Technology Shifts, User Requirements Bring On-demand Business Model to Life

December 12th, 2005

It’s more than a slogan
Technology shifts, user requirements bring on-demand business model to life

Call it an "on-demand business," as IBM does, or "the adaptive enterprise"—a Hewlett-Packard (HP) term—or whatever catchphrase you like. The bottom line is, vendors' claims of being able to shape technology to fit the way a business works are coming true, even if, in some respects, there's still a ways to go.

Consider the situation at Munich-based Siemens Business Services (SBS), which provides a full range of IT services to some of the world's largest companies. With hundreds of field service engineers serving extremely demanding customers, SBS needs to move information through its network—from customers, to call-center reps, to engineers, and back—with deliberate speed.

"We service many Fortune 500 companies, with very aggressive service-level agreements," says Peter Manni, VP of services with SBS. "Our customers require around-the-clock support. If a critical server goes down, we have to rectify the problem in less than four hours."

To deliver on that commitment, SBS must be sure it can get basic information—i.e., a customer's name, location, the problem that needs fixing, and SBS's contractual obligations—to any of its field engineers at a moment's notice.

In the past, SBS engineers took initial trouble calls on cell phones and then used laptop computers with wireless antennas or edge cards to access customer information. The goal was to make sure SBS always had up-to-date information about every customer's situation. But the strategy didn't quite work as planned.

According to Manni, "Laptops take so long to boot up that our service engineers would wait until they completed a call to log in and update the customer record. That kept us from always having timely information."

A better fit
Ultimately, SBS solved this problem with assistance from Antenna Software, which deployed a solution based on BlackBerry devices from Research in Motion. Antenna worked with the SBS IT team to make systems that support service applications work on the BlackBerry devices.

The results have been impressive, including reduced response times, and higher first-call resolution rates. SBS also has the timely, accurate customer status information it wanted because field engineers are tapping into the BlackBerry devices—rather than the bulky laptops—to send immediate updates about what parts they are installing, or any other actions taken from customer sites.

There have been economic benefits as well. According to Manni, SBS has saved "a significant amount of money" on hardware by replacing cell phones and laptops with handhelds. Overall, this project has been so successful that Manni is planning to roll out the BlackBerry-based service applications to more than 1,700 engineers assigned to customer sites.

These are the types of results IBM and HP promised when they launched their on-demand and adaptive enterprise campaigns. Other vendors, including Unisys and Microsoft, also are marketing IT as a flexible business tool, and analysts say users are starting to buy into the concept.

Eric Austvold, a director with Boston-based AMR Research, says memories of the last tech bust—and subsequent economic downturn—have corporate executives sticking to their plans for keeping IT budgets as low as possible by moving to standard platforms and working with fewer "strategic" vendors. This climate, Austvold says, is fueling interest in flexible solutions that allow CIOs to "make sure they are maximizing the value of every IT asset and every dollar spent."

Vendors, of course, have talked of selling solutions—rather than simple hardware or software products—for years. But analysts say recent technology advances such as the service-oriented architecture (SOA); grid computing; and multi-core processors are, for the first time, giving vendors the power to actually deliver sets of technology that solve real problems.

A new era
" The most important development [related to these new forms of technology] is that IT is now responding to actual business needs," says William Mougayar, a VP with Boston-based AberdeenGroup.

Mougayar believes the new technology could kick off a new era in which users consistently negotiate better deals for technology because they no longer need to hazard systems integration if they buy applications or tools from multiple vendors. He says the SOA—which involves building libraries of self-contained, reusable software components that can be easily linked to create new business processes—offers the most promise in this regard.

Many software vendors are embedding capabilities for building an SOA into their product suites. The Microsoft .NET platform, for instance, is an environment for creating componentized applications called Web services, which can be the building blocks for an SOA.

"This is a once-in-a-lifetime opportunity for users to become vendor-independent, to own the architecture and IT environment, and break down monolithic applications," Mougayar says. "Platforms are getting less restrictive, and can be exploited in ways not possible before."

Vendors are seizing these new forms of technology to create ways to package and sell their products. The advent of things like software-as-a-service and utility computing—models that let users, in effect, rent rather than buy IT resources—are a direct result of these technical advances.

Utility computing is to IT what the PBX system was to telecom, according to Vick Viren Vaishnavi, director of product marketing with BladeLogic, a supplier of data-center automation software. "Just as the PBX made automated call switching possible, virtualized services in a data center will allow shared services and underlying resources like CPUs, memory, and configuration files to be managed dynamically," he says.

Further, utility computing allows companies to streamline IT operations management.
" You can control the genetic makeup of servers in real time," Vaishnavi says. "With data-center automation, it's easier to know each server's DNA and which configuration 'genes' need to be adjusted when an application is modified." This sort of highly dynamic, highly centralized environment will enable most new application deployments or upgrades to be completed within a matter of hours, rather than weeks or months.

Faster upgrades
" In the old days, the rule was 'one application, one box,' " says Nick van der Zweep, director of virtualization and utility computing at HP. "But that's hugely expensive and inefficient when you've got hundreds of applications, each running on multiple platforms."

HP's virtualization strategy is based on its Integrity line of multi-OS servers, which allow planning, simulation, configuration, and management of diverse server resources from a single location; as well as automated allocation.

"Companies seeking to become adaptive enterprises will be able to make IT changes based on business demands much faster than before," says van der Zweep. "In the past, it might have taken two or three months to ship, install, and configure servers needed for a new application. Now, if you cluster medium-size servers in a virtual machine, those new applications could be ready to go in as little as 24 hours."

Costs go down, too, as there is less hardware to purchase and maintain, and fewer licenses to buy.

On the performance side, companies that choose utility models will be able to guarantee themselves specific service levels—e.g., response times for database queries, and server availability rates—by writing those things into the service provider contracts. Those guarantees can be vital when moving mission-critical applications to a utility environment. Such contract provisions drove SBS to find an alternative to the cell phone and laptop infrastructure that was slowing its response to customer issues.

The utility model also will enable users to handle huge spikes in processing needs without paying for unneeded capacity at slower times. This turn-it-on/turn-it-off approach makes perfect sense for manufacturers with large seasonal shifts in demand for their products. Unisys, HP, and others now offer metering technology for buying processing capability in discounted allotments, similar to purchasing a prepaid phone card.

This pay-per-use model has proven popular in industries such as airlines and financial services, which routinely process large numbers of transactions. AMR's Austvold believes the model also makes sense in certain areas of manufacturing—particularly in the product design process, where high bandwidth is needed to move models and other documents created in CAD/CAM applications.

A real-time foundation
Now that next-generation IT tools are available and increasingly affordable, what should manufacturers do to take advantage? Most experts agree that some strategic thinking is a critical first step.

"An on-demand model must be customized to individual customer situations and, specifically, their competitive positions and differentiators," says Patrick Sedillo, IBM's segment executive for small and medium-size manufacturing in the Americas. "It may involve CRM for companies that need to get closer to their customers. For companies competing on price, it may focus on supply chain execution. You must understand what type of company you are, what you want to accomplish, and what your internal IT capabilities truly are."

To help companies take this look in the mirror, IBM offers free strategic assessments so small and medium-size manufacturers can understand where the threats and opportunities lie as they look to achieve the "on-demand" vision in the future.
After settling on strategy, the next step usually involves addressing fundamental infrastructure, such as servers, operating systems, and backbone applications like ERP. "If I'm a CIO, I'm going to make sure my infrastructure is flexible," says AberdeenGroup's Mougayar. "Over the past few years, it has become common for IT organizations to shave 10 percent off their costs each year while still getting more flexibility and scalability in their infrastructures."

Wetherill Associates Inc. (WAI)—a Royersford, Pa.-based manufacturer and distributor of automotive electric components—saw huge gains in performance when it replaced an aging UNIX-based enterprise system and a proprietary database that had maxed out their processing power.

WAI chose the Intel-based Unisys ES7000 platform to run its Baan applications, and a new Oracle database server. At first, WAI was skeptical about moving to a next-generation architecture, so it worked with its IT partner, Unisys, to develop a proof-of-concept environment with WAI's existing applications and database to demonstrate that the functionality and performance targets were achievable.

These steps convinced IT executives at WAI that the time was right and the technology was ready for centralization. In the end, WAI got the high-performance infrastructure it needed today, and a reduced total cost of ownership. It also established the scalability and adaptability it needed to drive rapid growth. For companies like WAI, the on-demand journey is just beginning.

Mougayar believes companies that haven't achieved similar cost and performance gains need to start asking why, because the technology is available to make it happen.
" If I had to build an adaptive, on-demand IT environment from scratch starting tomorrow, the infrastructure is 90 percent of the way there, the services 50 percent, and applications—many of which were written 10 years ago—are 20 percent of the way there," Mougayar says.

As those percentages increase in the years ahead, the underlying promise of the "on-demand" or "adaptive" enterprise is likely to become more of an everyday reality.