chain management • Implementation over (intended) strategy • Delivered value (= benefit – cost) in total, not marketing or technology • Network dynamics over static and linear worldview • Every industry is a complex adaptive system • Teaching experience of introductory MIS course and ERP/EAI issues • Students, IT people, and executives • Curiosity in various aspects of software, e-business, and new IT gadgets • Purchasing experience of e-book from Amazon.dom using .NET passport to read on iPAQ PDA • Conclusion • There must be a story out there I can tell with my own voice!

4. Formulating and Refining the Question • Industry study • Basic statistics and trends • Innovation infrastructure • New product • Major issues and trends • Wireless platforms and applications • Ubiquitous access • Web services • EAI (SCM, CRM), Storage solution, etc. • SCM Perspective • What is the meaning of the Web Service development from SCM perspective?

5. Software Industry from Dual SCM Perspectives • Observing software industry from SCM perspective • Dual framework • Software solution supply chain • Software tools and platforms (package software) • Application software (package, embedded and customized software) • Digital contents • Software services and distribution • Customers (Businesses and consumers) • Vertical market supply chain • Software solution for businesses • Finance, telecommunications, manufacturing-retail, entertainment, etc. • Software solution for personal services

6. Management Framework • Strategy • Target Market, Value Proposition, Product Concept, Competitive Priority or Distinctive Competence • Process, Players, Roles, Activities, Capabilities • Leadership, Relationship, Cooperation • Design and Development • Product, Supply Chain, Process • Communication and Coordination Mechanisms • Reengineering • Operations and Improvement • Meeting the Demand in terms of Cost, Quality, Time, and Variety • Continuous Improvement of the Operations in terms of (Information, Control, Buffer)  Pushing out efficient frontier • Synchronization, Flexibility, and Waste Elimination • Resources • Tangibles • Intangibles: Relationship, Problem Solving, Learning and Knowledge

7. Elements of a Supply Chain 1 • Nodes • Existing players • Raw material suppliers, part suppliers, module suppliers • B2B service providers, equipment suppliers, software vendors • Set manufacturer, wholesaler, retailer, logistics service providers • B2C service providers, infomediaries, consumers • Innovators, the converted and goners • What to observe • The roles in the network (goals) • The activities to carry out the role (means) • The competitive capability and resources (both tangible and intangibles) • Design-Development-Delivery • Plan-Source-Make-Deliver • Resources • Physical resources, human resources, intangible resources (knowledge, culture and relationship)

8. Elements of a Supply Chain 2 • Arcs • Information and cash (payment) flow • Physical flow • Logistics and reverse logistics • What to observe • Relationship and power distribution • Trust and sharing information, risk and gains • Transactional • Contractual • Partnership • Integrated (in-house) • Economic and operational mechanisms for value exchange

9. Elements of a Supply Chain 3 • Battle Ground • Domain: Product or Value • Customer, Competition, Change • Complexity and Uncertainty • Scope • Entire Network, Dyadic Relationship • Up-, Downstream • Global, Regional, Domestic • Performances • Efficiency and Responsiveness • Internal: cost, quality, inventory, capacity utilization, service rate, lead time, flexibility • External: Price, quality, variety (customization), availability, fast delivery, on-time delivery, information

10. The Scope of SCM • Strategy • Domain, Role, Complementary Assets • Leadership, Coordination, Relationship • Design and Development • Supply Chain Design • Structure, Function and Process • Product: Design for SCM • Organizational Arrangements • Operations and Improvement • Physical function: Plan-Source-Make-Deliver • Market mediation function: Plan-Source-Make-Deliver • Information function

11. SCM is defined as trying to establish and maintain optimal configuration of managerial and technical links with upstream and downstream partners. Upstream Suppliers to Manufacturer Manufacturer to Distribution Channels Downstream Managerial Link (Relationship) • Vertical IntegrationInternal/Subsidiary/Keiretsu • Dominating Partnership • Strategic Partnership • Transactional Relationship • Supplier Development • Trust and Information • Risk and Gain Sharing • Coordination and Incentive Mechanism • Continuous Improvement • OEM Management (Brand Products) • Trust and Information • Coordination and Incentive Mechanism Technical Link (Process Link) • Virtual IntegrationConcurrent Engineering/Lean Flow • Ad hoc LinkProblem Solving/Batch Order • Independent (No Link)Standard Products/Spot Purchasing • NPD Process Integration • Material and Equipment Development • Core v. Standard • Product Planning • Pre-Launch Marketing • Service Preparation • Q-C-D Performance • Production and Materials Planning and Control • Sales Information and Forecasting • Inventory Decisions • Logistic Services A Comprehensive Framework for SCM

12. Infrastructure End User Supplier OEM Manufacturer Contract Supplier End User Manufacturer End User Distributor Distributor Reseller Retailer Infrastructure End User End User Nonlinear Supply Chain Linear Supply Chain Basis for Collaborative Interactions Changing SCM Views • From value chain to value constellation

13. Lessons and Insights • The lessons of SCM research and experiences • SC success is determined by the strength of the • Nodes and Arcs • And the bottleneck of the chain (can be a node or an arc) • The insights from complex adaptive system theory • The structure matters • Which nodes are connected to which and how? • Linear chain • Hierarchical star network • Egalitarian random network • The tipping point and positive feedback

14. Web Services • What is it? • Business and consumer applications, • Delivered over the Internet, • That users can select and combine through almost any device from personal computers to mobile phones • What’s new? • Permit disparate systems to "talk" with one another—that is, to share data and services • Without requiring human beings to translate the conversation • Automation!!!

15. Some Basics and Jargons in Web Services Discussion http://www.xmethods.com/

16. The Meanings of Web Services • How they are accessed • By human thru web browser or wireless devices • By application programs and other web services • What do these really mean? For the vision to be realized, it requires • In technical sense • Service directory • Communication standards • Application standards across hardware and software platforms • Authentication, security and payment scheme • In business sense • How can new businesses be developed around this new ‘vision?’ • What is known for this critical question is next to none!!!

17. Client-Server Model for over the Web • Changing software battleground • From client-side to server-side • For ubiquitous access to information services • Competitive implications for software industry • Changes the rules of the game

18. The Universal User Profile • Access to services • Through a variety of devices and in a variety of roles • Passwords and other user information will be stored in the form of UniversalUser Profiles (UUPs) • UUP serviceproviders • Collecting, storingand letting othersto use UUP information • The trust of consumersand on-line partnersis a must!!!

19. The User Experience • Promises • A more consistentand uniform experience • Allow consumers tointegrate and personalizedata and services fromdiverse sources • Service ecosystem • Stock investment • Travel planning • Business Implications • Intermediaries • Competition amongconstituent serviceproviders

20. Web Services Cut SI Costs • Enterprise ApplicationIntegrations (EAI) • The source of the single biggest ITexpense ofmost companies • Cut the amount of timeand money up to 20% • Business Implications • New opportunities forSI providers andcustomers

21. WS Change Business and Customer Relationships • Promises in business relationships • Reduced transaction costs  encourage the outsourcing and flexible operations  unbundling corporations across supply chains  increased fragmentation of value chains and industries  more narrowly focused companies • Promises in customer relationships • For on-line B2B incumbents • Risk of losing direct links to customers • Intermediaries with UUPs directing users to service providers • Temptation too big, hence the possibility of regulation • For B2C incumbents like e-tailers, e-mail services, financial-service providers • As consumers dealt directly with their UUP providers, companies without strong brand names or reputations could be relegated to the virtual backwaters

22. Thorny Questions for All Businesses • How can you use web services to reduce IT costs and time to delivery? • What new revenue-generation services can your company offer via the web? • What are the new ways to interact with your trading partners? What threats and opportunities will emerge? • Do you have the organizational and IT capabilities to operate in the web services world? • How will each of the competing web services architectures compare in terms of costs/capabilities, and your company’s IT environment?

23. Web Services with J2EE

24. Web Services with .NET

25. J2EE vs. Microsoft .NET • http://www.middleware-company.com/

26. Comparative Analysis 1

27. Comparative Analysis 2

28. .NET over J2EE • .NET has Microsoft's A-team marketing it • .NET released their web services story before J2EE did, and thus has some mind-share • .NET has a better story for shared context today than J2EE • .NET has an awesome tool story with Visual Studio.NET • .NET has a simpler programming model, enabling rank-and-file developers to be productive without shooting themselves in the foot • .NET gives you language neutrality when developing new e-Business applications, whereas J2EE makes you treat other languages as separate applications • .NET benefits from being strongly interweaved with the underlying operating system

29. J2EE over .NET • J2EE is being marketed by an entire industry • J2EE is a proven platform, with a few new web services APIs. .NET is a rewrite and introduces risk as with any first-generation technology • Only J2EE lets you deploy web services today • Existing J2EE code will translate into a J2EE web services system without major rewrites. Not true for Windows DNA code ported to .NET • .NET web services are not interoperable with current industry standards. Their BizTalk framework has proprietary SOAP extensions and does not support ebXML • J2EE is a more advanced programming model, appropriate for well-trained developers who want to build more advanced object models and take advantage of performance features • J2EE lets you take advantage of existing hardware you may have • J2EE gives you platform neutrality, including Windows. You also get good (but not free) portability. This isolates you from heterogeneous deployment environments • J2EE has a better legacy integration story through the Java Connector Architecture (JCA) • J2EE lets you use any operating system you prefer, such as Windows, UNIX, or mainframe. Developers can use the environment they are most productive in. • J2EE lets you use Java, which is better than C# due to market-share and maturity. According to Gartner, there are 2.5 million Java developers. IDC predicts this will grow to 4 million by 2003. 78% universities teach Java, and 50% of universities require Java

30. Sun vs. Microsoft over Java: Round 2 • Round 1, October 1997 • A contract dispute over Microsoft's distribution of Java compatible technology, which the parties settled in January 2001 • Round 2, December 3 2002 • Sun's call for a preliminary injunction that would force Microsoft to ship a standard version of the Sun Java Virtual Machine (JVM) with each new copy of Windows and Internet Explorer • Sun filed a private antitrust suit against Microsoft in March claiming the software giant used its desktop operating system monopoly to slow and sidetrack Java's momentum as an alternative platform for developers

31. Vertical Market Penetration 1 • Finance.NET • Integrating diverse financial service scenarios • Passport.NET • Alert service • .NET MyServices • Instant Messaging • SI • Backend • .NET Enterprise Server • VisualStudio.NET • Front-end • Windows.NET • Office.NET

32. Finance .NET • New service ecosystem using web service

33. Finance .NET

34. Vertical Market Penetration 2 • Bank Town • A spin-off from KT • Strategic alliances with Compaq, Microsoft, Intel (September 2001) • E-Banking solution development • Migrating from banking ASP based on Unix platform to .NET platform • Payment and billing system • For KT using .NET platform

35. Implications 1 • Software industry • Who will win the platform war? • Winning developers • Winning customers • Winning vertical markets? Or consumers? • Who will win the vertical markets? • Component functionality? • Application package value • Cost and time? • Winner-take-all?

36. Microsoft’s Strategic Deployment VisualStudio.NET Software Talents Providers Pocket PC,XBox B2C Web Services ASP.NET Digital Contents Providers Windows.NET Customized Software Developers Office.NET SQL Server .NETFramework .NET MyServices, Passport Consumers and Users in Business Explorer, Outlook, MSN .NETEnterprise Server Application Software Vendors Other Businesses Hotmail, Messenger CRM and Other BIZ APPs SI and IT Consulting Media Player, Reader B2B Web Services Vertical Solutions • Proprietary standards • Bundling and interoperability • Quality improvements Consumer Front Developers and Supplier Front

37. Monopolistic Lock-In • Preempting the resource pool • Investing in education and training (future users and developers) • Java v. VB, VC++, C#, Linux v. Windows • Customers lock-in • The best value for the customers • Consumers and businesses • E.g., windows and office  outlook  exchange server  .NET server  .NET framework • MSN messenger and hotmail  passport  MS reader and MS media player  e-Book and multimedia contents  .NET server • Complementors lock-in • Proprietary standards become ‘de facto’ standard • No more customer base worth trying • Competitors lock-out • Unbreakable virtual monopoly • Even US DOJ cannot break it!!!

38. Losers: What Do They Have in Common? • Do not understand the ‘Name of the Game’ • Focusing on ‘state-of-the-art’ technologies • Feeling comfortable about their own innovations and successes • Believing in ‘Justice’ or ‘Fairness’ • Lazy or ignorant • Going • Real Player, AOL messenger, Acrobat reader, Unix, Parm, etc. • Almost gone • Netscape, Macintosh, Borland, Netware, etc. • Gone and forgotten • Wordstar, 1-2-3 and Quattro, dBase, PS2, etc.

39. Fighters: Are They Dreaming Yet? • Idealists and defenders • Hangul • Linux and several “fronts” • Adobe, Oracle, IBM, etc. • Whiners • Sun Microsystems, Apple, etc. • Do not see the opportunistic behavior of “Mass Market Participants” • Believing in “Technical Superiority” • Observers • SAP, i2, Siebel, Accenture, etc.

40. Implications 2 • Other industries • Who will win the consumer market And who will get the juice? • Closed partnership? • Open network? • New kids on the block • New roles and new agents • Losers? • SI and IT consulting industry • How can they win the ‘trust’ of customer companies?

41. The Brave New World of New Web Services • The real reason behind the ERP/CRM/SCM failure • Or limited successes • Business processes is very difficult to automate • The U-S-A principle • Training and organizational change • Web services from business perspectives • Intra- and extra-nets: closed EAI • The same difficulty as in SCM/PDM solutions  n to n relationships • Opportunism and transaction cost economics • Internet service eco-system • Modularization of service packages (business standards) • Pricing and payment system • Strategic alliances and consortiums • The experience of B2B catastrophes

42. Conclusions • What are the ways for Korean software companies to prepare for this brave new world?