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Three IT Developments and Their Impact

E-commerce

One immediate impact of E-commerce is that businesses must be able to transact 24 hours per day 365 days per year. This has repercussions on the information technology which is used, demanding increased reliability and availability, and support services focused on keeping the system running 24 hours per day. The requirement to trade 24 hours per day increases the requirement for system reliability, availability, and fault tolerance. These are aspects which have long been available in the mini and mainframe markets, and since 1989, these technologies have also been introduced into the pc server market place. This has resulted in cost effective and reliable products being used for truly business critical applications. In order to achieve success, companies must view this pc-based technology as they would previously have viewed mini or mainframe based systems. This means that applications development should be planned and structured in exactly the same way, and that maintenance, downtime, disaster recovery etc should all be planned prior to implementation.

Furthermore, E-commerce transacted over the Internet is no longer restricted by national or regional boundaries as is the case for traditional Commerce. Globalisation means that clients are demanding the same higher levels of service no matter location and regardless of the time-zone or time of day. Intelligent companies can use information technology to their advantage, by providing “follow the Sun” service and support. By automatically routing calls to a different time zone, a user in the United States may receive support from someone in the United Kingdom despite the fact that it is night time locally, as it is day time in the UK.

There is still one significant hurdle which must be overcome in order for E-commerce to fulfil its potential - today, the majority of users are comfortable using the Internet as a means of searching for products and for information, but a relatively small percentage would be confident in the security, reliability, and trust worthiness of purchasing over the Internet. As the security technology has developed and will continue to develop more and more users are turning to shopping online.

E-commerce requires huge investments in information technology and infrastructure capable of supporting predicted market needs. What can the supplier expect in return from the client? Disloyalty. The Internet by definition makes it easier for a client to investigate alternative products and alternative suppliers. In order to foster increased client loyalty, companies will have to investigate and employ methods of delivering ever greater value add through Information Technology. This value add will typically be in the form of information which is tailored for that specific client. This will require information technology to analyse, investigate, and deliver information and service which is truly individualised. In so doing, the client will see value in returning to that supplier.

In order to achieve some client loyalty, Virgin finance has developed an Internet-based agent, which their clients can run and use to monitor the status of their pension products, ISAs, Virgin one account etc. In return for this convenience, Virgin have the opportunity to convince the clients to purchase more Virgin and financial products.

In 1996 a major client estimated that every purchase order raised with a supplier cost it around £70. In order to reduce this cost, the client decided that suppliers should either trade electronically for larger orders, or smaller orders should be transacted using company American Express cards. In return for changing their ways of doing business, suppliers were rewarded with a preferred status which would provide a higher level of revenue, and would also provide the client with reduced costs.

The ability to trade online has become a de facto standard. In future for clients, there will be a supposition of supplier ability to trade on line, and this ability will become part of standard tendering procedures. In future, differentiation will be created by the way the transaction is handled, and the services which are wrapped around that single transaction.

In theory, E-commerce gives a reduced cost per transaction. At least some of the service which would traditionally require human intervention can be handled by information technology processing. While this is true, there are still costs associated with Internet-based transactions. While companies such as Amazon can trade reasonably profitably in their core business of books, as they branch out into products such as CDs, it becomes increasingly difficult to yield acceptable returns. A client may only purchase the single CD, costing £12, but the associated Picking and transaction costs swamp any profit from that £12.

The key to successful online trading in future, will be not only to convince the client to spend money, but it will be convincing them to spend enough money to cover costs and generate a profit. Intelligent information technology is required which can dynamically market to that single client as they are online probably not just the supplier's own products, but associated products from which the supplier can gain a commission.

As companies adopt online trading as the de facto standard, there is an immediate benefit from being able to access real time, detailed information on clients current preferences and purchasing behaviour. This market analysis will allow companies to adopt new products, adapt their business processes and respond to client requirements based on information which previously would have taken months or years to research.

As we enter the information age, companies and their information technology will be expected to tailor products and services on demand by any single client. This segment of one marketing, requires that a company has instant access to a clients purchasing history, preferences, demographic profile, and service history. By intelligently using computer processing power, the client is made to feel that the entire resources of companies such as Amazon are being directed to help him. While the computing power undoubtedly exists in most companies to achieve this goal, the Implementation of the client focused strategy, requires a different business approach and model.

As more businesses trade online, the role of traditional retail outlets must change. Take for example Vauxhall selling their Dot com range of cars over the Internet. On the face of it this by-passes the existing channel of Vauxhall outlets. In practice, as is the case with Compaq, this business model equates to taking orders online, and fulfilling these orders through the existing channel.

Now, Vauxhall have direct access to client information, allowing them to market future products directly, creating a pull demand. Potentially, this, combined with the model outlined above, will actually increase the business through any Vauxhall reseller. At the very least, it presents an opportunity for the reseller to package a different combination of services tailored to the user. Once again this requires intelligent information processing, distilling the information provided by Vauxhall and combining it with the existing information on their current client base.

In competitive markets such as supermarket retailing, organisations such as Tesco have created on line e-retailing operations, in order to protect and increase market penetration. This service, marketing consumable goods on the Internet, is not yet as advanced as marketing consumer durables such as CDs and electronic goods. The challenge here is to convince the users not only that their information is secure and well cared for, but also that perishable goods can be delivered accurately and freshly with improved convenience.

Manageability

During the first decade of its life, the PC enjoyed a meteoric growth in the business market place. This growth led to PCs being used in a multitude of ways, from traditional desktop processing such as spreadsheet or Document Creation, to servers running business critical applications.

During the late Eighties, network operating systems such as Novell Netware or IBM OS/2 or Microsoft Windows NT, were installed on PC platforms, allowing a significant number of users to share common resources such as Network drives, printers, and communication devices.

The introduction of manageability features such as predictive fault tolerance, Remote performance monitoring, remote-control of PCs, and monitoring of activities has allowed companies to reduce support costs. In 1993, Gartner released a report on the five year cost of a ownership of the PC. This report showed that the cost of the hardware was a small percentage of the overall cost of running the system. The use of Manageability features, allows companies to reduce the cost of support by allowing it to use more Remote services, or alternatively to make intelligent decisions about reallocating support funds to focus strategic development, assessing the best ways to use information technology for competitive advantage in a knowledge based market.

As a colleague once said, "the nice thing about standards, is that there are so many to choose from''. The adoption of SNMP as a Manageability standard means that manageable objects such as PCs, printers, and Networking devices, can be managed remotely using Enterprise products such as IBM Tivoli.

The combination of Enterprise management software and manageable products allows an organisation to perform elements of Predictive maintenance. Some products are intelligent enough that they will notify an administrator if their hard disk starts to fail, or if memory starts to go bad. This means that the maintenance engineers can replace the degrading part before it has failed, and certainly before the user has experienced any inconvenience.

By using technology to combine the proactive management of resources, with the reactive information generated by those resources, maintenance costs can be reduced, their shadow costs of users supporting other users can be reduced, the significant cost to of service downtime can be reduced, and the sometimes intangible cost user downtime can also be reduced.

Despite stringent efforts, most companies will be using illegal copies of software either intentionally or unintentionally. Enterprise management products can monitor the use of existing licences, and it generates alerts should more licences be required. This reduces the likelihood that the company will fall foul of such organisations as the Federation Against Software Theft (FAST). The extent of software fraud varies on a per country basis, from countries where there is almost an expectation of fraud, to countries such as the UK where up to be caught using illegal software would cause significant damage to a company’s social and commercial reputation.

Today, business critical applications must be available for companies to survive. As an example, the Automobile Association Insurance website was unavailable at precisely the time when I wanted to renew my own car insurance. Consequently, I renewed with my existing supplier.

Also, a comprehensive information systems strategy will include the actions to take in the event of catastrophic failure. This may be premeditated as in the case of the Docklands bombs, or purely accidental in the event of a power failure to the computer room. Either way an organisation must be capable of regenerating its business critical applications in the event of serious failure. This in part explains the significant increase in home-working which we see today.

The increase in remote access of information and technology has led to a blurring of the boundaries between the provision of Computing Services, and provision of the telecommunications infrastructure. As the cost of office space becomes prohibitively expensive, users expect the ability to work from home, and the company demands an ever mobile workforce/sales force, companies require the cohesive strategy for providing higher bandwidth and greater reliability communications between remote workers and Central Office.

The importance of Manageability cannot be over estimated in the field of Internet access and e-mail abuse. Whilst the individual can be held responsible through their contract of employment, resulting in gross misconduct and dismissal, significant damage can be done over a very short period of time, by e-mailing all current and prospective clients. Equally, companies are worried that they will be held responsible should any employees be found to be accessing inappropriate information via a company provided Internet connection. The ability to monitor, interpret, and act upon Internet and e-mail data has spawned in new and rapidly growing industry. Similarly, there is a significant market for firewall products to restrict access to the Internet, for E-mail anti-virus tools, and for E-mail and Internet consulting services.

Knowledge Management

The field of knowledge management is relatively new, but is recognised as being of crucial importance to successfully dealing with clients in future. Organisations typically have a wide range of data, residing in many different parts of the company, and potentially only existing in the heads of people such as salespeople with a vested interest in retaining intellectual copyright to that data.

It has traditionally been very difficult to organise this data, and consequently to gain any commercial advantage. The ability to collate, interpret, and act upon this wealth of information confers competitive advantage and the ability to tailor products and services based on market demands.

From a management perspective, Knowledge Management represents a way to centralise the appropriate information, reducing their dependence on individual employee recollection.

Knowledge Management Systems will provide marketing information on clients, competitor information to allow an appropriate strategy to be followed, and allow sensible business decisions to be made about allocation of resource, distribution of marketing budget based on the effectiveness of appropriate media, and the development of new products.

Once again, this requires an increase in the processing power to distil and interpret the available data. Beyond this, there is an even greater security issue - rather than commercially sensitive information being held by an individual, all individuals can now have access to the entire information base of the organisation. While on the face of it this means that single employees could personally benefit from the store of information, the general assumption is that every market will move so rapidly over the coming years, that information will become redundant over a very short period of time.

This knowledge base presents a huge barrier to entry that new competitors must overcome before achieving commercial viability. In the E-commerce market, new enterprises typically provide value-added services, in return for valuable information about the potential clients or subscribers. In so doing, they will be creating their own knowledge base from which to develop products and services in future. Consequently, it is very rare not to have to register for access to popular Internet sites, and these sites will interpret your activity and market based on their findings.

The ability to harvest the data held in the knowledge base will allow companies the opportunity to cross sell appropriate products based on client preferences inferred from the existing portfolio. This allows the company to focus marketing effort on product mixes which have proved successful to other clients in that demographic group.

In the traditional industries, it can seem obvious that there is an element of cooperation between competitors as in the case of the car industry, the oil industry, amongst others. As we move into the information age, cooperation will stop at setting appropriate standards for delivery of the information. Beyond this, competitors will compete on the basis of the quality and timeliness of the information charged to the customer. At the same time that it becomes more important to use information technology to monitor competitor activity, it is becoming more and more difficult to identify true competitors. Examples would include gas companies selling electricity, cable companies selling telephony services, and communications companies selling the media content.

In an information-based market place, information technology will be used to assess the effectiveness of new products in real time. Whereas in previous years, a company would have user forums, user testing, and market research, in the information world users will give immediate feedback as to their likes and dislikes regarding a product which will allow that product to be altered, tailored, and remarketed in it seconds.

SUMMARY

Over the last three decades, there have been many fantastic designs and innovations which ultimately have not achieved commercial success. The key to success has been derived from business or personal need. For example, banks and government clearly needed mainframe computers to process large amounts of information. Individuals clearly needed computing power on their desktop, creating a market for the personal computer. As the PC-based market has matured, more and more applications are being found for the technology. It would be difficult to say that the technology itself is driving user demand, rather the users and companies are finding more and more creative ways to exploit the benefits of the technology.

Over the last few years, the so-called PC has developed immeasurably, and when coupled with advanced operating systems, it can provide awesome capability. But this has only been one piece of the information technology jigsaw. The convergence of improved communications, improved media content, improved processing capability, increased user demand has created a market for media communication devices which encompass the convenience of personal computing, with tailored programme content from a wide choice of media sources such as cable, satellite, terrestrial, and emerging content providers.

E-commerce is really a step towards more intelligent purchasing. Currently I have to actively purchase a holiday, a camera, food over the Internet. In future my intelligent devices will be capable of assessing when I need more coffee, when my fridge is running low on milk, when I plan to take a holiday and to book it in advance. It will also monitor my investments, and to make intelligent decisions about allocating money appropriately, to maximise the return on those investments.

As we look to the future, we must also look back at seventeen years since the launch of the first IBM PC in 1983. Because of the advances made in that time, it is likely that we will see far greater advances but instead of taking 17 years they will happen over periods of a few months to two or three years.