The Technology of Transformation: Business issues are the guide, but technology is the enabler. (Infrastructure).

Since the early 1990s, executives have been told repeatedly that business issues, not technology; should guide transformation -- and that's still true in the age of the Internet. But even though transformation is not driven by technology; "a lot of it is powered by technology," says Lorrie Scardino, a research director at the Stamford, Gonn.-based Gartner research firm.

Technology is, of course, a key enabler of the e-business revolution, and an integral ingredient in competitiveness. Faced with that reality, companies are working hard to keep up with ever-evolving systems. But they're also being more careful about how they spend their money. Like all areas of the corporation, IT budgets are under increased scrutiny. And so, as they support the transition to e-business, executives are making sure that IT investments are based on a sound business case.

As they consider where to invest, executives should lift their gaze beyond the Web, says Hollis Bischoff, director of electronic business transformation at the META Group research firm, also in Stamford, Gonn. "Business is transforming through the use of electronic means. But don't get caught up on that being just the Internet," she says. As e-business moves deeper into business, it involves a broad range of technologies, from databases and servers to wireless devices and broadband networks. "What we're really talking about is institutionalizing processes and using technology to do that," says Bischoff.

Indeed, rather than look for any single new technology, companies should focus on building a solid foundation, or e-business infrastructure. "You need an infrastructure that unifies the people and processes across the company;' says John Carrow, 010 of Unisys Corp. "You need consistent, timely and easy-to-use information across the organization, and you also need to give customers and suppliers access to that information, whenever and wherever they need it. Having an infrastructure that lets you do those things is a prerequisite for e-business."

According to the META Group, that kind of infrastructure is still far off for many companies. "Most organizations are unprepared to support e-business from an operational perspective;' Bruce Allen, an IT operations expert at the META Group, recently explained. "Companies can spend millions of dollars on cutting-edge technology applications, but if they don't have the infrastructure and operational processes in place to support them, it's a total waste of money."

As one might expect, e-business requires some new thinking about systems and processes. In a world where change is endemic, companies need to create "adaptive infrastructures" that can accommodate new technologies, processes and business models with relative ease. "The architecture has to be very flexible so that it can respond quickly," says Scardino. "That way, if you decide to go with an application for a certain business problem, you are not going to be stuck with that for the next five years. And that approach is a big change for a lot of technology departments."

Come Together

There are a number of fundamental principles to guide companies as they create adaptive infrastructures starting with "integration, integration, integration," says Bischoff. "Integration internally, and integration externally with your partners -- because collaboration and integration are really what e-business is all about."

"You have to 'integrate backward' - tie together your enterprise systems and reach back into suppliers," says Carrow. "You also have to 'integrate forward' -- tie together the front-office systems, such as CRM and e-commerce, and include all channels of interaction with the customer and frontline users. Then, you can couple those front and back areas together in a unified data warehouse. That allows you to have consistent reporting of information about personnel, customers and finances across the company.

"That unified infrastructure provides a smooth information flow at a lower cost of operation' Carrow continues. It also readily supports the addition of systems that rely on cross-company data, such as decision support systems and "information dashboards" that provide a concise view of key performance indicators. "It puts you in the position to provide analyses that help you run the business and serve customers more efficiently and effectively;' he says.

Traditionally, major integration efforts have been complicated and difficult, because each system had to be linked separately to every other system. But now, enterprise application integration (EAI) software can be used to create a middle layer between various systems. To link a system into the infrastructure, a company can connect it just to the EAI layer, rather than to numerous separate systems. Notes Bischoff: "Integration can still be fairly painful, but you have to remember that it's about making an investment for the future."

Standardize -- But Don't Sweat the Small Stuff 

As many corporations have learned, the use of numerous fragmented systems makes things difficult to change -- and so an adaptive infrastructure should be based on standards as much as possible.

In one sense, that means open technical standards, so that systems are less expensive and easier to integrate. But it also means establishing guidelines for the type of systems and processes to be used across the company.

The value of standardization can be seen in the enterprise resource planning (ERP) systems that corporations have embraced to replace piecemeal software. "Those global implementations allow enterprises to get on one common database and use standard processes across the globe," says Carrow. Over the past three years, Unisys has used such systems to implement standard financial accounting, purchasing, time-reporting and project-accounting processes. The result has been "tremendous efficiency gains" and the ability to report enterprise-wide financials in a fraction of the time it used to take, he adds.

The concept of standardization should be applied to other technologies, too. "The corporate network, the desktop environment, the e-mail environment -- the more standardized you can make things, the more efficiency you will have," Carrow says. With Unisys' standardization efforts, "the cost per person for IT support went from close to $9,000 down to $5,700."

Those kinds of changes bring increased flexibility, as well. With common systems, upgrades and improvements typically require less expense and time, because the company does not need to deal with making myriad connections and enhancements to multiple technologies. Fewer skill sets are required, and efficient implementation procedures can be quickly developed and replicated around the globe.

In a similar vein, experts typically warn against spending too much time customizing software to fit your business. The advent of sophisticated off-the-shelf packages has largely eliminated the need to build core systems from the ground up. But those packages can be modified, and organizations often spend too much time fine-tuning them to support their existing processes. That does more than add to the expense of implementation -- "in the future, it comes back to haunt you," says Unisys CFO Janet Brutschea Haugen, who along with Carrow has been overseeing a major e-business infrastructure initiative at Unisys. "When you want to upgrade, you essentially re-incur those customization expenses as you go along."

What's more, Haugen says, major software packages typically incorporate best practices for the processes they support, so extensive customization may be missing the point. "Usually, you can change your process rather than the software," she says. If a company spends a lot of time on customization, "they are probably not looking at the business process to understand how it should change -- they are just enabling what they had before." Controlling such changes is so important that during an ERP implementation at Unisys, any customization required the joint signoff of Haugen and Carrow.

That said, however, Haugen and other observers warn against being too dogmatic in setting guidelines. In some areas, unique technology will be needed to give the company a competitive edge. As a result, executives have to keep their eyes open for situations where stepping outside the guidelines will differentiate the company in ways that ultimately matter to the customer. For example, says Bischoff, different divisions of a company may have different core competencies, and so need to have some leeway in choosing systems. "You need to create corporate principles and standards that say, 'these apply to you no matter what you are and 'here is the place where being different is important,'" she says.

Share the Load

It's clear that an adaptive infrastructure is a complicated, multifaceted thing -- and staying on top of it all can be a challenge for the corporate IT division. As a result, many experts say that outsourcing should be considered a vital part of the infrastructure tool kit.

Indeed, IT outsourcing is taking on new importance as companies struggle with the demands of e-business. Business spent some $56 billion on IT outsourcing in 2000, and that figure is expected to top $100 billion by 2005, according to IDC, the Framingham, Mass.-based market research firm. Cost reduction has always been a driver for outsourcing, and it still is, notes IDC. But the firm adds that there is "mounting evidence that companies have turned to outsourcing for more strategic reasons, including keeping up with cutting-edge technology and broadening infrastructure and operations reach."

In particular, companies want access to the specialized skills needed to maintain the various technologies that are part of an adaptive infrastructure. IT department workloads are growing 30 to 40 percent each year, "while budget and staff levels clearly are not," notes a recent report from the META Group. The firm also points out that there is still a tremendous shortage of IT workers, especially in areas such as networking, database management, supply chain collaboration, business-to-business integration and commerce chain management.

On the supply side of the equation, companies have a wide array of options. In addition to data center operations, outsourcers today will handle tasks such as applications management, desktop maintenance, network operations and Web hosting. "Outsourcing lets the IT group get out of the businesses they don't want to be in and turn them over to professionals in those areas," says Carrow.

In a networked world, companies can turn work over to professionals across the country or across international borders. Indeed, a New York company may rely on a disaster-recovery provider in California, or a U.S. caller to a Florida company may well end up talking to an "offshore" outsourced call center in Ireland. Many companies are also working with ASPs, or application service providers, which provide software functionality over the Internet. Originally associated with the dot-com world, ASPs have rapidly evolved to provide a range of sophisticated offerings to large corporations, including enterprise applications and other services focusing one business infrastructure.

From Back to Front -- and Beyond

The adaptive infrastructure may touch virtually all of the company, not to mention suppliers and customers, but executives don't have to look far for a good point to get started. "We usually tell people, 'Get your own house in order; make sure your internal systems are in order before you move on,'" says Bischoff.

"Start with the back office," agrees Carrow. "That's where you'll find opportunities for cost saving where you can demonstrate a good ROI." From there, the company can expand efforts in logical steps. "It's kind of like the rings that go out when you throw a rock in the water. The next ring might be extending transactions out to your suppliers, for purchasing. And the one after that might be reaching out to customers to give them the ability to buy products and services. But at the core of it all is your own company, your own unified approach."

That progression won't happen overnight, he adds, but it is quite do-able. "We're getting near the holy grail of computing, which for three decades has been to get consistent information from the department level all the way to the enterprise level rapidly, consistently and inexpensively. With the advent of the Internet and the Web, we have the delivery mechanisms that truly allow us to reach that goal."

RELATED ARTICLE: Across the Corporation.

The linking of processes and systems is fundamental to effective e-business, and companies are working to build "unified" technology platforms that will encompass virtually all corporate systems (see diagram, above). As a result, worldwide spending on systems integration services is expected to leap from $71.7 billion last year to $142 billion in 2005, according to IDC, the Framingham, Mass.-based market research firm.

A majority of that spending will target the integration of software solutions, such as customer relationship management (CRM) and supply chain management applications -- a trend that is "being fueled by the need for seamless business processes across a company's entire value chain of customers, partners, suppliers and employees," notes Stephanie Torto, senior analyst with IDC's Solution Integration Strategies research program. "In today's competitive environment, it's not sufficient to have isolated solutions that are unable to communicate with one another. Companies need their IT systems and applications to work as one cohesive unit."

Keeping the Front Line Engaged

As companies create integrated e-business infrastructures, employees need more sophisticated ways to access and manage the growing stream of information moving through the enterprise. A number of technologies have emerged to help meet that challenge, including:

* Enterprise portals, which give employees a single, Web-based point of access to a range of information and tools. Portals are designed to help employees navigate the overwhelming amount of information available on corporate and external systems, and to share information internally and with customers and suppliers. The Boston-based Delphi Group says that portals will soon become the predominant desktop environment for corporations -- and that by 2003, businesses will spend some $1.9 billion a year on portal software. (See chart, below.)

* Wireless voice and data. In the wireless world, a lot of attention has been paid to "m-commerce" and the ability to reach mobile customers. But many companies are turning to wireless devices to keep in touch with employees as well -- and especially those people working on the front line of customer service and sales. By the end of this year, 47 percent of the U.S. work force will have access to wireless voice and/or data devices, according to Cahners In-Stat Group, a Scottsdale, Ariz.-based research firm. Cahners expects that figure to reach 60 percent by 2004.

* Web self-service. Companies can use internal Web-based systems to let employees maintain their own information and handle routine information in areas such as training and updating human resources files. The Boston-based Aberdeen Group notes that workplace self-service applications "provide 24x7 access to information, immediate transaction processing and 'empowerment"' -- and help cut HR costs by 15 percent to 25 percent.

* Unified messaging, which uses a variety of technologies, including text-to-speech systems, to give employees universal access to email, voicemail, fax and pager through whatever messaging device they choose. For example, an employee might listen to voicemail on his or her PC, or check fax messages via a wireless phone. As a concept, unified messaging has been around for some time, but complicated integration issues have slowed its emergence. Today, however, "even the most conservative analysts are now saying that growth in unified messaging is finally exploding, and that it will be a mainstream service with over 100 million users worldwide by 2003," notes a report from Unisys.

Estimated Spending on Portal Software.

(in millions)


1998     $37
1999    $178
2000    $405
2001    $737
2002  $1,274
2003  $1,945

Source: Delphl Group.

Note: Table made from bar graph.