Much is made in technology circles of transforming businesses into agile, ‘on-demand' enterprises. Indeed much of the technology necessary to promote such a transformation already exists. But faced with a rapidly changing competitive landscape, businesses need to reassess the way they manage their core processes if they are to reap the full benefits of the technology, says Peter Korsten, European director of IBM's Institute of Business Value.
According to Korsten, there are four unstoppable drivers that are forcing businesses to change their view of the future, and that demand an agility of process management that many companies cannot currently boast.
First of the four is what Korsten describes as ‘competitive Darwinism': the increasing pressure on companies to differentiate themselves from competitors. As choice of products and services offerings expands, it grows ever more essential for businesses to focus on what it is that they do best and to minimise expenditure on functions that offer no competitive advantage.
Implied in this is a recommendation to outsource non-differentiating functions: "Focus on those things that set you apart from the rest, and find solutions for things that don't," says Korsten.
However, Korsten stresses that the benefits of outsourcing are undermined if the company is not tightly aligned with its strategic partners. As this close alignment will depend on efficient transfer of information between partners, it will fall on IT managers and CIOs to ensure that relationships with third parties are managed effectively.
"In this model, IT becomes the thing that holds the business together and ties the company to its partners, suppliers and customers."
Korsten says another factor driving change is the fluidity of business conditions. Customer expectations are increasing; simultaneously the opportunity for improving supplier and partner relationships has led to a situation where businesses face ‘continuous discontinuities' he adds.
This unpredictability demands a rapid responsiveness to market conditions, suggesting an ‘on-demand' provisioning of resources, says Korsten. In effect, it is through closely aligning business processes to fluctuations in the market, that flexibility becomes not only a necessity but a competitive advantage; margins on unprofitable business areas can be kept to a minimum.
The third driver to more flexible business operations that Korsten highlights is the unrelenting pressure on a company's financial operations, both from shareholder scrutiny and market conditions.
Korsten warns that businesses must embrace variable cost structures and business processes to minimise the operational risks these pressures bring. Through ‘on-demand' sourcing of IT resources, a company's infrastructure can be scaled to meet the market demand, while minimising costs.
‘Unpredictable threats' are the final driver to on-demand IT operations, but require resilience rather than flexibility. On-demand computing reduces the IT investment risk associated with natural disasters or some other major source of discontinuity, says Korsten. That is because the risk is spread across multiple partners, he explains.
Korsten insists that the operational changes he recommends are not simply ideas that favour technology vendors such as IBM, but offer genuine benefits that are only now imaginable.
"Look at what is now possible, versus 15 years ago, with the abundant availability of partners to do things with you and for you. With these new things coming on board, you can really think [of IT] in a different way." And as the keeper of the medium through which an ‘on-demand' enterprise operates, the CIO has an opportunity to lead this new thinking.
Korsten says that this approach to managing business operations and resources offers IT management a challenge to elevate their role above that of information handlers.
"The leading edge CIOs are following a couple of business directions: they understand the basics of finance, activate the discussion about what the company should do and can contribute to evaluating what is not differentiating it from the competition and focus resources on that which does differentiate," he says.
It will be anathema to many companies to relinquish hands-on control of their informational stores and operational functions. But, argues Peter Korsten, as the pressure to be flexible while minimising operational risks mounts, many businesses will find the advantages of partnered, ‘on-demand' business functions difficult to resist.
