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  • 1. TEAM LinG
  • 2. i IRM Press Publisher of innovative scholarly and professional information technology titles in the cyberage Internet Strategy: The Road to Web Services Solutions MatthewW.Guah WarwickUniversity,UK Wendy L. Currie WarwickUniversity,UK Hershey • London • Melbourne • Singapore TEAM LinG
  • 3. ii Acquisitions Editor: Renée Davies Development Editor: Kristin Roth Senior Managing Editor: Amanda Appicello Managing Editor: Jennifer Neidig Copy Editor: Lisa Tosheff Typesetter: Cindy Consonery Cover Design: Joyce Li Printed at: Integrated Book Technology Published in the United States of America by IRM Press (an imprint of Idea Group Inc.) 701 E. Chocolate Avenue, Suite 200 Hershey PA 17033-1240 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: cust@idea-group.com Web site: http://www.irm-press.com and in the United Kingdom by IRM Press (an imprint of Idea Group Inc.) 3 Henrietta Street Covent Garden London WC2E 8LU Tel: 44 20 7240 0856 Fax: 44 20 7379 3313 Web site: http://www.eurospan.co.uk Copyright © 2006 by Idea Group Inc. All rights reserved. No part of this book may be reproduced, stored or distributed in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher. Product or company names used in this book are for identification purposes only. Inclusion of the names of the products or companies does not indicate a claim of ownership by IGI of the trademark or registered trademark. Library of Congress Cataloging-in-Publication Data Internet strategy : the road to web services solutions / Matthew W. Guah and Wendy L. Currie, editors. p. cm. Summary: "This book tells you how to create, execute and evolve a customer-centric approach for your Internet-based management strategy"--Provided by publisher. Includes bibliographical references and index. ISBN 1-59140-763-X (hc) -- ISBN 1-59140-764-8 (sc) -- ISBN 1-59140-765-6 (ebook) 1. Business enterprises--Computer networks--Management. 2. Information technology--Management. 3. Web services--Management. I. Guah, Matthew W., 1963- II. Currie, Wendy, 1960- HD30.37.I573 2006 004.6'068--dc22 2005013815 British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. All work contributed to this book is new, previously-unpublished material. Each chapter is assigned to at least 2-3 expert reviewers and is subject to a blind, peer review by these reviewers. The views expressed in this book are those of the authors, but not necessarily of the publisher. TEAM LinG
  • 4. iii Internet Strategy: The Road to Web Services Solutions Table of Contents Preface .................................................................................................. vi Introduction ......................................................................................... viii SectionI:StrategicApproachestoInternetforOrganizations ChapterI.ApplicationServiceProvision ............................................. 1 Matthew W. Guah, Warwick University, UK Chapter II. Web Services...................................................................... 8 Matthew W. Guah, Warwick University, UK ChapterIII.Concerns ......................................................................... 17 Matthew W. Guah, Warwick University, UK ChapterIV.Recommendations........................................................... 40 Matthew W. Guah, Warwick University, UK Section II: Case Studies ChapterV.ConsideringtheImpactofBroadbandontheGrowth andDevelopmentofB2CElectronicCommerce ............................... 48 Jyoti Choudrie, Brunel University, UK Yogesh Kumar Dwivedi, Brunel University, UK TEAM LinG
  • 5. iv ChapterVI.ATheoreticalApproachtoEvaluateOnlineand TraditionalTradingontheNASDAQStockExchange ..................... 67 Haroun Alryalat, Brunel University, UK Yogesh Kumar Dwivedi, Brunel University, UK Jasna Kuljis, Brunel University, UK Ray J. Paul, Brunel University, UK ChapterVII.AdaptiveCollaborativeWorkandXMLWebServices: BenefitsofApplicationintoInformationInfrastructureandHuman Resources ............................................................................................ 86 Mayumi Hori, Hakuoh University, Japan Masakazu Ohashi, Chuo University, Japan Chapter VIII. Helping Users, Mentally: A Lesson Learned from HypertextandWebNavigation ........................................................ 101 Paulus Insap Santosa, National University of Singapore, Singapore Chapter IX. Reducing the Costs of Doing Business: Human Costs and Social Issues of IS/IT Strategies ........................ 135 Souad Mohammed, UK Chapter X. From ASP to Web Services: Identifying Key PerformanceAreasandIndicatorsforHealthcare .......................... 149 Matthew W. Guah, Warwick University, UK Wendy L. Currie, Warwick University, UK SectionIII:ThrivingorNot ChapterXI.FutureTrends................................................................ 178 Matthew W. Guah, Warwick University, UK ChapterXII.A21st -CenturyToolforIntelligentEnterprises ......... 185 Mathew W. Guah, Warwick University, UK ChapterXIII.Conclusions ................................................................ 227 Matthew W. Guah, Warwick University, UK TEAM LinG
  • 6. v Glossary ............................................................................................. 259 AbouttheAuthors.............................................................................. 313 Index................................................................................................... 318 TEAM LinG
  • 7. vi Preface This book addresses the business issues and management concerns in rela- tions to Internet strategies of organisations in the 21st century. By so doing, the editors hope this book will point medium- and large-sized businesses in the proper direction, to manage emerging technologies, such as Web services resources and strategies to their competitive advantage. With the phenom- enon of Web services in its infancy, the authors have drawn from works of IS pioneers Markus, Porter, Checkland, and others. Their intellectual contribu- tions, plus findings from research work by both new and experienced aca- demics in Europe, USA, and Asia, provide a framework for discussion. Web services business model was borne out of the Application Service Provi- sion (ASP) business model. ASP delivers personal productivity software and professional support systems, assisting an intelligent enterprise in processing information, solving business problems, developing new products, and creat- ing new knowledge. The need to exploit Web services capabilities to preserve and enhance organisational knowledge is clearly defined by this book. This is not a textbook, but it encompasses all the practical areas in which an information system strategist functions, and also those of IT and business man- agers. The following criteria that are being used as the foundation for the best of textbooks on information systems are all explored in this book. They are Internet strategies and management concepts, the business and economic of information systems environment, opportunities and information about ASP and Web services, sociological aspects of Web services buyer behaviour, psy- chological aspects that influence consumption of Web services applications, strategic tools and tactics, market segmentation, Web services product life TEAM LinG
  • 8. vii cycles and categories, commercialization, distribution, promotion, communi- cations, organization, analysis, application integration, future aspirations of service providers, ethical issues and much more. The aim of this book is to disclose the motives and mechanisms of Web ser- vices as it is developing and changing as the 21st century unfolds. Internet strategies cannot be described intelligently without exploring some fundamen- tal features and problems of society as a whole. That many IT managers in small and medium-size businesses are either directionless, like a boat without a rudder, or are drowning beneath waves of Internet strategies management theories that pass over their heads, and others that persist in spite of the fact that they remain unproven, may well be a reflection of the draft of general economic slowdown. An IT manager or Information Systems strategist or Business Operations man- ager will find that this book: • Balances systems theory and proven Internet management frameworks which are illustrated with practical cases; • Explains the strategic management of Internet policies in terms of capa- bilities of IT in business; and • Provides a good guide to those who need to discover how to apply Internet for strategic advantage of an organization. Matthew W. Guah & Wendy L. Currie Leamington, Warwickshire, UK June 2005 TEAM LinG
  • 9. viii This book is about strategic direction of Internet strategies and the manage- ment of strategic change to emerging technologies, in general, and Web ser- vices, in particular. To deal with this complex topic we have structured this book into three parts containing six main areas. The first section looks at a comprehensive framework of the emerging technologies process upon which this book is structured. This part also includes chapters on Application Ser- vice Provision (ASP), Web services, Concerns, and Recommendations. These chapters clarify the various issues relating to this new phenomenon in Internet strategy. Section II includes chapters on case studies from different parts of the world showing how Web services are being used to benefit businesses. They show leadership in the Internet strategic direction and decision-making and on cul- ture and values as these are forces that determine how Internet strategy can be managed within an organization. Section III considers how a situation analysis for the future of Web services business model might be carried out. The emphasis is on understanding the future of new technology strategies and the continuously changing business environment and technological resources. The functional subjects that relate to the management of organizational technological resources and that under- pin a study of Internet strategy are examined. Following this Introduction is a Technology Review section that presents the central theme of the historical shifts from a mainframe to a client server, and now to Web services strategy. An observer of the client-server technol- ogy would have found the task of accurately discerning the path of that tech- Introduction TEAM LinG
  • 10. ix nology during the last decade of the 20th century very difficult. Similarly, the reality of the Web services technology has not burst on the business scene full-blown, but has evolved over some 5 to 10 years from the ASP business model. Moreover, statistical evidence to define this emerging social and eco- nomic reality has lagged behind the writers and commentators who have iden- tified the important features of this significant change. Chapter I contains ASP and discusses the rise and fall of this phenomenon in a relatively short period. This is followed by a similar discussion for the Web Services business model. This will then be followed by Concerns which discusses the engine that is driving the Web services industry. Just as the steam, electric, and gasoline engines became the driving forces behind the Industrial Revolution of the early 1900s, so the Internet and high-speed telecommunications infrastructure are making Web services a reality today. A resulting “information processing” in- dustry is the business sector which is providing the impetus for this revolution, with its increasingly improving array of hardware, software, and information products and services. These technologies, in turn, are having and will con- tinue to have profound impacts on business management, competitive advan- tage, and productivity. Having set the stage by describing the changing business environment for or- ganizations today, Recommendations then moves to the need for each en- terprise to fundamentally think its corporate strategy. The situation can be compared to the railroad industry in the late 1800s. It had to change its mind- set from one of buying up large land tracts and laying railroad ties to one of moving goods and people from one place to another, so companies today must reconsider their traditional lines of business as they begin operating in the 21st century. For Web services vendors, it is not just a question of selling a product, but of selling a solution to a customer’s problem. This is where the lines between delivering the services and traditional versus emerging markets are blurring and changing. The qualitative dimension is as important in the Web services industry as the quantitative dimension. Quality control must be built into the front end of the service delivery cycle, not viewed as a last-minute check to be done just before contracts are reviewed. Here is where the human factor is introduced into our discussion. In essence, the intelligent enterprise is a distributed net- work of human talent. Within the individual enterprise, outmoded human re- sources management philosophies must be replaced by modern approaches that maximize the brain contribution to the products and services, not just the brawn contribution. The emphasis of Web services is on working smarter, not TEAM LinG
  • 11. x just harder. Web services strategy requires businesses to rethink not just the elements of their economic milieu, but also their political and social contexts. This does not suggest some kind of radical shift away from the profit motive to the quality-of-life motive. However, we do endeavor to point out that this strategy presents both risks and opportunities for every business in the 21st century. Much of this discussion implicitly recognizes that doing business in an intelligent enterprise forces suppliers, producers, and consumers into far closer proximity with one another than is the case in an industrial economy. Before the concluding statements, we invite the reader to look at more forms of Web service applications involving implementation issues from active re- searchers in both Europe and Asia. Haroun Alryalat and his colleagues at Brunel University, London, report on a strategy involving the Stock Exchange. Mayumi Hori and Masakazu Ohashi both at Hakuoh University, Japan, and Paulus Insap Santosa at the National University of Singapore, report on some respectable projects taking place in Asia involving Web services in the distri- bution of technology to that part of the world. Souad Mohammed clarifies several hidden costs relating to the implementation of information systems in the 21st century. Matthew Guah and Wendy Currie take the reader through an implementation of Web services in the UK National Health Service, summa- rizing parts I and III within a live project. Finally we examine the problem of redefining success in the business environ- ment of the 21st century in Future Trends. Central to this discussion is the idea of adding value at each stage of the information systems life cycle. ASP, as a form of technological accomplishment, had little meaning for businesses and other organizations. Unless Web services can be linked to business inno- vation, the challenge for business professionals is to find ways to improve business processes by using Web services. This book has been written to take the reader into the 21st -century IS strategy paradigm. Utmost attention is paid to integrate the current business and man- agement ideas with the deployment of Web services as one of the new infor- mation technologies. Yet, the book is rooted in the concepts that have emerged over the decades of development of the IS discipline. Web services in terms of its products and services has continued to evolve over its short history. As these changes have progressed, the landscape of the Internet technology has become crowded with new services, technologies, products, and transmis- sion media. As the Internet has continued to evolve with the discovery of new technologies and the integration of “older” technologies such as mobile com- puters and broadband communications, new opportunities and markets within this area of business have opened up. Web services, as a form of electronic TEAM LinG
  • 12. xi commerce, can be the sharing of business information, maintaining business relationships, and conducting business transactions by means of computer tele- communications networks. Similar to the development of the Internet’s World Wide Web, Web services has been changing both the ways organizations deal with one another and the way internal corporate processes are carried out with the assistance of telecommunication infrastructures. The capabilities of- fered by Web services present an opportunity to redesign the business pro- cesses of intelligent enterprises in order to reach new levels of performance. The researchers whose work underpins this book did not operate in isolation to the work of others in the IS and related fields. All through this book, se- lected examples of the existing literature will be discussed under the various headings of theory. Many examples and cases throughout the text have been drawn from international business areas. The purpose is to describe some interesting work, which was forerunner and inspiration to our research, while maintaining the role of theory and case studies within the interpretive tradition of IS research. The epistemology can be viewed as broadly interpretive, see- ing the pursuit of meaning and understanding as subjective, and knowledge as a social construction. Technology Review Change usually takes a long time, and the technology that transformed enter- prises and the economy is no exception. Why should anyone be overwrought about the slow growth of Web services? It took mainframe computers a de- cade or two to become central to most firms. In fact, when IBM marketed its first mainframe computer, it estimated that 20 of these machines would fulfill the world’s need for computation! Minicomputers moved into companies and schools a little faster than mainframes, but they were also considerably less expensive. Even the ubiquitous PC took 5 to 10 years to become an impor- tant part of work life. The road travelled by these pioneers was rocky. Actual accomplishments seldom matched those initially envisioned. There were sev- eral reasons for this shortfall—a general lack of computer literacy among us- ers, a general lack of business literacy, and an ignorance of the management role by information specialists, computing equipment that was both expensive and limited by today’s standards, and so on (McLeord, 1993). Some IS re- viewers believe that one error in particular characterized the early systems above all others: they were too ambitious. Firms believed that they could build TEAM LinG
  • 13. xii giant information systems to support all managers. With the benefits of hind- sight, one can now describe systems designed then as being snowballed or the task attempted being unmanageable. However, some firms stuck it out, in- vested more resources, and eventually developed workable systems—although more modest in size than originally projected—while other firms decided to scrap the entire management information system idea and retreated to data processing. When the first computers were applied to business problems in the 1950s, there were so few users that they had almost total influence over their sys- tems. That situation changed during the 1960s and 1970s as the number of users grew. It then became necessary to consider the combined needs of all users so that the systems could function in an efficient manner. During the 1980s, the situation became even tighter when a new player entered the pic- ture—the enterprise (McLeord, 1993). A stage of organization/staff reliance on information systems started in the mid-1980s with demands that informa- tion systems increased operational efficiencies and managerial effectiveness. On the back of such evolution, strategic information systems gained impor- tance as systems expected to help organizations compete. In the 21st century, information systems are being developed in an enterprise environment (see Figure 4.1). 21st Century: The Age of Information Society Beniger (1986) puts forth a seemingly influential argument that the origin of the information society may be found in the advancing industrialization of the late nineteenth century. As industrial plants increased their processing speed, the need for increased resources to control manufacturing and transportation resulted in a feedback loop wherein enterprises had to process information ever faster. The demand for sophisticated information processing equipment resulted in the development of computers. While the subsequent new tech- nologies nurtured the development of an information society, the continuing cycles of demand pull and supply push account for the progress in the field. The Internet is simply a global network of networks that has become a neces- sity in the way people in enterprises access information, communicate with others, and do business in the 21st century. The Internet contains a distributed software facility that organizes the information on it into a network of interre- lated electronic documents called the World Wide Web (WWW). WWW has TEAM LinG
  • 14. xiii changed the face of computing, both individual and enterprises resulting in the expansion and development of electronic commerce. The Internet is regarded in the 21st century as much more than a means of communication. It is also a source of information and entertainment that facilitates the development of electronic commerce. The initial stage of e-commerce ensured that all large enterprises have computer-to-computer connections with their suppliers via electronic data interchange (EDI), thereby facilitating orders completed by the click of a mouse. Unfortunately, most small companies still cannot afford such direct connections. Web services enable low-cost access to this service and having a standard PC is usually sufficient to enter this marketplace. The Internet has been a subject of enormous hype and speculation since its explosion in late 1980s. However, Web services can most certainly be said to be responsible for the latest debate surrounding its usage for purposes far beyond its original scope. By the late 1990s, ASP-like business models were applied by a proliferation of small businesses in the Western world, thereby creating what sometimes seemed a cult status with people from many parts of society talking about a “new breed of entrepreneurs.” Beyond the problems that may arise from the systematization of information, we suggest that there is within the discipline of Web services a model of infra- structure and context which is foundational but inadequate. This is the code model of Web services, deriving from the work of Sleeper and Robins taking a pragmatic look at the emerging Web services market (Porter & Millar, 1985). We will draw on a number of theoretical sources in search for an improved foundation. A link is also made to the environment reality theory of perception proposed by Little (1999). Internet Strategy Our examination of Internet strategy begins with a look at the understanding of strategy in business and it’s purpose to achieving business goals. Nearly all written work in the area of strategy are based on the classic book by Alfred Chandler (1962), Strategy and Structure. The definition used in that book is: The determination of the basic long-term goals of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. (p. 13) TEAM LinG
  • 15. xiv Chandler considered strategy to be about setting general goals and deciding on the broad types of action and use of resources needed to achieve them. These involved the overall size and scope of the organization concerned, the mix of products or services being provided, and the organization’s core val- ues. Such approach to strategy implies that strategies are the intended out- comes of systematic, rational decisions by top managers about clearly defined problems. The resulting strategic change or innovation would appear as a linear, sequential process in which strategic analysis and choice would follow unproblematic trend by strategy implementation. It has been recorded that Chandler’s views of strategy goes without its cri- tiques (Mintzberg, 1979, 1990; Quinn & Hilmer, 1994; Whittington, 1993). Some of these authors have contrasted the idea of strategy as a deliberate, consciously intended plan with strategy as an emergent property, evolving incrementally and piecemeal out of the ideas and actions of people at different levels of the organization. Such strategies may be articulated consciously by top management in most successful organizations. Others consider such emer- gent, adaptive, or incremental view of strategy assumes that the internal and external environments of organizations are inherently ambiguous, unstable, and unpredictable. Others believe strategy does not assume that managers in or- ganizations can only influence events at the margin, simply adapting pragmati- cally and opportunistically to continually changing circumstances. These au- thors consider the essence of a strategy and its crucial importance in any pro- cess of change or innovation is that it embodies the deliberate and conscious articulation of a direction. Successful strategies require both an overall sense of direction and a continuous adaptation to change. For a deeper understanding of strategies and strategy development, it is im- perative to recognize their strong links with organization culture, the deeper level of basic assumptions and beliefs that are shared by members of an orga- nization that operate unconsciously and define in a basic taken-for-granted fashion an organization’s view of itself and its environment. It has become even more accepted in the 21st century that strategies are both rooted in, and partly explained by, organization culture. Jon Clark in his book, Managing Innovation and Change (1995), outlined how the original founders of many of today’s large successful organizations—Ford in the USA, Marks & Spen- cer in the UK, Pirelli in Italy, and Siemens in Germany—played a crucial role in establishing their overall strategy and organizational culture. Clark (1995) also shows that organizational culture is one of the most important areas of strategy which can be influenced by top managers and visionary leaders within the organization. TEAM LinG
  • 16. xv Mintzberg (1979, 1990) shows strategies to usually exist at a number of lev- els in any organization. These strategic levels can be generally distinguished into corporate, business, and operational. 1. Corporate strategy is concerned with the overall size and scope of the organization.Thisinvolvestheorganization’sbasicgoalsandobjectives, its core values and overall profile, as well as the general allocation of resourcestodifferentoperations. 2. Business strategy can also be referred to as competitive strategy and is concerned with the choice of products or services to be developed and offeredtoparticularmarketsandcustomers.Thisalsoinvolvestheextent towhichthechoicesmadeareconsistentwiththeoverallobjectivesofthe organization. 3. Operationalstrategyisconcernedwiththedifferentfunctionswithinthe organization. These functions could be production or service delivery, finance,personnel,research,ordevelopmentwhichallinfluenceandare integratedwithinthecorporateandbusinessstrategiesoftheorganization. The interaction and consistency between the different levels of strategy and structure are crucial issues for the organizational performance. Clark (1995) raises the level of a long-standing debate about the relation between strategy and organization structure. Chandler (1962) phrased this debate with a phrase that “structure follows strategy.” This implies that orga- nizations should first plan their strategy before embarking on the process of designing their structure to fit within such strategic plan. In contrast, Mintzberg (1990) argued that strategies are unlikely to be decided without reference to existing structures. The relationship between strategy and structure is likely to be reciprocity rather than a one-way determination. Mintzberg (1990) para- phrased Chandler’s “structure follows strategy” as the left foot follows the right. Clark (1995) points out that multinational corporations face a number of complex structural problems in developing strategies which are not faced by small businesses or professional organizations. TEAM LinG
  • 17. xvi References Beniger, J.R. (1986). The control revolution: Technological and economic originsoftheinformationsociety.Cambridge,MA:HarvardUniversity Press. Chandler,A.D.(1962).Patterninorganizationalanalysis:Acriticalexamina- tion. Business History Review, 36(2), 233–. Clark, J. (1995). Managing innovation and change. London: Sage. Little,G.R.(1999).Paper1:Theoryofperception.RetrievedJune2002,from www.grlphilosophy.co.nz McLeord Jr., R. (1993). Management information systems: A study of computer-based information systems (5th ed.). New York: Macmillan. Mintzberg, H. (1979). An emerging strategy of direct research.Administra- tive Science Quarterly, 24(4), 582–589. Mintzberg,H.(1990).Thedesignschool:Reconsideringthebasicpremisesof strategic management. Strategic Management Journal, 11(3), 171. Porter,M.E.,&Millar,V.E.(1985).Howinformationgivesyoucompetitive advantage. Harvard Business Review, 62(4), 149–160. Quinn, J.B., & Hilmer, F.G. (1994). Strategic outsourcing. Sloan Manage- ment Review, Summer(39), 63–79. Whittington,G.(1993).Corporategovernanceandtheregulationoffinancial reporting. Accounting and Business Research, 23(91), 311. TEAM LinG
  • 18. xvii Acknowledgments So many people have played a role in the development of the ideas presented here that it is difficult to know where to begin in acknowledging them. The first draft of this manuscript was written while I was a PhD student at the Centre of Strategic Information Systems in the Department of Information Systems and Computing at Brunel University. All the staff at DISC, initially, established a wonderfully hospitable environment for this enterprise. I owe an inestimable debt of gratitude to Michael Livesey with whom I have discussed many of the ideas developed herein and who read and made nu- merous helpful comments and suggestions on several drafts that have been incorporated in the final version of this book. While I was writing this manuscript, I was reading Wendy Currie’s excellent book Value Creation from e-Business Models (Elsevier Butterworth- Heinemann, 2004). Her study clarified my thinking on many issues and con- tributed to shaping the direction of my own work. I humbly appreciate her continuous support and encouragement as I seek my way through the ‘trap- doors’ of academic life. This book would not have been possible without the cooperation and assis- tance of the authors, reviewers, my colleagues and the staff at Idea Group Publishing. The editors would like to thank people at Idea Group, namely: Mehdi Khosrow-Pour for inviting us to produce this book, Jan Travers and Amanda Appicello for their contributions, Diane Huskinson and Michele Rossi for managing this project, especially for answering our questions and keeping us on schedule. A special word of thanks goes to Ms. Kristin Roth, for her diligence and determined stewardship during this laborious project. TEAM LinG
  • 19. xviii Last but certainly not least my family (including Evelyn Christine, Michael Appopo, Matthew Gbeyadeu and David Gbemie) who have all patiently borne with me through dejection and inspiration as this book has evolved. Evelyn has also provided a steady supply of patience, sound judgement and an inde- fatigable supply of good nature for which I will continue to owe her consider- ably. TEAM LinG
  • 20. Section I Strategic Approaches to Internet for Organizations TEAM LinG
  • 21. xx TEAM LinG
  • 22. Application Service Provision 1 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Chapter I ApplicationService Provision Matthew W. Guah, Warwick University, UK Abstract Thischapternotonlydefinestheapplicationserviceprovisionphenomenon, but also details the issues surrounding its emergence as an Internet strategic module. It reports on several studies that concentrated on the application service provision module impact on the day-to-day operation of a business. What is Application Service Provision (ASP)? According to the ASP Industry Consortium, an ASP is a third-party service firmthatdeploys,manages,andremotelyhostssoftwareapplicationsthrough centrally located services in a rental or lease agreement (ASP Consortium, TEAM LinG
  • 23. 2 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 2000). Such application deliveries are done to multiple entities from data centresacrossawideareanetwork(WAN)asaserviceratherthanaproduct, pricedaccordingtoalicensefeeandmaintenancecontractsetbythevendor. ASP is considered by many to be the new form of IT outsourcing, usually referred to as application outsourcing. While the IT industry has become accustomedtosellingsoftwareasaservice,theASPbusinessmodelisdifferent due to its scale and scope of potential and existing application software offeringstosmall,medium,andlargecustomers.Inaddition,thismodelenables ASPstoservetheircustomersirrespectiveofgeographical,cultural,organiza- tional,andtechnicalconstraints.TheapparentcomplexityoftheASPmodelled to a taxonomy including Enterprise ASP, Vertical ASP, Pure-Play ASP, Horizontal ASP, and ASP Enabler (Figure 1.1). An earlier evaluation of differentASPbusinessmodelsresultedintofourbroadcategoriesofdelivery, integration, management and operations, and enablement (Currie, Desai, & Khan, 2004). An important debate surrounding all ASP models is the extent to which applicationoutsourcingisdifferentfromtraditionaloutsourcing.Figure1.2 providesabreakdownoftraditionalandapplicationoutsourcing.Probablythe Initiation Evaluation Implementation Integration Services Consolidation 1997 2003 2002 2001 2000 1999 1998 Full Service Providers (FSP) Application Service Delivery (ASD) Virtual Application Service Provider (VASP) Application Centric Customer Centric Figure 1.1. The evolution of the ASP models TEAM LinG
  • 24. Application Service Provision 3 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. mostnoticeabledifferencebetweenthetwoiswithintherelationshipwiththe customer. ASP is a metamorphosis of software into a service that exists on the Web, or often referred to by practitioners as Web-native software world. In this model,agiantInternetprotocol(IP)network(calledtheInternet)isbeingused toeffectivelyturnsoftwareintoaservicedrivenfunctionthatexistsasaone- to-many option. The simple explanation for ASP is that a company delivers application software from a central source, delivering it over a network connectionandchargingafeeforitsuse. ASPscanalsobedescribedasthedeliveryofpreconfiguredtemplatesoftware fromaremotelocationoveranIPnetworkonasubscription-basedoutsourcing contract.Thisisusuallyinaone-to-manyrelationshipandmustbeviewedas apreimplementationoutsourcingcontractthatcanbebilledaspaymentfora service—inrelationtotheUKmobilephonemarket,apay-as-you-goservice. Figure 1.2. Three stages of IT outsourcing (Currie & Seltsikas, 2000) TEAM LinG
  • 25. 4 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Emergence of ASP ThissectionfocusesontheemergingroleoftheASPmodel.Duringthelastfive years,theASPphenomenonhasgrownconsiderably,withmanyestablished andstart-upfirmsdevelopingtheirASPstrategies.Thereisagrowingaware- nessthatfewactivitiesandprofessionshaveseensucharapidchangeoverthe past years as the activities and professions related to the field of information systems(Leeetal.,1995).Initiallycalled“appsontap,”thissourcingmodel promisedtodeliverbest-of-breed,scalable,andflexiblebusinessapplications tocustomerdesktops(Kern,Willcocks,&Lacity,2002).ASPwasthehottest topicin2000–2001inwhatwasreferredtoinUSAas“practicemanagement solution.”Well-establishedpracticemanagementsoftwarecompaniesinclude Medic, Millbrook Corp., and Computer Sciences Corp. Other less-known companies are Greenway Medical, Alteer Corp., and Perfect-Practice.MD. Whilethesecompaniesofferremotehostingofsoftwaretotheircustomersin the healthcare sector, they also promise the advantages of client-server applicationswithouttheexpensiveinfrastructureoreventhestaffrequiredto maintain it. Forecasts for the growth of the ASP industry vary, with Ovum (Ring,2000)predictingitwillbe$25bnandDataquest$22.7bnby2003(ASP IndustryConsortium,2000).ASPswillhaveasignificantimpactonoutsourcing policies and practices if the business model successfully penetrates underexploitedsectorssuchashealthcare. TheearlyphaseoftheASPmodelappearedtorevisittheservicebureaumodel of the 1960s and 1970s (Currie, 2000). During this period, many companies signed outsourcing contracts with a service bureau. The fashionable term “outsourcing” was rarely used, as the more narrow facilities management contractsinvolvedmainframesdatacentresandbespokesoftware.Theservice bureau model was moderately successful even though there were many technical,communications,andfinancialproblemswhichprecludeditbeinga viableoptionformanycompanies. Inthiscurrentera,outsourcingwillcontinuetoundergoasignificantshiftfrom thecentralizedcomputingofthe1960sand1970s,thedistributedcomputing of the 1980s and 1990s, through to the remote computing in the 21st century. ASPswillplayacentralrolesincetheywillincreasinglyofferautilitymodelto customers where the latter will purchase applications on a pay-as-you-use basis (Currie et al., 2003). TEAM LinG
  • 26. Application Service Provision 5 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Asthesehistoricalstageshaveevolved,thebasicstrategicresourcesandtools ofeconomicactivityhaveshifted,ashasthenatureofworkandculture.Inthe “post-Net era,” a term coined by editors of Issues of Strategic Information Systems for its special issue in 2002, the application of knowledge and intellectualtechnologyinresponsetotheorganizedcomplexityoftechnology, organizational,andsocialinstitutionsbecomethecriticalfactorofproduction andservices. Thefindingsofmanystudiesprovidesubstantialevidencefortherealityofthe ASPindustryintheUSAandthetransitionalphasewhichthenationaleconomy hasmovedthroughinprogressingtoASPtechnology(Currie,2000).More- over, the study also provided support for the notion that the basic sources of wealth had shifted from capital to information and knowledge resources. If ASP is a technological and economic reality, then what is its impact on business? At the outset, it is clear that the Internet’s impact on business will evolveovertimeandwillredefineourunderstandingofbusinessmanagement, competition, and productivity. While we have been living with the conse- quences of the Internet for many years, our understanding of these shifts in humaneventshaslaggedbehindthereality. Ironically,thisdelayedeffecthasbeenparticularlyacuteinEuropeinrecent years, as compared to Japan and the USA. For example, in the USA, preliminaryplanninginmovingIToutsourcingtowardanASPmodelemerged as a general business goal in early 1980s, and by the late l990s it had been translatedintoafull-scaleeconomicdevelopmentstrategy.Moreover,bythe late 1990s, the USA was beginning to assess its economic development strategies in the ASP industry, and the impacts such pronounced shifts in IT industryprioritieswouldhaveonbusiness. Eventoday,EuropeanbusinessandpoliticaldebatesoverISstrategicpolicy remaintiedtotraditionalviewsofoutsourcing.Manyseniorexecutivesstill remain sceptical or openly critical of the ASP phenomenon. These attitudes among corporate executives and senior managers betray some fundamental misunderstandingsnotonlyofthecurrentstateoftheASPindustryinEurope, butalsoofthetermsandconditionsunderwhichtheadvancedASPindustry intheUSAwillcompetewithEuropeanbusinessinthefuture. Nearlyeveryparticipantinourresearchwithsmall-andmedium-sizecompa- nies(SME)intheUKagreesthatimplementingASPsolutions(whichsome- timesresultsinautomatingcertainworkflows)withoutfirstmakingnecessary fundamentalchangesandimprovementsisthewrongwaytogoaboutbusiness TEAM LinG
  • 27. 6 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. improvement.Thatisbecausenewandbetterproductsoftenreplaceexisting ones. At the same time much-needed skills may not be backed up by job descriptionsandfunctionalstatements.Andtoooftenthepoolingofparallel andsimilaroperationsisnotconsideredwhenimplementinganASPsolution. Preliminary findings of our research show some conflicting stakeholders perceptionsforasuccessfulimplementationofsuchamodel.Thesepercep- tionsnotonlyleadtoabetterunderstandingoftheethicalissuesinvolvedbut also of the complex relationship of these ethical issues with other technical, organizational,andsocialissuesthatneedtobemanagedeffectively. What Does ASP Mean for Your Business? An application containing a database with all your customer information or paymentduedateorrecordsofalle-mailisstoredandprocessedbyanoutside providerinlieuofbeingonyourlocalnetwork. Thismeansnooneinyourbusinessneedstoworryaboutmaintainingaserver fullofallthisinformation.ItispainfulforanorganizationtohavetospendIT resourcesmaintainingserversandthinkingofthedisasterswhenthesystem goes down or an upgrade is needed. An ASP business model allows your businesstheluxuryofhavinganoutsideserviceprovider,whospecializesin server maintenance and support, to provide what should be an incredibly reliableandsecureITsystems—somethingonlyafewbusinessescouldafford beforenow. A typical ASP has to submit to government audits, provide multiple servers (redundancy),four-way(4-T3)replication,backuppowersystems,and24/7 support. Most small- and medium-size companies cannot afford all that and keep up to date with necessary improvements. It also allows savings from software licensing, enabling small- and medium-size companies to be as powerful as their larger competitors. They do this by subscribing to an inexpensive monthly ASP service giving them the chance to be virtually unlimitedintheircapacitytostoreinformation. AnASPsuppliesacompleteinfrastructureforyourbusinessandmanagesthe networkandalltheapplicationsthatyouwishtorunonallthecomputerswithin yourcompany.AnASPusuallychargesafixedfeetomanageyournetworkand TEAM LinG
  • 28. Application Service Provision 7 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. applications. One important factor in this business model is that the ASP is allowed to manage your network. Your business does not need to operate its own server; instead, your computers are connected to the ASP’s server throughanopenconnection.OnemajorproblemwithASPuptake,sofar,has been that the costs of such connections have not fallen significantly as anticipated.Thiswouldhaveprovidedanattractivealternativetoincreasingly expensive network management. Moreover, your company would know in advance what the software and management will cost because it is being charged a fixed fee. References ASPIndustryConsortium.(2000).Industrynews.RetrievedDecember2002, from www.Aspindustry.org Currie, W., Desai, B., Khan, N., Wang, X., & Weerakkody, V. (2003). Vendor strategies for business process and applications outsourcing: Recent findings from field research. Hawaii International Conference onSystemsSciences,Hawaii. Currie,W.L.(2000).ExpandingISoutsourcingservicesthroughapplication serviceproviders.ExecutivePublicationSeries.CSIS2000/002. Currie,W.L.(2004).Theorganizingvisionofapplicationserviceprovision:A process-oriented analysis. Information and Organization, 14, 237– 267. Kern, T., Willcocks, L.P., & Lacity, M.C. (2002). Application service provision: Risk assessment and mitigation. MIS Quarterly Executive, 1(2), 113–126. Lee, D.M.S., Trauth, E.M., & Farwell, D. (1995). Critical skills and knowl- edgerequirementsofISprofessionals:Ajointacademic/industryinvesti- gation. MIS Quarterly, 19(3), 313. Ring, (2000). European market research: A report to the ASP Industry Consortium.Ovum,March. TEAM LinG
  • 29. 8 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Chapter II WebServices Matthew W. Guah, Warwick University, UK Abstract Organizations today are desperate to identify new opportunities in the facilities provided by the Internet. Few have attempted to link interorganizational, interfunctional and interpersonal levels of their organizational processes via Web services. They have undertaken this process in anticipation of reshaping and improving their core business processes. This chapter details how Web services could potentially make a significant different in the integration of software applications across multiple platforms, sites and departments of an organization. The chapter concludes by advising that organizations, in the process of reviewing their Internet strategies, should at least investigate the potential impact of Web servicesintegrationbecausethiscouldsoonerorlaterbecomeapermanent business necessity and not just a competitive advantage material. TEAM LinG
  • 30. Web Services 9 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. What are Web Services? Web services are the small software components that are available over the Internet. Publishing as Web services makes the software applications more reusable and shared by many more users. Web services enable business partnering and thereby generate a great way of revenue streaming for the companies.Italsohelpsinreducingthedevelopment,integration,andmainte- nancecostofthesoftwareapplication. Simple Object Access Protocol (SOAP) is the communication protocol that helps in transporting the Extensible Markup Language (XML) messages between the client and server. SOAP is nothing but XML over Hypertext TransferProtocol(HTTP).WhentheWebserviceclientmakesarequest,the SOAP client application programming interface (API) constructs a corre- spondingXMLmessagecontainingtheremotemethodnameandvalueforits parametersandsendstheXMLmessageoverHTTPtotheserverhostingthe Web services. The server receives the XML message, executes the business logic (may be written in Java), and sends the response back to the client. The Web services paradigm includes a programming model for application integrationthatdoesnotdiscriminatebetweenapplicationsdeployedinsideand outside the enterprise. Integration and development of Web services can be done in an incremental manner, using existing languages and platforms and adopting existing legacy applications (Figure 2.1). One of Web services’ anticipatedbenefitsisthathumanend-userinteractioninthenormaldataentry Webapplicationcanbereplacedbydirectapplication-to-applicationcommu- nication. When we talk about the benefits of Web services, we cannot overlook a few issues in using Web services as well (Sleeper & Robins, 2002). The primary issueissecurity.TheotherWebapplications,suchasJavaServlets,arebeing accessedviaHTTPbrowser.Theuser-specificinformationcanbestoredinthe HTTPsessionandusedforusers’sessiontracking.Afineexampleofthisisthe shoppingcartapplication. However,becauseWebservicesarebeinginvokedbythestand-aloneclient applications,theservercouldnothaveanyideaabouttheuserwhoisactually makingtherequest.Thiswouldposeamajorproblemthatanyunauthorized user may consume our Web services and we do not have any control on this. Another serious problem is the tampering of XML messages while they are transmittedoverwire(Wilkes,2002). TEAM LinG
  • 31. 10 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Figure 2.1. Web services integration model TEAM LinG
  • 32. Web Services 11 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. UsingXML,businessanalystscandefinepoliciesandexpressthemasEML documents. These documents can have sections that are encrypted and the documents can be digitally signed, distributed, and then interpreted by the securitymechanismsthatconfigurethelocalsoftware.Thiswillallowvarious implementationstomapfromtheXMLdescriptiontoalocalplatform-specific policyenforcementmechanismwithoutrequiringchangestotheinfrastructure. Web Services Approach This new approach introduces the proxy-based lightweight framework for providingsecureaccesstotheWebservicesbeingrequestedbytheclients.The basicideaistodeployaproxyWebservicethatreceivestherequestfromthe endclientonbehalfoftheactualWebservice.Theproxyserviceauthenticates theendclientbyvalidatingtheclient’scredentials,whichhe/shehadsentalong withtheWebservicerequest.Iftheclientisauthenticatedsuccessfully,he/she will be given access to the requested service. The advantages of this approach are as follows: • Itisbasedonmessage-levelsecurity. • It does not only authenticate the user, but it also verifies the message integrity. • ItdoesnotdisturbtheactualWebservice,whichmayberunningonthe productionserver. • It acts like a plug-in; it can be removed and replaced with any other solutionatanypointintime. • IthidestheactualWebservice;theprocessisabstractedfromtheclient. Theclientwouldnotknowthathis/herrequesthasbeeninterceptedand processed by a proxy. Integrating new handlers, such as auditing and notification, is very easy. Whereasanauditinghandlerisformaintainingtheserviceaccessinformation, anotificationhandlercouldbeusedforsendinge-mailstotheserviceproviders in case of any problem in accessing the service. Someone might now want to raise a question about the performance of the proxyapproach.Becauseoftheintroductionofaproxyinthecommunication TEAM LinG
  • 33. 12 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. path of end service, the invocation time will be a little longer. However, the performancefiguresaremoreacceptable. The proxy Web service uses Web services handlers to intercept XML messagesusedinWebservices.Itcontainstwomajorcomponents,namely: • Authenticationhandler • Proxyclient Needlesstosay,theauthenticationhandlerisrealizedbyusingaWebservice handlerandtheproxyclientistheback-endcomponent.Thetwocomponents are packaged into a single Web service. While the authentication handler authenticatestheclient,theproxyclientinvokestheactualWebservice. Tostartwith,theendclientsendstherequesttotheWebserviceproxyalong withitscredentials.Thecredentialscouldbeeitheracleartextpasswordora digitalcertificate.Incaseofbasicauthentication,thecredentials(usernameand password) need to be sent as HTTP header parameters. In the case of advancedauthentication,theendclientsignstheXMLmessagewithhis/her digital certificate and sends the signed XML message to the server. Now the client has done its job. On the server side, the authentication handler acts as an XML interceptor, which receives the XML message and the HTTP header parameters, if any. Dependingonthetypeofauthenticationmechanismneeded,thecorresponding Figure 2.2. Proxy-based approach to Web services (www.developer.com/ articles) WS 1 WS 2 TEAM LinG
  • 34. Web Services 13 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. implementationisinvokedtoverifythecredentials.Byprovidingmanyhooks, differentkindsofimplementationsfortheauthenticationcouldbeintegrated veryeasily.TheLightweightDirectoryAccessProtocol(LDAP)servercanact asanACLrepository,whichstoresalltheclients’profiles. In the process of authenticating the client, the credentials being sent by the clientscanbeverifiedagainstthecredentialsstoredintheACLrepository.If they are found to be matching, the user is authenticated successfully. Other- wise,theauthenticationprocessisafailureandthehandlerwillsendthefailure message to the end client. In the case of successful authentication, the proxy client invokes the actual Web service by constructing a new SOAP message and sending it to the server hosting the actual Web service. As far as the end client is concerned, he/she receives the response from the proxy Web service and the whole logic of authentication and actual service invocationisabstractedout.Theotheradvantagesofthisnewproxyapproach over other products are as follows: • Lightweightframework • Low cost • Easytointegrate • Quick to deploy Webservicesarenotadisruptiveapproachtohostedservices,rather,theyare anadditivestepforward.Theywillprovideastandards-basedwayfordifferent servicesandapplicationstointeroperate,whichwillgreatlyreducetheintegra- tionhurdlesASPshavelongfaced.Intheprocess,Webservicewillalsogive ASPs increased flexibility to create and deliver more personalized hosted solutionsfortheircustomers. ConsideringWebservicesarecreatedanddistributedbymultipleentities,an ASP would not be able to ensure that individual Web services will be developedorrunontheinfrastructureoftheirchoice. However,theASPmust developanddeployitsownserviceswithinfrastructurethatcomplieswithWeb servicesstandards.Thiswillensurethatservicescanefficientlyinteractwith, and take advantage of, other Web service components. TEAM LinG
  • 35. 14 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Web Services’ Impact In the seemingly fast-paced world of the 21st century, change is the only constantandthereforeeventhorizonsareimmediate;businessescannotpredict whattheywillneedorhowtheywillactinayear’stime.Webservicesarethe currenttoolsbestsuitedtotheabilitytobridgethemultiplicityandcomplexity ofexistingITinfrastructures.SuchusefulnessofASPtoanintelligententerprise isasimportantasanyotherinthe21st -centurycollaborativebusinessenviron- ment.Webservicesareself-contained,modularbusinessprocessapplications that Web users or Web connected programs can access over a network— usuallybystandardizedXML-basedinterface—andinaplatform-independent and language-neutral way. This makes it possible to build bridges between systems that otherwise would require extensive development efforts. Such servicesaredesignedtobepublished,discovered,andinvokeddynamicallyin adistributedcomputingenvironment.Byfacilitatingreal-timeprogrammatic interaction between applications over the Internet, Web services may allow companiestoexchangeinformationmoreeasilyinadditiontootherofferings, suchasleverageinformationresources,andintegratebusinessprocesses. Users can access some Web services through a peer-to-peer arrangement rather than by going to a central server. Through Web services systems can advertise the presence of business processes, information, or tasks to be consumed by other systems. Web services can be delivered to any customer device and can be created or transformed from existing applications. More importantly,Webservicesuserepositoriesofservicesthatcanbesearchedto locatethedesiredfunctionsoastocreateadynamicvaluechain.Thefutureof Webservicesgoesbeyondsoftwarecomponents,becausetheycandescribe theirownfunctionalityaswellaslookforanddynamicallyinteractwithother Webservices.Theyprovideameansfordifferentorganizationstoconnecttheir applicationswithoneanothersoastoconductdynamicASPacrossanetwork, nomatterwhattheirapplications,design,orrun-timeenvironment. Web services represent a significant new phase in the evolution of software development and are unsurprisingly attractive to a great deal of media and industryhype.LikealmostallnewInternet-relatedtechnologies,theimmediate opportunitieshavebeenoverstated,althoughwebelievetheeventualimpact couldbehuge.ThiscanbedemonstratedbytheimmediateandkeyroleofWeb serviceswhichistoprovideaparadigmshiftinthewaybusinessmanagesIT infrastructure(Hondo,Nagaratnam,&Nadalin,2002).Itprovidesintelligent TEAM LinG
  • 36. Web Services 15 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. enterpriseswiththecapabilityofoverturningtheacceptednormsofintegration and thereby allowing all businesses to rapidly and effectively leverage the existingITandinformationassetsattheirdisposal. Intelligententerprisescurrentlyrunninganoutsourcingservicearealreadyseen to be one of the early gainers of the Web service revolution. However, there will be others as enterprises discover the hidden value of their intellectual assets. Considering most enterprises have until now used the Internet to improveaccesstoexistingsystems,information,andservices,weenvisagethe dayswhenWebservicespromisenewandinnovativeservicesthatarecurrently impossible or prohibitively expensive to deploy. With such developments anticipated to promote the ASP business model, Web services integration is considered to be at the heart of this expectation. Through this process of connectingbusinesses,ASPswillbeabletoquicklycapitalizeonnewoppor- tunitiesbycombiningassetsfromavarietyofdisparatesystems,creatingand exposing them as Web services for the end game of fulfilling customer expectations. ItisourviewthatanyintelligententerpriseconsideringtheASPbusinessmodel shouldatleastinvestigatethepotentialimpactofWebservicesintegrationas thiswillsoonerorlaterbecomeanotherpermanentbusinessnecessityandnot a competitive advantage material. Those intelligent enterprises that have adoptedoursuggestedapproachwillnotonlygainadvantagenowinbusiness for lower costs and better return on assets, but are also expected to develop valuable experience for the first decade of the 21st century. Considering the Internet’s history, as Web services become the standard and the expertise of ASP become more established, it should become the norm. Figure2.3showsthatholisticapproachtotechnologyalwaysseemstowork betterthanpiecemealapproachtoinformationsystemssolution. Web Services, as it is currently is like a two-legged table. A version of Web Services Plus being practiced by a few vendors after the dot.com crash is representedbythethree-leggedtableabove.However,anevenmoresuccess- fulmodelofWebServicesPluswouldbeaproperlyarchitecturedfour-legged table, as presented above. The analogy here is that a two-legged table is less stablethanathree-leggedtablewhileafour-leggedtableisevenfirmer(Figure 2.3). TEAM LinG
  • 37. 16 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Technology • Application • Technology • Application • People • Technology • Application • People • Work Flow Figure 2.3. Evolution of Web services Conclusion This chapter has discussed Web services and the security issues involved in usingWebservices.Italsobriefedyouaboutthevarioussolutionsavailableand howtheproxy-basedapproachcanbeveryusefulforsecuringWebservices. References Hondo, M., Nagaratnam, N., & Nadalin, A. (2002). Securing Web services. IBM Systems Journal, 41(2). Sleeper,B.,&Robins,B.(2002).Thelawsofevolution:Apragmaticanalysis oftheemergingWebservicesmarket.AnanalysismemofromtheStencil Group. Retrieved April 2002, from www.stencilgroup.com Wilkes, L. (2002). IBM seeks partners to drive adoption of XML Web services. Interact, February. TEAM LinG
  • 38. Concerns 17 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterIII Concerns Matthew W. Guah, Warwick University, UK Abstract As evidence relating the reality and basic features of the application service provider (ASP) market continues to grow, there begins to be less concern about confirming that any structural economic shift has continued historically, and more concern about understanding how the ASP industry is performing, and its impacts on productivity, investment, corporate capital formation, labor force composition, and competition. The relationship between the traditional outsourcing and the “latest wave” e- sourcing on the one hand, and Internet investment productivity on the other, is at the centre of the IT strategic problem confronting corporate management in the 21st century. Intelligent Enterprise Business Environment Anintelligententerpriseexistswithinseveralenvironmentalelements.Theseare theenterprisesandindividualsthatexistoutsidetheintelligententerpriseand haveeitheradirectorindirectinfluenceonitsbusinessactivities(seeFigure TEAM LinG
  • 39. 18 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 3.1).Consideringintelligententerprisesareoperatingindifferentsectors,area ofemphasis,andwithdifferentpoliciesandstrategies,theenvironmentofone enterpriseisoftennotexactlythesameastheenvironmentofanother. Thebusinessenvironmentforintelligententerprisesincludestheenterpriseitself and everything else that affects its success, such as competitors, suppliers, customers, regulatory agencies, and demographic, social, and economic conditions.AproperlyimplementedASPbusinessmodelwouldprovidethe meansoffullyconnectinganintelligententerprisetoitsenvironmentalelements. As a strategic resource, ASP helps the flow of various resources from the elementstotheenterpriseandthroughtheenterpriseandbacktotheelements (see Figure 3.1). Some of the more common resources that flow include informationflowfromcustomers,materialflowtocustomers,moneyflowto shareholders,machineflowfromsuppliers,andpersonnelflowfromcompeti- tors and workers’ union. Looking at Figure 3.1, one can see a generalized theory of enterprise’s perception(Little,1999).Thetheoryissufficientlyimaginativelymotivatedso thatitisdealingwiththerealinnercoreoftheASPproblem—withthosebasic relationshipswhichholdingeneral,nomatterwhatspecialformtheactualcase may take. Intelligent Enterprise Financial Community Environmental Movements Competitors Worker’s UnionShare Holders Suppliers Customers Education / Researchers International Government Charities / NGO National Government Local Government Figure 3.1. A tool for controlling influences in a complex environment TEAM LinG
  • 40. Concerns 19 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Anintelligententerprisecansucceedonlybyadaptingitselftothedemandsof its external environment, which is often represented by a number of groups (formallycalledstakeholders)thataffecttheorganization’sabilitytoachieveits objectives or those affected by it. Stakeholders other than participants and customersformanotherimportantpartofthecontext.Stakeholdersarepeople withapersonalstakeinanASPsystemanditsoutputseveniftheyareneither itsparticipantsnoritscustomers.Permanentamongsuchgroupsarecustom- ers, distributors, competitors, employees, suppliers, stockholders, venture capitals,tradeassociations,governmentregulators,andprofessionalassocia- tions.Animportantrolefortheinformationsystemsistokeeptheorganization informedoftheactivitiesofallthesestakeholdersandsimilarlystakeholdersare keptinformedabouttheactivitiesoftheorganization. Zwass (1998) describes an organization as an artificial system. He further defines an organization as a formal social unit devoted to the attainment of specificgoals.Withnotificationthatabusinessenterprise,asasystem,hasto generateprofit,thoughitmayalsopursueotherobjectives,includingemploy- mentprovision,andcontributingtoitscommunitygenerally.Zwass(1998)also restricts the value measurement of an artificial system to two major criteria: effectiveness (the extent to which a system achieves its objectives) and efficiency(theconsumptionofresourcesinproducinggivensystemoutputs). Consideringthatintelligententerprisescompeteinaninformationsociety,the requirementsforsuccessfulcompetitiondependsontheenvironment.Inthe case of ASP, such environment presents several serious challenges, and the role of intelligent enterprises information systems has evolved over time as competingenterprisesattempttomeetthesechallenges.Fewenterpriseshave, however,identifiedopportunitiesfordeployingstrategicinformationsystems that have proven success in the competition process by analyzing the forces actinginthemarketplaceandthechainsofactivitiesthroughwhichtheydeliver products and services to that marketplace. Infrastructure Issues Infrastructure is the resources the system depends on and shares with other systems.Infrastructureistypicallynotunderthecontrolofthesystemsitserves yetitplaysanessentialroleinthosesystems.ForASPthetechnicalinfrastruc- turetypicallyincludescomputerhardware,telecommunicationfacilities,and appropriatesoftwaredesignedtorunontheInternet.Examininginfrastructure TEAM LinG
  • 41. 20 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. mayrevealuntappedopportunitiestouseavailableresources,butitmayalso revealconstraintslimitingthechangesthatcanoccur. Evaluationofinfrastructureisoftendifficultbecausethesameinfrastructure maysupportsomeapplicationsexcessivelyandothersinsufficiently.Drawing from Porter and Millar’s theory that information systems are strategic to the extent that they are used to support or enable different elements of an enterprise’s business strategy, this paper proposes a framework that IS in largerorganizationalsystemsmayenabletheireffectiveoperationormaybe obstacles (Porter & Millar, 1985). In an earlier paper we use the UK’s National Health Service’s system infrastructure and context as two distinct meansofdeterminingimpactonlargersystems(Guah&Currie,2002). Infrastructure affects competition between businesses, geographic regions, andevennations.Inadequateinfrastructurepreventsbusinessinnovationand hurtsintelligententerpriseefficiency.Whileeveryinternationalbusinessperson canseethatthingshavechangedvastlyinmostofAfricaandSouthAmerica, thesignificanceofinfrastructureasacompetitiveenablerorobstaclehasclearly not changed. That is because infrastructure consists of essential resources sharedbymanyotherwiseindependentapplications.Alocalregion’sphysical infrastructureincludesitsroads,public,transportation,powerlines,sewers, andsnowremovalequipment.Itshumanandserviceinfrastructureincludes police, fire, hospital, and school personnel. A region’s physical and human infrastructurecanbeeitheranenableroranobstacleandisthereforeacentral concerninmanybusinessdecisions.TheimportanceofcertainISinfrastructure elementsserveasakeymotivationforthesuccessfulimplementationofASP. The required IS infrastructure raises a broad range of economic, social, and technicalissuessuchaswhoshouldpayforinfrastructure?Whoshouldhave access to/control over them and at what cost? Which technology should it include?WhereASPisinvolved,theeconomicquestionoftenputstelephone companiesagainstcablecompanies,bothofwhichcanprovidesimilarcapa- bilitiesformajorpartsofthetelecommunicationssystem.Fromcertainview- points,itcanbeconsideredtheresponsibilitiesofgovernmenttoensurethata nationalITinfrastructureisavailableasakeymotivationforthepreviousbuzz words“informationsuperhighway.” Justaslocalregionsdependonthetransportationandcommunicationinfra- structure, infrastructure issues are important for ASP implementation and operation. These systems are built using system development tools; their operationdependsoncomputersandtelecommunicationnetworksandonthe ISstaff.Deficienciesinanyelementofthehardware,software,orhumanand TEAM LinG
  • 42. Concerns 21 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. serviceinfrastructurecancrippleaninformationsystem.Conversely,awell- managedinfrastructurewithsufficientpowermakesitmucheasiertomaximize businessbenefitsfromASP. Inadequacy of Existing Infrastructure Most people would agree that motorways such as the M4, M6, and M1 together with railways up and down the country are a part of the UK’s transportationinfrastructure.Transportationisvitaltotheeconomy;itmakes themovementofgoodsandpeoplepossible.Economicinfrastructureprovides afoundationonwhichtobuildcommerce.Isthereatechnologyinfrastructure? At the national level, there is a communications infrastructure in the form of networks that carry voice and data traffic. In recent years, the Internet has become an infrastructure that ties a wide variety of computers together. The Internethighlightsthefactthataninnovationwhichbeganasanexperimentcan maturetobecomepartoftheinfrastructure. InfrastructurebeginswiththecomponentsofASP,hardware,telecommunica- tion networks, and software as the base. A human infrastructure of IS staff membersworkwiththesecomponentstocreateaseriesofsharedtechnology services. These services change gradually over time and address the key businessprocessesoftheintelligententerprises.Noninfrastructuretechnology isrepresentedbyapplicationsthatchangefrequentlytoservenewstrategies andopportunities(Weill,1993). Itsoundsinpracticethatmuchofthejustificationforinfrastructureisbasedon faith. Weill (1993) did find one firm with a creative approach to paying for infrastructure. The company required careful cost-benefit analysis of each project.Whenthisshowedhigher-than-necessarybenefits,itwasloadedwith infrastructure costs to take up the slack. In essence, the company added in “infrastructuretax”toprojects,notunlikeairlinetickettaxestopayforairports. Infrastructureisvital,butinvestmentsinitarehardtojustifyifyouexpectan immediatereturn.TheSingaporeexamplepresentstheclassiccaseforinfra- structure;asmallamountofinvestmentandguidancecreatesafacilityonwhich many organizations can build. Networking in Singapore has the potential to transform the nature of commerce on the island and to help achieve the city- state’sgoalsforeconomicdevelopment. TEAM LinG
  • 43. 22 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Telecommunications: Facilitating ASP Emancipation Telecommunicationsistheelectronictransmissionofinformationoverdis- tances. In recent years this has become virtually inseparable from computer withapairedvaluethatisvitalforintegratingenterprises.Mostenterprisesin the 21st century have access to some form of telecommunications network, which is simply an arrangement of computing and telecommunications re- sourcesforcommunicationofinformationbetweendistantlocations.These enterprisesareusuallyusingoneoftwotypesoftelecommunicationsnetworks which can be distinguished by their geographical scope: local area network (LAN)andwideareanetwork(WAN).LANisaprivatelyownednetworkthat interconnectsprocessors,usuallymicrocomputers,withinabuildingorona compoundthatincludesseveralbuildings.Itprovidesforhigh-speedcommu- nicationwithinalimitedareawhereuserscansharefacilitiesconnectedtothe network. On the other hand, WAN is a telecommunications network that coversalargegeographicalareawhichlargebusinessesneedtointerconnect their distant computer systems. Computer networks differ in scope from relatively slow WAN to very fast LAN. There are several topologies and channel capacities responsible, which the objective of this chapter does not permitofadetailedexploration. ASPs use WAN as a fundamental infrastructure to employ a variety of equipment so that the expensive links may be used efficiently. The various equipmentscontrolthemessagetransfersandmakesharingthelinksamonga number of transfers possible. An increasing number of ASP customers have user PCs that are connected to a LAN that communicates with the WAN via a gateway. In certain cases the ASP may offer common carriers and provide value-addedservicethatcanbecombinedwithprivatenetworkstocreatean overallenterprisenetwork. Asane-commercephenomenon,afewoftheessentialsofanASPinfrastruc- ture are common carriers, value-added networks, private line, and private networks. Common carriers are companies licensed, usually by a national government,toprovidetelecommunicationsservicestothepublic,facilitating thetransmissionofvoiceanddatamessages.Asmostcountriespermitonlyone common carrier, the service can be broken down and leased as value-added networkstovendorswhothenprovidetelecommunicationservicestotheirown customers with added values that could be of various sophistications. For increasedspeedandsecurity,anenterprisemaynotwanttosharewithothers andcouldtaketheoptionofleasingitsownprivatelinesorentirenetworksfrom TEAM LinG
  • 44. Concerns 23 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. acarrier.Ithasbeenproventhatleasinglinkscanresultinsavingsfromhigh- volumepoint-to-pointcommunications. TheabovearetheapparatusthroughwhichanASPusestelecommunications togiveitscustomerthecapabilitytomoveinformationrapidlybetweendistant locations and to provide the ability for their employees, customers, and supplierstocollaboratefromanywhere,combinedwiththecapabilitytobring processing power to the point of the application. As shown earlier in this chapter, all this offers an ASP customer the opportunities to restructure its businessandtocapturehighcompetitivegroundinthemarketplace. Issues of Security ConsideringtheASPindustryisridingonthebackoftheInternet’sovernight success,thehighlypublicizedsecurityflawshaveraisedquestionsaboutASP suitabilitytoserveasareliabletoolforthepromotionofintelligententerprises forthe21st century.AnASPvendorcouldbeforgivenforthinkingtheprimary servicetoitscustomersistoprovideconnectionsbetweenpossiblymillionsof computerslinkedtothousandsofcomputernetworks.However,thepreven- tion of unauthorized users who steal information during transmission, who sabotage computers on the network, or who even steal information stored in thosecomputersaremajorpartsofthevendor’sresponsibilities.Exploitingthis flawmightpermithackerstogaincontrolofdesignatedserversandthenaccess ordestroyinformationtheycontain.Aslongastheserisksarenotasfarfetched asonemighthope,customerswouldcontinuetobewaryabouttheuptakeof ASP business model (Currie, Desai, Khan, Wang, & Weerakkody, 2003). The many break-ins and other general security problems occurring with Internet/intranet demonstrate some of the risks of engaging in any form of businessmodellinkingtotheInternet.ManyASPvendorshavetriedtoreduce thedangerusingfirewallsandencryptionsbutsuchmaneuversnotonlyreduce risk, but they also reduce the effectiveness of a networked environment (see Figure 3.2). The IT community has generally accepted that effective use of encryptionandfirewalltechniquescouldeliminatemuchoftheriskrelatedto unauthorizedaccessanddatatheft. Doesanymathematicalencryptionguaranteeabsolutesecurity?No.Justasa physical lock cannot provide absolute safety, encryption cannot guarantee privacy—ifathirdpartyusesenoughcomputersandenoughtime,itwillbeable tobreakthecodeandreadthemessage.However,bychoosingtheencryption TEAM LinG
  • 45. 24 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. methodcarefully,designerscanguaranteethatthetimerequiredtobreakthe code is so long that the security provided is sufficient. It is advisable that intelligententerpriseskeepthisprincipleinmindwhenthinkingaboutInternet security.Whensomeoneassertsthatanencryptionschemeguaranteessecu- rity,whattheyactuallymeanisthatalthoughthecodecanbebroken,theeffort andtimerequiredisgreat.Thus,anencryptionschemethatrequireslongertime to break than another scheme is said to be “more secure.” However, a good proportion of the small- and medium-size enterprises (SMEs) surveyed did not appreciate that many ASP vendors have tried to reduce the danger using what is called firewalls—computers that intercept incomingtransmissionsandcheckthemfordangerouscontent.Somefearthat the mere process of downloading information across the Internet may entail hidden risks (see Figure 3.2). As far as performance goes, some vendors are consideringarrangementswithnationaltelecommunicationgiantsforbetter dataaccessfacilitiesoverWAN.Thetrendtowardderegulatingtelecommu- nicationsmustcontinuegloballyfordataratestobecomeamuchlessimportant restrictioninthefuture. Overcoming Obstacles to a Commercial Future Thepowerfultrendtowardanetworkedsocietyhasmanycomponents,starting with the fact that use of online networks is exploding. Businesses in the 21st Figure 3.2. Comparison of forward and reverse proxy cache security TEAM LinG
  • 46. Concerns 25 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. century require tools that take advantage of the millions of people who have usedcomputernetworksforbusinessandpersonaluses.Thesebusinessesrely on the fact that e-mails and e-bulletin boards are not only commonplace in leadingbusinessesbutalsousedforpurposesrangingfromansweringcustomer service inquiries to exchanging views about personal topics and politics. Reinforcingthesetrends,ASPvendorsarebuildingthenetworkcapabilities into their products for intelligent enterprises to see the Web services as an importantturningpointforcommercialopportunitiesbecauseithasmadethe Internet so much more accessible and adaptable for nontechnical business users. Many obstacles are currently apparent, however, when one looks at the possibilitythatASPwillbecomeamotivationaltoolforintelligententerprises inthe21st centuryandamajordeterminantforthefutureofInternetinfluence ontheworld’spopulation. Theareasofconcern,mentionedinTable3.1,relatetoorganization,security, online performance, freedom and control, competition, and hype versus OBSTACLES CAUSES SOLUTIONS Organization Earlier capacity was daunting and business strategy was unproven Advent of Web services to make ASP far easier to comprehend and adapt Security Too many reported server break-ins and other general Internet/intranet security problems Industry to emphasize efforts in protection machinery and firewall systems Performance Telecommunications infrastructure available in the 1990s globally not sufficient to support requirements Use of broadband services and improvement to infrastructure globally Control General negative press about lack of control on the Internet and risk to criminal accessing confidential data Some form of regulation— of an international nature—might be needed Competition Business model does not encourage differentiation Cooperation must be based on trust between vendors and individual customer Hype Although ASP model was said to save costs and is enticing to SMEs, very little evidence exist Whether the great potential of ASP to SMEs will prevail over the sceptics’ views remains to be seen. Web services is expected to provide that killer means of bridging the gap Table 3.1. Major obstacles and proposed solutions TEAM LinG
  • 47. 26 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. substance.TheissueoforganizationisbasedonthewayASPhasevolved.The ASPindustrylacksthetypeofclearorganizationthatwouldmakeiteasytouse as a reliable and profitable business model. Although ASP vendors’ former capacitywasdauntingandstrategywasunproven,theadventofWebservices will make it far easier to comprehend and even adapt. LookingbackattheInternet’shistory,oneseesmanyincidentsthatraiseissues about freedom and control. Major Western nations (USA, UK, France, etc.) have either proposed or passed legislation related to criminal penalties for transmitting,accessing,orinterceptingdataoftheInternetillegally.Although theInternethasbeenunregulatedinthepast,seriousconsiderationofASP-like businessmodelscouldresultinmorelegislation. ASP as Competitive Investment Thefundamentaldefinitionofwhatconstitutesamission-criticalapplication remainsrelativelyunchanged;itisthoseapplicationswhereeventhesmallest amountofdowntimewillhaveasignificantnegativeimpactonanenterprise’s operationalefficiencyandbottomline.However,thenatureofwhatintelligent enterprises now deem to be mission-critical systems has altered with a far greaterrangeofapplications. Onewaytointerestamanagerinanewinnovationistoshowthatacompetitor is planning to adopt this innovation. Intelligent enterprises do respond to competition to avoid being put at a disadvantage. Banks provide a good exampleofinvestmentintechnologyforcompetitivereasons.Inanearlystudy ofATMdeployment,BankerandKauffman(1988)foundthatATMadoption providedalimitedadvantagetocertainbanks.Thefindingssuggestanearly advantagefrominstallingATMsandjoiningalargenetwork.Customersclearly likeATMsandtheinterconnectionstothebankingnetworkitprovides:there is very little reason for a bank not to join an ATM network. In fact, because competitors offer ATMs and are in networks, a new bank is almost forced to investinthistechnology.In2002ATMswerecertainlycompetitivenecessities forbanking.SomebankswereclosingexpensivebranchesandinstallingATMs instead.However,sinceallbankscanfollowthisstrategy,itwasunlikelyone wouldgainasignificantadvantagefromit. TheairlineindustryoffersanotherexampleofISasacompetitivenecessity.To start an airline in the 21st century—especially in the UK and the USA—you wouldhavetoinvestinsomekindofASPserviceformakingareservation.The TEAM LinG
  • 48. Concerns 27 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. travellingpublichasbecomeaccustomedtobeingabletomakereservations andobtainticketseasily,eitherpaperorelectronic. Investmentsforstrategyandtomeetacompetitivechallengemaynotactually benefittheenterprisemakingthem.Anenterprisemaybeforcedtoadoptnew technologytostayevenwiththecompetition,asinthetwoexamplesmentioned earlier. In this case, it is not so much return on investment in ASP, but rather whatisthecostofnotinvesting?Willanenterpriselosecustomersandmarket sharebecauseitdoesnothaveaparticulartechnologyinplace? Canyouenter anewlineofbusinesswithoutinvestinginthetechnologythatcompetitorshave adopted? What kinds of services do customers expect? ASP Implementation Strategies Thestrategyonechoosesforimplementationhasadirectimpactonthelevel of investment required for an ASP initiative. One strategy is to hire external expertise,eithertodeveloptheentireapplicationortoworkwiththeinternal ISstaff.ConsultantshavebeenavailablefordevelopingASPinvestmentssince the first systems appeared. Consultants will provide advice, and many will actually undertake the development of the IT application. Carried to an extreme,theenterprisecanoutsourcethedevelopmentandeventheoperation of an ASP application. There are a number of network providers who offer completexSPservices(vertical,horizontal,pureplay,etc.)andanenterprise mightoutsourceitselectronicdatainterchangeeffortstothem. Themajoradvantageofusingconsultantsandoutsourcingistheavailabilityof external expertise. ASP is so complex and difficult to implement that most intelligententerprisesincludeabudgetforhelpfromaconsultingenterprisethat hasextensiveexperiencewiththispackage.Whentheenterpriseentersintoa consultingoroutsourcingagreementforanASPinitiative,itshouldbeaware oftheneedtomanageitsrelationshipwiththesupplier.Enterprisesthathave delegatedtheresponsibilityfordevelopinganewASPapplicationtoanoutside enterprisegenerallyhavebeenunhappywiththeresults.Managersstillhaveto monitortheagreementandworkwiththesupplier.Thereareexamplesofmany very elaborate management committees and structures established at enter- prises such as Microsoft, UNISYS, and IBM to manage outsourced IS. Evidencewithinthepastthreeyearshaveshownthatsituationscandevelopin whichlargenumbersofinsurmountableproblemsarisewithissuesthat,inan TEAM LinG
  • 49. 28 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ASPvendor’sopinion,weregoingtocauselastingimpedimentstotheultimate systemsimplementation.Amongseveralvendoroptionsweretheseprimary four: • ImplementedtheISasbestastheycouldwithintheseconstraints; • Demonstrated unpalatable objection to the problem owners and set conditionsforeventualcompletionsofwork; • Strove to ignore the problems and created the system as if they did not exist;and • Completelyrefusedtocontinueworkregardlessofsystemphase. Whileeachoftheabovecourseshasquiteaseriousimplication,thefirstoption was most taken. IntelligententerprisesshoulddeterminetheuptakeofASPbasedontheirlong- termISplanandonrequestsforinformationsystemsbyvariousstakeholder, that is, the prospective users, corporate management, internal IS team, customer,andsupplieraccessibility.ItisnotsufficienttoimplementASPforthe competitive edge the system may give the enterprise or the high payoff the system promises. The past phase of ASP has proven that not all systems that appearpromisingwillproducesufficientbusinessresultstojustifytheiracqui- sition.However,itisnosurprisethatcertainintelligententerprisesstillfindit difficulttoevaluatetheworthofprospectivenewtechnology. BorrowingfromCheckland’sHumanActivitySystem(HAS)concept,anASP vendor will have problem with certain stakeholders and surrounding issues (Checkland & Scholes, 1990): • Client: the systems beneficiary can be difficult to identify due to the outsourcingnatureofASPbusinessarrangements. • Owner: the eventual system owner may be anywhere between the negotiatingpartytoafourthpartysomewhereandinsomecasesnotable toparticipateintheoriginalnegotiations. • Actor:theseareoftenindividualsandgroups—ofvarioustypesandwith variousneeds—whoareusuallyinvolvedinthesystematdifferentstages. • Objective:whattheprojectisintendedtoachieveishighlydependenton theprocessanditcanoftenbedifferentforvarioususersandstakeholders. TEAM LinG
  • 50. Concerns 29 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Environment:thesituationinwhichthesystemwillbedevelopedand implementedgrosslyaffectsthefinaloutcomeoftheprocess. • Expectation: there are often as many assumptions of a project as the numberoftimesitisdiscussed.Moreimportant,theseassumptionstend tochangeasonegoesthroughvariousstagesofthesystemdevelopment andimplementation. Theissuehereisnotjustoneofinvestment;italsoinvolveslearningandtime. Thereisalearningcurve,sometimesquitesteep,withnewtechnology.Ifthe enterprisehasnotdevelopedamoderninfrastructureovertime,itwillhaveto investmoreforanewASPinitiativebecauseoftheneedtobuildinfrastructure. It will also have a longer development time as the IS staff learns about this infrastructureanddevelopsthenewapplicationsthatrequireit. Problem, Solution, or Opportunity? OnestimulusforASPsolutionimplementationisitsintentiontotransformthe enterprise. In this light, the investment in ASP is part of a larger change programmethatismeanttoenableintelligententerprises’virtualandmultiple- team structures. The resulting contributions can be described as part of the outcome of a general change effort. Change is also an opportunity. For most ofthecompaniesinvolvedinourresearch,managementdecidedonadesired organization structure and used IT investments to help create it. Managers planned for change and welcomed it as an opportunity to make the entire organizationfunctionbetter.Changeisalwaysathreat,asstaffmembersare forcedtoalterbehaviorthathasprobablybeensuccessfuluntilnow.However, asshowninsomeoftheexamplesinthisbook,changeisalsoanopportunity toreshapeintelligententerprisesandmakethemmorecompetitive. ThepushtowardgreaterconnectivityisamajorfactordrivingASPinvestments in the 21st century. The UK’s Department of Trade and Industry (DTI) has encouraged (some would say mandated) a certain level of electronic data interchange(EDI)complianceforcompaniesthatwishtodobusinesswithit. Industryassociationsencouragecompaniestocommunicateelectronically. Efficientcustomerresponse,EDI,just-in-time,continuousreplenishmentpro- grams, and the Internet are all examples of the different kinds of electronic connectivity. TEAM LinG
  • 51. 30 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. For the successful implementation of ASP in the 21st century, organizations must maintain a socio-technical perspective, thereby avoiding the purely technologicalapproachtoachievinghigherproductivity.Indeed,balancingthis with the consideration of social and human aspects of technology brings the added value of creating a workplace that will provide job satisfaction. Such information systems must be designed to fit the needs of its users and the organization at large and be capable of evolving as these needs invariably change.Suchethicalconsiderationsofinformationsystemshavemovedintothe forefrontasinformationsystemshavebecomepervasiveinmodernbusinesses. Ethics,forthemostpart,involvemakingdecisionsaboutrightandwrongand notnecessarilyaboutthepossibleandimpossibleandonlyremotelyrelatesto production increase or decrease. The major ethical issues that have been noticedtobeaffectingintelligententerprisesinformationsystemsinthe21st centurycanbesummarizedintoprivacy,accuracy,property,andaccess. In an effort to modernize, every challenging intelligent enterprise in the 21st century seems to be jumping on the ASP bandwagon. There comes a point whenindustryanalystsshouldimplementthecriticalsuccessfactor(CSF).The CSFmethodology—developedbyJohnRockartoftheMassachusettsInsti- tuteofTechnology—definedasthosefewcriticalareaswherethingsmustgo rightforthebusinesstoflourish—derivesorganizationalinformationrequire- ments from the key info needs of individual executives or managers. CSF methodologyisorientedtowardsupportinganenterprise’sstrategicdirection. BycombiningtheCSFsofthesemanagers,onecanobtainfactorscriticaltothe successoftheentireenterprise.Suchanapproachhasbeenproventobeuseful in controlling quality of the information system in certain vertical sectors (Bergeron & Bégin, 1989). Effects of ASP on IS Departmental Staff Employee involvement is an employee’s active participation in performing workandimprovingbusinessprocess(Alter,1996).Theold-fashionedview ofemployeeinvolvement—employeefollowingtheemployer’sinstructionin returnforawage—encouragesemployeetobepassive,takelittleinitiative,and oftenviewthemselvesasadversariesoftheenterpriseanditsmanagement.In contrast,trulyinvolvedemployeesfeelaresponsibilitytoimprovetheirwork practiceswiththehelpofmanagersandothersintheenterprise. TEAM LinG
  • 52. Concerns 31 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ASPcandirectlyaffectemployeeinvolvement.ASPcangenerallybedeployed inwaysthatincreaseordecreaseemployeeinvolvementintheirwork.AnASP businessmodelthatprovidesinformationandtoolsforemployeesincreases involvementbecauseitreinforcestheemployee’sauthorityandresponsibility forwork.Ontheotherhand,anASPbusinessmodelthatprovidesinformation tomanagersorqualityinspectorsbutnottheiremployeescanreduceinvolve- mentbyreinforcingthesuspicionthattheemployeeisnotreallyresponsible. Thehumanandservicesideoftheinfrastructureinintelligententerprisesoften gets short shrift in discussions of new systems or system enhancements. Businessprofessionalsareoftensurprisedattheamountofeffortandexpense absorbed by the human infrastructure. The tendency toward organizational decentralizationandoutsourcingofmanysystem-relatedfunctionsmakesit even more important to include human infrastructure in the analysis of new systems. Human Factors in ASP Technologies Development Therapidrateofdevelopmentofthesetechnologicalmiracles,astheywould havebeenviewedfromanearlierage,hascreatedamomentumofitsown,and it is not surprising that concomitant concerns have also developed about the impactandinfluenceofASPonhumansociety.Theshrinkingoftimeandspace enabledbyASPhasbenefitsintermsoftaskefficiencyandwidercapabilityfor communication,butitislessobviousthateaseofmanagementorevenstress at work are improved at a deeper level (Markus, 1983). TheabovediscussionshouldnotbetakentoimplythatASPmodelsdetermine thedirectionofintelligententerprisemanagement.Thedevelopmentandtheuse ofanASPsolutioniswithinmanagementcontrolandthereisnoinevitablefuture path. However, it can be argued that the quantity and quality of debate about the human and societal impact of computers and related technology has not matchedthatrateofdevelopmentofthetechnologiesthemselves(Walsham, 1993). For example, the debate concerning ASP and its Web services in intelligententerpriseslargelycentresonquestionsofstrategicimportanceand valueformoneyratherthandeeperissuesofhumanjobsatisfactionandquality oflife. While the mechanistic view of enterprise formed the early foundation of an intelligententerprisemanagement,theimageofenterprisesasorganismshas arguablybeenthemostinfluentialmetaphorformanagementpracticeoverthe TEAM LinG
  • 53. 32 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. lastfewdecades.Thecorporealviewseesintelligententerprisesasanalogous tolivingsystems,existinginawiderenvironmentonwhichtheydependforthe satisfactionofvariousneeds.Theoriginsofthisapproachcanbetracedback totheworkofMaslow(1943),whichdemonstratedtheimportanceofsocial needsandhumanfactorsinworkactivitiesandenterpriseseffectiveness.Itthen emphasized that management must concern itself with personal growth and development of its employees rather than confining itself to the lower-level needsofmoneyandsecurity. WithrespecttosocialrelationsasconsideredinWebmodels,itisimportantto notethatparticipantsincludeusers,systemdevelopers,theseniormanagement of the company, and any other individuals or groups who are affected by the ASPbusinessmodel.Kling(1987)notesthatcomputingdevelopmentswillbe attractivetosomeenterpriseparticipantsbecausetheyprovideleveragesuch as increasing control, speed, and discretion over work, or in increasing their bargainingcapabilities.Fearoflosingcontrolorbargainingleveragewilllead some participants to oppose particular computing arrangements, and to proposealternativesthatbetterservetheirinterests. It could be said that the above comprises the analysis of what Checkland (1983)definesastheHAS.HAScanbeseenasaviewonthesocial,cultural, ethical,andtechnicalsituationoftheorganization.Bothmodelsdealwithone old problem which continues to trouble information systems today. That is, thinking about the means by which to deal with the two aspects of any new system(humanbeingsandtechnology)andhowtheycanbestcommunicate witheachother.AsitrelatestoASP,theindustrymustbringtogethertheright mixofsocial(humanresources)andthetechnical(informationtechnologyand othertechnology)requirements.Hereiswherethekeyhardwareandidentified humanalternatives,costs,availability,andconstraintsaremarriedtogether. AsynopsisofanISproblemusuallyappearschaoticandincomprehensible.An exampleistheNHSISstrategyasofDecember2001(Guah&Currie,2002). The use of a problem framework will not only show the essence of a view of the problem context but will also demonstrate that getting the context and meaningoftheproblemrightismoreimportantthanpresentation.Theprimary tasksshouldreflectthemostcentralelementsofwhatisoftencalled“problem setting.” ASPvendorsshoulddemonstrate,whenreviewingagivensituation,thatany incoming information system is intended to support, develop, and execute primarytasksoriginallyperformedbyhumans.Theyshouldbeawareofissues thataremattersofdisputethatcanhaveadeleteriousaffectuponprimarytasks. TEAM LinG
  • 54. Concerns 33 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. In terms of IS, the issues are often much more important than the tasks. Consideringitisnotpossibletoresolveallissueswithanygiventechnology, theyshouldalwaysbeunderstoodandrecognized.Thatisbecauserealityreally is complex, so the ASP industry should never approach a problem situation withaconceitedorinflatedviewofitsowncapacity.Notallproblemscanbe mapped, discussed, and designed away. Often the ASP industry will be requiredtodevelopaformofamnesiatowardcertainproblemsthatareeither imponderableortoopoliticalintermsoftheorganizationorbusiness(Guah& Currie, 2002). A detailed understanding of the above will help in providing a reasonable answer to certain essential questions that are necessary for an ASP to satisfactorilyproduceworkingsolutionsforitscustomers.Afewofthegeneral questions are: Who is doing what, for whom, and to what end? In what environmentisthenewsystemtobeimplemented?Towhomisthefinalsystem goingtobeanswerable?Whatgapswillanyadditiontotheoldsystemfillwithin thenewsystem? Socio-Technical Issues AnintelligententerprisenormallyhasseparateobjectiveswhenlookingatISin termsofsocialandtechnicalrequirements.Whilethesocialobjectivesreferto theexpectationsofmajorstakeholders(i.e.,employees),thetechnicalobjec- tives(Table3.2)refertocapacityoftheorganizationasawholetoreacttokey issues. Because the social objectives (Table 3.2) of an ASP solution can broadly be seen as the expectations of the system in terms of the human beings who are goingtobeworkingwithit,theywillvaryfromoneproject/contracttoanother. Astheyareoftenundervalued,managementdoesnottendtofeelthatthesocial SOCIAL TECHNICAL Being relatively self-sufficient Informing management Providing a quick service Improving timeliness Providing job satisfaction Improving communication Providing professional satisfaction Increasing information-processing capacity Improving division’s professional status Providing a long-term facility Table 3.2. Socio-technical benefits of ASP TEAM LinG
  • 55. 34 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. needs of a system are as critical for system development as technical issues. Theymayinvolvedifferentwaysoforganizingindividualstoundertakethework requiredforthesystem,simultaneouslyachievingtheauthoritativeinfluence. The technical objectives (Table 3.2) are the primary tasks one hopes that the systemwillneedtoundertakeandwouldthereforeneedtobeveryspecific.It isimportantthatASPvendorsindicatetotheircustomersthedepthofdetailit needs to go into. Selecting Information Systems ASPsolutionscomeinvariousforms.Ideally,selectingamongthealternatives shouldbebasedonclearlystateddecisioncriteriathathelpresolvetrade-offs and ASP uncertainties in light of practical constraints and implementation capabilities. The trade-offs for intelligent enterprises include things such as conflictingneedsofdifferentbusinessprocesses,conflictsbetweentechnical purityandbusinessrequirements,andchoicesbetweenperformanceandprice. Theuncertaintiesincludeuncertaintyaboutthedirectionoffuturetechnology andaboutwhatisbestfortheenterprise.Implementationdecisionsarealmost nevermadebyformulabecausesomanydifferentconsiderationsdonotfitwell intounderstandableformulas. Althoughtheseideasprovidesomeguidanceandeliminatesomeoptions,there isnoidealformulafordecidingwhichsolutionandcapabilitiestoinvestin.Many ISdepartmentscoulddoubleandstillnothaveenoughpeopletodoallthework users would like. In practice, many IS departments allocate a percentage of their available time to different project categories, such as enhancements, majornewsystems,andusersupport.However,witheachcategory,theystill need to decide which systems to work on and what capabilities to provide. Cost-benefitmayhelpwiththesedecisions. Cost-benefit analysis is the process of evaluating proposed systems by comparing estimated benefits and costs (Alter, 1996). While the idea of comparingestimatedbenefitswithestimatedcostsmaysoundlogical,thereare several limitations in terms of ASP business model. One could see the appropriateness when the solution’s purpose is to improve efficiency. But wherethesystemismeanttoprovidemanagementinformation,transforman enterpriseoreventoupgradetheISinfrastructure,itbecomesterriblydifficult to predict either the benefits or the costs of the solution. Considering cost- benefitanalysesareusuallydonetojustifysomeone’srequestforresources,the TEAM LinG
  • 56. Concerns 35 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. numbers in a cost-benefit study may be biased and may ignore or understate foreseeablesolutionrisks(Alter,1996).Keyissuesforcost-benefitanalysis includethedifferencebetweentangibleandintangiblebenefits,thetendencyto underestimatecosts,andtheeffectofthetimingofcostsandbenefits. Agent-Based Approach to ASP MostoftheASPapplicationsmentionedinthisbookautomatesomeaspectof theprocurementprocess,therebyhelpingdecisionmakersandadministration stafftocompletetheirpurchasingactivity.Anagent-basedapproachtoASP is well equipped to address the challenges of multimarket package to e- procurement.Thissectionofthepaperisdevotedtolookingatthegoal-driven autonomousagentsthataimtosatisfyuserrequirementsandpreferenceswhile beingflexibleenoughtodealwiththediversityofsemanticsamongstmarkets, suppliers,serviceproviders,andsoforth. Service agents within the ASP model are the system’s gateway to external sourcesofgoodsandservices.Theseagentsareusuallyawareofthesource’s market model and of the protocols it uses (Zhang, Lesser, Horling, Raja, & Wagner,2000).Serviceagentsarenotonlyabletodeterminewhichrequests theycanservice,butalsoproactivelytoreadtheserequestsandtheytrytofind anacceptablesolution. Agent technology has been widely adopted in the artificial intelligence and computer science communities. An agent is a computational system that operatesautonomously,communicatesasynchronously,andrunsdynamically on different processes in different machines, which support the anonymous interoperationofagents.Thesequalitiesmakeagentsusefulforsolvingissues ininformation-intensivee-business,includingspeakingontology,advertising, serviceexchange,knowledgediscovery,andsoforth.IntheASPindustry,the interoperationandcoordinationacrossdistributedservicesisveryimportant. Thedesireformorecostefficiencyandlesssuboptimalbusinessprocessesalso drivestheemploymentofagenttechnologyintheASPbusinessmodel.Thishas resulted in the support of agent technology; more ASP agents seem to be appearingontheInternetprovidinge-servicesaswellasexchanginginforma- tionandgoodswithotheragents.TheinteroperationofASPagentsleadstothe formation of the e-Business Mall, which is an interaction space of agent communitiesundervariousbusinessdomains. TEAM LinG
  • 57. 36 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Asindicatedinthischapterandelsewhereinthisbook,thesignificantproblems in the ASP business model are the information deficiency and asymmetry between the business participants. It is also difficult for each participant to exchange information products and services in an efficient manner, and to partnerinanintelligententerprise.Thesocialnatureofknowledgesharing— especiallycriticalbusinessknowledge—carrieshighcomplexity.Thecapabil- ity advertisement and knowledge discovery, upon which agent-based ap- proachtoASPdepends,canonlybeachievedbymessageinteractionamong dynamic processes. Knowledge or service relevance is one basis for such approach to be introduced to real-life business procedure and service con- tractinginthe21st centurybycompanies. Tangible and Intangible Benefits Benefitsareoftenclassifiedaseithertangibleorintangible.Thetangiblebenefits of ASP solution can be measured directly to evaluate system performance. Examplesincludereductioninthetimeperphonecall,improvementinresponse time,reductionintheamountofdiskstorageused,andreductionintheerror rate. Notice that tangible benefits may or may not be measured in monetary terms. However, using a cost-benefit framework for ASP solution requires translatingperformanceimprovementsintomonetarytermssothatbenefitsand costs can be compared. Intangiblebenefitsaffectperformancebutaredifficulttomeasurebecausethey refertocomparativelyvagueconcepts.Afewofintangiblebenefitsofasolution are: • Bettercoordination • Bettersupervision • Bettermorale • Betterinformationfordecisionmaking • Abilitytoevaluatemorealternatives • Abilitytorespondquicklytounexpectedsituations • Organizationallearning TEAM LinG
  • 58. Concerns 37 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Althoughthesegoalsareworthwhile,itisoftendifficulttomeasurehowwell they have been accomplished. Even if it is possible to measure intangible benefits,itisdifficulttoexpresstheminmonetarytermsthatcanbecompared withcosts.Alltoooften,projectcostsaretangibleandbenefitsareintangible. Althoughhardtoquantify,intangiblebenefitsareimportantandshouldnotbe ignored.ManyofthebenefitsofISareintangible. The Role of Government Having articulated these basic parameters, it is now possible to focus on specificpolicyissuesofmostimmediateconcerntoWesterngovernmentsas they develop their agendas for Internet administration. Some of the issues affectingthesuccessoftheASPbusinessmodelareapparentnow,butothers remainonthehorizons—notaproblemoftodaybutapotentialoneinthefuture: • Modernization of the machinery and process of government. This is to includetheelectronicdeliveryofservicesandinformation. • Reform of intellectual property law to accommodate access to and exploitationofworksviatheInternet.Thisistoincludeadministrationof Internetdomainnamesonaninternationalbasis. • Facilitation of the development of e-commerce including national and internationalinitiativesandmeasurestoprotectbothsuppliersandcon- sumersoperatingwithinthiselectronicmarketplace. The Law of Confidence Thelawofconfidenceprotectsinformation.Unlikecopyrightandpatentlaw, thelawofconfidenceisnotdefinedbystatutenorderivedfromclasslaw.The guidingprincipleistheprotectionofthebusinessinterestoftheorganization already using and benefiting from it. The scope of this branch of intellectual propertyisconsiderableanditprotectstradesecrets,businessknow-howand informationsuchaslistsofclientsandcontacts,informationofapersonalnature andevenideaswhichhavenotyetbeenexpressedinatangibleform(Bainbridge, 2000). A typical example would be an idea for a new software program. The contentsofmanydatabasesownedbyintelligententerpriseswillbeprotected bythelawofconfidence.However,themajorlimitationisthattheinformation TEAM LinG
  • 59. 38 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. concernedmustbeofaconfidentialnatureandtheeffectivenessofthelawof confidenceislargelyorcompletelydestroyediftheinformationconcernedfalls intothepublicdomain;thatis,ifitbecomesavailabletothepublicatlargeor becomes common knowledge to a particular group of the public such as computer software companies. Nevertheless, the law of confidence can be a usefulsupplementforintelligententerprisestocopyrightandpatentlawasitcan protect ideas before they are sufficiently developed to attract copyright protectionortoenableanapplicationforapatenttobemade.Beingrootedin equity,thelawofconfidenceisveryflexibleandhasprovedcapableoftaking newtechnologicaldevelopmentsinitsstride. References Alter, S. (1996). Information systems: A management perspective (2nd ed.).Benjamin/Cummings. Bainbridge, D. (2000). Introduction to computer law (4th ed.). Longman PearsonEducation. Banker, R., & Kauffman, R. (1988). Strategic contributions of information technology: An empirical study of ATM networks.Proceedings of the Ninth International Conference on Information Systems, Minneapo- lis,MN. Bergeron, F., & Bégin, C. (1989). The use of critical success factors in evaluation of information systems: A case study. Journal of Manage- ment Information Systems, 5(4), 111–124. Checkland, P.B. (1983). Systems thinking, systems practice. Chichester, UK:Wiley. Checkland, P.B., & Scholes, J. (1990). Soft systems methodology in action. Chichester,UK:Wiley. Currie, W., Desai, B., Khan, N., Wang, X., & Weerakkody, V. (2003, January). Vendor strategies for business process and applications outsourcing:Recentfindingsfromfieldresearch.HawaiiInternational ConferenceonSystemsSciences,Hawaii. Guah,M.W.,&Currie,W.L.(2002).EvaluationofNHSinformationsystems strategy: Exploring the ASP model. Issues of Information Systems Journal, October. TEAM LinG
  • 60. Concerns 39 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Kling, R. (1987). Defining the boundaries of computing across complex organizations. In R. Boland & R. Hirschheim (Eds.), Critical issues in information systems research. New York: Wiley. Little,G.R.(1999).Paper1:Theoryofperception.RetrievedJune2002,from www.grlphilosophy.co.nz Markus, M.L. (1983). Power, politics and MIS implementation. Communi- cations of the ACM, 26(6), 430–445. Maslow,A.H.(1943).Atheoryofhumanmotivation.PsychologicalReview, 50, 370–396. Porter,M.E.,&Millar,V.E.(1985).Howinformationgivesyoucompetitive advantage. Harvard Business Review, 62(4), 149–160. Walsham, G. (1993). Interpreting information systems in organisations. Chichester,UK:Wiley. Weill, P. (1993). The role and value of IT infrastructure: Some empirical observations. In M. Khosrow-Pour & M. Mahmood (Eds.), Strategic information technology management: Perspectives on organiza- tional growth and competitive advantage (pp. 547–572). Hershey, PA:IdeaGroupPublishing. Zhang,X.,Lesser,V.,Horling,B.,Raja,A.,&Wagner,T.(2000).Resource- bounded searches in an information marketplace. IEEE Internet Com- puting: Agents on the Net, 4(2), 49–57. Zwass, V. (1998). Foundations of information systems. Irwin/McGraw- Hill. TEAM LinG
  • 61. 40 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterIV Recommendations Matthew W. Guah, Warwick University, UK Abstract After looking at a few concerns we have about Web services, this chapter suggests a number of ways to approach the Web services business model. It reminds strategists to consider a more holistic approach to IT management rather than supporting their decisions with economies of scale or cost displacement alone. The chapter uses Porter’s classic theories of competitive advantage to review Web services adoption process within organizations. Blurring In-House IT and ASP Services OneimpactoftheASPindustryonbusinessistheblurringoftheoldboundaries in IT services between in-house and ASP vendors. In the traditional view, servicesaremerelyanadd-ontothein-housesector—theyarebydefinitionat least,“nonproductive.”InASP,serviceseithersupportthegrowthandsurvival TEAM LinG
  • 62. Recommendations 41 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ofthein-houseITdepartment,ortheyareperceivedassociallydesirablebut noteconomicallyessential.Thus,ITconsultancyservicesareimportantsup- port services for short-term strategies, while “pay as you go” is perhaps nice forbusinessbutnotessentialtothesurvivaloftheASPindustry.Atthecentre oftheASPindustryandcriticaltoitswealth-producingcapacityistheneedfor partnership,aroundwhichancillaryservicesrevolve. What is commonly overlooked in this view is, first, the notion that the relationshipbetweenin-houseandASPisoneofinterdependence,notdepen- dence. And, second, that the categories of ASP and in-house are not distinct andisolateddomains,butrepresenttwosidesofacontinuum.Thus,contrary tothetraditionalview,inASPthegrowthofserviceshelpssupportthegrowth ofin-house.Astheindustryevolvesandbecomesmorecomplex,theneedfor newservicesandspecializationinthedivisionoflaborcontinuestoincrease.In- housemigratesintostrategicmanagementandmonitoringofITstandardwhile ASPmigratesintovalue-addedservicessothat“businessITbecomesaservice in a package form.” As the boundaries between in-house and ASP become moreblurredthroughtheuseofimprovedcommunicationstechnologies,the opportunitiesforentrepreneurscontinuetoincrease. Entrepreneurial Opportunities As the ASP industry matures, a premium is placed on ideas and the strategic use of data flow technology for new business development, rather than on economiesofscaleorcostdisplacementalone.Theentrepreneur,therefore, becomestheprimaryuserofnewtechnologyandideasforstrategicadvantage. As a premium is placed on innovative ideas, small businesses acquire an advantage in being flexible enough to evolve new products and services. Moreover,assuchinnovationproceeds,theroleofsmallbusinessassourceof employmentcontinuestoincreaseinsignificance,particularlyintheASP-like partnerships.Inevitably,evenlargecorporations(suchasIBMandmostmajor players)intheASPindustry,areprovidingopportunitiesforcorporateentre- preneurs to test new ideas under conditions where “normal” corporate con- straints on risk-taking and new investments in internal ideas are relaxed. CorporationsaslargeasIBMareprovidingopportunitiesforentrepreneursto flourishinternally.Theterm“intrapreneur”hasbeencoinedtodescribethis internalentrepreneur. TEAM LinG
  • 63. 42 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. When technological innovation is the main force leading to lower costs, the firm’sabilitytocreateacompetitiveadvantagedependsonitstechnological skills.Technologicalinnovationsoftenbringcostsdown—sometimessignifi- cantly—thus making the cost reduction solely attributable to economies of scaleseemscomparativelyminor.Theenterprisesresponsiblefortheseinno- vationsdrawasignificantcompetitiveadvantagefromthemintermsofcost, notablywhentheysucceedinmaintaininganexclusiverightuponthemforalong period. Vendors can only benefit from experience through sustained effort, efficientmanagement,andconstantmonitoringofcosts(Dussauge,Hart,& Ramanantsoa,1994). Web Services and New-Game Strategy An ASP may deploy one or more of Porter’s classic theories of competitive strategies: differentiation, cost leadership, focused differentiation, or cost (Porter,1985).Theuseofsuchcompetitivetacticsmayincludeinternalgrowth orinnovation,mergersoracquisitions,orstrategicallianceswithotherenter- prisesormembersofthesamegroupofenterprises.However,mostenterprises electtousethenew-gamestrategywhichcanbedefinedasadeliberateattempt tomodifytheforcesshapingcompetitionandthedefinitionofthebusinessby particularcompetitors(Buaron,1981).LetustakeMicrosoftandOracle,both bigplayersintheASPindustry.Thedifferencebetweenspontaneouschange intheircompetitiveenvironmentsandnew-gamestrategieshaslesstodowith theobjectivecharacteristicsoftheASPphenomenonthanwiththeirindividual attitudeswithrespecttoASPphenomenon.Inthefirstcase,changesareseen asexternaltothem,requiringadaptation.Inthesecondcase,however,certain initiativesbythemareresponsibleforsomechangesintheindustryandthey havethereforedeliberatelybasedtheirstrategyonthem.Suchstrategiesalter thepaceofthechange,generallymakingitmorerapidanddirectthefocusof changeinwaysthatwillbestbenefittheinnovatingenterprise(s). Web services technology is one of the most important foundations for ASP new-game strategies. Thus, by accelerating the pace of Web services in the industry,acompetitorwithgoodcapabilityinthetechnologyreinforcesitsown competitiveposition.Therearenumerouspaperswarningthatsuchaccelerated Webserviceevolutionincreasesthedifficultythatothercompetitorshavein adapting to ASP (Gottschalk, Graham, Kreger, & Snell, 2002; Honda, TEAM LinG
  • 64. Recommendations 43 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Nagaratnam, & Nadalin, 2002; The Stencil Group, 2002; Wilkes, 2002). By modifyingthenatureandtherelativeimportanceofthekeyfactorsforsuccess intheASPindustry,Webservicetechnologicalchangesthatareintroducedby one or more of the vendors can lead to favorable changes in the competitive environment.Inanindustrybuiltuponhighvolume,newtechnologiesthatare introducedbysomeofthecompetitorsthatnullifyorminimizetheimpactof scalecansignificantlyalterthenatureofthecompetitiveenvironmentbymaking sizeadrawbackratherthananadvantage.Thus,referringbacktotheexample ofASPcontentdistribution,theseinnovationsweredrivenbytheactionsofa few competitors, Microsoft and IBM. The changes that occurred in the competitiveenvironmentwerethustheresultofnew-gamestrategiesdesigned tochangetherulesofcompetitiontotheiradvantage:underthenewrules,itwas no longer a disadvantage to be a small producer. The competitive impact of suchstrategiesisespeciallystrongwhentheothercompetitorscannotusethe sametypeoftechnologybecauseitisnoteasilyavailable,forlackoftraining orforfinancialreasons. Duringtheperiodwhenanenterprisecontrolsanexclusivetechnology,itcan easilyrecoupitsinvestmentthroughhighprices;butbythetimethistechnology becomesmorewidelydispersed,pricestendtofalldramaticallywiththeadvent ofnewentrants.Theseinvestmentsareasignificantentrybarriertocompeti- tors.However,theenterprisestillmanagestoretainadominantpositionanda goodlevelofprofitabilityinbusiness,sinceithadrecoupeditsinitialinvestment manytimesover. Dynamics Competitiveness Though the big vendors’ strategy depends on several factors, it is not etched in stone; rather, it will vary with the changes in the industry’s key factors for successandtherelativeadvantagethatitstechnologyrepresents.Twotypesof competitivebehaviorwithrespecttotechnologycanbeobserved: • Switchingfromadifferentiationstrategybasedonatechnologicaladvan- tage to a cost leadership strategy based on scale, accumulated experi- ence, and a dominant market position; and • Constantefforttoinnovateandimprovetechnology,therebymaintaining adynamiccompetitiveadvantage. TEAM LinG
  • 65. 44 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Oracle’srelativesuccesssofarcanprovethatfirmsdisplayingthefirsttypeof strategicbehavioraregenerallythosethathavebeenabletoattainadominant positionbecauseofexclusivetechnology.Astheirtechnologybecomesdif- fusedovertime,however,theytendtoresorttocompetitiveadvantagebased ontheiraccumulatedexperience,goodreputation,anddistributionnetwork. Thesecondtypeofstrategicbehaviorforvendorsconfrontedwiththeerosion of their technology-based competitive advantage is a sustained effort to improveoreven“reinvent”theirtechnology;ratherthan“milking”theirinitial technological advantage, such firms choose to create a new competitive advantagethroughtechnologicalinnovation. AvitaldifferencebetweentheASPmodelandtraditionalsystemlifecycleis that error in this initial phase may not proof fatal. That is because the model supportsasmoothandeasilycontrolledchangemethodevenafteritgoesinto operation,mainlyduetoitsthird-partycontrollingnature. Table 4.1 describes the four general phases of any IS, which also serves as a common link for understanding and comparing different types of business processesusedforbuildingandmaintainingsystemswithintheASPmodel. ASP Becomes a Part of Strategy ItiseasytofocusonindividualASPinvestmentsratherthantheircumulative impact.Intelligententerprisesbudgetforindividualapplicationsoftechnology andtheISstaffworksonaprojectbasis.Forsomeintelligententerprises,the combinationofallitsindividualinvestmentsintechnologyfarexceedstheir individualimpact.AgoodexampleisSAP.Here,continuedinvestmentsinASP changedthesoftwareprovisionindustryandSAP’sownviewofitsfundamen- talbusiness. PHASES TARGET OBJECTIVES CHALLENGES Initiation Statement of problem IS expectations Changes in expectations by time Development Deciding what the system should deliver Users quite often lack a total understanding output Implementation IS running as part of the process to support business goals achievement Power and control issues within organization Operation and Maintenance Enhance system and correct bugs Diagnose/correct problems within time pressure Table 4.1. ASP model system life cycle (adapted from Alter, 1996) TEAM LinG
  • 66. Recommendations 45 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. By becoming a necessity ASP may not create much benefit for intelligent enterprisesthatinvestinit,exceptthatASPallowstheenterprisetocontinue in a line of business. Who does benefit from investments of this type? The cynical answer might be the vendors of various kinds of ASP product and service. However, a better response is that customers benefit from better qualitygoodsandservices,andespeciallybettercustomerservice. Looking at our two earlier examples, customers are much better off with the presenceofATMandcomputerizedreservationsystems(CRS).AnATMis convenientandallowsonetoaccesscashwithoutpresentingacheckathisor her own bank. With an ATM, you do not have to worry about a foreign bank acceptingyourcheck;fromATMsaroundtheworldyoucanwithdrawcash. WhileairlineshavecertainlybenefitedfromCRS,sotoohavecustomers.You can use a CRS to compare flights, times, ticket prices, and even on-time statistics for each flight. A consumer can make a reservation on a flight and complete the transaction over the telephone or the Internet. Economists talk aboutaconceptcalled“consumersurplus.” Howdoesconsumersurplusrelatetoinvestmentsinstrategicandcompetitive information technology? From a theoretical standpoint, consumer surplus increasesaspricesdrop.ThecompetitiveuseofASPreducescostsandprices throughapplicationslikethoseinbankingandairlines.Thecompetitiveuseof ASP has, in many instances, reduced prices (or held down price increases), whichcontributesdirectlytoconsumersurplus.Technologicalcompetitionmay notalwayscreateaneconomicconsumersurplus,butitdoesprovidebenefits in the form of service and convenience. An ATM can save time for the customer,somethingthecustomermaybeabletovaluefromadollar/pound standpoint. The fact that two firms (IBM and Microsoft) had a similar Web servicelaunchedwithinafewmonthsofeachothermeansthatthetechnology wasnotabletodeliverasustainableadvantagefromitsinvestment.Neitherwas abletoraiseitspricesdirectlytopayfortheirWebservices,sothebenefitsfrom theirinvestmentsinASPallwenttothecustomers. WhilethestrategiesofASPvendorscanthuschangeovertime,aclearstrategic direction is indispensable to success. In addition, the transition from one strategytoanotherisaverydifficultandriskyundertaking,sinceitrequiresa completereorientationofthevendors’effortsandradicallydifferentpatterns of resource allocation. As we have seen, technology is often a major factor behind both differentiation and cost leadership strategies. It is also a critical factorinnew-gamestrategies. TEAM LinG
  • 67. 46 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. References Alter, S. (1996). Information systems: A management perspective (2nd ed.).Benjamin/Cummings. Buaron, R. (1981). New game strategies. McKinsey Quarterly, Spring. Dussauge, P., Hart, S., & Ramanantsoa, B. (1994). Strategic technology management: Integrating product technology into global business strategies for the 1990s. Chichester, UK: John Wiley & Sons. Gottschalk, K., Graham, S., Kreger, H., & Snell, J. (2002). Introduction to Web services architecture. IBM Systems Journal, 41(2). Hondo, M., Nagaratnam, N., & Nadalin, A. (2002). Securing Web services. IBM Systems Journal, 41(2). Porter, M.E. (1985). Competitive advantage. New York: Free Press. The Stencil Group. (2002). Understanding Web services management: An analysis memo. Retrieved May 2002, from www.stencilgroup.com Wilkes, L. (2002). IBM seeks partners to drive adoption of XML Web services. Interact, February. TEAM LinG
  • 68. Section II Case Studies TEAM LinG
  • 69. 48 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Chapter V ConsideringtheImpact of Broadband on the Growthand Development of B2C ElectronicCommerce Jyoti Choudrie, Brunel University, UK Yogesh Kumar Dwivedi, Brunel University, UK Abstract Internet connectivity has a profound impact on almost all aspects of human lives including social interaction and individual behaviour. The impacts may further foster due to the availability and access of broadband Internet connection. This paper focuses on evaluating the impact of broadband on the growth and development of business-to-consumer (B2C) electronic commerce. The research data was collected from a total of 104 respondents and subjected to both quantitative and qualitative TEAM LinG
  • 70. Considering the Impact of Broadband on the Growth and Development of B2C 49 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. data analysis. The results indicate a significant impact of broadband use on transforming consumer behaviour towards adoption of B2C electronic commerce. The paper illustrates how broadband use has an influence on off-line purchase behaviour, online B2C electronic commerce and overall online experience. The conclusions drawn are that broadband adoption and use is encouraging the adoption of B2C electronic commerce. Introduction ItisanestablishedfactthatInternetconnectivityhasasignificantimpactonboth thedaily-lifeactivitiesandelectroniccommerceconsumerbehaviour(Nie& Erbring,2000).Internetinnovationistransformingtheproductionanddelivery of various categories of products including information and entertainment. Furthermore,newInternet-basedservicessuchase-mail,onlineconversation, andWeb-driveninformationdiffusionwillslowlyreplaceorsupplementthe traditionalmeansofbuyingandselling(Nie&Erbring,2000).Althoughthe Internetishelpingthespreadandadoptionofe-commerce,itsnarrow-width connectionhasbeenproventobeoneofthemajorbarriersagainstthegrowth anddevelopmentofbusiness-to-consumer(B2C)electroniccommerce(Rose, Khoo, & Straub, 1999; Lee et al., 2001). Current research suggests that existingInternetconnection—thatis,narrowband—islimitingcurrentcon- sumptionandaccess.Therefore,theaimsofconductingthissurveyresearch are to examine the off-line purchase behaviour and the frequency of B2C e- commerce in the broadband environment. Other related issues that are examined in this article are reasons for shopping online, barriers to online shopping,reasonsforsubscribingtobroadband,andoverallonlineexperience inthebroadbandenvironment. Thisexploratorystudyisstructuredintoseveralsections.Section2provides acriticalreviewoftheprevioussurveyscorrelatedwithbroadbandimpacton B2Ce-commerce.Thisisfollowedbyadiscussionoftheresearchmethodfor data collection and analysis in section 3. The research findings are then presentedintheformofgraphsandchartsinthesection4. Thesefindingsare comparedanddiscussedinsection5.Finally,thelimitations,researchcontri- butions,andfuturedevelopmentsareevaluatedanddiscussedinsection6. TEAM LinG
  • 71. 50 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Background Literature: Research Undertaken on B2C E-Commerce and Broadband Reviewoftheliteratureforthisresearchinvolvedresearchmethodconsisting of surveys of B2C e-commerce and broadband. This is to obtain similar contextstothisresearch.Theinitialtheoreticalreviewbeganbyusingtheresults of Rose, Khoo, and Straub (1999). The research identified six major catego- riesoftechnologicalimpedimentstoe-commerceincludingthatofdownload delays.Thisisanattributethatbroadbandisviewedtoovercomeandisonethat this research focussed upon (Rose, Khoo, & Straub, 1999). Broadband is described as a speedy Internet service. This is a primary factor that derives subscribers to adopt the broadband (Bouvard & Kurtzman, 2001).AMcKinsey&Company(Carriereetal.,2000)studyalsorevealsthat high-speedandanalways-onconnectionwasthemajorreasonforsubscribing tobroadband.However,increasingnumbersofpeoplearebeingmotivatedto obtain broadband by their desire to use specific Web services applications (Carriere et al., 2000). The most attractive features of broadband that UK consumersfounddesirablewereincreasedspeedandtheabilitytomakevoice callswhilstconnected(Oftel,2002).Theunmeteredaccessandthealways-on natureofbroadbandareless-significantfeatures.Thereasonforthismaybethe wideavailabilityanduseofnarrowbandunmeteredpackages.Accordingtothe study(Oftel,2002),consumersclaimedthatthefeaturesoffasterspeedsand always-on access offered by broadband increased Internet usage and en- hanced enjoyment. Furthermore, the majority of narrowband users (55%) expressed an interest in upgrading to broadband (Oftel, 2002). Additionallyithasbeenfoundthatbroadbandtechnologiesarefacilitatingnew Webservicesapplicationstomeetconsumerdemandsintransformingmany aspects of everyday life (Carriere et al., 2000). Consequently, broadband consumersbehavedifferentlyastheyareonlinefourtimesmorethannarrowband customers,usemoreonlineservices,andtheironlineexperienceiscompelling (Figure5.1)(Carriereetal.,2000).Accordingtoanotherstudyconductedby Nie and Erbring (2000), the majority of Internet users engage in at least five distincttypesofactivitiesontheWeb;however,themostwidespreaduseisthe informationsearchutilityforproducts,travel,hobbies,andgeneralinformation (Nie & Erbring, 2000). TEAM LinG
  • 72. Considering the Impact of Broadband on the Growth and Development of B2C 51 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Nie and Erbring (2000) have found that B2C online e-commerce is still conducted by a minority of Internet users. In contrast, the McKinsey & Company study (Carriere et al., 2000) found that broadband subscribers shoppedonlinealmosttwiceasmuchasnarrowbandsubscribers(Figure5.1). Thereasonforthisshiftistheconsumers’broadbandaccessovercomingthe problem of slow page loading. This has been viewed as a major cause for abandoning online shopping in a narrowband environment (Carriere et al., 2000). Similarly, another research study revealed that approximately half (46%) of the population using broadband at home state that more items are being bought online since they can connect more easily to the Internet using broadband (Bouvard & Kurtzman, 2001). B2Ce-commerceisalsobeingpromotedviaotherapplicationsutilisedwithin the broadband domain. These include applications such as multimedia in researchasexplainedinthefollowingdescriptions.Costa(2001)foundthat broadbandnetworksallowaccesstootherfacilitiessuchasmultimedia(image, sound,andtext)inareal-timecontext.This,inturn,hasapositiveinfluenceon theselectionandbookingofholidaysandtraveltickets(Costa,2001).Other studiesthathavealsofoundtheemergenceofotherapplicationsviabroadband are detailed in Bouvard and Kurtzman (2001). They found that multimedia, Figure 5.1. Internet activities performed by U.S. consumers (Source: Adapted from McKinsey & Company, 2000) Broadband users are different Percentage of users in the Unites States who use the Internet for ... Exhibit 2 E-mail Downloading software Chat Browsing Buying consumer products Researching purchases made off line Using online financial services Playing games Buying software Time spent on line Hours per week Narrowband Broadband 75.6 42 47 23 23 31 18 16 10 5.7 94 67 66 41 40 38 36 31 24 20.7 e-marketer: e-land inc., Ziff Davis; Time Warner; McKinsey analysis TEAM LinG
  • 73. 52 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. which is enabled by broadband, is creating a new form of consumers. These consumers are focussed upon using electronic media and entertainment. Comparedtonarrowbandusers,broadbandusersspend22%moretotaltime on electronic media and are nearly twice as likely to watch or listen to downloaded or streamed content from the Internet. However, the amount of time per day that broadband users spent on downloaded or streamed content isstillrelativelysmall(Bouvard&Kurtzman,2001). The aforementioned findings are based on surveys conducted in the United States and represent a significant—yet small—fraction of broadband users. Thisisbecausetheimpactofbroadbandusesremainsunclear,asthepenetra- tionofbroadbandhasnotbeenachievedwidely.Therefore,thetruthofsocio- behaviouralchangemayormaynotbeconsistentwiththesesurveyfindingsand theearlypredictionsmadeacrosstheglobe.Toexaminethisindifferentsocial, cultural,andeconomicenvironment,researchersfromdifferentcountriesmust movefromideologicalclaimstoempiricalevidence.Thisisnecessarytosustain broadbandtechnology,toimprovetheonlineconsumerservices,andtocreate afavourableenvironmentfordevelopmentandgrowthofB2Ce-commerce. Thischapterisanearlyattempttoprovideinitialandempiricalevidenceforthis topicalandemergingphenomenon. Research Method As a recent phenomenon, broadband is still in the emergent stages of the development cycle. As a result, any research that is meant to emphasise its current position could not be a longitudinal one. Therefore, this study was designed to obtain a snapshot of the B2C e-commerce frequency and other relatedissuesinabroadbandenvironment.Forsuchpurposes,theresearchers consideredsurveyasasuitableresearchmethod.Anumberoftechniquesare available to capture data about B2C e-commerce in the broadband environ- ment. However, to maintain information reliability (Cornford & Smithson, 1996)andtocollectsufficientdatawithinalimitedtimeandbudget(Hall&Hall, 1996), a self-administered questionnaire was considered to be the primary surveyinstrumentfordatacollectioninthisinvestigation. Fowler(1993)hassuggestedthat“ifoneisgoingtohaveaself-administered questionnaire, one must reconcile oneself to closed questions, which can be TEAM LinG
  • 74. Considering the Impact of Broadband on the Growth and Development of B2C 53 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. answeredbysimplycheckingaboxorcirclingtheproperresponsefromaset providedbytheresearcher.”Therefore,mainlymultipleandclosedquestions wereincludedinthequestionnaireexcepttwoopen-endedquestions.Initially, the literature review provided an understanding of the broadband impact phenomenonandthebasisforthedevelopmentofadraftquestionnaire.Apilot studyvalidatedthequestionnaire.Thiswasadministeredto10knownrespon- dents familiar with the topic. The majority of the respondents validated the contentofthequestionnaireandsuggestedanumberofusefulimprovements thatwereadoptedinthefinaldesign. The final questionnaire consisted of a total of 41 questions that included 39 close-ended,multipleandtwoopen-endedquestions.However,manycatego- riesofthissurveyquestionnairearenotdiscussedhere,includingconsumers’ onlinehabitsandactivitiesperformedonlineinthebroadbandenvironment.The aforementionedcategoriesofthesurveywillbepresentedinaseparatechapter (Dwivedi&Choudrie,2003).Thisisduetothefocusofthischapterbeingan examinationofthereasonsforshoppingonline,barrierstoonlineshopping, reasonsforsubscribingtobroadband,off-linepurchasebehaviour,frequency of B2C e-commerce, and the overall online experience in the broadband environment. Due to the uncertainty regarding personnel using the broadband facility, the researchers adopted the snowball or chain sampling (Fridah, n.d.) method when selecting the respondents for the survey. Initially, respondents with broadband connections were contacted to complete the questionnaire via e- mail. Respondents were also requested to recommend friends and family contacts who had broadband connections at home. This strategy led to the questionnairebeingadministeredtoatotalof110broadbandusersduringthe periods of July to August 2002. The questionnaires were administered to respondents mainly using e-mail. A small number of questionnaires were distributedpersonally.Ofthe110questionnairesadministered,104respon- dentssubmittedcompletedquestionnairesviae-mail. Theinitialstageofdataanalysisinvolvedcheckingtheresponsesandproviding auniqueidentificationnumbertoeach.UsingSPSS(version10.1)andExcel applications, the research mainly generated the descriptive statistics (i.e., frequencies,percentage,crosstables,andcharts)topresenttheresearchdata obtainedfromthequestionnaire.Thequalitativedataobtainedfromtheopen- ended questions were summarised and discussed in light of the quantitative data. TEAM LinG
  • 75. 54 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Findings Usingtheliterature,weidentifiedseveralissuesthatneededtobeinvestigated. Inthefollowingsubsectionstheyareidentifiedandrelatedtoourresearch. Demographic Details Therespondents’demographicdetailsindicatedthatthemajorityofbroadband usersofthissurveysamplebelongedtotheagegroupof20–35,hadobtained highereducation(undergraduatetopostgraduatedegree)qualifications,and hadahighsocialandeconomicstatus.Theresultsindicatedthatonly10.6%of therespondentshadbroadbandaccessathome,whilsteducationalinstitutions served as a major point of broadband Internet access. Reasons for Shopping Online According to the results of this investigation, the major reason for shopping onlineisconvenience.Themajorityoftherespondents(70.2%)statedthattheir mostcompellingreasonforundertakingonlinepurchasingwastheconvenience of shopping. The second most compelling reason was that online shopping savestime(Figure5.2). Figure 5.2. Reasons for purchasing online 70.20% 29.80% 51.00% 49% 28.80% 71.20% 4.80% 95.20% 19.20% 80.80% 35.60% 64.40% 21.20% 78.80% 0% 20% 40% 60% 80% 100% Respondents Convenience SaveTime LowerSearch Cost More Awareness Shoppingfrom Anywhere Shopping Anytime WiderBrand Choices Reasons Why Respondents Shop On-line? No Yes 29.80% 70.20% 49.00% 71.20% 95.20% 80.80% 51.00% 28.80% 4.80% 64.40% 78.80% 21.20% 35.60% 19.20% TEAM LinG
  • 76. Considering the Impact of Broadband on the Growth and Development of B2C 55 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Barriers to Online Shopping Figure5.3depictsthethreemajorimpedimentstoonlineshopping.Theyare slowpageloading,lackoftrust,anddifficultnavigationsites.Alittlelessthan half of the respondents (42.3%) stated that they abandoned their online shopping due to slow page loading at some point of time. Whilst 27.9% respondentssaidthatthemajorreasonsforleavingthesitewithoutshoppingis due to the difficult navigation of products/catalogues on the site. A similar percentage(28.8%)ofpeopleleftthesitewithoutapurchaseastheyworried abouttrust. Reasons for Subscribing to Broadband This research found that the most compelling reason for subscribing to broadbandisfasteraccess,ratherthanunmeteredaccessorfreehome-phone line.Slightlyoverhalfoftherespondents(58%)saidthatthemostimportant reason for subscribing to broadband is the need for the high rate of data/file transfer. Statistics show that the always-on connection is the second most importantreason(25%)forbroadbandsubscription(Figure5.4). Figure 5.3. Reasons for abandoning online shopping 42.30% 57.70% 27.90% 72.10% 3.80% 96.20% 20.20% 79.80% 28.80% 71.20% 18.30% 81.70% 1% 99% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Respondents SlowPageLoading DifficultNavigation Technical SecurityProblem LackofTrust LackofFeelandTouch Others Reasons Reasons for abandoned online shopping No Yes 42.30% 57.70% 72.10% 27.90% 96.20% 79.80% 3.80% 20.20% 71.20% 81.70% 28.80% 18.30% 1.00% 99.00% TEAM LinG
  • 77. 56 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Consumers’ Off-Line Purchase Behaviour in the Broadband Environment Figure 5.5 illustrates that 66% of the respondents search a site for a product before they buy it instead of the traditional channels of shopping. However, consumersstilldonotsearchthesiteusingtheInternetonadailybasis.Only 4.8% of respondents undertook this activity on a daily basis. 58% 25% 17.30% 7.70% 0% 10% 20% 30% 40% 50% 60% 70% Faster Access Alw ays-on- Connection Un-metered Access Free Home Phone Line Reasons RespondentsFigure 5.4. Reasons for subscribing to broadband connections 24% 36.50% 21.50% 5.80% 6.70% 4.80% 0% 5% 10% 15% 20% 25% 30% 35% 40% Respondents Offline purchase research How often respondents research before purchase off-line? Never Rarely Monthly Weekly A few times in a week Daily Figure 5.5. Frequency of using the Internet for off-line purchase research TEAM LinG
  • 78. Considering the Impact of Broadband on the Growth and Development of B2C 57 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. B2C Online Purchase The results illustrated that an estimated 66% of the respondents conducted online shopping in a broadband environment (Figure 5.6). However, the numbersofrespondentswhoundertakeonlineshoppingonadailybasisarestill minimal.Figure5.6depictstherespondentswhopurchaseproductsonlineon a weekly or daily basis and this still falls below the 15% parameter. Further- more,thefrequencyofonlinepurchasingpatternsdiffersinlinewiththeoffered products. Figure 5.7 demonstrates that books and music (55%) and travel- related products (54%) are the most widely purchased products online. Following this, computing/hardware, entertainment, electronic goods, and softwarearethemostfrequentlypurchasedgoodsonline.Incontrast,jewelery, food and beverages, and sporting goods are the least purchased products online. Overall Online Satisfaction in the Broadband Environment Figure 5.8 illustrates that the majority of people (79%) who use broadband connections are satisfied with their online experiences. Ten percent of the 23.10% 39.40% 23.10% 9.60% 2.90% 1.90% 0% 5% 10% 15% 20% 25% 30% 35% 40% Respondents On-line Purchase How often respondents purchase on-line? Never Rarely Monthly Weekly A few times in a week Daily Figure 5.6. Online purchase frequency TEAM LinG
  • 79. 58 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. respondentssaidthattheyareverysatisfied,whilst5%arenotsatisfiedwith pastonlineexperiences. Discussions: Major Findings and Interpretations Broadband Internet Connection Oftel (2002) has reported that only 2% of UK homes are connected to the Internet using broadband. In contrast, this research found that 10% of the respondents of this survey sample have broadband at home excluding those whohavebroadbandbothathomeandwork.Thisindicatesanincreaseinthe surveyedpopulationutilisingabroadbandconnection.Contributingreasons includetheincreasingcompetitionamongstbroadbandserviceprovidersand adeclineinbroadbandconnectionprices.However,theresearchiscautious inmakinganyclaimsonthisparticularissue. How Can Broadband Promote the Adoption and Diffusion of B2C E-Commerce? Thefindingsofthissurveyclearlyindicatethatconvenienceandtimesaving(see Figure 5.2) are major drivers leading to the adoption of e-commerce. Slow Internetconnectionswereconsideredtobemajorbarriersdistractingconsum- ersfrommakingonlinepurchases.Thefindingsofthisresearchsupportthis. Forty-threepercentoftheconsumersstatedthemajorreasonforabandoning onlineshoppingwasslowpageloading.Thesecondmostimportantreasonis difficultnavigationofthesitesince28%oftherespondentsabandonedonline shoppingduetothis(Figure5.3).Thesefindingsarefurthersupportedbythe McKinsey&Company(Carriereetal.,2000)investigations,whichmentioned slow page loading as a reason for abandoning online shopping. Difficult navigation of the site may occur due to several reasons, but one of the most importantfactorsistheslowInternetconnectionfromboththeclientsideand server side (Rose, Khoo, & Straub, 1999). High traffic at peak times makes itevenmoredifficulttonavigatethesite(Windham&Orton,2000).Hence,the researchconcludesthatslowpageloadingcausesamajorobstructiontoonline TEAM LinG
  • 80. Considering the Impact of Broadband on the Growth and Development of B2C 59 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. purchase.However,thismayalsotriggerchangesintheconsumers’attitude towardssubscribingtobroadband,butonlyifconsumersarereallyinterested inonlinepurchasing. Why do Consumers Subscribe to Broadband Internet? Accordingtothisinvestigationtheprimaryreasonforsubscribingtobroadband is a need for faster speed. Fifty-eight percent of the total respondents quoted thisreason.Twenty-fivepercentoftherespondentssaidthatasecondmajor reason to subscribe to broadband is an always-on connection. A free home- phone line is the least preferred reason for the respondents (Figure 5.4). The findingsofthisresearchvalidatethepreviousfindingbyCarriereetal.(2000), Bouvard and Kurtzman (2001), and Oftel (2002). That is, whether faster access is a major reason for subscribing to broadband. However, the second most important factor that drives consumers to subscribing to broadband differsfromthatofpreviousstudies.ThisinvestigationsupportstheMcKinsey &Company(Carriereetal.,2000)findingsthatanalways-onconnectionisthe second most important factor for subscribing to broadband. However, it contradictsthefindingsofOftel(2002),whichfoundthatafreehome-phone line is the second most important reason for subscribing to broadband. Consumers who use broadband connections do not like to log on repeatedly andwastetime.Therefore,thesecondmostimportantreasonisthealways-on connection.TheOftel(2002)reportmentionedthatconsumersclaimedthatthe fasterspeedandalways-onaccessofferedbybroadbandincreasedusageand enhancedenjoyment.Thisfurthersupportsthefindingsandtheresearchers’ views.Onthebasisoftheabovediscussions,thisresearchstudyconcludesthat although faster access is a key factor for driving consumers to subscribe to broadband,therearemanyothersecondaryfactors,suchasconvenienceand savingtimeforonlineshopping,slowpageloadings,unmeteredaccess,free home-phoneline,andsoforth,actassecondarytriggerstostimulateconsum- ers. How Consumers’ Off-Line Purchasing Behaviour Differs from That in the Broadband Environment? Thisresearchalsofoundasignificantshifttowardshigherlevelsofresearch beforepurchaseinabroadbandenvironmentisundertaken.Sixty-sixpercent TEAM LinG
  • 81. 60 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. of the respondents accepted that they search products and prices online regardlessofthechannelofactualpurchase(Figure5.5).Thisisahighervalue thanreportedbyCarriereetal.(2000).Accordingtothisresearch,31%ofthe respondents undertake this in a narrowband environment and 38% in the broadbandenvironment(Figure5.1)(Carriereetal.,2000).Theresultsofthe qualitative data also support this finding. When respondents were asked, “What do you think is the most important change that has occurred in your shoppingattitudeandbehavioursincehavingconnectedtotheInternet?”,the majorityoftherespondentssaidthattheirshoppingattitudesandbehaviours havebeenchangedastheyundertakemoreresearchbeforetheypurchaseany products.Duetobroadband,consumersaremuchmoreawareofthemarket, products,andpricesastheyhavebetterconnectionstotheInternet.According tooneoftherespondents,thefollowingchangeinbehaviourandattitudehas occurred: More selective in choice of product, with full understanding of the product by utilising several review sources being most important followed by comparison of price being second. I will now search for a specific product in advance to when I’ll need it, as I’m aware of the time lag in receipt due to post. This means I do not buy for the immediate satisfaction; however, this is replaced by the new pleasurable shopping experience of a parcel arriving at your door! My other traditional shopping behaviour has changed, as I do not make so many compulsory purchases in the products I buy online. However, this has not changed the shopping habits of products I do not buy online. Furthermore, when respondents were asked, “What do you think is the most important change that has occurred in your online shopping attitude and behavioursincehavingbroadband?”,themajorityoftherespondentssaidthat theirresearchingbehaviourchangedincrediblyinanonlineenvironment.With a broadband connection, respondents researched much more than they did with a narrowband connection. With broadband, consumers also enjoyed accessingmoregraphicalpages,whichsignificantlyenhancedtheirresearch experience.Therespondentsalsoacceptedthatinabroadbandenvironment theiroverallonlineexperienceismorecompellingandenjoyable.Findingsfrom both the close- and open-ended questions indicated that broadband has a direct impact on consumer behaviour related to online products and prices research. TEAM LinG
  • 82. Considering the Impact of Broadband on the Growth and Development of B2C 61 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. How B2C Consumer Online Purchase Activity Differs in the Broadband Environment The McKinsey & Company research (Carriere et al., 2000) found that only 23%ofrespondentspurchaseproductsusingnarrowbandconnections.Onthe otherhand,40%ofbroadbandsubscribersundertookonlineshopping(Carriere etal.,2000).Thisresearchfoundthat67%oftherespondentshadundertaken online shopping. This is a major impact of broadband connections on online shoppingbehaviour(Figure5.6).Thisisfurthersupportedbythedataobtained fromtheopen-endedquestions.Whenrespondentswereaskedaboutthemost important change that has occurred in their online shopping attitudes and behaviours since having connected with broadband, the majority of respon- dents said that their shopping behaviour changed incredibly in a broadband environment.Theyacceptedthattheypurchasedmoreonlineinthebroadband environment since high-speed connections facilitate them to compare the productsandpricesrapidly,whichresultsinapurchase.Thisissueisillustrated below: Due to the speed of broadband I can compare products faster and arrive at a decision quicker, usually resulting in a buy. Slow connections result Figure 5.7. Products purchased online 21.20% 78.80% 53.80% 46.20% 54.80% 45.20% 25% 75% 16.30% 83.70% 9.60% 90.40% 8.70% 91.30% 1.90% 98.10% 3.80% 96.20% 19.20% 80.80% 10.60% 89.40% 21.20% 78.80% 3.90% 96.20% 0% 20% 40% 60% 80% 100% 120% Respondents PC/Hardware Books&Music Gifts&Flowers Food&Beverage SportingGoods DIY/Gardening Other Products What Respondents Purchase Online? No Yes 78.80% 46.20% 21.20% 53.80% 54.80% 45.20% 75% 83.70% 25% 90.40% 16.30% 91.30% 98.10% 9.60% 8.70% 1.90% 96.20% 80.80% 89.40% 78.80% 96.20% 3.80% 19.20% 10.60% 21.20% 3.90% TEAM LinG
  • 83. 62 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. in no purchase. For example, I do not shop online when I visit home as they have a “slow” 56k connection. Compulsive buys can occur in my home as I realise that I need a certain product that may not necessarily be on my mind when high-street shopping. Due to speed (again) I can find the product whilst the impetus is on me to purchase it. This may mean I am more inclined to be persuaded by TV adverts! Althoughbroadbandhasanimpactononlineshopping,thefrequencyofonline purchasesisnotsimilarforallproducts.Figure5.7illustratesthatbooks,music, travelandholidayreservations,electronicgoods,personalcomputing,hard- ware,andentertainmentareproductsthatarepurchasedbythemajorityofthe respondents more frequently. According to a framework proposed by Asch (2001),onecanarguethatalthoughbroadbandtriggersconsumerstounder- takemoreonlinepurchases,itmayormaynotstimulateconsumerstopurchase productswithahighpurchasevalueandhigh-riskinvolvement. How Does Consumer Satisfaction Level Differ in a Broadband Environment? Withregardstothesatisfactionlevelsobtainedinabroadbandenvironment,the McKinsey & Company study (Carriere et al., 2000) found that 71% of the broadband users’ online experience was compelling (Carriere et al., 2000). Theinvestigationresultsshowedthat89%oftherespondentsweresatisfied withtheironlineexperiences(Figure5.8).Thisvalueisevenhigherthanthatof Respondents Overall On-line Experience Not Satisfactory 5% Satisfactory 79% Very Satisfactory 10% Other 6% Figure 5.8. Level of satisfaction in broadband environment for online services TEAM LinG
  • 84. Considering the Impact of Broadband on the Growth and Development of B2C 63 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. External triggers that stimulate consumers to subscribe to broadband Online Activities Broadband Broadband use triggers changes in individuals online behaviour Online B2C E-commerce (Thrice than before) Use More Broadband-Specific Content & Applications Use More Often These Trigger Too Many New Behaviours Consumer Changes in Online Habit Increase in Total Time Spent Online Use Internet Many Times a Day Use More Activities Purchase More Number of Products Secondary Factors Faster Access Always-on Connection Video Streaming Saving Time Difficult Navigation Slow Page Loading Convenience Download of Graphical Pages, Software, Music, and Video Video Conferencing Primary Factors Purchase More Often Search More Often (Product & Price) More Positive Attitude Consumer Overall On-line Experience is Compelling E-commerce (B2C) Broadband Applications Figure5.9.Impactofbroadbandonusersonlinehabits,activitiesperformed and B-2-C consumer behaviour (see reference 11) TEAM LinG
  • 85. 64 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. previous studies. This illustrates that broadband has a significant impact on consumeronlinesatisfactionlevel. Concluding Remarks Theresultsanddiscussionsofthischapterindicatethatbroadbandactedasa catalyst to changing consumer behaviour towards adoption of B2C e-com- merce. On the basis of discussion made in section 5, overall impact of broadbandisillustratedinFigure5.9. Mostofthefindingsofthisresearchareconsistentwithpreviousresults,except certainexclusions.Thisstudysuggeststhatmostoftherespondentssubscribe to broadband to obtain faster access to the Internet. The percentages of B2C onlineshoppingnumbershaveincreasedandconsumersareoftensatisfiedwith theironlineexperiences.Thefindingsandanalysisofthisstudyalsosuggests that the frequency of online purchasing differs within products. The most frequentlypurchasedonlineproductsincludebooks,music,travelandholiday reservation, entertainment, personal computing, and consumer electronics. Further, the findings of this research demonstrate that broadband will play a major role in improving the B2C e-commerce market. Therefore, wide adoption of broadband by consumers will produce a significant impact on various components of the e-commerce ecology. As our results indicate, broadbandacceleratesthegrowthofB2Ce-commerce,whichhasencourag- ingimplicationsforthedevelopmentoftheB2Ce-commercemarket.How- ever, further in-depth studies are required before any business strategies are formed. Limitations and Future Directions Thefirstlimitationofthisresearchisthescarcityofacademicresearchanddata as references in order to discuss the findings and to generalise the results. Therefore,theresearchwasforcedtousethefindingsanddatafromindustry research.Theotherlimitationofthisresearchisthegeneralisationoffindings thatarehighlighted. TEAM LinG
  • 86. Considering the Impact of Broadband on the Growth and Development of B2C 65 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Thegeneralisationsofthisstudyrequiredcollectingthedatarandomlyfroma wide geographical area. Furthermore, this research was also required to supplementthequestionnairedatawithinterviews.However,thesewerenot possible to undertake due to the shortage of time and resources. Thedataforthisresearchhavebeencollectedwithinashortperiodoftime.This could, however, have been expanded over a longer period to eliminate any variablesthatmayhaveproducedanomaliesintheresultsfound.Forforming anystrategy,itisessentialtocollectlongitudinaldatafromvarioussegmentsof consumers.However,sincebroadbandisstillanovelarea,empiricalevidence is difficult to obtain. Future directions for this research includes examining consumer behaviour and the applications and services that broadband can offer. Studyingtheimpactofbroadbandonconsumerbehaviourisaverybroadarea. There is a need to research specific areas such as music and software download, entertainment, retail, travel and tourism, and so forth, on an individualbasisinordertodeterminetherealimpact. References Asch, D. (2001). Competing in the new economy. European Business Journal, 13(3), 119. Bouvard, P., & Kurtzman, W. (2001). The broadband revolution: How superfast Internet access changes media habits in American house- holds. Arbitron & Coleman. Carriere, R. et al. (2000). Broadband changes everything. McKinsey & Company. Cornford, T., & Smithson, S. (1996). Project research in information systems: A student’s guide. London: Macmillan. Costa,L.(2001).Managingimpactanduseof“information&communication technologiesbasedservices”intourismsector,Finalreportonworking groupE,June2001.RetrievedJuly20,2002,fromhttp://europa.eu.int/ c o m m / e n t e r p r i s e / s e r v i c e s / t o u r i s m / w o r k i n g g r o u p s / finalreportejune2001en.pdf Dwivedi,Y.K.,&Choudrie,J.(2003,June22–24).Investigatingtheimpact of broadband upon the users’ online habits and the usage of Internet TEAM LinG
  • 87. 66 Choudrie and Dwivedi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. services. Paper presented at the International Telecommunication Society’s Asia-Indian Ocean Regional (ITS) Conference, Curtin Uni- versityofTechnology,Perth,Australia. Fowler, F.J. (1993). Survey research methods (2nd ed.). London: Sage. Fridah M.W. (n.d.). Sampling in research. Retrieved April 29, 2002, from http://trochim.human.Cornell.edu/tutorial/mugo/tutorial.htm Hall, D., & Hall, I. (1996). Practical social research: Project work in the community.London:Macmillan. Lee,H.etal.(2001).ThegrowthofbroadbandInternetconnectionsinSouth Korea: Contributing Factors. Paper presented at the 14th Bled Elec- tronic Commerce Conference, Bled, Slovenia. Nie, N.H., & Erbring, L. (2000, February 17). Internet and society: A preliminaryreport.Stanford,CA:StanfordInstitutefortheQuantitative Study of Society (SIQSS). Oftel.(2002).Consumerresearchprogramme:Internet&residentialconsum- ers. Retrieved June 17, 2002, from http://www.oftel.gov.uk/publica- tions/news/on55/res0202.htm Rose, G., Khoo, H., & Straub, D.W. (1999). Current technological impedi- ments to B2C electronic commerce. CAIS Articles, 1(16). Retrieved from http://cais.isworld.org/articles/1-16/article.htm Windham, L., & Orton, K. (2000). The soul of the new consumer: The attitudes,behaviour,andpreferencesofe-customers.Oxford:Windsor Books. TEAM LinG
  • 88. Online and Traditional Trading on the NASDAQ 67 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterVI ATheoreticalApproach to Evaluate Online and TraditionalTradingon theNASDAQStock Exchange Haroun Alryalat, Brunel University, UK Yogesh Kumar Dwivedi, Brunel University, UK Jasna Kuljis, Brunel University, UK Ray J. Paul, Brunel University, UK Abstract The aim of this chapter is to discuss current online and traditional trading on the NASDAQ stock exchange using theoretical approach. The paper aims to derive future trends for the online stock trading. The following are objectives of this paper: (1) To describe the current state of online trading; (2) To compare the execution of quality trades between market makers and electronic communications networks (ECNs). By achieving TEAM LinG
  • 89. 68 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. set objectives, this paper will provide insight into how ECNs are used and what impact they have on the overall NASDAQ market performance. Introduction Thetradingofstockinvolvesthreeprimaryfunctions:thegatheringoftrading orders,theexecutionoftheseorders,andthesettlementofthetrades.Thecost structuresandthesocialexternalitiesofthesethreefunctionsdiffer.Further- more, each has different regulatory issues. The ultimate goal of a well- functioningstockmarketistobringtogetherallpossiblebuyersandsellers,so thatthemarketpricereflectsthecombinedpreferencesofallparticipants. Theadventofonlinestocktradingrepresentsauniqueopportunitytostudythe effect of changes in the mix of naïve and sophisticated traders on market behavior.Thissettingallowsustoinvestigatethedescriptivevalidityofrecent modelsoftradewithasymmetricallyinformedinvestors.Mostofthemodelsof trading behavior group traders into one of two categories: informed traders (whoknowsomethingaboutthetruepriceofthesecurity)orliquiditytraders (who need to trade for reasons of liquidity) (Barclay, Hendershott, & McCormick, 2001; Barber et al., 2001). Technologythatallowsservicestraditionallyprovidedbypeopleinbuildingsto be replaced by services provided by the software industry and computers is challengingtraditionalpracticesinthebrokerageindustryandstockexchange. Traditionally, stockbrokers have been known for their “full service,” as the friendly “financial consultant” whom you knew for over 10 years, and who knewyourriskappetite.Theywouldprovidenewsaboutstocksandmarkets. They would also provide liberal financial advice. But they would also offer advice,service,andpreferenceininitialpublicofferings(IPOs)andblameiton thebroker.Forthese“services”theychargeacommissionthatwouldsome- times amount to a percentage of the value that you had traded. The key issue in full-service brokerages is that the brokers are compensated on trading volume,andnotontheperformanceofyourportfolio. Discountbrokers—knownassuchfortheir“discounting”ofthecommission— beganthepracticeofflatfeesfortrading.TheInternethelpedtheonsetofonline discount brokerages (Web broker). Online brokerages replace people and telephoneswithcomputersandcode,theyoffercost-efficienttrades,24-hour TEAM LinG
  • 90. Online and Traditional Trading on the NASDAQ 69 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. service,fasttradeexecution,bankingfacilities,accesstoIPOsonline,access tomarketinformation,andnoonetoblame.Becauseofonlineservices,thefee percentagedeclineddramatically. Thestart-upfixedcostsofsettingupanonlinefirmarefarlowerthansettingup atraditionalfull-servicebrokerage(Barberetal.,2001).Traderstendtohave very different preferences for trading with market makers and trading on an ECN(whichautomaticallymatches,buys,andsellsordersatspecifiedprices) becauseoftheirdifferenttradingmotives.Thesedevelopmentsarecommonly attributed to the efficiency of “friction-free” electronic markets that lower transactionandinformationprocessingcostsbyreducinghumanintermediation (Konana,Menon,&Balasubramanian,2000). TheInternetservesasanexcellenttoolforinvestors,allowingthemaneasyand inexpensivewaytoresearchinvestmentopportunities.Ontheotherhand,the Internetisalsoanexcellenttoolforfraudsters.Forthisreason,investorsshould alwaysthinktwicebeforeinvestinginanyopportunityfortradingthroughthe Internet. Onlinetradinginvestorsneedtounderstandtherisksofonlinetrading orinsecuritiestradingingeneral. Theaimofthischapteristoevaluatecurrentonlineandtraditionaltradingon theNASDAQstockexchangeusingtheoreticalapproach.Thechapteraimsto derivefuturetrendsfortheonlinestocktrading.Thefollowingareobjectives of this chapter: (1) To describe the current state of online trading; (2) To comparetheexecutionofqualitytradesbetweenmarketmakersandECNs.By achievingsetobjectives,thischapterwillprovideinsightintohowECNsare usedandwhatimpacttheyhaveontheoverallNASDAQmarketperformance. Section1brieflyintroducesonlinestocktradinganddefinesaimsandobjec- tives of this paper. Section 2 presents a background of the structure of U.S. stock market and online stock trading in the NASDAQ stock exchange. The sectionincludesthedifferenttradingmechanismstomatch,buy,andsellorders resulting in diverse market outcomes in terms of execution price and speed. Section3thengoesintomoredetailabouthowonlineinvestorsaffectmarkets. Thesectionprovidesbackgroundofinvestor’sbehavioronfinancialmarketto understandtheinvestor’sperformance.Section4presentstheexistingregula- tion relative online trading with respect to a number of important factors. Finally,section5presentstheconclusion. TEAM LinG
  • 91. 70 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. The Structure of U.S. Stock Markets Equitymarketsworldwideareinastateofchange.TechnologyandtheInternet haveandwillcontinuetohaveaprofoundimpactonthestructureoftheequity markets (Blume, 2000). A U.S. investor will be able to trade with just a click onanymarketthatprovidesadvantagesoverthemarketsintheUnitedStates. Investors in the U.S. stock are desperate; there are institutional investors, householdswithsubstantialassets,alargenumberofhouseholdswithlimited assets, day traders, less active traders, foreign investors, after-hour traders, and so on. The different ways of trading will evolve to satisfy their varying needs. Anessentialconceptofnationalmarketsystem(NMS)wastomakeinforma- tion onprice,volume,andquotes forsecuritiesinallmarketsavailabletoall investors,sothatbuyersandsellersofsecurities,whereverlocated,canmake informedinvestmentdecisionsandnotpaymorethanthelowestpriceatwhich someone is willing to sell, or not sell for less than the highest price a buyer is prepared to offer (SEC, 2000). The Securities ad Exchange Commission (SEC)believesfulldisclosurewillultimatelyproduceinformedinvestorsand will eventually put increase competitive pressure on brokerage firms (Fan, Stallaert, & Whinston, 2000; Yue, Chaturvedi, & Mehta, 2000). A trading system is crucial to an exchange market and plays a critical role in determiningtheoverallefficiencyofthemarket.Marketefficiencyislargely affectedbythewaytradingisorganised(Fanetal.,2000).Despiteproposed changes in the securities trading process and the introduction of electronic tradingsystems,otherprocessesdeterminingmarketefficiency,includingorder flow,pricediscovery,andorderexecution,remainlargelyunchanged(Figure 6.1). Konanaetal.(2000)findthatforefficiencytomovebeyondtheuserinterface intotheactualtradingprocess,investorsneedatransparentwindowtoobserve theactualflowoforders,thetimeofexecution,andthecommissionstructure ofvariouspointsinthetradingprocess. Figure 6.1. The market process of securities trading information search order routing negotiation and agreement clearing and settlement TEAM LinG
  • 92. Online and Traditional Trading on the NASDAQ 71 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Someresearchershavearguedthatinstitutionalrules,regulations,andmonitor- ingfunctionswouldplayasignificantroleinpromotingefficiencyandtranspar- encyalongthevaluechaininelectronicmarkets. Transparencyacrossmarketcentershelptomitigatetheeffectsofthefragmen- tation. Last trade and quote reporting provide a great deal of transparency across U.S. market centers, but market centers are not fully transparent. For greatertransparencyofpriceandquoteinformation,theSECin1997instituted neworderhandlingrules(Schwartz,2000). Currenttrendsinthemarketstructurefortradingstockswillbeworldwide.The physicallocationofthemarketcenterwherethetradehappenswillnotmatter. Technologywillmakethelocationofthemarketcenter,thecurrency,andthe timeoftradeamatterofchoice.Today,amajorhindrancetothedevelopment ofaglobalmarketissettlementandtheclearingmechanism(Blume,2000). The Current Scene at NASDAQ MostdramaticintheUnitedStateswastheNationalAssociationofSecurities Dealers’(NASD’s)acquisitionoftheAmericanstockexchangeinJune1998 (Blume, 2000; Schwartz, 2000). The NASDAQ is not a physical entity. It is anover-the-countermarket(OTC)anditreliesonmarketmakerstofacilitate tradingandliquidityinstock(ensurethattherearealwaysbuyersandsellersfor NASDAQ-tested securities, and enable trades to be filled quickly and effi- ciently). For each stock, there is at least one market maker; NASDAQ is mainly a dealershipmarketwithanaverageofapproximately12.3marketmakersper NASDAQ stock. But the emergence of ECNs has added an auction element in the NASDAQ market (Fan et al., 2000). Rather than being an auction market, NASDAQ is a communication network between thousands of com- puters,whichtransmitsreal-timequoteandtradedatatomorethan1.3million usersin83countries(www.nasdaq.com,2002).Insteadofbrokerscallingout orders, market makers place their name on a list of buyers and sellers, which is then distributed by the NASDAQ in a split second to thousands of other computers. If an investor wishes to buy a stock that trades on the NASDAQ, thebrokerwilleithercallupamarketmakerwiththeinformationofthetrade or enter an order into a NASDAQ-sponsored online execution system. NASDAQ market makers that trade listed stocks are currently linked to the exchangesthroughNASDAQ’sCAESsystem’sinterfacewiththeIntermarket TEAM LinG
  • 93. 72 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. TradingSystem(ITS)(thesemarketmakersareknownasITS/CAESmarket makers).ITSisanelectronicorderroutingsystemthatfacilitatesintermarket tradingofexchange-listedsecuritiesbyallowingabroke-dealerinonemarket center to send an order to another market center trading the same security at a better price. TheNASDAQiscurrentlyworkingonthetechnicalandprogrammingmodi- ficationstoitssystemsneededtosupportthislinkage(SEC,2000).Currently, there are nine ECNs (Table 6.1) operating in the U.S. equities markets (Instinet, Island, Bloomberg Tradebook, Archipelago, REDIBook, Brut, Attain, NexTrade, and MarketXT) linked to NASDAQ through SelectNet. ThislinkallowseachECNtodisplayitsbestorderforNASDAQsecuritiesin the NASDAQ system, and allows the public to access those orders. TheNASDAQisdevelopingmarketstructurestotradeanystockinanynation inanycurrency.Thesenewdevelopmentsareintheirinfancy,buttheypointthe way to the future. In recent years, the SEC has been extremely active in encouragingcompetitionacrossmarketcenters.Theseinitiativeshavehadthe mostimpactonNASDAQ.Therearethreemaininitiatives:themanningrules, Vendor Exchange/Broker Market Share of ECN Trades Daily Share Volume Archipelago Filed as Exchange 1% 25 million Attain Filed as Exchange ? ? B-Trade Broker 7% 35 million BRUT Broker <1% 7 million Instinet Broker 70% 150 million Island Filed as Exchange 20% 95 million NexTrade Broker <1% 275,000 REDIBook Filed as Exchange <1% 17 million MarketXT Broker <1% 2 million TOTAL 100% 181.25 million Table 6.1. Market share of trade and daily share volumes of ECNs (SEC, 2000) TEAM LinG
  • 94. Online and Traditional Trading on the NASDAQ 73 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. the order display rules, and alternative trading system (ATS) rules. Each of these can be understood through their interaction with each other and the market. ThemanningrulesrequirethatamarketmakerinNASDAQstocksexecutea customer’slimitorderbeforeexecutinganorderforitsownaccount(Blume, 2000).Underthemanningrulesamarketcenterhadnoobligationtodisplay a limit order that improved the NBBO. Theorderdisplayrulesrequiredthatamarketmakerthatreceivesabidoroffer that betters the NBBO take one of three actions, execute the limit order immediatelyagainstitsowninventory,displaythebetterpriceaspartofitsown quote, or send the limit order to another market maker who would then have thesamethreechoices.Theorderdisplayrulesalsorequiredthatthequotesof ECNsbeintegratedintotheNBBO.Theimmediateeffectoftheorderdisplay rules was to narrow spreads on the ECNs. Thealternativetradingsystemrulesmadeiteasiertoestablishanewexchange andtofullyintegratethemintothenationalmarketsystem(NMS).Alternative trading systems could choose to be a market participant and register as a broker-dealer, or to be a separate market and register as an exchange (SEC, 2000). ECN and Market Maker Trades The trading of NASDAQ-listed stocks is spread over many more market centers. There are two principal types of market centers: market makers and ECNs. As of June 2000, there were an average of 12.7 market makers per listed stock, while for the top 1% of issues by dollar volume, there were an average52.9marketmakers.Althoughthisnumberseemslarge,thereisahigh degreeofconcentrationoforderflowinanystockinalimitednumberofmarket makers.Furthermore,allofthesemarketmakersarelinkedtogetherthrough electronictradingsystems. Amajorbarriertoanewmarketcenterisobtainingacriticalmassoforderflow tothrive.Orderflowiscriticaltoeverymarketcenter’sbusiness. Moreorder flowmeansmorerevenueandtradingprofits(Fanetal.,2000).Todisplacean existingmarketrequiresthatthenewmarketofferssignificantlybetterservices thantheestablishedmarket. TEAM LinG
  • 95. 74 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. It is useful to pause to consider the difference between an ECN and an exchange. ECNs are broker-dealers regulated by NASD; they match public ordersanddonotactasprincipals.BoththeECNformoforganisationandan exchangehaveadvantagesanddisadvantages.AmajoradvantageofanECN is that NASD performs the regulatory function and frees the ECN from this activity.Amajoradvantageofanexchangeisthatanexchangereceiveswhat istermed“taperevenue.”Suchtaperevenuecomesfromthesaleofquoteand last trade data to public vendors. This can represent between 20% to 40% of anexchange’srevenue.AsanECN,therevenuegoestotheNASD.Another advantageofanexchangeisthatitmayhavemorelatitudeinsettingitsownrules (Blume,2000). ECNsarebeingviewedasacompetitivethreattothetraditionalmarketboth intheUnitedStatesandabroad.Thepreponderanceofstockexchangearound theworldnowhaselectronictradingplatforms.Theelectronicsystemsarefast, inexpensive,eliminateintermediaries,andprovideanonymity.Electronictech- nologyhasmadeitpossibletocombinesystemsinnewwayssoastogiveusers some of the options they want for working their orders. TheECNphenomenonisattributabletotechnologicalandregulatorydevelop- ments,andtoanintenselycompetitiveenvironment.ECNs’enforcedconsoli- dation,transparency,andaccessibilityofpriceinformationarecausingtheflow of limit order to fragment onto multiple books, and ECNs’ cheap, fast, anonymous, and extended hours of trading is forcing NASDAQ to alter its tradingsystemsandorganisationstructures(Schwartz,2000). Technologicalinnovationsthatenablehigh-speed,low-costelectronictrading systems are dramatically changing the structure of financial markets. In the United States, ECNs are involved in more than a third of total NASDAQ tradingvolume. Today,ECNsaccountforapproximately30%oftotalsharevolumeand40% of the dollar volume traded in NASDAQ securities. ECNs account for approximately 3% of total share and dollar volume in listed securities. In contrast,in1993ECNsaccountedforonly13%ofsharevolumeinNASDAQ securities and only 1.4% of listed share volume (SEC, 2000). NASDAQECNtradingvolumehasgrownrapidlyoverthepastseveralyears, transforming NASDAQ’s operations. ECNs’ operational efficiency (e.g., Island, one of the largest ECNs, has only about 60 employees) promises low costsinadditiontoimprovedlimitorderexposure,anonymity,andincreased speed. TEAM LinG
  • 96. Online and Traditional Trading on the NASDAQ 75 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Investors’ choices of whether to send their orders to market maker or to an ECN will depend on the total expected trading costs, including the implicit, explicit, and opportunity costs (Naik & Yadav, 1999). For some institutional investors the choice of trading venue is dynamic. InstitutionalinvestorscanexaminethepriceanddepthofferedbyECNsand bymarketmakersandchoosesthevenuethatwillprovidethebestexecution. Forretailinvestors,however,thechoiceisgenerallystatic. Several previous papers have examined the effect of ECN quotes on market quality.ECNquotesplayanimportantroleinreducingtradingcosts.Barclay etal.(2001)foundthatanincreasedECNtradingimprovesmarketqualityas measured by effective, realised, and time-weighted quoted spread. These improvementsoccurintheoverallmarketaswellasformarketmakertrades and quotes. We can explain that because, first, ECNs facilitate customer-to- customer trades that occur at better price than trades with intermediaries; second, ECNs attract a higher fraction of the informed orders than the uniformed order. This reduces the adverse selection costs faced by market makers.Finally,thelowerspreadavailableonECNincreasecompetitionand dissipate any quasi-rent on preference market maker trades. ECNs offer several advantages over market makers such as spread of executionandanonymity.Themainfactoraffectingthequalityofexecutionis priceimprovement(whichistheopportunity,butnottheguarantee,foranorder to be executed at a better price than what is currently publicly), and market makersgivemorepriceimprovementtosmalltradesthanECNs.Barclayetal. (2001)suggeststhatretailcustomersbenefitwhentheirsmallordersaresent to a market maker instead of to an ECN. Because the ECNs were not integrated into the NASDAQ market, many retail investors traded at prices inferiortothosedisplayedbymarketmakersandothersubscribersonECNs. Thiscreatedatow-tieredmarket—thetraditionalpublicmarketandthenew ECNmarketwithbetterpricesandlimitedaccess.Marketmakerscouldpost quotes in private ECNs that were better than the quotes they posted in the public market. This allowed market makers to charge higher prices to retail customersandlowerpricetomoreprice-sensitiveinstitutionalinvestors. Best execution does not require market makers to match the rounded or nondisplayedquotesonanECN.Thus,customersmaygodirectlytotheECN to get those better prices. ECNsubscriberssubmitlimitorders,whicharepostedonthesystemforother subscriberstoview.TheECNthenmatchescontra-sideordersforexecution. Inmostcases,thebuyerandsellerremainanonymous,asthetradeexecution TEAM LinG
  • 97. 76 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. reports list only the ECN as the contra-side party. Subscribers may use additionalfeaturesoftheECN,suchasnegotiationorreservesize(Barclayet al., 2001). ECNsarechallengingthetraditionalmarketsbyprovidinglow-costtradingand liquiditythroughelectroniclimitordermatchingsystems(Barber&Odean, 2001). Whenanorderisplacedtobuyorsellstock,onemightthinkaboutwhereand how the order is executed can impact the overall costs of the transaction, includingthepricepaidforthestock.Manyinvestorswhotradethroughonline brokerage accounts assume they have a direct connection to the securities market,buttheydonot.Justasinvestorshaveachoiceofbrokers,brokersalso generally have a choice of markets to execute the trade. The broker may route the order—especially a limit order—to an ECN or market maker. Some brokers now offer active traders the ability to direct orders in NASDAQ stock to the market maker or ECN of their choice. Onlinetradingisnotalwaysinstantaneous;investorsmayfindthattechnological “chokepoints”canslowdownorpreventtheirorderformreachinganonline firm.Forexample,problemscanoccurwhere • an investor’s modem, computer, or Internet service provider is slow or faulty; • abroker-dealerhasinadequatehardwareoritsInternetserviceprovider is slow or delayed; or • trafficontheInternetisheavy,slowingdownoverallusage. Acapacityproblemorlimitationatanyofthesechokepointscancausedelay orfailureinaninvestors’attempttoaccessanonlinefirm’sautomatedtrading system (SEC, 2000). Who Trades on the Web? This section provides a profile of those who go online. Barber and Odean (2001)foundthatyoungmenwhoareactivetraderswithhighincomesandno childrenaremorelikelytoswitchtoonlinetrading.Thosewhoswitchtoonline trading seem to experience an unusually strong performance prior to going TEAM LinG
  • 98. Online and Traditional Trading on the NASDAQ 77 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. onlineandtrademorespeculativelyaftergoingonline.Thosewhoswitchalso havehigherlevelsofself-reportedinvestmentexperienceandapreferencefor investinginsmall-growthstockswithhighmarketrisk. Online investors do not generally receive such personal assistance; they do haveaccesstoavastarrayoffinancialinformation,oftenatnocharge,suchas market data, historical charts, industry reports, and analyst report. This informationcanassisttheminmakingtradingdecisions(GAO,2000). To help investors make informed decisions, the SEC and self-regulatory organisations(SROs)requirethatbroker-dealersfurnishinvestorsinformation relating to margin trading. They have proposed rules concerning privacy of information,andrecommendthatbroker-dealersalsofurnishinformationabout tradingriskandbestexecutionoftrades.Thesearekeyinvestorprotections. Throughgreaterspeedofexecution,onlinetradingallowsinvestorstomake profitable trades that would not have otherwise been available. Despite the pressgiventoInternettrading,only11%usedtheInternettobuyorsellstock in 1998. These individuals tended to be younger, more affluent, and better educatedthanthetypicalinvestor(Blume,2000). Some investors may anticipate unusual liquidity needs and switch online in hopesoffacilitatingliquidity-drivenpurchasesorsalesmoreeasily.Investors trademorewhentheygoonlinesimplybecauseofgreatereaseofaccess,lower trading costs make more trade potentially profitable. Lower trading costs, liquidity needs, speed of execution, and ease of access do not explain why rational investors would trade more actively, more speculatively and less profitablyaftergoingonline(Barber&Odean,1999). Choi, Laibson, and Metrick (2001) document several other patterns: young, male, and wealthy participants are more likely to try the Web for trading. Participants who try the Web tend to do smaller than phone trades both in dollars and as a fraction of the portfolio being traded. Lastly, “short-term” trades make up a higher proportion of phone trades than Web trades. There is even a relatively new breed of market participant known as “day traders,” that is, retail customers of brokerage firms who attempt to make profits intraday on small changes on the price of stocks who may also affect price for some securities. Some day traders may add to market depth by providing instant liquidity while those who try to profit from short-term momentum cycles probably increase market volatility (Barber & Odean, 2001). TEAM LinG
  • 99. 78 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. The Investment Style of Online Investors Theinvestmentstyleofonlineinvestorsdiffersfromotherinvestors.Online investorstilttheirinvestmentstowardssmall-growthstockswithhighmarket risk. Since the tilt towards small-growth stocks with high market risk is apparentbothbeforeandafteronlinetrading,BarberandOdean(1999)found thatitdoesnotappearthattheswitchfromphone-basedtoonlineinvestingis accompaniedbyasignificantchangeinthestockinvestor’sownstyle. An investor may trade common stocks for many reasons. An investor with a bonustoinvestoralargebilltopaymaybuyorsellforliquidityreasons.Ifone securityinhis/herportfolioappreciatesconsiderably,he/shemayrebalanceto restorediversificationtohis/herportfolio.He/shemayselltocaptureataxloss ormaytradetospeculate.Thepropositionthatmoreinformationleadstobetter decisionmakingisintuitivelyappealing.Butthetruthofthepropositiondepends ontherelevanceoftheinformationtothedecisionandhowwellequippedthe decision maker is to use the information. Similarly, abundant data may encourageinvestorstotrytobeatamarketthatisnotfullyefficient,butfewhave the ability to beat through skill (Barber & Odean, 2001). Competitive markets will become fragmented in response to the diverse demand of investors. Some investors will prefer one type of market, while otherswillpreferothertypes.Nosinglemarketstructurewillsatisfytheneeds ofallinvestors.Somefragmentationisanaturalresultofcompetition(Blume, 2000). How Online Investors Affect Markets Web access could be expected to increase activity. Since the prevalence of such behaviour, especially when motivated by noise, can play a role in stabilisingordestabilisingmarkets,itisusefultoknowwhethersuchactivityis indeedincreasedbythisnewtechnology.Choietal.(2001)foundthattheWeb affectedbothtradingfrequencyandtradesize. It is very difficult to test whether a stock is mispriced. Furthermore, to some economistsitisnearlytechnologicalthatthemarketpriceofastockistheright price.Theexperimentaleconomicsliteraturehasspelledouttheconditionsthat TEAM LinG
  • 100. Online and Traditional Trading on the NASDAQ 79 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. are most conducive to prolonged mispricing and speculative bubbles: when thereisgreateruncertaintyaboutthefuturevalueofasecurity.E-commerce andthemarkethavehelpedtocreatetheconditions(Barber&Odean,2001). These very active investors are often making decisions in a situation of high uncertainty.Onemeasureoftheseheterogeneousbeliefsanduncertaintyisthe volatility of stock returns. The volatility of individual stock has increased dramaticallysincethe1960s.Inthe1990s,thevolatilityofthesehigh-turnover stocks rose to nearly double its highs from the previous three-decade levels (Choi et al., 2001). Effects of ECN Trading on Overall Market Quality The total cost to trade includes not only the commission charge but also differences in stock purchase or sale price that may result from different methodsofexecutingtrades. Determiningwhetherinvestorsweregettingthebestpossibleexecutionsoftheir orderswasdifficultbecausethequalitydependedonanumberoffactors,such asprice,speed,andthelikelihoodofexecution.Someonlinebrokerageshad problemsensuringqualityexecutionoftradingorders,SECandNASDrequire broker-dealerstoobtainthebestexecutionavailableunderthecircumstances fortheircustomerorders. Online investors can take steps to help ensure quality trade executions. The SECfoundthatmanyonlinebroker-dealerswouldaccommodateacustomer’s request to route an order to a specific market center, although the customer wouldlikelybechargedhighercommissionfees.Investorsmaybeabletooffset thehigherfeesbygettingbetterpricesfortheirtrades.ThechairmanoftheSEC saidinvestorswouldbenefitgreatlyfrommoreinformationaboutexecution quality. Overconfidence and Trading on Financial Markets TherehasbeenmuchspeculationthatthedevelopmentoftheInternetandthe WorldWideWebhashadasignificantimpactonfinancialmarketbehaviours (Yue et al., 2000). The change in trading behaviour that takes place when investorsgoonlinehaveincreasedstockmarketvolumeandvolatility(Choiet TEAM LinG
  • 101. 80 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. al., 2001). This research attempts to provide a description of the theory that overconfidenceleadstoexcessivetrading. The only careful analysis of the behaviour of online investors is Barber and Odeon(1999),whofocussedonthetradingbehaviourandinvestmentperfor- mance of investors who switch from the phone to an online channel. Data constraintspreventeddetailedstudiesofindividualinvestor’sbehaviourand performance. Barber and Odeon (2001) discovered many stylized facts: for investorswhostayoff-line,themoreinvestorstrade,theworsetheyperform (after transaction costs), and men perform worse than women. Barber and Odeon show that many of these results can be reconciled if investors are overconfidentoftheirinvestmentsuccess. Overconfident investors may trade even with their expected gains although tradingsarenotenoughtooffsettradingcost(Odean,1999).Lowercostsand morealternativesclearlybenefitinvestors.Manyoftoday’sinvestorsarenew to the market. Placing trades directly, rather than through a broker, can give suchinvestorsanexaggeratedsenseofcontrolovertheoutcomeoftheirtrades. Thevastamountofonlineinvestmentdataavailablewillenableinvestorsto confirmtheirpriorbeliefsandmayleadthemtobecomeoverconfidentintheir ability to pick stock and other securities. Faster feedback may focus the investor’s attention on recent performance. Markets in which valuation are uncertain,investorsareactiveandinexperienced,andmoneytoinvestisreadily availablearepronetospeculativebubbles,whichcanhurtallinvestors(Barber & Odean, 2001). TheInternethasbroughtchangestoinvestingwhichmaybolstertheovercon- fidenceofonlineinvestorsbyprovidinganillusionofknowledgeandanillusion ofcontrol,whilealsochangingthedecisioncriteriatowhichinvestorsattend. These very active investors are often making decisions in a situation of high uncertainty.Onlineinvestorshaveconcentratedtheirtradingine-commerce and other high-tech firms. Many e-commerce firms have novel, untested business plans. Many have little or no earning. Values are based on distant projections, about which there is much disagreement. However, due to the illusionsofknowledgeandcontrol,andthetendencyofpeopleinaninforma- tion-rich environment to become more set in their beliefs, the volume and varietyofinformationavailableonlinehaveprobablyledtogreaterdispersion of beliefs and greater investor overconfidence (Barber & Odean, 2000). Overconfidence led them to trade active, and active trading caused subpar performance.Overconfidenceoccurswhenfactorsordinarilyassociatedwith improvedperformanceinskilledsituations,suchaschoice,taskfamiliarity, TEAM LinG
  • 102. Online and Traditional Trading on the NASDAQ 81 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. competition, and active involvement are present in situations at least partly governedbychance. Asaninnovativecommunicationmediumandinformationsource,theWebhas agreatcapacitytoaltertradingbehaviouralongmanydimensions(Choietal., 2001). Online investors have access to vast quantities of investment data. These data can foster an illusion of knowledge, which increases overconfi- dence. Online investors generally manage their own stock portfolios and executetradesattheclickofamouse.Thisfostersanillusionofcontrol,which reinforces overconfidence (Barber & Odean, 1999). The basic idea is that risk averse, overconfident traders trade more aggres- sivelybasedonvalidinformationthandorationaltraders(Odean,1999).As a result, overconfident traders are better able to exploit risky profit opportu- nitiescreatedbythetradesofliquidity—motivatedtradersorthemistakesof noise traders (Hirshleifer & Luo, 2001; Yue et al., 2000). Regulation Regulation has facilitated the ECNs’ inroads into NASDAQ trading. The ECNs new order handling rules (the limit order display rule and the market maker rule) have made it much easier for a new ECN to capture public order flow(Schwartz,2000). Alternative Trading System (ATS) IntheUnitedStates,alternativetradingsystems(ATS)havebeenusedsince 1969(instinet)andwereabletoacquireasignificantmarketsharebyoffering integratedelectronicorderroutingandmatchingservicesforsecuritiestrading, byprovidingbenefitstoretailandinstitutionalinvestors,suchasbetterprice andlowercommissionsasthetraditionalexchanges.Thus,theyattractnotonly professionalbutalsoretailinvestorstotheirsystems(Holtmann,Lattemann, Stefan, & Weinhardt, 2001). TheSEC(2000)definesATSas“automatedsystemsthatcentralise,display, match,crossorotherwiseexecutetradinginterests,butthatarenotcurrently registeredwiththecommissionasnationalsecuritiesexchangesoroperatedby registeredsecuritiesassociation.” TEAM LinG
  • 103. 82 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ATStypicallyhavesophisticatedITinfrastructuresthathavebeendesigned from scratch to support the relevant phases in the transaction process— particularlytheautomatedmatchingandpricediscovery(SEC,2000;Holtmann et al., 2001). This enables ATS to • underbidthefeesexchangeschargetotheircustomers; • actmoreflexiblytovaryingcustomerdemandsormarkettrends;and • establishthemselvesascompetitorsforthetraditionalexchanges. Global Trading Themarketoftomorrowwillbeglobal.Technologywillallowamarketcenter or order gathering function to be located anywhere in the world. A national market system assumes that one market will best serve the needs of all investors.Investorshavedifferentneedsanddifferentmarketswilldevelopto serve these needs. Monitoringandregulatingthismovementtoglobaltradingwillbeoneofthe majorregulatorychallengesoverthenextdecade.Itwillrequirethatdomestic regulatorscoordinatetheirregulationswiththoseofothercountries. NASDAQ has formed an alliance with the Hong Kong Stock Exchange to tradesomeofthemoreactiveNASDAQstocksinHongKonginHongKong dollarsduringHongKongbusinesshours.NASDAQhasalsoformedajoint venture to trade Japanese stock and U.S. stocks in Japan. Once it becomes cheapandeasytotradesacrossborders,therewillbeincreasedtradingacross borders. Today, a major barrier to the trading of U.S. equities worldwide is the settlement process. The settling of trades is even more centralised for any particularissue,iftheissueisregisteredeitherdirectlyinthenameoftheowner orindirectlythroughanintermediary.IntheUnitedStates,theDepositoryTrust and Clearing Corporation (DTCC) is the focal point for this transferring of ownershipfromoneentitytoanother.TheDTCCguaranteesthecontra-party risk. The problems that must be overcome in establishing global settlement platformsareinterrelated(Blume,2000). It is imperative that U.S. regulatory bodies change their focus from the regulationofadomesticU.S.equitymarkettothechallengesofregulatingina globalmarket. TEAM LinG
  • 104. Online and Traditional Trading on the NASDAQ 83 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Conclusions Thischapterpresentedwhatextantofthesubjectareaofthisresearch.Online stocktradingmechanismsatexchangesareoftenhybridofdealerandauction markets.Differentaspectsoftradingexecution,whichisthemostcommonly used market centre at present, were discussed. This led to discussion of the wayofexecuteorderisorganisedandwhatistheimpactoneffectivemarket performance,tradingcosts,andinvestorbehaviour. Thechapter’sobjectiveledtoestablishingthecasefortheresearchquestion: Toinvestigatetheimpact,ifanyway,ofonlinetradingwithECNs,oneffective market performance, trading costs, and investors’ behaviour as opposed to market makers. In the future, researchers should empirically compare stock tradingwithECNsandmarketmakers.Thiswillestablishtheimpactofonline trading on market performance. The findings will be helpful for investors to makecost-effectiveinvestmentstrategies. References Barber, B.M., & Odean, T. (1999). Online investors: Do the slow die first? (Workingpaper).Davis:UniversityofCalifornia. Barber, B.M., & Odean, T. (2000). The Internet and the investor. Journal of Economic Perspectives, 15(1), 41–54. Barber,B.M.,&Odean,T.(2000).Tradingishazardoustoyourwealth:The common stock investment performance of individual investors. The Journal of Finance, 4(2), 773–806. Barber, B.M., & Odean, T. (2001). Boys will be boys: Gender, overconfi- dence, and common stock investment. The Quarterly Journal of Eco- nomics, February, 261–292. Barclay, M.J., Hendershott, T., & McCormick, T. (2001). Electronic com- munications networks and market quality. University of Rochester, NY, May 2001, pp. 1–38. Blume, M.E. (2000, October 16). The structure of the U.S. equity markets. Paperpresentedatthe FinancialMarketsConference,FederalReserve BankofAtlanta,SeaIsland,Georgia,UniversityofPennsylvania. TEAM LinG
  • 105. 84 Alryalat, Dwivedi, Kuljis and Paul Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Choi, J.J., Laibson, D., & Metrick, A. (2001). How does the Internet affect trading?Evidencefrominvestorbehaviourin401(K)plans.TheRodney L. White Center for Fianncial Research, March, 1–68. Daniel,K.,Hirshleifer,D.,&Subrahmanyam,A.(1997).Atheoryofovercon- fidence,self-attribution,andsecuritymarketunder-andover-reactions. February 19, pp 1–57. Fan,M.,Stallaert,J.,&WhinstonA.B.(2000).TheInternetandthefutureof financial markets. Communications of the Association for Computer Machinery, 43(11), 83–88. Hirshleifer,D.,&Luo,G.Y.(2001).Onthesurvivalofoverconfidenttraders inacompetitivesecuritiesmarket.JournalofFinancialMarkets, 1–39. Holtmann,C.,Lattemann,C.,Stefan,S.,&Weinhardt,C.(2001).Transform- ingfinancialmarketstoretailinvestors.Proceedingsofthe34th Annual Hawaii International Conference on System Sciences (HICSS), 34(1), 1–8. Konana,P.,Menon,N.M.,&Balasubramanian,S.(2000).Theimplications of online investing. Communications of the Association for Computer Machinery, 34(1), 35–41. Naik, N., & Yadav, P. (1999). The effects of market reform on trading costs ofpublicinvestors:EvidencefromtheLondonStockExchange. June, 1–46. Odean, T. (1999). Do investors trade too much? American Economic Review, December, 1–39. Schwartz, R.A. (2002). Building a better stock market: New solution to old problems. Social Science, January, 1–29. U.S. General Accounting Office (GAO). (2000). On-line trading: Better investorprotectioninformationneededonbrokers’Websites.May,1– 43. U.S.SecuritiesandExchangeCommission(SEC).(n.d.).Investortips:Trade execution.RetrievedJune30,2002,from www.sec.gov/investor/pubs/ tradexec.htm U.S.SecuritiesandExchangeCommission(SEC).(n.d.).Investortips:Trad- inginfast-movingmarkets.RetrievedJune30,2002,fromwww.sec.gov/ invstor/pubs/onlinetips.htm TEAM LinG
  • 106. Online and Traditional Trading on the NASDAQ 85 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. U.S. Securities and Exchange Commission (SEC). (n.d.). Special study: Communication network and after-hour trading. Retrieved June 30, 2002, from www.sec.gov/news/studies/ecnafter.htm Yue,W.T.,Chaturvedi,A.R.,&Mehta,S.(2000).Ismoreinformationbetter? Theeffectoftraders’irrationalbehaviouronanartificialstockmarket. Purdue University, pp. 660–666. TEAM LinG
  • 107. 86 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterVII AdaptiveCollaborative WorkandXML WebServices: Benefits of Application into Information Infrastructure and Human Resources Mayumi Hori, Hakuoh University, Japan Masakazu Ohashi, Chuo University, Japan Abstract In this chapter, we discuss XML Web services, which integrates different systems and applications into one comprehensive system. XML Web services connects different entities such as corporations, governmental bodies, and nonprofit organizations, enabling the adaptive collaboration work (ACW) which is essential to promptly meet the increasingly diverse needs and kaleidoscopic changes in the economy. ACW is critical in the ubiquitous society where constant improvement of business processes and cooperation and collaboration with both existing and new systems are TEAM LinG
  • 108. Adaptive Collaborative Work and XML Web Services 87 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. required. We propose the advanced application of XML Web services based on the ACW would enable a variety of organizations to collaborate with each other on the Internet and ultimately increase their productivity and efficiency. XML Web services effectively strengthens business management as it enables organizations to share personnel information across the board, therefore, organizations can unify management of their human resources. In the ubiquitous society, whether it is public or private, organizations need to develop and cultivate human resources capable of planning integrative strategy with information and communications technologies(ICT),designinganddevelopingsystems,managinghardware and software, and operating/maintaining systems.XML Web services based on the ACW gives suggestions on tactical solutions for these emerging agendas. Introduction Overthepastyears,wehavewitnessedthedrasticchangesinourubiquitous society.Thisnetworkedsociety—enabledbytherevolutionofinformationand communicationstechnologies(ICT)—canalsobecalledaknowledge-based society.Knowledgeisnolongerequivalenttoestablishingpoliciesandbuilding machinesasitusedtobeinatraditionalindustrialsocietyinthe20th centurythat solelypursuedefficiency.Rather,today’sknowledgeisconsideredecological andorganicinawaythatitisflexibleenoughtoswiftlysensenumerousshifts intheenvironment.Furthermore,themaincharacteristicofknowledgein21st - centurynetworkedsocietyisconnectivitythroughnetworkforthepurposeof achievinghighergoals.Suchachievementisbasedontheinnovationsandnew creations.Thenewmethodthatintegratesanumberofdifferentsystemsand applicationsintoonesystemtoenabletheadaptivecollaborativework(ACW) has been generating much attention as it may meet the diverse and growing demands in the future of the ubiquitous society. In other words, in our ubiquitoussocietywithadvancedinformationandcommunicationstechnolo- gies(ICT)infrastructure,tacitknowledge,themostdifficultyetvaluabletype ofknowledgetobetransmittedwhichisgainedthroughpersonalexperiences and stored within individuals, is thought to have better chances of being transferred and stored on the network. Therefore, it is essential to build a platformtomaketacitknowledgemoreaccessibleandshareableinsociety. TEAM LinG
  • 109. 88 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. The business benefits of applying the ACW architecture with XML Web services are clear. It enables a new collaboration practice on the computer networkinfrastructuresuchasinternetDataCenter(iDC).Byimplementing XML Web services, the architecture allows entities of different ontological level to be linked laterally, therefore making it easier for them to appreciate eachother’sexpertise,whichessentiallyencouragesfurtherdevelopmentand innovation. In a broader sense, XML Web services collectively means any servicesinvolvingtheuseofWebapplications.However,inthischapter,we specificallyusethetermasthetechnologythatintegratesnumeroussoftware applications online and automatically conduct operations on its own. XML Webservicesisamethodforcollaborationbetweendifferentsystemsincluding thelegacysystemwhichexchangesinformationwritteninXMLandautomati- cally processes the task on the network according to the object of each program.Themostinnovativefeatureofthissystemisitscompatibilitywiththe Internet.Thisarchitecturealsoenablesorganizationstopracticeanintegrative strategymanagementwhichimprovesthequalityofhumanresourcespractices includingpersonnelaffairs,compensations,employeeeducationandtraining, andprojectmanagementbysharingpersonnelinformationacrosstheboard. Inthischapter,weexaminetheefficiencyofXMLWebservicesbasedonthe ACW and how it would strengthen and develop human resources. Further- more, we discuss telework as a major working format for the ACW and how itshouldbepracticedintheubiquitoussociety. Adaptive Collaborative Work and Paradigm Shift From the Perspectives of Providers to Those of Consumers ThegoaloftheACWistopushbacktheboundaryoftraditionaldefinitionof network as a “tool or system to get connected,” which focuses mostly on its convenience and efficiency. The ACW aims to build a new networked collaborativesociety,whichsensitivelycapturesthehumanityofindividualsas wellasawholewithoutrestrictionoftimeandlocation.Thisnewnetworked societyconnectsindividual-to-individual,individual-to-organization,individual- TEAM LinG
  • 110. Adaptive Collaborative Work and XML Web Services 89 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. to-community,individual-to-society,andindividual-to-world.Furthermore, ICThavebeendevelopedbasedontheperspectivesofproductsandservices providers.However,byapplyingXMLWebservices,theACWshiftsitsfocus totheperspectivesofconsumersincludingthoseofcorporations,municipali- ties,andcitizens. Traditionally,usingICTtoolsrequiredknowledgeofthetoolsandprocessof operation. Hence, each operation with those tools required professional servicesfromtheproductsandservicesproviders.XMLWebservices,onthe otherhand,automaticallyprocessesmultipleinquiriesofusersontheInternet regardless of their data type or format without having users worry about the technicalissues.Therefore,itoffersservicesbasedontheperspectivesofusers and brings about a paradigm shift in ICT. Further development of ICT based on the perspectives of users necessitates the building of a network infrastructure with which users can get connected anytime,anywhere,andwithanything.Thatis,weneedtobuildanetworked environment not only with PCs but also with mobile phones and other information equipments that provide access to constant Internet connection fromhome,cars,trains,airplanes,oranywhere. Sharing and Utilizing Knowledge Through the ACW: Furthering Knowledge Management by Human Resource Management (HRM) Conventionalbusinessmodelshadbuiltinformationsystemsthatoperatedonly within the organization, and interchangeability or interactivity was not well considered. However, the rapid development of ICT has prompted the creation of a seamless networked environment regardless of organizations’ typeandsize.Ithasalsoencouragedthedevelopmentofubiquitousenviron- mentwherepublicinstitutions,suchasgovernmentandlocalgovernments,can freely access and utilize each other’s information and collaborate together withouttheboundaryoftimeandspace.ExpansionoftheversatilityofICThas facilitatedmanycorporationsandadministrativeagenciestomergeandcol- laboratewitheachotherandenabledthemtoenterintonewbusinessschemes. Ontheotherhand,ithasbecomeextremelydifficulttomaintainthecompetitive advantage in the present market as the culture of sharing and collaboration prevailed.Furthermore,governmentandlocalgovernmentshavebeenurgedto meetthediverseneedsofthepeoplewhileimprovingeconomicefficiency. TEAM LinG
  • 111. 90 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. In accordance with these situations, there is a growing interest in human resource management (HRM) that suits well with the new paradigm of knowledgeintegrationandcollaborationintheubiquitoussociety.Someofthe corefeaturesofknowledgeintegrationandcollaborationforhumanresource intheeraofknowledgemanagementareasfollows: • Realizationofthepotentialsofeachmemberofanorganization • Sharingofknowledgeandabilitiesofanorganization • Sharingandcollaborationofknowledgeandabilitiesbeyondthebound- ariesofanorganization • Externalizingtheexperiences(know-how)ofmembers • Systematizingskillsandintellect • Collaborationbetweencorporationsandresearchorganizations • Exchanginginformationwithclients Practicingthesecorefeaturesenablesorganizationstoreinforcetheircompeti- tiveness and product development, encourage restructuring of operation, createnewbusinessopportunities,andachievehighercompetenceandadvan- tageinintellectualproperties.Inorderfororganizationstopracticethesecore features, it is essential to create an environment that nurtures members’ creativityandacceleratesmotivationwithappropriateincentivesandevalua- tion. Traditionally, HRM in Japan has been considered as personnel and labor managementholdingasubordinatepositioninbusinessstrategies,anditsmain agenda was how to better manage people at a worksite. As society moves towardaubiquitoussociety,managementneedstoemphasizebusinessstrat- egiesthatevaluateavarietyofshiftsintheenvironmentsuchasglobalizationand technicalinnovations.Thepersonnelmanagementinaknowledgemanagement society is required to operate as business strategies that are consistent with HRM. TEAM LinG
  • 112. Adaptive Collaborative Work and XML Web Services 91 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Demonstration Experiment on the ACW and HRM Utilizing XML Web Services Benefits of XML Web Services and Demonstration Experiment on the ACW ThebenefitsofutilizingXMLWebservicesbasedontheadaptivecollaborative systemareasfollows(Ohashi,2003c): 1. Itisplatformindependent,thereforeitisusableregardlessofthetypeof hardwareandsoftware. 2. Theconnectionishighlyflexible,collaborative,andcompatiblewithother systemsincludingthelegacysystemwithoutmakinganychangestothe system or data. 3. It enables the collaboration between the legacy systems and newly developedsystems. 4. ItavoidsoverlappinginvestmentsoftheICTutilizationanddevelopment bydeterminingthedevelopmentmethodsbymodule. 5. It enables the sharing of the ICT sources. 6. Itoffersmoreflexibilityindataprocessandexchange. These benefits improve the efficiency of business-to-business (B2B) busi- nesses and customer relationship management (CRM), and produce new businessopportunities.UtilizingXMLWebserviceswiththeadaptivecollabo- rative system also enables organizations to practice an integrative strategy managementwhichimprovesthequalityofhumanresourcesystem,including personnelaffairs,compensations,educationandtrainingofemployees,and projectmanagementbysharingtheirpersonnelinformationacrosstheboard. Today, in order for corporations and government agencies to achieve swift decisionmakingandinnovation,theyneedtoutilizeasystemthatefficiently manages large-scale information and data—both in terms of quantity and quality—existing within and outside of the organization, and to make these resourcesshareable. TEAM LinG
  • 113. 92 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. A University B University Overseas iDCiDC EXPERIMENTAL STUDIES Data management Storage Management Collaborative Work Tools Knowledge Management Software EXPERIMENTAL STUDIES Data management Storage Management Collaborative Work Tools Knowledge Management Software Private Sector Collaborative Work Testbed SAN SAN Mesh Gigabit Eethanet or WDMMAN Backbone C University NAL(National Aerospace Laboratory) Collaborative Work, Collaborative LearningCollaborative Work, Collaborative Learning WehavebeenbuildingtheNext-GenerationCollaborationStudiesPlatformin Tokyo since April 2003, which is supported by the Ministry of Post and Telecommunications(Ohashi,2003a).Inordertoexaminetheeffectivenessof real-timeACWthroughtelecommunicationanddatasharing,anexperiment utilizing the knowledge management systems and the wavelength division multiplexing(WDM)wasconductedincooperationwithseveraluniversities and research institutes in Japan. We examined whether incorporating the storageareanetwork(SAN)collaborationsystemsinstalledintheiDCandthe knowledgemanagementsystemwouldsophisticateandenhancethequalityof real-timecollaborativework. Theexperimentprovedthatreal-timeoperationoflargevolumesofdatawith ahigh-speedlinetobepossibleandtheadaptivecollaborativeteleworktobe veryeffective.Beyondmerelysharingdatathroughtelecommunication,the experimentdemonstratedthatutilizingtheknowledgemanagementsystemsin conjunctionwiththeWDMfacilitatesanenhancedcommunicationstructure.In essence,theunionofthetwosystemscreatesareal-timecollaborativeresearch environmentbyallowinguserstosharetheprocessesandresultsofresearches between the institutions regardless of their location. This experiment was unique in that we developed a collaborative research system that allows researchers to work on several different projects at the same time and also a Figure 7.1. Collaborative work systems WDM TEAM LinG
  • 114. Adaptive Collaborative Work and XML Web Services 93 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. project management system that manages all the collaborative projects as a whole. This demonstration experiment of the adaptive collaboration platform was conductedinthefollowingsettings: 1. Acollaborativeresearchandexperimentsysteminanintegrateddistrib- utedenvironment 2. Adaptivecollaborationforvisualmediacontentsproduction These trials were performed using the database and applications in the collaborative workspace located in the external storage within the iDC. The knowledge management systems enabled users to control access to the files and data stored in the iDC. Not only allowing authorized individuals to customizethesettingstoobtainaccesstospecificorganizations,workgroups, and workplaces, the experiment also performed detailed control over the visibilityandinvisibilityoftheintelligentfolders,bulletinboards,ande-mails. Anapplicationthatintelligentlyrelatesthedatabasesintheexternalstorageto each organization and management was also introduced allowing users to voluntarilycreateand/oralterthesettingsofthecollaborativeworkspace.The adaptivecollaborationisalsoanautonomous-distributedcollaborativework system with the iDC centralized, layered data-type sharing model, which enablestheclientsdistributedonthenetworktoautonomouslyprovideservices totheirconsumers(Figure7.1). As challenges for the future, we would like to have more organizations be involved in the experiment in order for the further sophistication of the knowledgemanagementsystemsincludingtheadvancedutilizationofhuman resourcesmanagement. Utilizing Both Insource and Outsource to Support the ACW Theadaptivecollaborationassumestheinvolvementofpeoplefrommultiple organizations and multiple systems. In order to maximize its effectiveness, utilizingXMLWebserviceswhichcorrelatesavarietyofplatformapplications onanetworkatreal-timespeedsisconsideredhighlycritical.Value-creating organizationmanagementinaubiquitoussocietyprioritizestheaccelerationof TEAM LinG
  • 115. 94 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. thedecision-makingprocesswhichrequiressignificantshiftsinorganizations’ strategies and structure. It requires organizations to promote networking of knowledge and information, and concentrate the human resources into their core competence. Doing so would strengthen the competitiveness for the furthercreationofintellectualproperties.Inordertoshareindividuals’knowl- edge,expertise,andknow-howacrosstheboard,humanresourcesstrategies need to be applied in organization-wide. Organizations need to change their structure so that they can emphasize individuals’ abilities and potentials, contrasting to traditional organizations in which employer offers his or her ability (labor) and receives financial or social security in return based on the fixedlong-termcontract.Organizationsarerequiredtotransformtheirnature to collaborative, networked, flat, and to produce appropriate evaluation methodwhichmotivatesindividualsandmaximizestheirabilities. XMLWebserviceseffectivelystrengthensbusinessmanagementasitenables organization to share personnel information across the board; therefore, organizationscanunifymanagementoftheirhumanresources.Forinstance,an integrative cross-section management of insource human resources may facilitatemoreeffectiveprojectmanagement,personnelmanagement,staffing, andin-housetrainingandeducation. Furthermore,organizationscanincreasetheirefficiencybyconcentratingtheir insourceintocore-competenceactivitieswhileoutsourcingotherareassuchas trainingandhumanservices.Itmightbeeasierandmoreefficientforsmall-and medium-sizedenterprisesandmunicipalitiestooutsourcethespecialistsfor strategy planning. XML Web services based on the ACW system is able to transformconventionalpersonnelmanagementintomanagementstrategies. Potentials of the ACW The Adaptive Collaborative Telework TheACWaimstoshifttheconceptofcomputerizationandinfomatizationfrom ameredevelopmentofICTtofurthersophisticationofthesystemofsociety itself. There underlies a mission coming from the need of rebuilding the Japanesesocietycenteredondigitalization.In21st -centurysociety,regional characteristics are valued as well as the concept of globalization. Today, decentralizationisreceivingmoreinterestanddemandfortheelaborate,finely TEAM LinG
  • 116. Adaptive Collaborative Work and XML Web Services 95 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. tuned services for individuals and innovative measures for promoting their regionareincreasing.Inotherwords,peopleareseekingindividuallytailored servicesratherthanmany-to-many,ready-madeservices.Inordertoswiftly andappropriatelysatisfyavarietyofneedsofresidentsandlocalorganizations, further development and utilization of ICT and its infrastructure in local regions—especiallywithinthelocalmunicipalities—areessential. IntheUnitedStates,governmentcomputerizationisfarmoreadvancedthan thatinJapan. Eachagencycooperateswithoneanotherinahorizontalwayso that one can process a complicated task that requires services from a wide range of agencies efficiently. Furthermore, the U.S. government promotes teleworkwithingovernmentalagencies.Ontheotherhand,inJapan,building ofinfrastructurefortelework,whichmaymaximizethepotentialsofhuman resourcesanddevelopinformationandtelecommunicationssystemscooper- atedbye-governmentande-localgovernment,hasjuststartedtobediscussed. InJapan,itisdifficultforlocalmunicipalitiestoinvestincomputerizationand provide residents and organizations with services and appropriate security systemsduetothefinancialdeterioration.Therefore,computerizationneedsto be fair in its cost, safe and trustworthy, and contribute and meet the needs of residentsandlocalorganizations. TheACWplaysavitalroleinenablingcomputerizationbypromotingICTwith fairly low cost. It is also highly expansible for the further development and ensuressecurityinatimeofdisaster.Forthelocalmunicipalitiesandorganiza- tions of the 21st century, the following are the benefits of utilizing the ACW basedonXMLWebservices.First,itutilizesexpertiseandknowledgeoflocal staff in a more functional and collaborative way in order to promptly meet a variety of needs of local residents and organizations. Second, unlike the sectionalism often seen among governmental agencies, information can be sharedacrossagencieswhichallowspeopletoworkcollaboratively,therefore reducingadministrativecost.Third,itishighlyimportantinadisaster-prone countrysuchasJapantodevelopacollaborativesystemtoshareanyinforma- tion related to disaster among the government, municipalities, prefectures, citiesandtowns,andlocalorganizationstoefficientlyenforcetheemergent measures. Inordertoutilizethisdisaster-relatedsystem,securityhastobeensured.Each municipalityandorganizationneedstoadministerthesysteminadecentralized mannerandtobepreparedforcollaborationdependingonthesituation.The ACW can be one of the important measures against disasters. And finally, it reducesorganizations’investmentinfacilitiesandefficientlyutilizessophisti- TEAM LinG
  • 117. 96 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. cated expertise and highly technical knowledge of human resources. For instance,buildinginfrastructureofinformationandcommunicationssystemsin municipalities requires advanced facilities and it could cost large amount of fundsformaintenance.Furthermore,itisalsodifficulttohirehighlyexperienced people due to its cost. The ACW enables organizations to utilize human resources with advanced expertise for low cost. Telework,arepresentativeformoftheACW,sharesthecommonbenefitsfor municipalitiesandlocalorganizationsastheACWthatwementionedabove. Today,municipalitiesandlocalorganizationsarerequiredtoseriouslyconsider the implementation of telework in order to utilize the expertise within and outsidetheirorganizationsinacollaborative,networkedmanner.Additionally, liketheprivatesector,municipalitiesareexpectedtoincreasetheirproductivity and become more output oriented. For those reasons, telework has drawn considerableinterestthatitwouldincreaseindividuals’productivity,network the human resources and encourage the collaboration between different branches in the organization, and utilize the outsource human resources for advanced knowledge and expertise. Telework would ultimately create an environment where organizations and individuals bring their expertise and generateinnovativeideas,whichleadstonewbusinessopportunities,expan- sionofemploymentopportunities,anddevelopmentofICT-relatedengineers; hence,itwouldproducethedrivingforceforlocalrevitalization. ACW as Social System Intheubiquitoussociety,sharingandutilizingofknowledge,inotherwords, knowledgemanagement,becomeessentialnotonlyinthefieldofbusinessbut also in e-government and e-local governments. For instance, in the field of business,sharingknowledgestoredininformationsystemsofeachorganization wouldbeimperativefortheconcentrationofintellectualresourcesandcompe- tenceforexcellenceofintellectualcapitalregardlessofthesizeoftheorgani- zation.Additionally,collaborationacrossthedivisionswouldencourageachiev- ing higher goals in a more creative and strategic manner. The digitization of governmentandlocalgovernmentstodayhasnotgonefurtherthanpromoting onlineapplicationproceduresandintroducingprocurementsystems.However, intheubiquitoussociety,e-governmentande-localgovernmentsareexpected to further disclose their information and integrate authorized operations. Moreover, they need to expand their limited concept of digitization to the digitization of social system at large including the welfare and healthcare of TEAM LinG
  • 118. Adaptive Collaborative Work and XML Web Services 97 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. citizens,education,regionalrevitalization,jobdevelopment,andothersthatare tightlyrelatedtoourdailylives. Thusfar,Japanhasmanagedtoachievedevelopmentsinsocialwelfare,health care,andcultivationofhumanresourceswiththesocialsystemdependenton officialdom. However, in the era of the rapid and drastic transformation, conventionalbureaucrat-ledsocioeconomicstructuresandsystemshavegone throughsystematicfatigueandlosttheirproductivity.TheACWbasedonICT encouragestheshiftfromthebureaucrat-ledsystemtopublic-privatesector- ledorprivatesector-ledsystembylinkingtheexpertisefromthetwodifferent fields. Conclusion For government agencies and corporate organizations to solve emerging complexproblemsintheubiquitoussociety,theywillneedtocollaboratewith otherbranchesintheirorganizationorbuildindustry-government-academia relationship to collaboratively work on the problems. In a homogeneous society, many problems had been solved with a comprehensive approach. However,today,itisofteninevitabletodividetheproblemintomodulesand thenapplyknowledgetosolveeachmodulatedproblem. Asdiscussedinchaptertwo,thebenefitsoftheadaptivecollaborativesystem, suchascollaborationwiththelegacysystemwithoutapplyingspecialsystem anddevelopmentatthemodulelevel,symbolicallyrepresenttheirpotentialsin theubiquitoussociety.Accordingly,therapiddevelopmentoftheubiquitous societyrequireshumanresourcesthatcreativelykeepsupwiththerapidity.The XMLWebservicesweintroducedinthischapteralsorequiresdevelopment andtrainingofengineers,managers,andotherhumanresourcestotakeitsfull advantageandmaximizeitseffectiveness.Thisillustratesthemorespecialized and diversified needs in the ubiquitous society that necessitate experts who collaboratively respond to the changes in business environment and find solutionsfortheemergingproblems. AsthemostrepresentativeformoftheACW,teleworkneedstotransformits naturefromindividualteleworkingtoworkinggroupandtoworkingorganiza- tion for the greater sophistication of business and for corresponding to the diversification of business needs. Collaborative telework may expand the effectivenessofknowledgemanagementasitstrategicallyintegrateshigh-level TEAM LinG
  • 119. 98 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. knowledgeandexpertise.Furthermore,intheubiquitoussociety,whetheritis publicorprivate,organizationsneedtodevelopandcultivatehumanresources capableofplanningintegrativestrategywithICT,designinganddeveloping systems,managinghardwareandsoftware,andoperating/maintainingsystems. XMLWebservicesbasedontheACWgivessuggestionsontacticalsolutions fortheseemergingagendas. References Beyerlein, M.M., Freedmau, S., McGee, C., Moran, L. (2003). Beyond teams building the collaborative organization. Jossey-Bass/Pfeiffer. Fenson, B., Hill, S. (2003). Implementing and Managing Telework: A Guide for Those Who Make It Happen. Praeger. Fisher, K., Fisher, M.D. (2001). The distance manager. McGraw-Hill. Grundy, A.F., Köhler, D., Oechtering, V., Petersen, U. (Eds.). (1997). Women, work and computerization. Proceedings of the 6th Interna- tional IFIP-Conference, Bonn, Germany. Hori, M. (2001). The development of IT and a new work format for women in Japan. Proceedings of t-World 2001, The Eighth International Assembly on Telework, 231 Labour Policy Studies, Ministry of Labour,Finland,Helsinki. Hori,M.(2002).Thepresentsituationandperspectiveofwomen’swork:How does IT work? Hakuoh Business Review, 11(1), Institute of Business Research,HakuohUniversity. Hori, M. (2003). Society of telework and working for women. Tokyo: PublishersofChuoUniversity. Hori, M., Ohashi, M. (2001). Information technology and the possibility of women’s work: A new work format for women in Japan. The 6th InternationalITFWorkshopandBusinessConference“Workinginthe NewEconomy,”Amsterdam. Hori,M.,Ohashi,M.(2004a).Implementingadaptivecollaborativetelework inpublicadministration,eAdoptionandtheknowledgeeconomy:Issues, applications,casestudies.InP.CunninghamM.Cunningham(Eds.), (pp. 708–714). IOS Press. TEAM LinG
  • 120. Adaptive Collaborative Work and XML Web Services 99 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Hori,M.,Ohashi,M.(2004b).Teleworkandmentalhealth:Collaborative worktomaintainandmanagethementalhealth.Proceedingsofthe37th Annual Hawaii International Conference on System Sciences, Ha- waii. Hori, M., Ohashi, M. (2004c). Telework changes working style for Japanese women. Proceedings of AWEEB2004, International Work- shop on Advanced Web Engineering for E-Business, Frankfurt, Ger- many. Hori,M.,Ohashi,M.(2005).ApplyingXMLWebservicesintohealthcare management. Proceedings of the 38th Annual Conference on System Sciences,Hawaii. Illegems, V., Verbeke, A. (2004). Moving towards the virtual work- place: Managerial and societal perspectives on telework. Chichester, UK:EdwardElgar. Nicson, D., Siddons, S. (2003). Remote working: Linking people and organization. Butterworth/Heinemann. Ohashi, M. (Ed.). (2003a). Knowledge-based collaborative work. The Report of Supplementary Budget Project of the Ministry of Post and Telecommunications.Tokyo:MinistryofPostandTelecommunications. Ohashi, M. (2003b). Public iDC and c-Society. Tokyo: Kogaku Tosho. Ohashi, M. (Ed.). (2003c). The Report of the Society for the Advanced Studies on e-Society. Tokyo: The Society of the Basis for the e- Community. Ohashi, M. (2003d). Time business. Tokyo: NTT Publication. Ohashi, M. (Ed.). (2004). The Report of the Advanced Studies for the Social Capital on e-Society. Tokyo: The Society of the Basis for the e- Community. Ohashi, M. (Ed.). (2005). XML Web services for next generation and a view of citizen centric. Tokyo: Kinokuniya Ltd. Ohashi,M.,Hori,M.(2005).Onthestudiesofadaptivecollaborativework. JournalofIPCS,12,TheInstitutionofPolicyandCulturalStudies,Chuo University. Ohashi, M., Hori, M. (2005). The theory of economics for network society.Tokyo:KinokuniyaCompanyLtd. TEAM LinG
  • 121. 100 Hori and Ohashi Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Ohashi, M., Nagai, M. (2001). Internet data center revolution. Tokyo: Impress. Ohashi,M.,Sasaki,K.(2003).Onthestudyofknowledgestructuralization process based on project based learning. Journal of Policy Studies,10. Ohashi, M., Sasaki, K., Hori, M. (2004). On the study of knowledge structuralizationandadaptiveprocessesbasedonprojectbasedlearning. Journal of IPCS, 7, 55–78. The Institution of Policy and Cultural Studies,ChuoUniversity. OrganisationforEconomicCo-operationandDevelopment(OECD).(2002). OECD employment outlook. Paris. Sasaki, K., Ohashi, M. (2001). Key issues for the next generation knowl- edge management. Journal of Policy Studies, 9. Steward,B.(1999).Sicknessabsenteeismintelework:Asociologicalstudy. ProceedingsoftheFourthInternationalTeleworkWorkshopTelework Strategies for the New Workforce, 61–68. U.S. General Services Administration. (2003). The status of telework in the federal government. Retrieved from www.telework.gov/documents/ tw_rpt03/status-toc.asp TEAM LinG
  • 122. A Lesson Learned from Hypertext and Web Navigation 101 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterVIII HelpingUsers, Mentally: A Lesson Learned from Hypertext and Web Navigation Paulus Insap Santosa, National University of Singapore, Singapore Abstract The World Wide Web offers a vast collection of information. As the result, information seeking and related activities have become increasingly common. However, several drawbacks of the current systems often cause some user frustrations. One source of frustration is the way information is presented on the Web. It appears that virtually anyone could become an information source and Web site owner. As such, it is difficult, if not impossible, to have a standardized structure on how information should be structured and presented on the Web. This chapter presents a comprehensive literature review on information seeking emphasizing aspects of human cognition. It starts by pointing out some problems the information seekers may encounter when searching the Web. It proceeds with a navigation metaphor to compare the real-word navigation into hypertext navigation. A psychological overview of navigation is also TEAM LinG
  • 123. 102 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. presented,followedbyadiscussionofmentalmodel.Thechapterconcludes with a discussion of an application of a real-world navigation strategy, called wayfinding, into a hypertext system. It shows how certain Web site design elements can be used as wayfinding cues. Introduction The World Wide Web (WWW) is a vast collection of interconnected docu- ments.Itsfoundationisbasedontheconceptofhypertext.TheWebconsists ofhypertext,theInternet,andmultimedia(RumpraditDonnell,1999).The Web provides individuals with the potential to access large and complex informationsources.TheincreasingamountofinformationontheWebgives opportunities, challenges, as well as problems to individuals who engage in Webactivities.TheproblemscamefromthefactthatWebsearchenginesare designedtosupportonlyonetypeofinformation-seekingstrategy:specifying queries by using terms to select documents from the database (Xie, 2000). Fromusers’perspective,Kuhlthau(1991)statesthattheinformationsearch process is a form of users’ constructive activity which leads to finding the meaning of information in order to extend their state of knowledge on a particularproblemortopic.Itisaprocessofsensemaking,whichinvolvesthe wholeindividual’sexperience,feelings,thoughts,andactions.Theoreticaland empirical studies have identified user goal as the most important factor in defininginformation-seekingbehavior(Belkin,Marchetti,Cool,1993).This suggeststhatweapproachinformationsystemdesignfromthepointofviewof its users; specifically to determine how users view their domains, goals, and tasksinspecifyingtherangeandrelationshipsofrelevantinformationsources, and the most appropriate means of accessing them (Belkin et al., 1991). To provide assistance to its users, computerized information providers need to performthefollowingfunctions(RaskuttiZukerman,1997): 1. Recognizethegoalthatuserispursuingonthebasisofuser’sinitialrequest andsubsequentutterances,andproposeaplantosatisfytheuser’sgoal; and 2. Generateclarificationandinformation-seekingqueriesandnegotiatea user’sspecificationswhenneeded,andgenerateanswersthatinformthe user of the plan proposed by the systems to satisfy the user’s goal. TEAM LinG
  • 124. A Lesson Learned from Hypertext and Web Navigation 103 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Tohaveabetterunderstandingofinformationseeking,thischapterpresentsa comprehensiveliteraturereviewoninformationseekingemphasizingaspectsof humancognition.Thischapterisdividedintosixsections.Thesectionfollowing this introduction points out some problems the information seekers may encounter when searching hypertext and the Web. The second section dis- cussesnavigationmetaphortocomparethereal-wordnavigationintohypertext. A psychological overview of navigation is presented in the third section, followedbyadiscussionofmentalmodelinsectionfour.Sectionfivediscusses an application of a real-world navigation strategy, called wayfinding, into a hypertextsystem.Thechapterendswithaconclusion. Hypertext Navigation and Its Problems Hypertext system is “a database composed of a collection of nodes of data items and where relations between nodes are represented by explicit links” (Kim Hirtle, 1995, p. 239). Hypertext is used to structure information in a nonlinearfashionthatenablesuserstosearchfortheinformationontheirown perspective.Thesesystemsincludeuserinterfacesthatallowuserstoviewthe nodesbytraversingthelink.Itisbytraversingthehypertextlinkuserscanfind, learn, and explore the databases content (Foss, 1989). Nielsen (1990) considers hypertext as a nonsequential writing, where the information is linked together to form a directed graph, in which each node containstextualinformationorothertypesofinformation.Outgoinglinksare associatedwithsomesmallerpartofthenodecalledananchor.Usersnavigate ahypertextfirstbyactivatingaparticularanchorthenfollowtheassociatedlink toitsdestination.However,othercomputertechniquesmaymatchthisdefini- tion, at least partly. Nielsen then describes that a true hypertext should also make users feel that they can move freely through the information according to their needs. This feeling is hard to define precisely but certainly implies short response times and low cognitive load when navigating. (p. 298) The nonlinear structure of hypertext enables users to jump from one part to another quite easily. With the repeat usage of such a system, users may TEAM LinG
  • 125. 104 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. “possesssomeformofmentalrepresentationforadocumenttypethatprovides informationonthelikelystructureandorganizationofkeyelementswithinit” (Dillon,1991,p.913).However,usersmaynothaveaclearconceptionofthe relationshipswithinthesystem,notknowingwheretogonext,knowingwhere togobutnotknowinghowtogetthere,andnotknowingwheretheyareinthe overall structure of the document (Elm Woods, 1985). Researchers have calledthisproblemasdisorientation(Ransom,Wu,Schmidt,1997;Rumpradit Donnell, 1999; Park Kim, 2000). It is also called lostness, lost in hyperspace, getting lost (Edwards Hardman, 1999; Elm Woods 1985; Otter Johnson, 2000; Spence, 1999). Foss (1989) elaborated this problem bystatingthat being disoriented is more than not knowing the spatial layout of the frames in the hypertext network. Other problems that ‘lost’ or ‘disoriented’ users have are: arriving at a particular point in a document and then forgetting what was to be done there; neglecting to either return from digressions or to pursue digressions that were planned earlier; not knowing if there are any other relevant frames in the document; forgetting which sections have been examined or changed after hours of browsing. (p. 407) However,ElmandWoods(1985)andSmith(1996)arguedthatdisorientation shouldbeviewedintermsofuser’sperformancedegradationratherthanpurely subjectivefeelingsofbeinglost. Twoundesirableconsequencesofbrowsingthehypertextleadtodisorienta- tion: embedded digression problem and art museum phenomenon (Foss, 1989).Userscouldexperienceembeddeddigressionproblemwhentheytryto followadifferentlinkwhilebrowsinganotherlink.Whentheycontinuewiththe second link, they may have forgotten what they got from the first link. This situationmayworsenwhentheyfindmoreinterestingmaterialsonthesecond linkthatimpressedthemtofollowthislink.Fosspointedoutthat pursuing multiple paths and digressions leads to a lot of trouble such as: losing your place, forgetting to return from digression, and neglecting to pursue digressions you intended to follow. The Embedded Digression Problem is aggravated when a lot of interesting neighboring information is around to distract you from your main task. (p. 408) TEAM LinG
  • 126. A Lesson Learned from Hypertext and Web Navigation 105 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Fosscategorizedtheoriginofembeddeddigressionproblemintotwotypes. Thefirstoriginiscognitiveoverhead(Conklin,1992).Cognitiveoverheadis cognitive demands placed on the user of hypertext documents. Users must decidewhichpathtofollowinthemiddleofseveralinterestingsidetracksthat maydistractthemfromthemaintask.Thesecondtypeistheunfamiliaritywith thestructureorconceptualorganizationofthehypertextnetwork.Anexample of this type is a closure where users do not know the extent of the network or what proportion of it remains to be seen (Shneiderman, 1987). The art museum phenomenon could happen to users who spend their time browsingtheInternetwithoutanyefforttomemorizeanythingtheysee.This problemiscausedbyunfamiliaritywiththesubjectmattersoranyinterference resulting from viewing a large number of items. It is also due to general inexperience with the practice of learning by browsing. This may result in problemswithrememberingtheinformationcontainedwithinthesystemand problems in consolidating and understanding the semantic content of the informationnodes.TrippandRoby(1990)arguethatdisorientationitselfwill lead to an increased cognitive load thus reducing the mental resources for learning. As pointed out by Conklin (1992), hypertext users have to manage their cognitiveloadaccordinglyortheywillfacethedifficultyinfindingwhatthey needamongtheabundantsourcesofinformationontheInternet.Thisiswhat Nielsen(1999)calledthe“dilemmaoffindingapieceofinformationamonga hugecollectionofinformation.”Thedifficultyoffindinginformationarises becauseusersmustcarryoutmultipletasksconcurrently(KimHirtle,1995). Thesemultipletaskscanbeclassifiedintothreecategories(p.241): 1. Navigationaltasks:planningandexecutingroutesthroughnetwork, 2. Informationaltasks:readingandunderstandingthecontentspresentedin thenodesandtheirrelationshipsforsummaryandanalysispurposes,and 3. Taskmanagementcoordinatinginformationalandnavigationaltasks(e.g., keepingtrackofdigressionstoincidentaltopics) Severalcauses—unfamiliaritywiththesubjectmatter,unfamiliaritywiththe structure or conceptual organization of hypertext network, and individuals’ inexperienceofusingparticularsystem—havecreatedproblemswhenindi- vidualsworkwithhypertextsystem.Indealingwiththissituation,Navarro- Prieto, Scaife, and Rogers (1999) suggested three factors as the units of TEAM LinG
  • 127. 106 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. analysis that need to be considered to study the complex task of information searchingwithintheWebcontext.Thesethreefactorsare 1. theuser’sexperienceandcognitivestrategies, 2. the type of searching task, and 3. howtheinformationispresentedandinteractedwiththeusers. EdwardsandHardman(1999)suggestedthatuserswouldnotbedisoriented iftheyhadaconceptualoverview(orspatialrepresentation)ofthehypertext structurebystatingthat the main disadvantages of using hypertext at present seem to be consequent of its sheer lack of physical presence and integrity … the very flexibility of reading on screen is disorienting for a user who can’t conceptualize an overview of the structure. (p. 91) Navigation Metaphor Navigationisanincrementalreal-timeprocessthatintegratesphysicalactivity (calledlocomotion)anddecisionmaking(JulFurnas,1997).Itisnotmerely aphysicalmovementthroughaspace,butitalsoinvolvesacognitiveactivity. Thiscognitiveelementisreferredtoas“wayfinding.”Wayfindinginvolves mentalrepresentation,routeplanning,anddistanceestimation(Darken,Allard, Achille,1999). Researchershavecomparedthewayapersonbrowsesahypertextsystemand the Web to that of person navigating and wayfinding through a physical environment (e.g., Parunak, 1989; Dillon, McKnight, Richardson, 1990, 1993; Jul Furnas, 1997; Spence, 1999; Hodkinson, Kiel, McColl- Kennedy,2000).Browsinginahypertextsystemincludesmanyofthesame tasks as wayfinding in physical spaces such as: finding individual’s current location,planningtheroutethatwillaccomplishindividual’staskgoals,and execution of the planned route. Canter, Rivers, and Storrs (1985) have also considered the analogy between navigating data and navigating a physical environmentbystatingthat TEAM LinG
  • 128. A Lesson Learned from Hypertext and Web Navigation 107 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. it is fruitful to recognize the direct parallels between navigating concrete environments, such as cities or buildings, and navigating data. After all, such parallels are implicit in the navigation metaphor, so it is worth establishing whether or not there is fruitful analogy between the psychological processes involved. (p. 93) Parunak(1989)comparednavigationstrategiesinphysicalenvironmentsand hypertexttopologies.Heidentifiedfivestrategiesthatpeopleuseinnavigating physicalspaces: 1. Identifierstrategy:auniqueidentifierordescriptionisassociatedwith eachentityofinterest.Thisstrategyrequiresanexhaustivesearch,butit can be applied to any topology. 2. Path strategy: a procedural route of how to get the target is provided. This strategy is used if the number of places directly accessible from a particularplaceismuchlessthanthetotalnumberofplaces.Ifthisisnot the case, then finding the next step in the path is not easier than directly goingtothetargetitself. 3. Direction strategy: the searchers use a global frame of reference to avoidexhaustivesearch(north-south,east-west).Thestrategydepends upon the texture and comparability of the space. 4. Distance strategy: the search is bounded to a circle around one’s currentposition. Distancecanbeusedinconjunctionwithdirection,and isalwaysdefinedinspaceswherepathsexist. 5. Address strategy: direction is refined by establishing an orthogonal coordinatesysteminthespace.Thedefinitionoforthogonaldimensional coordinatesreducesthecomputationalcomplexityofthesearch. Parunak (1989) then defines five classes of topologies, which hypertext systemscanbedevelopedbasedontheconceptofgraphtheory.Inincreasing orderofcomplexity,theclassesarelinearandring,hierarchy,hypercubeand hypertorus,directedacyclicgraph,andarbitrarystructure.Healsostatedthat simplertopologiesallowuserstousewidervarietyofnavigationalstrategies, withthelinearandringstructureallowingallfiveofstrategies,whereasarbitrary structureallowsonlyforthedefaultidentifierstrategy. TEAM LinG
  • 129. 108 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Monk(1990)distinguisheddirectedfromexploratorynavigation.Usersen- gage in directed navigation when they know exactly where to find a piece of information,becausethatlocationhasbeenregularlyvisitedinthepast.Onthe otherhand,itisquiteoftenthatusersdonotknowwheretofindcertainpieces ofinformation.Theyjustlookarounduntilinterestinginformationpopsup.In thissituation,usersareengaginginexploratorynavigation.Itisoftenimplicitly assumed that much of hypertext usage is exploratory. This distinction is independentoftheuser’shigher-levelgoaltoextractinformationfromthetext. Bothgeneralhigher-levelgoal(e.g.,“FindcountriesthatparticipatedinWorld Cup 2002”), and specific higher-level goal (e.g., “Who beat the Republic of Korea team in World Cup 2002?”) can result in directed navigation (e.g., “What was the score between Germany and Korea in the World Cup 2002 semifinal?”). Navigationandqueryaretwodifferenttacticstoaccomplisheithersearching taskorbrowsingtask(JulFurnas,1997).Queryingissubmittingadescrip- tionoftheobjectbeingsought(e.g.,usingkeyword)toasearchengine,which willreturnrelevantcontentorinformation.Ontheotherhand,navigationdeals withmovementofindividualssequentiallyaroundanenvironment,decidingat each step where to go. Czerwinski et al. (see Jul Furnas, 1997) distinguished situated from plan- basednavigation.Situatednavigation,areactivestrategy,employsasituation- specific knowledge, landmark, and incomplete information. It is employed whenthegoallooksachievableand/orclose.Plan-basednavigationemploys survey knowledge and generating, in advance, a complete plan to achieve a certaingoal.Itisusedforgeneralnavigationtothegoal.Theynotedthatusers switched between these two strategies for error recovery. Psychology of Navigation Itiswellestablishedthatpeopleutilizealargeamountoforganizedknowledge whenengaginginanymentalandmostphysicalactivities(WilsonRutherford, 1989).Cohen(1986)statedthatmanymentalactivitiessuchasremembering, perceiving,andproblemsolving,involveacombinationofinformationfromtwo sources: TEAM LinG
  • 130. A Lesson Learned from Hypertext and Web Navigation 109 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • incominginformationfromtheoutsideworld,thatis,theinputreceivedby the sense organs, and • informationalreadystoredinmemory,thatis,priorknowledgederived frompastexperience. Basedonthesetwokindsofinformationsources,Cohen(1986)describedtwo kinds of information processing related to as bottom-up processing ordata- drivenprocessinghappenedwhenindividualsattendtotheincominginforma- tion from their outside world and capture them using their sense organs. Althoughthisinformationmightbeincompleteorevenambiguous,information stored in the memory, in form of prior knowledge, influences individuals’ expectationsandhelpsthemtointerpretthecurrentinput.Theinfluenceofprior knowledge is known as top-down or conceptually driven processing. The combinationofthesetwokindsofinformationprocessingissometimesknown as interactive processing. Schema Theory Individuals store information they gather from the real world inside their memory.Cohen(1986)statedthat“theuseofpastexperiencetodealwithnew experience is a fundamental feature of the way human mind works” (p. 27). AccordingtoRumelhart(1980)andRumelhartandNorman(1988),schema (plural:schemasorschemata)isadatastructureforrepresentingthegeneric conceptsstoredinmemory.Accordingtotheschematheory,theknowledge we have stored in our memory is organized as a set of schemata or mental representations,eachofwhichincorporatesalltheknowledgeofagiventype of object or event that we have acquired from the past experience. Schemata operate in a top-down fashion to help us interpret the bottom-up flow of informationfromtheoutsideworld. Schemataareunconsciousmentalstructurethatunderliesthemolaraspectsof humanknowledgeandskill(Brewer,1987).Theyaremodular,anddifferent cognitivedomainshaveschematawithdifferentstructuralproperties.Schemata interactwithincomingepisodicinformationtomodifygenericinformationinthe schema and to produce specific instantiated memory representations of the incomingepisodicinformation.Aninstantiatedschemaisaspecificcognitive structurethatresultsfromtheinteractionoftheoldinformationofthegeneric schemaandthenewinformationfromtheepisodicinput. TEAM LinG
  • 131. 110 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Asmentalrepresentations,schematahavetheirowncharacteristics.Rumelhart andNorman(1983)givealistoffivecharacteristicsofschemata: 1. A schema for any concepts has slots that may be filled with fixed, compulsory values, or with variable, optional values. It may also have defaultvalue. 2. Schematacanbelinkedtogetherintorelatedsystems.Anoverallschema mayconsistofasetofsubschemata(e.g.,schemaaboutpicnicmaybea part of larger system of schemata including “meals,” “outing,” and “parties”). Packets of knowledge about one topic are linked to packets ofknowledgeaboutrelatedtopic. 3. Schemata represent knowledge of all kind, from simple to complex knowledge,aswellasaboutmotoractions.Individualshaveschematato represent all levels of experience, and all level of abstraction. Thus the schematheoriessupposethathumanmemorysystemcontainscountless packetsofknowledge. 4. Schemata incorporate all the different kinds of knowledge we have accumulated,includingbothgeneralizationsderivedfromourpersonal experience and facts we have been taught. 5. Variousschemataatdifferentlevelsmayactivelybeengagedinrecogniz- ingandinterpretingnewinputs.Bottom-upandtop-downprocessingmay gothroughrepeatedcycles,andthefinalinterpretationofnewinputwill dependonwhichschemaconstitutesthebestfitofincominginformation. Whenappliedtoreal-lifeexperience,schematamayinfluencememoryinany ofthefollowingdifferentways(Cohen,1986): 1. Selection.Theschemaguidestheselectionofwhatisencodedandstored inmemory.Informationthatisnotrelevanttothecurrentlymostactive schemamaybeignored. 2. Abstraction. Information in memory tends to undergo transformation from the specific to the general. Only the general schema is retained in memory,whiletheparticularepisodeisforgotten. 3. Integration and interpretation. According to the schema theory, a singleintegratedmemoryrepresentationisformedwhichincludesinfor- mationderivedfromthecurrentexperience,priorknowledgerelatingto TEAM LinG
  • 132. A Lesson Learned from Hypertext and Web Navigation 111 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. it,defaultvaluessuppliedbytheappropriateschemata,andanyinterpre- tationthataremade.Theinterpretationhappenedbasedonpriorknowl- edgeaboutpossiblewaysofbehavinginaparticularevent. 4. Normalization. Memoriesofeventsalsotendtobedistortedsoastofit inwithpriorexpectationandtobeconsistentwiththeschema.Theyare thereforetransformedtowardthemostprobableormosttypicaleventof that kind. People may misreport an event they witnessed because they rememberwhattheyexpectedtoseeratherthanwhattheyactuallysaw. Whileselection,abstraction,andnormalizationexplainhowinformationmaybe lostorreducedinmemory,integrationandinterpretationservetoenrichand elaboratethememorytrace. Rumelhart (1980) describes schemata in terms of four metaphors. First, schemata are like plays, which are written with actions, characters, settings, and so forth. Second, schemata are like theories in that they guide the constructionofaninterpretationandbecomethebasisforpredictionsthatare tested and then confirmed or rejected. Third, schemata are like procedures, suchascomputerprograms,thatis,anorganizationofactivitieswithstructural relationshipsamongtheseactivitiesandotherentities.Four,aschemaislikea parser;itbreaksdown,organizes,andinterpretsincomingdata. Cognitive Map Themediatingfactorsofsensoryinputofenvironmentalandspatialinformation are cognitive process, attitude, and belief. Through contemplation, sensory experienceistransformedintoknowingandunderstanding.Thewholeprocess isknownascognitivemapping(Jacobson,1998).Cognitivemappingrelatesto notonlyhowweperceive,store,andrecallinformationaboutspatialenviron- ment,butalsohowwethinkandfeelaboutthegeographicenvironment. Itis used in spatial choice and decision making in wayfinding and navigation, migration,environmentalpreferencesformodesoftransport,shopping,recre- ation, housing, and learning new environments and maps. Downs and Stea (1973)offeraformaldefinitionofcognitivemappingas a process composed of a series of psychological transformations by which an individual acquires, codes, stores, recalls, and decodes information TEAM LinG
  • 133. 112 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. about the relatives locations and attributes of phenomena in his everyday spatial environment. (p. 9) The result of such process is known as a cognitive map. Thus, a cognitive map is a coping mechanism through which the individual answers two basic questions quickly and efficiently: (1) where certain valued things are; (2) how to get to where they are from where he is. (p. 10) Withthiscognitivemap,individualsorganizerepresentationofsomepartofthe spatial environment (Downs Stea, 1977). It is a “mental representation of physicalspacesusedfornavigation”(KimHirtle,1995,p.242)andacting “as the basis for deciding upon and implementing any strategy of spatial behavior”(DownsStea,1973,p.10).Thisrepresentationiscalledaspatial knowledgeanditismadeupofthreecomponents:landmark,route,andsurvey knowledge (Thorndyke Hayes-Roth, 1982). Landmarkknowledge,alsoknownasplaceknowledge,representsinformation aboutthevisualdetailsofspecificlocationinanenvironment.Itincludes“the salientaspectsofplacesencodedinadeclarativeform”(KimHirtle,1995, p. 242). This knowledge presumably takes the form of perception icons and images (or the sensory data they represent). This type of knowledge can be acquireddirectlybyviewingobjectsintheenvironmentorindirectlybylooking atthephotographsorfilmsofparticularobjects.Thuspeoplecanknowofthe existenceofplacesandcanrecognizethem.Locationrecognitiondependson accuratelandmarkknowledge. Procedureknowledge,alsocalledrouteknowledgeorprimaryspatialknowl- edge,representsinformationaboutthesequenceofactionsrequiredtofollow a particular route. At a minimum, this knowledge consists of a series of proceduredescriptionofstartingpoints,anchorpoints,subsequentlandmarks, intermediatestoppingpoints,andafinaldestination.Thisknowledgeisderived directlyfromtheexperienceofnavigatingtherepresentedroute(Thorndyke Hayes-Roth,1982). Surveyknowledge,alsocalledconfigurationknowledgeorsecondaryspatial knowledge,representstheconfigurationrelationsamonglocationsandroutes inanenvironment.Thistypeofknowledgeencodesthetopographicproperties TEAM LinG
  • 134. A Lesson Learned from Hypertext and Web Navigation 113 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. of the space, including the locations of objects with respect to a fixed global coordinatesystem,theinterobjectdistance.Surveyknowledgeconcerns“the spatial layout of the salient places” (Kim Hirtle, 1995, p. 242). Survey knowledge is not available from direct experience, but it can be acquired directlyfromthemaporthroughthestudyofothermedia(ThorndykeHayes- Roth, 1982). Dillon et al. (1993) added a fourth aspect of spatial knowledge called spatial schemata. It is inside these spatial schemata that those landmark, route, and surveyknowledgearepresentedinmemory. Imagine students who always make a journey between their home and their school,andviceversa,inwhichtheytakethesamerouteeveryday.Oneday, thesestudentsdecidetotakeadifferentroute.Insteadofgoingdirectlyfrom schooltotheirhome,theygofromschooltotheshoppingcenter,andfromthe shoppingcentertohome.Ontheirwayfromschooltotheshoppingcenter,they mayencounteranewenvironment.Thismayalsobetruewhentheywalkfrom theshoppingcentertotheirhome.Astheyencounteranewenvironment,they will“adjust”theirknowledgeaboutanewenvironmenttheyjustencountered, based on their “old” knowledge of going from school to home. As such, cognitivemappingisnotapassiveprocessbutanactiveone(DownsStea, 1977). Individuals take a journey to work, a trip to a recreational area, or sometimesgivingdirectionstoaloststrangeraspartoftheirdailybehavior.This wouldnotbepossiblewithoutsomesortofcognitivemap. Spatial Schemata and Spatial Orientation Theconceptofcognitivemaphasalsogonebythenameofmentalmap(Cox Zannaras, 1973) and spatial schema (Lee, 1969). It is mentioned that schematarepresentknowledgeofallkindsincludingaboutmotoractions.In thissense,allmovementsinspacecallforsometypeofschema.Itispossible to conceive a range of schemata from those applicable to microspaces to macrospaces(CoxZannaras,1973).Forexample,wemayhaveschemata forourhome,ourneighborhood,thecitywherewelive,andanationofwhich wearecitizens.Inshort,besidesallotherschemata,ineveryindividualthere areseveralschematarelatedtothespatialinformation.Thisiswheretheterm “spatialschema”camefrom. TEAM LinG
  • 135. 114 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Spatial schema is based on actual sensory and verbal contact with the environment where any information that cannot be fitted to the schema will eventuallybediscarded.CoxandZannaras(1973)furtherstated: The organized structure of this spatial schema, therefore, has a tendency forself-perpetuation;earlierperceptionsareconsiderablymoreimportant than later perceptions since they provide the basis for a core of meaning in the schema to which later perceptions must be assimilated. (p. 163) One way to arrange schemata is by location specificity. On one hand, individualsmaydevelopschemataapplicabletohighlyspecificcontentareas; on the other hand, individuals may also develop more general schemata applicable to a wide variety of specific content areas. ArthurandPassini(1992)definetwoproblemsrelatedtodisorientation.The firstproblemiscalledtopographicalorspatialagnosiainwhichindividualswere incapable of recognizing spaces visited on previous occasion. The second problemiscalledtopographicalorspatialamnesiainwhichindividualswere incapableoflinkingspacesmentallytoanoverallrepresentation. Therepresentationofenvironmentsurrounding,alsocalledacognitivemap,is psychologicalconceptsthatunderliethenotionofspatialorientation.Depend- ingonthespatialcharacteristicsofanenvironment,cognitivemappingcanbe very difficult or even almost impossible operation for everyone. Spatial orientation is based on the ability to form a cognitive map. Individuals are considered spatially oriented if they have an adequate cognitive map of the surroundingsettingandareabletosituatewithinthatrepresentation.Therefore, spatial orientation is the process of devising individuals with an adequate cognitivemapsettingalongwiththeabilitytosituatethemselveswithinthat representation. Mental Model Amentalmodelis“knowledgethattheuserhasabouthowasystemworks,its component parts, the processes, their interactions, and how one component influencesanother”(Fein,Olson,Olson,1993,p.157).Thismentalmodel TEAM LinG
  • 136. A Lesson Learned from Hypertext and Web Navigation 115 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. issupposedtohelppeopleinlearningandunderstandingcomplexsituation.It synthesizes several steps of a process and organizes them as a unit (Allen, 1997). Mental models are “what people really have in their heads and what guidestheiruseofthings”(Norman,1983,p.12).Itis“thebridgebetweenthe workenvironmenttobecontrolledandthementalprocessesunderlyingthis control”(Rasmussen,1990,43).Itservestoqualitativelymodeltheeffectsof changesinasystem(William,Hollan,Stevens,1983).Itallowsusto“both understand problem situations and predict consequences of action contem- platedforsolvingtheproblems”(Marchionini,1989,p.56). Amentalmodelcanbeformedthroughtraining(Borgman,1999),basedona specific task (Olfman Shayo, 1997; Potosnak, 1989), engaging in a particular activity such as information search (Diaper, 2002; Marchionini, 1989;Navarro-Prietoetal.,1999),throughcontinuousexposuretoaspecific item, for example, textbooks (Dillon, 1991). It can also be formed by observation(Lokuge,Gilbert,Richards,1996),andaccidentalencounters (Fisher, 1991). Training, with various supporting means, is one important methodtoincreaseuserunderstandingofaparticularsystemandatthesame time to give some sort of experience to the users. Several studies (Borgman, 1999; Muramatsu Pratt, 2001) have demon- stratedhowsubjectsdevelopedmentalmodeloninformationretrievalsystem and search engine, by having their subjects trained on a Boolean logic operation. However, not all of their subjects demonstrated what the authors weresupposedtosee.Thesefindingssupporttheassertionthatmentalmodels are incomplete (Norman, 1983). Moody, Blanton, and Augustine (1996) equipped with animated conceptual model, showed that subjects presented withanimationinteractedmoreeffectivelyandscoredhigheronthetestthan thosewhopresentedwithnonanimatedmodel.OlfmanandShayo(1997)also showedthattheirsubjectswhohavepreviousexperienceindatabasemanage- ment system perform better on the given tasks than those who have no experience. A user’s mental model relates to the user’s age—because, for some reason, olderusersaremoreexperiencedthanyoungerusers—andhabit.Marchionini (1989) showed that sixth-grade students performed better in information- seeking activity compared to third or fourth graders. In terms of age, sixth graders are definitely older, and as such are more mature and possess more experience,thanthirdorfourthgraders.Dillon(1991)showedthatindividuals whousedtousecertaintexttypepossessasuperstructureormodelofthattext TEAM LinG
  • 137. 116 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. whichenablesthemtopredictwhereinformationislocatedwithhighlevelof accuracy. Mental Model Theory Model is an approximation to objects or processes, which maintain some essentialaspectsoftheoriginal(Allen,1997).Itis an image of an object or a state of affairs representing only those aspects of the objects or state of affairs that are considered relevant in a given context. It is an abstraction from the real object or state of affairs. (Rupietta, 1990, p. 322) Norman (1986) defines three different concepts related to the system being considered:twomentalandonephysical.Thefirstmodelisthemodelheldby the designer of the system, the second model is the model constructed by the userswhentheyareusingthesystems,andthethirdmodelisphysicalimageof thesystemfromwhichtheusersdeveloptheirconceptualmodel.Sincethere arethreedifferentmodels,whichmightcausesomeconfusion,thefollowing terms will be used. Model held or developed by the designer, teachers, scientists,orengineersiscalledconceptualmodel,whilethoseconstructedby theusersaboutthesystemunderobservationarecalled(user’s)mentalmodel, andthephysicalimageiscalledsystemimage.Therefore,conceptualmodelis a model invented to provide an appropriate representation of system being considered,inthesenseofbeingaccurate,consistent,andcomplete(Norman, 1983). Systemimageiswhattheusersactuallysee.Itincludesallofthedocumenta- tionsandinstructionsthatcometogetherwiththesystem.Byusingthesystem, usersdeveloptheirmentalmodelsaboutthesystemunderconsideration. GillanandBreedin(1990)callmentalmodelacognitivemodel.Initsrelation withhuman–computerinteraction(HCI),theydefineacognitivemodelas a representation of a person’s knowledge consisting of (1) a set of elemental concepts (elements in a model of an HCI might include windows, menus, tables, and graphics), (2) the relation among the elements (for TEAM LinG
  • 138. A Lesson Learned from Hypertext and Web Navigation 117 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. example, a mouse and a touch screen might be related to as input devices), and (3) the relations among groups of associated elements (for example, a group of input devices might be related to a group of user-computer dialogue techniques). (p. 391) Fisher(1991)pointsoutthatmentalmodelofacomplexsystemisacognitive constructthatdescribesauser’sunderstandingofparticulardomaininthereal worldbystatingthat these models are formed by experience, self-exploration, training, instruction, observation, and accidental encounters. In systems that operate at the ‘human-computer communication’ level, the model will be centered around the properties of a computer system. (p. 21) Itisimportanttorecognizethatmentalmodelsarecreatedforapurpose—they do not exist as some sort of optional extra in the user’s head (Green, 1990). Norman(1986)cautionsthat“mentalmodelisnotformedfromtheconceptual model:itresultswhentheuserinterpretsthesystemimage”(p.47).According to Rasmussen (1990), that purpose is to assist users in finding appropriate actionstoachievetheirgoals.Rasmussen(1990)distinguishescategoriesof human behavior according to the ways of representing the properties of deterministic environment as a basis for control of action into skill-rule- knowledge(orSRK)framework.VanderVeldenandArnold(1991)viewthis framework to be at the sensory level, perceptual-conceptual level, and intellectuallevel.BasedonSRKframework,Rasmussen(1990)arguesthatit is at the knowledge level that the mental models are used. There are several waystousementalmodels:tofigureoutactionstoperform,andinterpretingthe state of environment. Mental models are also used for repairing mistakes in performanceonintendedactions,andforlearninghowtodothetasks(Green, 1990). Mentalmodelschangeasusersgainmoreexperience(HawkWang,1999). Waern(1990)arguesthatusersmightchangetheirmentalmodelwhileinthe processofconstruction.Waern’s(1990)argumentisbasedonthedynamicof thementalmodel: TEAM LinG
  • 139. 118 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. the conceptual model or parts of it may be discarded and substituted by a new one. This means that either new objects or operations are conceived or that old objects are given new characteristics. (p. 82) Waernfurtherarguesthattherearetwodifferentapproachesinwhichmental modelcandevelop: 1. A bottom-up learning approach is where users start their mental model developmentfromincomingbitsandpiecesofinformationandputthem together towards a more consistent and complete model. 2. In a top-down learning approach, users build a mental model from the basisoftheirexpectationandpriorknowledgethattheypossessorderive fromasimilarsystemortask. Allen (1997) argues that mental models are not directly observable. Allen mentionsthatseveraltypesofevidencehavebeenusedtoinferthecharacter- isticsofmentalmodels:predictioninwhichuserspredictwhatwillhappennext insequentialprocess,explanations,diagnosis,andtraining.Thisisalsoevident when people are answering questions about particular process. Furthering Allen’sargument,Norman(1983,p.8)observesthefollowing: 1. Mentalmodelsareincomplete. 2. People’sabilitiesto“run”theirmentalmodelsareseverelylimited. 3. Mentalmodelsareunstable:peopleforgetthedetailsofthesystemthey are using, especially when those details (or the whole system) have not been used for some period of time. 4. Mentalmodelsdonothavefirmboundaries:similardevicesandopera- tionsgetconfusedwithoneanother. 5. Mentalmodelsare“unscientific”:Peoplemaintain“superstitious”behav- ior patterns even when they know that they are unneeded because they costlittleinphysicaleffortandsavementaleffort. 6. Mentalmodelsareparsimonious:oftenpeopledoextraphysicalopera- tionsratherthanthementalplanningthatwouldallowthemtoavoidthose actions; they are willing to trade-off extra physical action for reduced mentalmodelcomplexity.Thisisespeciallytruewheretheextraactions TEAM LinG
  • 140. A Lesson Learned from Hypertext and Web Navigation 119 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. allowonesimplifiedruletoapplytoavarietyofdevices,thusminimizing thechancesforconfusion. When users are exposed to the same system, they may have similarities and differences on their mental model. Ackerman and Greutmann (1990) stated that individual differences in action regulation exist. We supposed that they are caused by different style of thinking. We know from work psychology that a given task will be redefined by the subject according to his own interpretation of the goals and degree of freedom. (p. 133) Construction of Mental Model Waern (1990) describes the construction of mental model to take place by a seriesofeventsinwhichoneorseveraleventscanberepeatedatanypoint.The seriesofeventsconsistsofintentionandattention,evocationofpriorknowl- edge,formingaplan,action,evaluation,memorization,andinterpretation. • Intentionandattention.Supposeauserisgivenaparticulartask.Since humanattentionisrestricted,theuserwillhavetoselectsomeaspectsof thecurrentsituationtostartwith.Theusercanselectthoseaspectsintwo alternatives:bytop-downselection,inwhichtheuserhastomainlyrelyon the knowledge evoked to select aspects to be observe; or by bottom-up selection,inwhichtheuserwillattendsituationsthatarenotnecessarily related to evoke prior knowledge. • Evocationofpriorknowledge.Theuseractualizespriorknowledgethat shouldbeusefulintheobservedsituation.Thefirstevocationisinstanta- neousandisnotgovernedbyanyconsciouseffortonthepartoftheuser. Knowledge is evoked on the basis of perceived (not the objective) characteristics of the observed situation. Waern (1990) warns that knowledgeevocationisacomplexprocess,whichispoorlyunderstood. Theperceptionofthesituationcanberegardedasitistobecontainedin a frame. This frame represents a subset of all knowledge that could possiblybeassociatedtothesituationathand. Thisframewillrestrictthe TEAM LinG
  • 141. 120 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. subsequent processing and will be confined until the frame is found dysfunctional. • Forming a plan. From the task and current status of the mental model, the user may formulate a plan about what to do in order to perform the task. The lowest level of such plan concerns the actual actions to be performed. User’s mental model determines what levels of plans are available,andwhetheraplancanberealizeddirectlyinanaction.Theplan willcontainadescriptionofthegoal,andadescriptionofthemethodto reachthatgoal. • Action.Actionscanbedeterminedintwodifferentways:eithertheaction is exploratory, wherein the user just acts to see what happens, or the actionisdeterminedbyaplandescribedabove.Anexploratoryactionis notnecessarilyrandom,sinceitisbasedoneitherpresentlyevokedprior knowledgeorcurrentlyusedmentalmodel. • Evaluation. With respect to the given task, the result of action will be evaluated. Feedback from the system plays an important role. If the actionwereexploratory,thelackoffeedbackwouldgivenoinformation to the user and lead to no change in the mental model. If the action were planned,onlyawell-informedandexperienceduserwouldtrustthatthe actionhadtheintendedeffect. • Memorization. Some characteristics of the event can be stored for furtheruse.Theeventincludesthegiventask,thecurrentmentalmodel under construction, the observed situation, the plan, the action, the observedresultfromtheaction,aswellastheevaluationoftheresult.One shouldtakenotethatuserswillforgetatleastsomepart,whichusersdid notparticularlyattend,ofthoseevents. • Interpretation of event. The action and its result are placed within the contextofthemodelunderconstruction.Theeventswillbeassimilated intoitiftheyarefallintopermissiblecharacterizationoftheobjectsand operationscontainedinthementalmodel.Theinterpretationoftheevents willbeneedediftherearesomediscrepanciesbetweentheactionandits result with the context of the model under construction. Exploratory actions may also lead to a need to change something, through the interpretationoftheresults. TEAM LinG
  • 142. A Lesson Learned from Hypertext and Web Navigation 121 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Structure and Content of Mental Model Severalauthorsbelievedthatmentalmodelsareorganizedstructuresconsisting of objects and their relationships (Gentner Gentner, 1983; Greeno, 1983; William et al., 1983). William et al. (1983) state that mental models are composedofautonomousobjectswithanassociatedtopology. Autonomous objectisdefinedas: a mental object with an explicit representation of state, an explicit representation of its topological connection to objects, and a set of internal parameters.… The behavior of autonomous objects (defined in changes of parameter value) is governed strictly to internal rules reacting to internal parameter changes and to highly constrained external provocation. (pp. 133–134) Mentalmodelsarerunable,althoughpeople’sabilitiestoruntheirmodelsare limited.Onewaytorunamentalmodelisbymodifyingtheparametersofthe modelbypropagatinginformationusingtheinternalrulesandspecifiedtopol- ogy. It can also occur when autonomous objects change state. State change consistsofreplacementofonesetofbehaviorruleswithanother. The Usage of Mental Model Williametal.(1983)positsthatmentalmodelcanassisthumanreasoningin various ways. It can be used as inference engine to predict the behavior of physicalsystems.Itcanalsobeusedtoproduceexplanationsorjustifications. Itcanalsofacilitaterememberingbyservingasmnemonicdevices.Staggers and Norcio (1993) show that mental models are related to system learning, performance, and system design. Norman (1986) outlines the relationship betweenmentalmodelsandsystemdesignasfollows: The problem is to design the system so that, first, it follows a consistent, coherent conceptualization—a design model—and, second, so that the user can develop a mental model of the system—a user model—consistent with the design model…. The user model is not formed from the design model: it results from the way the user interprets the system image. Thus TEAM LinG
  • 143. 122 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. in many ways, the primary task of the designer is to construct an appropriate system image, realizing that everything the user interacts with helps to form the image. (pp. 46–47). Withinhumanfactors,particularlyinhuman–computerinteractionworkamong other else, the mental model notion is used or invoked in the following ways (Wilson Rutherford, 1989, p. 627): 1. Tosummonuptheideaofapictureinthemindofenvisionmentinwhich analogical representations seem to be equated only with graphical or pictorial-typemodels. 2. As experimenter-created or hypothesized models to test the effects of differentlevelsoftrainingortaskonperformance. 3. Intheexplanationanddescriptionofbehavior. 4. Intheexplicitorimplicitrequirementthattheybeemployedasatoolin design—onoperationalneed. Inproblemsolving,mentalmodelsseemtohelpproblemsolversinthefollowing ways (Hawk Wang, 1999, p. 258): 1. Bymakinglearningmoreefficientbecauseinformationisorganizedwithin themodel 2. Bysettingupexpectationsandsinglingoutcomponentsofthesystemto payattentionto 3. Byactingasmemoryaidsthroughassociationswithpreviousexperience orspecificdocuments/objects 4. Byhelpingcomprehensionthroughorganizingbackgroundknowledge 5. Byincludingproblem-solvingshortcuts Hawk and Wang (1999) added that good problem solvers developed mental modelsthatareclosertotheconceptualmodelanditsfunctionalitythandopoor problemsolvers.Goodproblemsolversmayhavemorementalmodelsaswell. In short, expert mental models’ are better organized than those of novices (Mayer, 1997; Shayo Olfman, 1998). TEAM LinG
  • 144. A Lesson Learned from Hypertext and Web Navigation 123 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Accessing Mental Model Protocolanalysisandknowledgeacquisitionaretwomostcommonwaysfor assessinguser’smentalmodel(Potosnak,1989).Protocolanalysis,alsocalled “thinkingaloud”technique,requiresausertodescribehis/herthoughtwhen performing a task. Two types of protocol analysis have been used to assess user’smentalmodel:verbalandgraphical.Inverbalprotocolanalysis,users have to spell out what their thoughts are, verbally. In graphical protocol analysis,usershavetodrawapictureordiagramabouthowspecificsystem, its components or elements, how these components are related to each other enablingthesystemtoworkproperlyasitisintended.Researchershavebeen using verbal protocol analysis to study mental models (Muramatsu Pratt, 2000),information-seekingbehavior(Branch,2001;Park,2000),andsystem usability(Benbunan-Fich,2001;Park,2000). Protocolanalysisusinggraphics/diagramhasalsobeenusedinmuchprevious work(Fiore,Cuevas,Oser,2003;Gray,1990;PadovaniLansdale,2003; Park,2000;ThatcherGreyling,1993).Theuseofdiagramtoaccessuser’s mental model has at least two advantages: it helps to capture a shift in user’s mentalmodelduringanexperimentwithparticularsystem(Gray,1990),which maybemoredifficulttospelloutverbally,anditcanbeutilizedtogroupusers intoseveralcategories(ThatcherGreyling,1993).BillinghurstandWeghorst (1995) and Fiore et al. (2003) also showed that a sketch map helped their subjectsmakeabetterorientationandunderstandingonspatialenvironment. A picture (or graphic) is worth a thousand words, is an old saying applicable tomanyreasonsandsituations.Graphicalinformationisalsosuperior,com- paredtotextualinformation,whenitcomestohelpusersformmentalmodeland togetahighuser-interactionperformance.RockandDonnell(1993)showed in their study that subjects who were presented with graphic-based mental model and graphical-based inference explanation yielded the highest user- interactionperformanceamongothercombinations. Anothermethodtoassessauser’smentalmodelisscalingtechniques(Kellogg Breen,1987).Thismethodcanbeusedtoshowhowexpertandnoviceusers are different in their conceptualization of interactive systems. Their study supports the claim that with experience, user’s mental model is closer to the designer’sconceptualmodel. TEAM LinG
  • 145. 124 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Wayfinding Wayfinding describes the process of reaching a destination, whether in a familiarorunfamiliarenvironment.Itisspatialproblemsolvingasdescribedby Downs and Stea (1977). Making a journey and reaching a destination are wayfinding goals. If individuals make a journey for the first time and if the destination is unfamiliar, they are confronted with a problem for which they needtofindasolution.Thesolutionisaplanofaction.DownsandStea(1977) describewayfindingas“theprocessofsolvingoneclassofspatialproblems, themovementofapersonfromonelocationontheearth’ssurfacetoanother” (p. 124). It is the users’ ability to maneuver in electronic space (Kerr, 1990). DownsandStea(1977)breakthewayfindingprocessintofoursequentialand interrelatedsteps: 1. Orientation: determining where individuals are in respect to nearby objectsandtargetlocation.Thissteprequiresthatsomelandmarksmust havebeendistinguishedandselectedbytheindividuals.Individualsknow what the landmarks are, where they are, and their relative position in relationtotheirownlocation. 2. Route decision: choosing a route that will get individuals to their destinations. It requires that individuals make a cognitive connection betweentheircurrentlocationandtheirdestination. 3. Keepingontherighttrack:monitoringtherouteindividualshavetaken toconfirmthatindividualsareonthecorrectrouteandisgoingintheright direction. 4. Destination recognition: individuals must be able to decide that they havereachedthecorrectdestination. ArthurandPassini(1992)intheirframeworkforwayfindingprocessdescribe thatwayfindingcanbecharacterizedbythreedifferentprocesses: 1. Cognitivemappingoraninformationgenerationinwhichindividuals developanunderstandingoftheworldaroundthem,retrievesinformation fromtheworld,andintegratesinformation. 2. Decision-makingprocesswhereanindividualplansactionsandstruc- turesthemintoanoverallwayfindingplan. TEAM LinG
  • 146. A Lesson Learned from Hypertext and Web Navigation 125 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 3. Decision-executionprocesswhereanindividualtransfersdecisioninto physicalbehavioralactions. ArthurandPassini(1992)define“toreachadestination”asafinalwayfinding task,whichisonesortofspatialproblem-solvingprocedure.Theyfurtherstate thatanycuesthatexistinaparticularenvironmentarecalledspatialinformation, and if those cues relate to the wayfinding task, they are called spatial knowledge.Inordertocompletethewayfindingtask(besidesspatialinforma- tion),anadequateamountofgeneralinformationisalsoneeded.Bothspatial andgeneralinformationarecategorizedintothreecategories:sensoryinforma- tion,memoryinformation,andinferredinformation. Differentwayfindingstrategiesmaybeemployeddependingontheavailability of the collectible information. For example, if only sensory information is available to the individuals, they have to perform a much more exhaustive spatialinformationsearchtoreachthedestinationthaniftheyfollowedroute directionsinmemory(thatis,memoryinformation).Thus,theavailabilityofthe spatialinformationtypeisinfluentialindeterminingthewayfindingstrategy (Chen Stanney, 1999). As suggested by Jul and Furnas (1997), physically navigating a Web site is clickingtheavailablelinks.However,indoingso,usersareguidedwithwhat they see on the screen, which are commonly regarded as navigational cues. Navigationalcuesthatappearonthescreenaresupposedtohelpuserstohave a better mental representation. Due to the fact that these cues can help users in shaping their mental representations of Web structures, which in fact is a mentalactivity,navigationalcuesshouldbecalledwayfindingcues.Several wayfindingcuesthatarecommonlyusedwithinWebsitesincludecolor,text, graphicsicons(Kerr,1990),(Internetspeed)trafficlightintheformofsimple hyperlinkannotation(CampbellMaglio,1999),graphicslevelofdetailand labelplacement(DevlinBernstein,1997),textandbackgroundcolors(Ling Schaik,2002),linkcolor(SchaikLink,2003),reservedarea,linkcolor, mousepointer,pop-up(WeinreichLamersdorf,2000),andcontextualaids (ParkKim,2000).Besideswayfindingcues,inordertosafetime,usersmay utilize navigational tools or aids. These can be a site map and/or bookmark (Padovani Lansdale, 2003), back and forward button, history feature, and address window (Hodkinson et al., 2000). TEAM LinG
  • 147. 126 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Conclusion Informationseekingisacomplexprocesscomprisingseveralactivitiesboth mentally and physically. Mental activities include combination of several specificmentalmodelsrelatedtoaparticularinformationproblemthatcanbe describedfunctionallyandstructurally(Marchionini,1989).Functionally,this combinationofmentalmodelscontrolssearchby extracting key concepts from the information problem, identifying criteria for search process, selecting candidate information sources, monitoring lookup (search) and examination procedure, and using result to modify itself. (p. 56) Structurally,aninformation-seekingsystemincludes a set of mental models associated with various information sources (databases and accompanying search systems), a set of mental models pertinent to a particular information problem (task domain knowledge), an historical record of past applications of the information seeking system (self awareness which allows analogy and checks context), and a set of rules for combining these components and monitoring progress. (p. 56) Physically,whatindividualsdowhentheyareseekinginformationisfollowing aroutebyclickinginformationoricontowardtheinformationtheyintenttofind. Afterfindingwhattheyarelookingfor,theymaycontinuewithotherinforma- tion,orjustsimplyexittheprocess.Whenindividualsarelookingforcertain information—especiallyontheWeb—theirmainloadwillbeontheirmental activities,althoughthismayneverberealized. Inordertobesuccessfulinnavigationaltask,itisveryimportanttohaveagood spatialnavigationskill(ElmWoods,1985).ElmandWoods(1985)stated that a good navigation skill is shown by (p. 927) 1. theabilitytogeneratespecificroutesastaskdemandsrequire(thatis,to derivenewandunforeseeninformation,particularlyintheformofnew relationshipsamongdata); TEAM LinG
  • 148. A Lesson Learned from Hypertext and Web Navigation 127 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 2. theabilitytotraverseorgeneratenewroutesasskillfullyasfamiliarones; and 3. orientation abilities, that is, the development of a concept of “here” in relationtootherplace. Edwards and Hardman (1999) argue that the first and the second item in the above list would be sufficient for users to navigate effectively through a hypertextsystem.Forthethirditem,theymentionedthatitmayormaynotbe necessaryfortheuserstopossessthatability.However,usersmaybetempted to create a comprehensive cognitive spatial map of the data structures, completewiththeirlocationsandroutes. References Ackerman, D., Greutmann, T. (1990). Experimental reconstruction and simulation of mental models. In D. Ackerman M.J. Tauber (Eds.), Mental models and human computer interaction I (pp. 133–150). North-Holland,TheNetherlands:ElsevierScience. Allen, R.B. (1997). Mental model and user models. In M. Helander, T.K. Landauer, P. Prabhu (Eds.), Handbook of human-computer interac- tion(2nd rev.ed.)(pp.49–63).North-Holland,TheNetherlands:Elsevier Science. Arthur, P., Passini, R. (1992). Wayfinding. People, signs, and architec- ture.McGraw-HillRyersonLimited. Belkin,N.J.,Marchetti,P.G.,Albrecht,M.,Fusco,L.,Skogvold,S.,Stokke, H. et al. (1991). User interfaces for information systems. Journal of Information Science, 17, 327–344. Belkin, N.J., Marchetti, P.G., Cool, C. (1993). BRAQUE: Design of an interfacetosupportuserinteractionininformationretrieval.Information Processing and Management, 29, 325–344. Benbunan-Fich,R.(2001).Usingprotocolanalysistoevaluatetheusabilityof a commercial website. Information Management, 39, 151–163. Billinghurst, M., Weghorst, S. (1995). The use of sketch map to measure cognitive maps of virtual environment. Proceedings of the Annual International Symposium on Virtual Reality (pp. 40–47). TEAM LinG
  • 149. 128 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Borgman, C.L. (1999). The user’s mental model of an information retrieval system: An experiment on a prototype online catalog. International Journal of Human-Computer Studies, 51, 435–452. Branch,J.L.(2001). Juniorhighstudentsandthinkaloudgeneratinginforma- tion-seekingprocessdatausingconcurrentverbalprotocols.Library Information Science Research, 23, 107–122 . Brewer,W.F.(1987).Schemataversusmentalmodelsinhumanmemory.In P. Morris (Ed.), Modelling cognition (pp. 187–197). John Wiley Sons. Campbell,C.S.,Maglio,P.P.(1999).Facilitatingnavigationininformation spaces: Road-signs on the World Wide Web. International Journal of Human-Computer Studies, 50, 309–327. Canter, D., Rivers, R., Storrs, G. (1985). Characterizing user navigation throughcomplexdatastructures.BehaviourandInformationTechnol- ogy, 4(2), 93–102. Chen, J.L., Stanney, K.M. (1999). A theoretical model of wayfinding in virtualenvironment:Proposedstrategiesfornavigationalaiding.Pres- ence, 8(6), 671–685. Cohen, G. (1986). Everyday memory. In G.Cohen, M.W. Eysenck, M.E. LeVoi (Eds.), Memory, a cognitive approach (pp. 15–56). Milton Keynes,UK:OpenUniversityPress. Conklin,J.(1992).Hypertext:Anintroductionandsurveystudy.InD.Marca G. Bock (Eds.), Groupware: Software for computer-supported cooperative work (pp. 236–261). Los Alamitos, CA: IEEE Computer SocietyPress. Cox,K.R.,Zannaras,G.(1973).Designativeperceptionsofmacro-spaces: Concepts, a methodology, and applications. In R.M. Downs D. Stea (Eds.), Image and environment (pp. 162–178). Chicago: Aldine. Darken, R.P., Allard, T., Achille, L.B. (1999). Spatial orientation and wayfindinginlarge-scalevirtualspacesII.Presence,8(6),iii–vi. Devlin, A.S., Bernstein, J. (1997). Interactive wayfinding: Map style and effectiveness. Journal of Environmental Psychology, 17(2), 99–110. Diaper,D.(2002).Taskscenariosandthought(Discussion).Interactingwith Computers, 14, 629–638. Dillon, A. (1991). Reader’s models of text structures: The case of academic articles. International Journal of Man-Machine Studies,35, 913–925. TEAM LinG
  • 150. A Lesson Learned from Hypertext and Web Navigation 129 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Dillon,A.,McKnight,C.,Richardson,J.(1990).Navigationinhypertext: A critical review of the concept. In D. Diaper et al. (Eds.), Human Computer Interaction— INTERACT’90 (pp. 587–592). North-Hol- land,TheNetherlands:ElsevierScience. Dillon,A.,McKnight,C.,Richardson,J.(1993).Space—thefinalchapter ofwhyphysicalrepresentationsarenotsemanticintentions.InC.McKnight, A.Dillon,J.Richardson(Eds.),Hypertext:Apsychologicalperspec- tive (pp. 169–191). Ellis Horwood. Downs, R.M., Stea, D. (1973). Cognitive maps and spatial behavior: Process and products. In R.M. Downs D. Stea (Eds.), Image and environment (pp. 8–26). Chicago: Aldine. Downs, R.M., Stea, D. (1977). Maps in minds, reflections on cognitive mapping. New York: Harper Row. Edwards, D.M., Hardman, L. (1999). Lost in hyperspace: Cognitive mapping and navigation in a hypertext environment. In R. McAleese (Ed.), Hypertext: Theory into practice (2nd ed.) (pp. 90–105). Intel- lect. Elm, W.C., Woods, D.D. (1985). Getting lost: A case study in interface design. Proceedings of the Human Factors Society – 29th Annual Meeting (pp. 927–931). Fein, R.M., Olson, G.M., Olson, J.S. (1993). A mental model can help learning to operate a complex device. Proceedings of Interact’93 and CHI’93 Conference Companion on Human Factors in Computing Systems (pp. 157–158). Fiore, S.M., Cuevas, H.M., Oser, R.L. (2003). A picture is worth a thousandconnections:Thefacilitativeeffectsofdiagramsonmentalmodel development and task performance. Computers in Human Behavior, 19, 185–199. Fisher, G. (1991). The importance of models in making complex systems comprehensible.InD.AckermanM.J.Tauber(Eds.),Mentalmodels and human computer interaction II (pp. 3–36). North-Holland, The Netherlands:ElsevierScience. Foss, C.L. (1989). Tools for reading and browsing hypertext. Information Processing Management, 25(4), 407–418. Gentner, D., Gentner, D.R. (1983). Flowing waters or teeming crowds: Mental models of electricity. In D. Gentner A.L. Stevens (Eds.), Mental models (pp. 99–129). Hillsdale, NJ: Lawrence Erlbaum. TEAM LinG
  • 151. 130 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Gillan, D.J., Breedin, S.D. (1990). Designers’ models of the human computer interface. Proceedings of the ACM SIGCHI (pp. 391–398). Gray, S.H. (1990). Using protocol analyses and drawings to study mental constructionduringhypertextnavigation.InternationalJournalofHu- man-Computer Interaction, 2(4), 359–377. Green,T.R.G.(1990).Limitedtheoriesasaframeworkforhuman-computer interaction. In D. Ackerman M.J. Tauber (Eds.), Mental models and human computer interaction I (pp. 3–39). North-Holland: Elsevier Science. Greeno, J.G. (1983). Conceptual entities. In D. Gentner A.L. Stevens (Eds.),Mentalmodels(pp.227–252).Hillsdale,NJ:LawrenceErlbaum. Hawk,W.H.,Wang,P.(1999).Users’interactionwithWorldWideWeb: Problemproblem-solving.Proceedingsofthe62nd AmericanSociety for Information Science and Technology Annual Meeting: Knowl- edge, Creation, Organization, and Use, Washington, DC. Hodkinson, C., Kiel, G., McColl-Kennedy, J.R. (2000). Consumer web search behavior: Diagrammatic illustration of wayfinding on the Web. International Journal of Human-Computer Studies, 52, 805–830. Jacobson, R.D. (1998). Cognitive mapping without sight: Four preliminary studies of spatial learning. Journal of Environmental Psychology, 18, 289–305. Jul, S., Furnas, G.W. (1997). Navigation in electronic worlds: A CHI 97 workshop. ACM SIGCHI Bulletin, 29(4). Retrieved June 17, 2002, fromwww/acm.org/sigchi/bulletin/1997.4/jul.html Kellogg, W.A., Breen, T.J. (1987). Evaluating user and system models: Applyingscalingtechniquestoproblemsinhuman-computerinteraction. ACM CHI+GI, 303–308. Kerr,S.T.(1990).Wayfindinginanelectronicdatabase:Therelativeimpor- tanceofnavigationalcuesvs.mentalmodels.InformationProcessing Management, 26(4), 511–523. Kim, H., Hirtle, S.C. (1995). Spatial metaphors and disorientation in hypertext browsing. Behavior and Information Technology, 14(5), 239–250. Kuhlthau,C.C.(1991).Insidethesearchprocess:Informationseekingfrom the user’s perspective. Journal of the American Society for Informa- tion Science, 42(5), 361–371. TEAM LinG
  • 152. A Lesson Learned from Hypertext and Web Navigation 131 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Lee,T.(1969).Thepsychologyofspatialorientation.ArchitecturalAssocia- tion Quarterly, 1(3), 11–15. Ling, J., Schaik, P.V. (2002). The effect of text and background colour on visual search of Web pages. Displays, 23, 223–230. Lokuge,I.,Gilbert,S.A.,Richards,W.(1996).Structuringinformationwith mental models: A tour of Boston. ACM CHI, 413–419. Marchionini,G.(1989).Information-seekingstrategiesofnovicesusingafull- text electronic encyclopedia. Journal of the American Society for Information Science, 40(1), 54–66. Mayer, R.E. (1977). From novice to expert. In M. Helander, T.K. Landauer, P. Prabhu (Eds.), Handbook of human-computer interaction (2nd rev. ed.) (pp. 781–795). North-Holland, The Netherlands: Elsevier Science. Monk,A.F.(1990).Gettingtoknownlocationsinahypertext.InR.McAleese C. Green (Eds.), Hypertext: State of the art (pp. 20–27). Oxford: Intellect. Moody, J., Blanton, J.E., Augustine, M.A. (1996). Enhancing end-user mentalmodelsofcomputersystemsthroughtheuseofanimation.Pro- ceedings of the 29th Annual Hawaiian Conference on System Sciences (pp. 299–307). Muramatsu,J.,Pratt,W.(2001).Transparentqueries:Investigatingusers’ mental models of search engines. Proceedings of the 24th Annual International ACM SIGIR Conference on Research and Development in Information Retrieval (pp. 217–224). Navarro-Prieto,R.,Scaife,M.,Rogers,Y.(1999).Cognitivestrategiesin Web searching. Proceedings of the Human Factors the Web. Retrievedfromhttp://zing.ncsl.nist.govt/hfweb/proceedings/navarro- prieto/index.html Nielsen,J.(1990).Theartofnavigatingthroughhypertext.Communication of the ACM, 30(3), 296–310. Nielsen, J. (1999). Differences between print design and web design. Re- trieved from www.useit.com/alertbox/990124.html Norman,D.A.(1983).Someobservationsonmentalmodels.InD.Gentner A.L.Stevens(Eds.),Mentalmodels(pp.7–14).Hillsdale,NJ:Lawrence Erlbaum. TEAM LinG
  • 153. 132 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Norman, D.A. (1986). Cognitive engineering. In D.A. Norman S.W. Draper (Eds.), User centered system design, new perspectives on HCI (pp.31–61).Hillsdale,NJ:LawrenceErlbaum. Olfman,L.,Shayo,C.(1997).Theroleoftraininginpreparingendusersto learnnewbutsimilarsoftwarepackages.Proceedingsofthe1997ACM/ Special Interest Group on Computer Personnel Research Annual Conference (pp. 210–223). Otter, M., Johnson, H. (2000). Lost in hyperspace: Metrics and mental models. Interacting with Computers, 13, 1–40. Padovani, S., Lansdale, M. (2003). Balancing search and retrieval in hypertext:Context-specifictrade-offsinnavigationaltooluse.Interna- tional Journal of Human-Computer Studies, 58, 125–149. Park,J.,Kim,J.(2000).Effectsofcontextualnavigationaidsonbrowsing diverse Web systems. ACM CHI Letters, 2(1), 257–264. Park,S.(2000).Usability,userpreferences,effectiveness,anduserbehaviors whensearchingindividualandintegratedfull-textdatabases:Implication for digital libraries. Journal of the American Society for Information Science, 51(5), 456–468. Parunak,H.V.(1989).Hypermediatopologiesandusernavigation.Proceed- ings of the ACM Conference on Hypertext (pp. 43–50). Potosnak, K. (1989). Mental models: Helping users understand software. Human Factors, September, 85–86, 88. Ranganathan, C., Ganapathy, S. (2002). Key dimension of business-to- business Web sites. Information Management, 39, 457–465. Ransom, S., Wu, X., Schmidt, H. (1997). Disorientation and cognitive overhead in hypertext systems. International Journal on Artificial Intelligence Tools, 6(2), 227–253. Raskutti, B., Zukerman, I. (1997). Generating queries and replies during information-seeking interactions. International Journal of Human- Computer Studies, 47, 689–734. Rasmussen, J. (1990). Mental models and the control of action in complex environments. In D. Ackerman M.J. Tauber (Eds.), Mental models and human computer interaction I (pp. 41–69). North-Holland, The Netherlands:ElsevierScience. TEAM LinG
  • 154. A Lesson Learned from Hypertext and Web Navigation 133 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Rock,F.W.,Donnell,M.L.(1993).Humancognitionandtheexpertsystem interface:Mentalmodelsandinferenceexplanations.IEEETransactions on Systems, Man, and Cybernetics, 23(6), 1649–1661. Rumelhart,D.E.(1980).Schemata:Thebuildingblocksofcognition.InR.J. Spiro,B.C.Bruce,W.F.Brewer(Eds), Theoreticalissuesinreading comprehension: Perspectives from cognitive psychology, linguistics, artificialintelligence,andeducation.Hillsdale,NJ:LawrenceErlbaum. Rumelhart,D.E.,Norman,D.A.(1988).Representationinmemory.InR.C. Atkinson, R.J. Herrnstein, G. Lindzey, R.D. Luce (Eds.), Stevens’ handbook of experimental psychology (2nd ed.) (pp. 511–587). Rumpradit,C.,Donnell,M.L.(1999).Navigationalcuesonuserinterface design to produce better information seeking on the World Wide Web. Proceedings of the 32nd Hawaii International Conference on System Sciences. Rupietta, W. (1990). Mental models and the design of user manuals. In D. Ackerman M.J. Tauber (Eds.), Mental models and human computer interactionI(pp.321–334).North-Holland,TheNetherlands:Elsevier Science. Schaik, P.V., Ling, J. (2003). The effect of link colour on information retrievalineducationalintranetuse.ComputersinHumanBehavior(in press). Shayo, C., Olfman, L. (1998). The role of conceptual models in formal software training. Proceedings of the 1998 Conference on Computer Personnel Research (pp. 242–253). ACM. Shneiderman, B. (1987). Designing the user interface: Strategies for effective human-computer interaction. Addison-Wesley. Smith, P.A. (1996). Towards a practical measure of hypertext usability. Interacting with Computers, 8(4), 365–381. Spence, R. (1999). A framework for navigation. International Journal of Human-Computer Studies, 51, 919–945. Staggers, N., Norcio, A.F. (1993). Mental models: Concepts for human- computerinteractionresearch.InternationalJournalofMan-Machine Studies, 38, 587–605. Thatcher,A.,Greyling,M.(1998).MentalmodelsoftheInternet.Interna- tional Journal of Industrial Ergonomics, 22, 299–305. TEAM LinG
  • 155. 134 Santosa Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Thorndyke,P.W.,Hayes-Roth,B.(1982).Differencesinspatialknowledge acquired from maps and navigation. Cognitive Psychology, 14, 560– 589. Tripp,S.D.,Roby,W.(1990).Orientationanddisorientationinhypertext lexicon. Journal of Computer-Based Instruction, 17(4), 120–124. Van der Velden, J.M., Arnold, A.G. (1991). Mental models and the evaluation of user interfaces: A case study of library system. In D. Ackerman M.J. Tauber (Eds.), Mental models and human computer interactionII(pp.179–189).North-Holland,TheNetherlands:Elsevier Science. Waern,Y.(1990).Onthedynamicsofmentalmodels.InD.AckermanM.J. Tauber (Eds.), Mental models and human computer interaction I (pp. 73–93).North-Holland,TheNetherlands:ElsevierScience. Weinreich,H.,Lamersdorf,W.(2000).Conceptsforimprovedvisualiza- tion of Web link attributes. Computer Networks, 33, 403–416. William,M.D.,Hollan,J.D.,Stevens,A.L.(1983).Humanreasoningabout physical system. In D. Gentner A.L. Stevens (Eds.), Mental models (pp.131–154).Hillsdale,NJ:LawrenceErlbaum. Wilson,J.R.,Rutherford,A.(1989).Mentalmodels:Theoryandapplication in human factors. Human Factors, 31(6), 617–634. Xie,H.I.(2000).Shiftsofinteractiveintentionsandinformation—Strategiesin interactive information retrieval. Journal of the American Society for Information Science, 51(9), 841–857. TEAM LinG
  • 156. Reducing the Costs of Doing Business 135 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterIX Reducing the Costs of Doing Business: Human Costs and Social Issues of IS/IT Strategies Souad Mohamed, UK Abstract One of management objectives when dealing with Web services (or related Internet strategies) is to cut business costs. Information systems (IS) literature has to date focussed primarily on research related to direct costs, that is, costs that occur in IS budgets (Bannister Remenyi, 1999). IS research into strategic planning on the other hand has underestimated the expenditure of hidden costs as part of the adoption of new information technology systems within organisations. One of the difficulties regularly faced by IS investment planners is the identification, and thus management of, hidden indirect costs, for example, human indirect costs (Mohamed Irani, 2002). This chapter addresses the increasing need to identify the “critical indirect human costs” associated with IS adoption as a fundamental part of the cost estimation of strategic planning when adopting IS. The research adopts an indirect human cost taxonomy proposed by Mohamed, Irani, and Baldwin (2002) associated with management, employee, finance, and maintenance divisions of an organisation. TEAM LinG
  • 157. 136 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. To conclude the author argues that to aid strategic planning in an organisation and to use it to their competitive advantage, understanding and managing the critical indirect human costs incurred during the adoption of information technology systems is essential in supporting decision makers’ effective management of these costs. Introduction One of management’s main objectives when dealing with Web services (or related Internet strategies) is to cut business costs. Information systems (IS) literaturehastodatefocussedprimarilyonresearchrelatedtodirectcosts,that is,coststhatoccurinISbudgets(BannisterRemenyi,1999).ISresearchinto strategicplanningontheotherhandhasundervaluedtheexpenditureofhidden costs as part of the adoption of new information technology systems within organisations.RemenyiandWilliams(1996)definehiddencoststobethose ambiguous costs that may occur in other departments as an outcome of the adoption of a new system. Direct costs are considered to be easy to identify andrelativelysimpletomeasure,whileindirectcostsarehiddenandnoteasily measured—oneofthedifficultiesthatthoseplanningISinvestmentfaceisthe identification, and thus management, of hidden indirect costs (Mohamed Irani, 2002). AreviewofthenormativeliteratureofISevaluation,withageneralfocuson IScosts,revealedthatthereisapressingneedforthoseadoptinginformation systems to better identify the potential indirect costs associated with the adoptionofIS.Forexample,DierandMooney(1994)notethatindirectcosts symbolise more than 80% of the total lifetime IT/IS project costs. Thus, organisationsneedtogainabetterunderstandingofindirectcostimplications andtheirpotentialsources.Indirectcosts,however,arevariedandnumerous. Irani (2002) reports that indirect costs escalate out of control and are categorisedashumanandorganisational. Thischapterfocusesparticularlyontheindirecthumancostsassociatedwith theadoptionofinformationtechnology/systemsingeneralandWebservicesin particular.Itidentifiestheneedtoaccountforthesoftcomponents(e.g.,human costs)asafundamentalpartofthecostestimationofstrategicplanningwhen adopting IS. The identification of these indirect human costs may enable organisations to avoid some of the complications that they may meet when TEAM LinG
  • 158. Reducing the Costs of Doing Business 137 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. adopting a Web services application, and thus would enable companies to manageandcontroltheirexpenditurebetter. Indirect Human Costs of an Emerging New Technology ThereisaconsiderableamountofmoneyspentonISandtheuseoftechnology tosupportcorebusinessfunctions(Irani,Love,Hides,2000),yetnotallthe anticipatedbenefitsareachieved.NewtechnologiessuchasWebservicesare usuallyadoptedtoprovidewaystolowercostsandtightenbusinessrelation- ships.Nevertheless,variousindirectcostsoccurasaresultofintroducinganew technologyaswell.HavingreviewedthenormativeliteratureonIScosts,itis arguedthatoneelementofindirectcosts,thatis,indirecthumancosts,ispoorly understood. It has been explained, earlier in the book, that Web services are not perceived merely from a hardware point of view, but also seen from a managementpointofviewasatechnologythatfacilitatestheworkofdifferent divisionstogetherwithinanorganisation. Wood(2004)reportsthatintheUnitedStatesitisestimatedbytheITTraining Associationthatthereare10millionITworkers,andeachcosttheircorpora- tionsmorethan$2,000peryearontraining,thusamountingtomorethana$20 billionmarket.Remenyi,Money,Sherwood-Smith,Irani(2000)notethat manydecisionmakersbelievethatthetotalcostofISistoohigh;nevertheless, many IS managers in organisations are not even sure what it is in IS that is costing so much (Bannister, 1999). Currie and Irani (1999) and Al-Yaseen, Baldwin, and Eldabi (2003) reveal that management dedicate only minimal attention to the less clear, or hidden, indirect costs. Researchstudieshavearguedthathumanaspectsmustalwaysbeconsidered inthedeploymentofIS(e.g.,Berghout,1997).Whenadoptinganinformation system, in addition to the financial factors, a variety of social factors (e.g., teamwork, decision making, group decision making, stress, and training) should also be addressed. It is argued here that an organisation is a social systemasmuchasitisatechnical/economicsystem.Takingtheseaspectsand theirimpactsintoaccountwillhelpmanagerstobeawareofthesocialimpacts ofISandaccountforanyresultingcosts(directandindirect).Recognisingthe humanissues/coststhataffectISinaworkcontextwillenableorganisationsto TEAM LinG
  • 159. 138 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. be aware of them and always endeavour to include them in all stages of the systemlifecycle. Asanorganisationisaconfederationofindividuals,IT/ISmanagersneedto haveacomprehensiveunderstandingofthesocial/softissuesthatmightoccur withinthecontextoftheinformationsystem,inparticularthosethatwouldaffect an individual at the workplace in general, and especially those that are cost related.Manyhuman-relatedcostsarementionedinthecontextofevaluation in IS literature; however, they are not categorised or said to be critical or influentialatanystageofthesystem/projectlifecycle.Thereis,nonetheless, evidencetosuggestthattheseindirectcostsaccountformuchoftheISbudget, hiddenorotherwise.Itissuggestedthattheinabilitytoidentifyindirectcosts leads to escalated project costs, which contribute to project failure or termi- nationbeforetheimplementationstageisreached:insomecases,projectsmay continue,duetomomentumandpracticalpressure. LoveandIrani(2001)concludethatifmanagementwishtomaximisebenefits and control their IT expenditure, then they need to position themselves to be abletoidentifyindirectcosts.Mohamed,Irani,andBaldwin(2002)assertthat identifyingthesecosts,categorisingthem,andidentifyingtheirimpactsfacilitate thedevelopmentofevaluationinISasasocialprocess,andcouldminimisetheir impact on the overall budget. Moreover, there is no clear consensus or approach for measuring these costs, which, as cited in the literature, can significantly hinder the progress of an organisation in the IS practice. Thus, identifyingandunderstandingatleasttheimpactoftheseindirecthumancosts ontheorganisationwillhelpingainingabetterunderstandingoftheindirect costsassociatedwithnewemergingtechnologies,leadingdecisionmakersto preparemoreaccuratefinancialplans,budgetestimates,andbudgetallocation fortheirIT/IScapitalinvestments. When introducing a new system many managers may decide to assign some employeestoatrainingcourse,theirdecisionsbasedsolelyondirectcostssuch astheactualtrainingfee.Nevertheless, traininghasmanyothercostsassoci- atedwithit.Eventuallytheywillrealisethatthereisneedforreplacementstaff to do the jobs of the staff members who are away on training. Although organisationsmaysendemployeesontrainingcoursesinthebeliefthattheywill implementwhattheyhavelearntimmediatelywhenthetrainingperiodisover, resultinginamoreeffectiveworkingenvironment,neverthelessagreatdealof timeisactuallyspentontransferringthetrainingtootherISstaff.Furthermore, ISmanagersmaybeinterestedintrainingthatwillbenefitthemonapersonal level,ratherthanbeinginterestedintheorganisationalbenefits,whichagainwill TEAM LinG
  • 160. Reducing the Costs of Doing Business 139 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. result in the indirect human costs of morale hazard and many other indirect humancosts.Theseareallexamplesofindirecthumancoststhatarecausedby introducinganewtechnology. AlloftheabovecostshavebeenrecentlyempiricallyconfirmedbyMohamed (2004) to be indirect human costs that result from the introduction of a new system.Tohelpmanagersidentifythesecosts,thefollowingsectionexplores in more detail the indirect human costs of an emerging new technology and describeshowtheseindirecthumancostsareactuallyacosttoanorganisation. Identifying such potential costs associated with new technologies allows a better understanding of their impacts and contributes towards improved decisionmaking. Table 9.1 illustrates the indirect human costs that Mohamed (2003) has identifiedascostsresultingfromintroducinganewsystem. Indirect Human Cost Factors (IHC) Loss of Time Learning Cost Resistance to New Systems Effort and Dedication Spent by Management Consequences of Redefined Roles Mismanagement of Training Allocation of Employees Integration With New Systems Rejecting Salary Raise Staff Turnover Loss of Productivity Displacement (Misassigned Costs) Reduction in Knowledge Base Deskilling Cost Associated With Redundancy Cost of User Involvement Disruption Costs Belief, Feeling, and Perception Misunderstanding Inaccurate Deliverable Table 9.1. Indirect human costs associated with IS adoption TEAM LinG
  • 161. 140 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Indirect Human Cost Factors Time:Managementtimeisanindirectcostintermsoftransferringtheirtraining/ knowledgetotheISstaff.ThereasonisthatneitherISstaffnorthemanagement willbedoingtheirroutinejobsduringthetrainingperiod(Hochstrasser,1992; Irani,1999;Love,Irani,Li,Cheng,2000;PattersonJohann,1998;Pratt, 1998). Moreover, Bannister (1999) and Love et al. (2000) state that when introducing any new system to an organisation, trainingwill be required for usersofthesystem.Unlesstheorganisationobtainsatime-recordingsystem, the indirectcostofthetimespentintraining wouldnotusuallyshowupasan IScost.Inparticular,thetimespentreadingmanuals,self-helpactivities,and informaljobtrainingareuntraceable.Theimplicationofthisforthebusinessis thattheydonotkeeptrackoftime;hence,anindirectcost occursthathasnot been budgeted for. • Learning costs: As new users or new systems are introduced to the organisation,theusersarelikelytogothroughalearningcurve.Asaresult, atemporarylossinproductivityoccursastheusersbecomefamiliarwith thesystem.Itislikelythatmistakeswilloccurandbecorrectedovertime, which will add to the cost of learning to activate the system to an acceptable level (Hochstrasser, 1990; Remenyi et al., 2000). • Costs of resistance: Introduction of a new IS could result in an unexpectedpoliticalpowershiftthatleadssomeindividualsorgroupsto resistextras.Consequently,staffmayengageinbehaviourthatresultsin a disruption or even the removal of an entire system. This is clearly an influentialindirecthumancost,asithasagreatimpactontheorganisation; notonlydotheyhavetorectifytheconsequencesofresistance,butalso bearthecostofresolvingtheresistanceifpossible(Hochstrasser,1990). Moreover,lackofcommitmenttochangecouldresultinanonoperational workingenvironment,withuserresistanceresultinginescalatingopera- tionalcosts(Stefanou,2000). • Effortanddedication:Thisoccurswhenanewsystemisintroduced,as managementatalllevelsspendtimeexploringthenewsystem,discovering itsbusinesspotential,andabsorbingthetransitionfromtheoldsystemto the new system. Here, managers are being less productive, and so not addinganyvaluetotheorganisation,althoughtheyarestillreceivingtheir fullwages(Hochstrasser,1992).Thetimeutilisedbymanagementand TEAM LinG
  • 162. Reducing the Costs of Doing Business 141 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. staffincorporatingthenewsystemintotheexistingorganisationalworking liferesultsinanindirectcosttotheorganisation.Staffmemberswhoare influencedbytheuseofthenewsystemwilltaketimetobecomeusedto the new system, and their usual activities will not be fully performed. Consequently,theorganisationwillencounterhighindirectintegration human cost (Hochstrasser, 1990; Irani, 1999; Love Irani, 2001). • Cost of redefining roles: Introduction of IS in some cases leads to organisationalrestructuring.Bydestructionoftheorganisation’shierar- chyandreducingthenumberoflevels,middlemanagementisexposedto abiggermarketenvironment,thusrequiringgreaterflexibility.Thedisrup- tion caused by this transition may result in various consequences of intangiblecostswithintheorganisation(Hochstrasser,1990).Changein rolesmayleadtotheintroductionoftraining,redundancy,andpromotion (Hinton Kaye, 1994). • Missed costs: Bannister, McCabe, and Remenyi (2001) state that one ofthemajorproblemsintracingIScostsismisassigningcosts.Displace- mentcost(alsocalledreallocation)isproposedasoneofthesemisassigned costs. This is encountered when people and operations have to be reallocated to accommodate a new system. Bannister (1999) suggests that,forexample,ifamemberoftheISstaffgoesontrainingabroad,the costoftheairfareisrecordedasatravelexpense,theaccommodationas miscellaneous,andotherexpensesasentertainment,whenessentiallythey areallactuallyIStrainingcosts.Bannisteretal.(2001)callbothdisruption costsanddisplacementcostsmissedcosts.Kaplan(1986)reportedthat theintroductionofanewsystem’simplementationisusuallyaccompanied withashort-termlossinproductivityassystemsaredisrupted;ISstaffwill notbedoingtheirjobasefficientlyuntilusersbecomeadjusted.Kaplan (1986) refers to this as disruption costs. • Reduction in knowledge base: This is usually a result of a high staff turnover or redundancies in the organisation. Some organisations may reducelabourcosts,believingthattheyarejustifyingtheirinvestmentinIT, as new systems are more efficient, more tasks can be allocated to an employee,andthuslesspeopleareneededforthejob.Nevertheless,this isalmostimpossibletomeasureinfinancialtermsandresultsinasignificant change in the knowledge base of the organisation that is impossible to predict (Hinton Kaye, 1994) and could have a significant negative impactontheorganisation’sdevelopment. TEAM LinG
  • 163. 142 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Deskilling: This is the inability to fully utilise the potential skills of employees.Forexample,asaresultofanewsystembeingintroduced,the organisationmayassignlessdemandingtaskstoveryskilledemployees (Hinton Kaye, 1994). As a result, the employees may seek different jobs,ortheorganisationmaycontinuetoassignhighsalariesforjobroles that are worth less in financial terms. Investing in IT at the expense of reduction in labour cost leads to a situation where it is difficult to accurately predict the costs involved (Hinton Kaye, 1994). As an outcome,significantcostscouldresultfromlosingtimeandmoneyalready invested in an employee who has left, in addition to requiring the same amount of money (if not more) for recruiting a substitute employee (Hochstrasser, 1992, 1990). • Rejecting increase in salary: As a result of training for a new system introducedoracquiringnewskillsinanyway,endusers,operationsstaff, andsupportstaffwillbeawareoftheirnewmarketableskills.Therefore, they may well request an increase in their salaries to reflect their new marketable value. Rejecting the request may result in the employees seeking employment elsewhere (Hochstasser, 1992, 1990). Thus, it is suggestedthatincreasingthesalaryofanemployeewhoisnewlytrained, ratherthanrejectinghis/herrequestofasalaryincreasemightminimiseor even prevent future indirect/direct costs from occurring, such as new recruitmentcostsandlossofproductivitywhenemployingnewstaff. • Beliefs, feelings, and perceptions: Implementing new software can createsusceptibilities,whichmayhaveanegativeimpactontheemotions ofpersonnel.Theimplementationapproachneedstotakehumanfactors suchasbeliefsandperceptionsintoconsideration(Stefanou,2000). • Trainingcosts: Thiscouldoccurwhenendusersareprovidedwiththe skillstousethenewlypresentedsystem,trainingthestaff(e.g.,develop- ment,operators,integrators,etc.)withtheessentialtechnicalskillsforthe project.Thiswillnotjustcontainthecostofthetrainingcourses,materials, manuals,andfacilities;itwillalsocoverthecostofreplacingtheISstaff whilsttheyareintraining.Furthermore,managementtimeisanindirect costintermsoftransferringtheirknowledgetotheISstaff.Asmentioned above, neither IS staff nor management personnel will be doing their routine jobs during that period (Hochstrasser, 1992, 1990; Pratt, 1998; PattersonJohann,1998;Remenyietal.,2000).Thisisinadditiontoall the indirect human cost factors associated with cost of time and loss of TEAM LinG
  • 164. Reducing the Costs of Doing Business 143 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. productivityasaresultoftheemployeenotbeingsufficientlytrained(Li, Love, Irani, 2000). • Delaycosts:EnormousinvestmentsinIT/ISrequiretheapprovalofthe organisation’sstockholdersandparticularlylargeinvestmentsalsoneed to see quality financial returns. Delayed delivery of a system could indirectlyhaveanegativeeffectonthestockpriceoftheorganisation.An indirect human cost may occur through loss of confidence and fear of financial losses leading to stock prices declining. Moreover, delayed deliveryofanISprojectimpliesmaintainingthefunctionoftwosystems (theoldandnew)atthesametime.Clearly,thiswouldrequiretwicethe effort from staff, and further costs may be driven by the overtime for developmentstafforevenexternalsupportstaffintheformofconsultants and contractors (Yourdan, 1989). • Integrationcosts:Thetimeutilisedbymanagementandstaffincorpo- ratingthenewsystemintotheexistingorganisationalworkingliferesults inindirectcostsfortheorganisation.Staffmemberswhoareinfluencedby theuseofthenewsystemwilltaketimetobecomeusedtoit,andthustheir usual activities will not be performed fully. Thus, the organisation will encounter high indirect human costs (Hochstrasser, 1990; Irani, 1999; Love Irani, 2001). • Redundancycosts:ThefunctioningofISisstillbeingdirectedtowards accomplishing huge improvements in productivity, such as those sup- posedbybusinessprocessreengineeringwhichcanbeashighasa10-fold enhancement.Obviously,suchdevelopmentwillmeanmajorredeploy- mentorrationalisationofstaff.Therefore,thiswillmeanmakingmajor redundancypaymentstothoseworkerswhoareentitledtothem(Hinton Kaye, 1994). • Staffturnovercosts:Asmentionedaboveasaresultoftrainingforthe new system new skills are acquired. The acquisition of new skills and proficienciesmayresultinstaffeitherrequestinganincreaseinsalaryor decidingtoseeknewemployment.Asanoutcome,significantcostscould result from losing time and money already invested in the employee, in additionrequiringthesameamountofmoney(ifnotmore)forasubstitute employee. In addition to spending a great deal of time and effort, recruitmentcostsincludethecostofadvertisingorusingexpertrecruit- ment(Hochstrasser,1992,1990;Irani,1999;LoveIrani,2001).High turnovercanleadtocriticalpostsremainingvacantforlongperiods. TEAM LinG
  • 165. 144 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Misunderstanding:Thiscanleadtounforeseenproblems,anditissaid to be one of the biggest problems, as it can easily lead to inaccurate deliverables, which can lead to great delays in the whole process (Mohamed, 2004). • Inaccuratedeliverable:Thisisthesituationwherethedeliverableisnot whattheclientwanted,whichisnotunusualinISprojects.Itissaidtobe biggestindirecthumancost—manufacturersdeliverwhattheythought wasrequired,buttheclientsays,“Wedidn’twantthis—youmisunder- stood.”Thismisunderstandingofwhatisactuallyrequiredcomesunder the category of poor communication. This is usually due to a poor requirementanalysisprocess(Mohamed,2004).Thishasahugeimpact; although there are checkpoints, in the worst-case scenario, the whole processmayhavetobestartedagain.Themanufacturerneedstofixwhat has been delivered to match what the client actually wanted, if this is possible.Thisindirecthumancostisveryinfluential;daysandweekscan belostasaresultofthesecost.Installationandschedulingareaffected, salesteamswillhavetoexpeditetheprocessthroughchasingthekit,for example,proofofdelivery. • Cost of user involvement: This is a human cost that is associated with ITdivisionsinparticular.ItismainlycausedbytheendusernothavingIT skillsandnotknowingexactlywhattoorder(Mohamed,2004).Thiscost mainlyincludesschedulingteamsandinstallationstaff. Given the amount of money spent on information systems and the often- considerableamountofriskinvolved,itwouldseemthatabetterunderstanding of indirectcostsandtheirimpactonbothemployeesandtheorganisationare needed. Clearly, the introduction of a new system is an influential driver of indirecthumancosts,asithasagreatimpactontheorganisation,andleadsto many indirect human costs. It is argued that having identified these indirect humancosts,decisionmakerscouldmoreaccuratelypredictthefinancialand humancostsofthesystemsthattheychooseandwhosevaluetheysubsequently havetojustify. TEAM LinG
  • 166. Reducing the Costs of Doing Business 145 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Conclusion Research suggests that indirect human costs are not considered, primarily becausetheyarehiddenandnoteasilyidentified.Thischapterhashighlighted the need to look more closely at social issues and indirect human costs associated with new emerging technologies. The focus needs to be changed fromtechnicalitiesanddirectaspectstoindirectandsocialissues.Indoingso, theauthorexploresthevariousindirecthumancostfactorsandtheirimpacton theorganisation,andestablishesaneedtoaccountforthesecostfactorswhen adoptinganewsystem. As new systems are introduced to the organisation, the users are likely to require training, and will hence go through a learningperiod; a great deal of timeisrequiredtointegrateanewsystem.Consequently,alossinproductiv- ityoccursastheuserbecomesfamiliarwiththesystem.Asaresultoftraining ortheacquisitionofnewskills,employeeswillbeawareoftheirnew,highly marketableskills.Therefore,theymayrequestanincreaseintheirsalariesto reflecttheirgreatermarketablevalue.Rejectingtherequestmayresultinstaff turnover.Furthermore,introductionofanewIScouldresultinanunpredicted politicalpowershiftthatleadssomeindividualsorgroupstoresist,aswellas resultinginescalatingoperationalcosts.Introducinganewsystemmayalso resultinmanagersbeinglessproductive,andhencenotaddinganyvaluetothe organisation.Asaresultoftheintroductionofthenewsystem,theorganisation mayassignlessdemandingtaskstoveryskilledemployees,whichislikelyto lead to indirect human costs such as job dissatisfaction and staff turnover. Highstaffturnoverresultsinasignificantchangeintheknowledgebaseofthe organisationthatisimpossibletopredict. Toconcludetheauthorarguesthattoaidstrategicplanninginanorganisation andtouseittotheircompetitiveadvantage,understandingandmanagingthe indirecthumancostsincurredduringtheadoptionofnewinformationtechnol- ogysystemsisessentialinsupportingdecisionmakers’effectivemanagement ofthesecosts.Oncethesecostsareidentified,theycanbemanaged,estimated, and reduced. In addition, it will provide greater transparency for those who requirefurtherevidenceorjustificationofhowandwhythosedecisionswere made. TEAM LinG
  • 167. 146 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. References Al-Yaseen, H., Baldwin, L., Eldabi, T. (2003). IT operational use evalua- tion: Does it matter? Proceedings of the International Business Infor- mation Management Conference, Cairo, Egypt, December 16–18. Bannister, F. (1999). Did we pay for that? The awkward problem of IT cost. Proceedings of the 6th European Conference on Information Tech- nology Evaluation, MCIL, Reading, UK, November 4–5. Bannister, F., McCabe, P., Remenyi, D. (2001). How much did we really payforthat?Theawkwardproblemofinformationtechnologycost.The Electronic Journal of Information Systems Evaluation, 5(1), 1–20. Bannister, F., Remenyi, D. (1999). Value perception in IT investment decisions. The Electronic Journal of Information Systems Evalua- tion. Retrieved from http://is.twi.tudelft.nl/ejise/ fr_ind.html Bannister, F., Remenyi, D. (2000). Acts of faith: Instinct, value and IT investmentdecisions.JournalofInformationTechnology, 15(3),231– 241. Berghout,E.W.(1997).Evaluationofinformationtechnology.Proceedingsof the Fourth European Conference on the Evaluation of Information Technology,DelftUniversity,Delft,TheNetherlands,October30–31. Currie, W., Irani, Z. (1999). Evaluating the benefits, costs and risks of IT/ IS outsourcing in a maturing market. Proceedings of the 6th European Conference for IT Evaluation, Brunel University, London, November 4–5. Dier,D.H.,Mooney,J.G.(1994).Enhancingtheevaluationofinformation technologyinvestmentthroughcomprehensivecostanalysis.Proceed- ings of the 1st European Conference on IT Evaluation, Henley ManagementCollege,HenleyonThames,UK,September13–14. Hinton, C.M., Kaye, G.R. (1994). A framework for understanding investments in information and communication technologies (OBS WorkingPaper).MiltonKeynes,UK:OpenUniversity. Hochstrasser,B.(1990).EvaluatingITinvestments—matchingtechniquesto projects. Journal of Information Technology, 5(4), 215–221. Hochstrasser, B. (1992). Justifying IT investments. Proceedings of Ad- vanced Information Systems, The New Technologies in Today’s Business Environment, UK. TEAM LinG
  • 168. Reducing the Costs of Doing Business 147 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Irani, Z. (1999). IT/IS investment justification: An interpretive case study. Proceedings of the 32nd Annual Hawaii International Conference on Systems Sciences, Los Alamitos, CA, January 5–8. Irani, Z. (2002). Information systems evaluation: Navigating through the problem domain. Information and Management, 40(1), 11–24. Irani Z., Love, P.E.D., Hides, M.T. (2000). Investment evaluation of new technology:IntegratingIT/IScostmanagementintoamodel.Proceed- ings of the Association for Information System, 2000 Americas Conference on Information Systems (AMCIS 2000), Long Beach, CA, August10–13. Kaplan, R. (1986). Must CIM be justified on faith alone?Harvard Business Review, 64(2), 87–95. Li, H., Love, P., Irani, Z. (2000). A preliminary investigation into the relationshipbetweentheuseofIT/ISandtheproductivityofprofessional consultingfirmsinconstruction.InternationalJournalofConstruction Information Technology, 8(1), 15–27. Love,P.,Irani,Z.(2001).EvaluationofITcostinconstruction.Automation in Construction, 10(6), 649–658. Love,P.E.D,Irani,Z.,Li,H.,Cheng,E.W.L.(2000).Amodelforassessing theorganisationalcostsofIT/ISinconstructionorganisation.Proceed- ings of the Construction Information Technology Conference Icelan- dic Building Research, Institute in Affiliation With CIB Working Commission W78, IABSE and EG-SEA-AI, Reykjavik, Iceland, June 28–30. Mohamed, S. (2003). Socio-organisational dilemma: Indirect management human costs. Proceedings of HAAMAHHA the 8th International Conference on Human Aspects of Advanced Manufacturing, Rome, Italy, May 26–30. Mohamed, S. (2004). An exploration of indirect human costs associated withinformationsystemsadoption.Unpublisheddoctoralthesis,Brunel University,London. Mohamed,S.,Irani,Z.,Baldwin,L.(2002).Proposingtaxonomyofindirect humancostsfortheevaluationofinformationsystems.Proceedings of the 7th Annual Conference of the UK Academy for Information Systems, Leeds Metropolitan University, Leeds, UK, April 10–12. TEAM LinG
  • 169. 148 Mohamed Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Mohamed, S., Irani, Z. (2002). Developing taxonomy of information systems indirect human costs. Proceedings of the 2nd International ConferenceonSystemsThinkinginManagement,UniversityofSalford, Salford, UK. Patterson, P., Johann, B. (1998). Why new IT systems don’t pay off. Information Technology, 35(11), 64–67. Pratt, S. (1998). Should software be leased/rented? Corner. IT Finance, (35). Remenyi,D.,Money,A.,Sherwood-Smith,M.,Irani,Z.(2000). Effective measurement and management of IT costs and benefits. Oxford: ButterworthHeinemann. Remeneyi,D.,Williams,B.(1996).Thenatureofresearch:Qualitativeor quantitative, narrow paradigmatic. International Journal of Informa- tion Systems, 6(2), 131–146. Stefanou, J. (2000). IT cost. The evaluation of enterprise resource planning (ERP)systems.Technologyinmanufacturing.TheInternationalJour- nal of Computer Applications in Technology, 12(2), 90–101. Wood, A. (2004). Measuring the RIO of training. CIO Magazine. Retrieved February26,2004,fromhttp://www.cio.com/archive/021501/roi.html Yourdan, E. (1989). Modern structured analysis. Prentice-Hall. TEAM LinG
  • 170. From ASP to Web Services: Identifying Key Performance Areas and Indicators 149 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Chapter X FromASPto WebServices: Identifying Key Performance Areas and Indicators for Healthcare Matthew W. Guah, Warwick University, UK Wendy L. Currie, Warwick University, UK Abstract Value creation from e-business for customers in healthcare is an important topic in academic and practitioner circles. This chapter reports the findings from a two-year research study, which found that disappointing results from the much-hyped application service provider (ASP) business model is currently being replaced by perceived new opportunities from Web services. Yet past failings from ASP do not guarantee future success with Web services models, particularly as evidence shows that accruing value-added benefits from e-business initiatives is often fraught with difficulty. Healthcare is no exception, and is likely to pose more problems given the complexity of the organizational structures, processes, procedures, and activities within this vertical sector. This research study TEAM LinG
  • 171. 150 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. calls for a more rigorous approach in identifying and evaluating key performanceareasandindicatorsfromnewe-businessinitiativesinvolving emerging technologies and platforms such as Web services. Yet the measures and metrics used for healthcare may differ from those adopted in other sectors. Healthcare professionals will therefore need to develop context specific key performance areas (KPAs) and KPIs, and caution against accepting at “face value” the value proposition devised by Web service providers. Introduction TheprocessofhealthcaremanagementmodernizationismaturinginEurope, North America, and in other developed countries. This has resulted to an exponential increase in demand for rapid business process execution, more accurateandtimelyinformation,andadditionalautomatedinformationsystems (IS).InterestinWebservicesisemerginginmanydifferentguises.Assubset of e-business, Web services offer customers software as a service. The principle of operation is similar to the application service provision (ASP) model,pricedonapay-as-you-go,utilitymodelofbusinesscomputing(Currie, Desai, Khan, 2004). Against a background of disappointing results from ASP (Hagel, 2002), Web services are designed to resolve problems of poor integration(interoperability)betweensoftwareapplicationsandlowcustomer satisfaction.ThisresearchstudytreatstheWebservicesbusinessmodelasthe mainunitofanalysisandseekstoidentifyhowvalueiscreatedforcustomers (Perseid, 2003; Sleeper Robins, 2001). Despite the promises of vendors, Webserviceshavefaredpoorlyintermsofattractingalargeclientbase(CBDI, 2003).Thereasonsforthisarebothtechnicalandcommercial(Hagel,2002). ThefalloutfromtheASPmarketprovidessomeimportantlessonsforvendors offeringsoftwareasaservice,andfore-businessmodelsmoregenerally. Thischapterpresentsthefindingsfromatwo-yearresearchthatexaminesboth the supply side and customer side of deploying, hosting, and integrating e- businessmodels,focussingprimarilyonWebservicesintheUKhealthsector. Thechapterisstructuredintothreemainareas.Itbeginswithadiscussionof ASP taxonomies and argues that the various templates for ASP were essen- tially flawed for a combination of technical or business reasons. Within the healthcaresector,technologyvendorsfailedtodevelope-businessmodelsthat TEAM LinG
  • 172. From ASP to Web Services: Identifying Key Performance Areas and Indicators 151 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. createdvalueforcustomers.Theyadoptedatechnologypushstrategywhere productandservicesareofferedtocustomerswithoutaclearunderstandingof their business requirements (Cassidy, 2002). This section is followed by an overview of the research study and methods used for data collection and analysis. Next, we present the results from a questionnaire survey and inter- viewswithhealthcareprofessionals.Usingariskassessmentframework,which capturesfivekeyperformanceareas(KPAs)forevaluatingthesoftware-as- a-service business model (which includes both ASP and Web services) (Currie, 2003), this research applies this framework within the healthcare sector.Comparingtheresultsfromhealthcarewiththoseoffivesectors(Currie etal.,2004),weobservethatprioritiesandpreferencesvary.Thissuggeststhat service provider vendors need to identify a more rigorous approach in developing their value propositions from e-business for specific industrial sectors, since a one-size-fits-all approach is inappropriate. The chapter concludesbyofferingfuturedirectionsforresearchonemergingtechnologies withinhealthcare. Lessons from the First Phase of the ASP Model TheemergenceoftheASPmodelsuggestedananswertoprevailingquestion: “Why should small businesses and non-IT organizations spend substantial resourcesoncontinuouslyupgradingtheirIT?”Manybelievedthatapplication outsourcing,usingtheASPmodelcouldprovidethesolutiontoenhancingIT efficiencyandreducingthetotalcostofownershipofIT(IDC,2000).Within thecontextofhealthcare,ASPscouldofferbothhorizontal(businessfacing) andvertical(sectorspecific)softwaresolutions.Anexampleofthelattercould be in the form of electronic patient records (EPR) systems (Guah Currie, 2004).AnASPassumesresponsibilityforbuying,hosting,andmaintaininga softwareapplicationonitsownfacilities,publishingitsuserinterfacesoverthe networks, and provides its clients with a shared access to the published interfaces.Thecustomersimplyhastosubscribetotheservicetoreceivethe applicationoveranInternetordedicatedintranetconnection,asanalternative tohostingthesameapplicationin-house(GuahCurrie,2004). The impetus behind ASP was fuelled by the belief that utility computing offered a new business model to customers, similar to electricity, gas, and TEAM LinG
  • 173. 152 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. water. The commercialization of the Internet meant that, as network traffic increasedinafirm’sdatacentre,ITarchitecturewouldtriggerotherresources intoaction,includingidleservers,applications,orpoolsofnetworkstorage. Thefirmwouldpayonlyfortheamountoftimeitusedtheservices.Thus,the conceptof“softwareasaservice”wascreated.AccessingITresourcesinthis way would result in reduced up-front investment and expenditure, enabling firms to buy services on a variable-price basis (Dewire, 2000). This fuelled opportunitiesinthelate1990sforserviceproviderstooffersoftwareapplica- tionsandITinfrastructureonarental,pay-as-you-gopricingmodel(Bennet Timbrell, 2000). An ASP could be a commercial entity, providing a paid service to customers (Susarla, Barua, Whinston, 2003) or, conversely, a not-for-profitorganizationsupportingendusers(Currieetal.,2004). In healthcare, an ASP may provide some mix of application services for laboratory,prescribing,charting,outpatientvisit,coding,andcliniciansched- uling,andreporting.Somemayevenofferclinicalalertsnormallyassociated withexpensiveinstitution-basedEPRsystems,includinghealthwarningsof potentialdrugreactions.Throughtheprovisionofthisone-to-manymodelover theInternet,anASPtakespatientchartsandmedicalrecordsandkeepsthem on a centrally managed repository, to which a healthcare provider can gain accessfromanywhereintheworld.Thiscanallowforaphysiciantoreviewthe patient’smedicationlistsfromallpreviousencountersandtheirprescription- fillinghabits(providedallthelegalrequirementsofpatientconfidentialityhave beenarranged). ASP Taxonomies Taxonomiesrepresent“ideal-type”scenarios,whichmaynotexistintheirpure form (Currie et al., 2004). They are useful for providing a framework for organizingphenomenabyattemptingtodeconstructthevariouscomponents and/orcharacteristics.Variationsexistwithinideal-typicalcategories,aswell asoverlapbetweencategories.DuringthefirstwaveoftheASPmarket,many different types of ASP emerged. Some were concerned to offer a broad, horizontalproductandserviceportfolio,whileotherstargetspecificvertical industry sectors such as healthcare. Table 10.1 focuses on a horizontal ASP products/services portfolio, and Table 10.2 looks at the service providers targeting the healthcare vertical sector. Each of these categories implies a differentoutsourcingrelationshipbetweensupplierandcustomer. TEAM LinG
  • 174. From ASP to Web Services: Identifying Key Performance Areas and Indicators 153 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ThefirstASPtaxonomy(Table10.1)delineatesASPsintovertical(industry specific),horizontal(across/withinbusinessfunctions);enterprise(complex softwaresuchasERPandCRM);pure-play(Web-enabledapplications)and infrastructure (data centre, networking, and other supporting technology) (Currieetal.,2004).Whilstmanyresearchanalystsandpunditssuggestedthat verticalASPsofferedexcellentopportunitiesforbusinessdevelopment,they also needed to address key challenges, such as a limited customer base; potentialproblemsinservingonlyonesector/subsector;potentialoverreliance ononeInternetservicevendor(ISV);andothers.Byrestrictingtheirpotential customerbase,verticalASPsbelievedtheycouldofferahighlevelofservice sincetheymarketedthemselvesashavinganin-depthknowledgeofthesector/ subsectortheyserved. Type of ASP Description Generic Examples Key Challenges Mixed/ Vertical Industry specific (health, finance, transportation) SchlumbergerSema (health) Bloomberg (finance) S/W for Excellence (dental) Limited customer base Reliant upon major vendors Restricted by sector-based economic Horizontal Business software (accounting, human resource, travel) Salesforce.com (HR) Concur (travel) SAGE (accounting) Low barriers to entry Undifferentiated products/services Enterprise Complex business software (ERP, CRM, supply, and logistics) SAP Oracle McKesson Very expensive for small/medium organisations Channel conflicts Data security/integrity Pure-Play Internet/Web- enabled software application (e- mail/security/dis aster recovery) Graphnet Health iSoft Mail.com Unprofitable commodity applications Reliant upon VC funding Unstable/volatile/dynamic market Infrastructure Technology partners to ASP (telco, data centre, networking) Cable and Wireless BT CISCO Technical inhibitors Over-capacity Severe competition Table 10.1. Taxonomy of ASPs based on a horizontal product/service portfolio (Currie et al., 2004) TEAM LinG
  • 175. 154 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Thesecondtaxonomy(Table10.2)oftheASPmarketadoptsfivecategories: ASP resellers, ASP developers, ASP aggregators, hosting services, and managed services providers (Hagel, 2002, p. 45). Comparing the two ASP taxonomiesrevealssignificantsimilaritieswithconsiderableoverlapbetween categoriesandactivitiesofthevariousplayers.The ideal-typicalcategories providedbydifferenttaxonomiesofferanillustrationofthemarket/strategic positioningandproduct/serviceportfoliosofASPs,andshouldnotbetreated asrigidcategoriesintheirownright.Giventheconfusionwhichsurroundedthe first wave of ASPs, attempts to deconstruct the ASP business model and marketintotaxonomiesisausefulexercise,whichmayprovidesomeclarityto thephenomenonunderscrutiny. ASP taxonomies can be further mapped across the netsourcing stack, which capturesavarietyofcustomer/supplierscenarios“whererelationshipsinthis spaceareverycomplicated” (Kern,Lacity,Willcocks,2002,p.115).For example,anASPdeliveringahostedsoftwareapplicationtotheendcustomer, may subcontract data centre services, billing, help desk, and other support servicestoadditionalfirms.Furthermore,theASPmaynotevenownorhave developedthesoftware,asthismaybetheintellectualpropertyofanInternet servicevendor.InthecaseofenterpriseASPsandASPresellers,developers, andaggregators,thesefirmsmayformcomplexstrategicalliancesorpartner- ships with leading ERP vendors, usually for specific target customer (Table 10.2). AsaforerunnertothecurrentWebservicesmarket,ASPwashighlyvolatile, dynamic,andimmaturemarket.ArecentreviewoftheASPindustry(Susarla etal.,2003)concludedthatthetechnologicalfactorslikescalability,speedand focus,andthebehavioralaspectsofpriceandflexibilitywerethekeydrivers ofthemodel.Theinhibitorsofthemodelwerepoorconnectivity,lackoftrust inthemodel,reluctancetobelockedintolong-termcontractswithsuppliers, lackofcustomization,poorchoiceandsuitabilityofsoftwareapplicationsfrom ASPs, and few opportunities to integrate disparate applications across tech- nology platforms and business environments. These factors and others led Hagel (2002) to conclude that ASPs in many respects represented a false start in the efforts to break out of the enterprise straitjacket. In particular, few of them adopted Web servicesarchitecturesastheirtechnologyplatform.Instead,theyattempted to build businesses on the Internet using traditional technology TEAM LinG
  • 176. From ASP to Web Services: Identifying Key Performance Areas and Indicators 155 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. architectures … this proved to be a significant flaw in the early ASP model and explains many difficulties these businesses experienced. (p. 43) The taxonomy indicates that many different service provider firms operate withintheASPspace.Morerecently,manyofthesefirmshaveabandonedthe “ASP”acronymandnowrelabelthemselves“Webservicevendors.”Against a backdrop of failed ASPs, these firms recognize the need to obtain market leadership through strategic differentiation and revenue generation. Whilst manye-businessmodelswerepremisedonthebasisthatdevelopingabrand precededprofitability(Cassidy,2002),start-upfirms,inparticular,areunlikely to secure second-round venture capital funding without demonstrating a capacity to generate revenues. So from a vendor perspective, entering the marketwithapoorlythought-throughor“flawed”(Hagel,2002)e-business modelwillnotbesustainable.Equally,fromacustomerviewpoint,rigorous performancemeasurementandassessmentofbenefitsandrisksiscritical,not justintermsofthesoftwareapplicationcapability,butalsointermsofwhether Type of ASP Description Healthcare Examples Key Challenges Resellers Provide new Internet- based distribution channel and “rental” pricing model for traditional enterprise applications Graphnet Health ISoft CSE Health Gaining customer acceptance, especially new pricing models Developers Develop new applications and deliver on the Internet with “rental” pricing model CSE Health EMIS AVOCA Systems Large investment in own IT infrastructure; Long lead times; Gaining trust and acceptance in marketplace; Competition with other ISVs Aggregators Integrate and market packages of applications provided by ASP develops First DataBank Europe CISCO McKesson Info Solution Potential channel conflicts with ISVs; Too many products/services on offer; Competition with other ISVs Hosting Services Provide specialised facilities and support services for companies deploying Internet-based applications IBM Microsoft Sun Potential overcapacity in an overcrowded market, confusing business model and partners with “unstable” ASPs Managed Service Providers Provide specialised application management IOKO365 Siemens Healthcare Services SAP Severe competition in overcrowded market, confusing business model for customers Table 10.2. A taxonomy of ASPs based on vertical industry positioning (adapted from Hagel, 2002) TEAM LinG
  • 177. 156 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. theserviceproviderislikelytoremaininbusiness.Thistaxonomy,developed frompriorresearch(Currie,2003),providesausefulframeworkforanalyzing theadoptionanddiffusionofsoftwareapplicationsinahealthcaresetting. The Research Study The findings reported in this chapter are part of a larger, five-year research studythatwasdevelopedtoinvestigatethedeployment,hosting,andintegra- tion of the ASP and Web services technologies from both a supply-side and demand-side perspective. The overall research was in two phases. The first phase,comprisingofapilotstudy,wasconductedintheUnitedStatesandUK (CurrieSeltsikas,2001).Anexploratory-descriptivecasestudymethodol- ogy(Yin,1994)wasusedtoinvestigate28ASPvendorsandsevencustomer sitesintheUK.Thedualfocusuponsupplysideanddemandsidewascritical forobtainingabalancedviewbetweenvendoraspirationsaboutthevalueof their business models, and customer experiences, which may suggest a less optimisticpicture.Theunitofanalysiswasthebusinessmodel(AmitZott, 2001), not the firm or industry level, so a case study methodology was anticipatedtoprovidearichdatasetforanalyzingfirmactivitiesandbehavior (Currie et al., 2004). The result from the pilot study led to the funding of two additional research studiesbytheEPSRCandESRC,respectively.Industrialcollaboratorswere selectedfortherolesoftechnologypartner,serviceproviders,andpotentialor existingcustomers.Thesestudieswereconcernedwithidentifyingsourcesof valuecreationfromtheASPbusinessmodelandWebservicestechnologiesin five key performance areas (namely, delivery and enablement; integration; managementandoperations;client/vendorrelationships;andbusinesstrans- formation). • Research Methodology: The research followed a number of stages involving the use of both qualitative and quantitative data collection techniques and approaches (Walsham, 1993). A questionnaire survey andcoveringnoteweredistributedbye-mailtobusinessesandhealthcare organizations all over the UK. These organizations were listed on a national database held and maintained by the National Health Service (NHS), the providers of healthcare to UK residents on a free-for-all at- TEAM LinG
  • 178. From ASP to Web Services: Identifying Key Performance Areas and Indicators 157 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. the-point-of-deliverybasis,plusthosemaintainedbytheuniversity.To ensurerelevantmanagersandpractitionersresponded,thecoveringnote clearly stated the purpose of the questionnaire and requested that it be passedontotheperson(s)withresponsibilityformanaginghealthcaree- business. • The Questionnaire: Scales to address the research questions were not availablefromtheliterature,sothequestionnairewasdevelopedbasedon the theory of strategic value (Banker Kauffman, 1988). It included a checklist, open-ended questions, and a section seeking organizational data. Research questions under part I required respondents to answer yes/noifInternettechnologiesapplicationinhealthcarewasbringingvalue to patients. Data in part II of the questionnaire was collected by open- ended questions seeking respondents’ views on the best approach to healthcareperformanceimprovementandWebservicesvaluecreation. Respondentswereaskedtogivetheirreasonsinopen-endedquestions. Asemistructuredquestionnaire,ratherthanopen-endedquestions,was usedtoincreasethereliabilityofdatasinceallrespondentswereaskedthe samequestions,butsomeaddedsupplementaryinformation.Thepurpose wastoimposeuniformityacrossthesampleofrepresentation,ratherthan to replicate the data obtained from each participant (Yin, 1994). • The Sample: As a result of the first phase of the research carried out in the United States and UK, a database of 700 international firms was developed,allofwhichhaddevelopedanASPbusinessmodel.Thedata servedtobuildupadatabankofmarketintelligenceonavarietyofASP firmsandtheirofferings.Manyofthesefirmsweretrackedoverafour- yearperiodtoidentifychangesintheirbusinessmodels.Fromthissample of700ASPs,about55%continuedinapplicationprovisioning(excluding infrastructure) by the time phase two of the research began. A good numberoftheoriginalsamplehadceasedtoexist(about24%)andsome had been taken over by other firms (about 6%). The remaining (about 15%)hadchangedtheirbusinessmodel,movingawayfromsoftwareas aservice(KakabadseKakabadse,2002)todatastorageandmanaged services provisioning. The ASP database proved to be a very useful source of market intelligence for the research study since it helped to developaquestionnairesurveytargetedatthehealthcaresector. • Healthcare Survey: In phase two of the research, a total of 350 questionnairesweredistributedtoNHSInformationAuthority(NHSIA) directors, current and prospective suppliers of IS to the NHS, and TEAM LinG
  • 179. 158 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. medicalpractitionersfromgeneralpracticesinmajorcitiesaswellasrural towns in an effort to avoid bias. The vendors were drawn from a list of businessesnegotiatingforcontractundera“primaryserviceproviders” scheme (Guah Currie, 2004). After persistent follow-up (telephone calls)exercise,225questionnaireswerecompletedandreturned,repre- sentinga64%totalreturnrate.Asthisstudywasexploratoryinnatureand wasdesignedtodevelopaframeworktoinformpracticeandguidefuture research,ratherthantestinghypotheses(AvisonFitzgerald,2003)the 225organizations’situationsonwhichitisbasedprovidedusefulprelimi- nary data. Respondents were mainly middle-level business managers (60%) offering various Internet-related services in Web services to the global healthcare industry,whiletherest(40%)consistedofmedicalpractitionersworkinginthe NHS.The40%includedITcoordinatorsatdifferentinstitutionsnationwide; some already implementing Web services architecture locally. The vendor organizationswerepredominantlyAmericanandBritish,consistentwiththe business structure in the UK. Seventy-eight percent of the companies were largeoneswithanannualturnoverofover£1bn,while13%hadbetween£25 mto£1bn,and9%wereconsideredsmallwithanannualturnoveroflessthan £25 m. ASP Model for Healthcare An important debate surrounding all ASP models is the extent to which applicationoutsourcingisdifferentfromtraditionaloutsourcing(ASPIndustry Consortium,2000).Probablythemostnoticeabledifferencebetweenthetwo iswithintherelationshipwiththecustomer.Unliketraditionaloutsourcing,the ASPmodelwouldtargetindividualhealthcentresandtrustswithintheNHS. The ASP model can be replicated into an appropriate mixed economy for healthcare.Thereisanissueofnotonlytryingtopersuadeandconvinceboth internalandexternalstakeholdersaboutthevalueofcurrentcapabilitiesbut alsotoensuretheirparticipationinasomewhatrelationalarchitecture. TEAM LinG
  • 180. From ASP to Web Services: Identifying Key Performance Areas and Indicators 159 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Content Distribution: A Major ASP Shortfall Overthepastfewyears,theISstrategyformostorganizationshavebeenina stateofevolutiontowardsaformof“federalgovernancearchitecture”(Zmud, 1988). These are instances where the authority for the management of IT infrastructureisvestedwithacentralITunitbuttheauthorityforthemanage- ment of IT application and use is vested with individual business units—or regional trust, in the case of the NHS. Such a situation has promoted the importanceofavarietyofcoordinationmechanisms,suchasITcouncils,IT steeringcouncils,service-levelagreements,andcharge-backinternalaccount- ing systems, as structural overlays to supplement the hybrid “federal gover- nancearchitecture”(Zmud,1988).ThepotentialforcurrentASPstosatisfac- torily provide such service to the NHS does exist but certain concentrated improvement would need to be made to their services. The critical nature of NHS services requires the service provider to provide higher-value and managedservice.TheASPswouldneedtobepreparedtoofferanintelligent “contentaware”architecturethatcomplementstheexistingIPinfrastructure (Figure10.1). A major form of visibility and control is demonstrated through content and performance.Themonitoringofsuchcontrolisseenthroughreal-timefeed- back. A formal reliability check must be put in place to assure that the distributionofanytypeofcontenttothevariousNHSedgessafelytakesplace withoutdisruptingothercriticalnetworkoperations.Toimprovereliability,the content and services of the ASP infrastructure would need to be moved “closer”totheusers.Suchactionswouldnotonlysignificantlyreducerequire- mentonnetworkperformance,butalsoresultinthecreationofasessionand content-awareroutingarchitecture(Figure10.1).Alargeorganizationsuchas theNHSwouldneedvisibilityandcontrolatalllevelsofserviceandqualityof delivery. By doing so, an undoubtedly high level of satisfaction can be maintainedwhichrequiresasignificantreductiontocurrentnetworkproblems andbottlenecks. One NHS trust executive assessed that content distribution competence of most ASPs would need to improve in terms of static content and on demand streaming.TheNHSneedsasignificantamountofsmallandlargeobjectsto be delivered promptly and accurately. By demand of the services there are continuousneedstoissuesimilarcontentatdifferingtimesofthenetwork.A TEAM LinG
  • 181. 160 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. significant amount of live streaming is required in NHS institutions. Such systemsrequireanextremelyhigh-qualityfeedoveraveryreliablenetwork (Arnott,2002).DuetothemultiplicityoftheNHS,therearevariouspointsof “flashcrowd”requiringatechnologytofacilitatethesamecontentatonetime. This would mean the use of edge relay over the ASP network with a very delicatestreammanagementandscaleoptimization. Consideringallofthepreviousinformation,thefundamentalgoaloftheASPin termsofcontentprovisioncanbesummarizedintoonephrase:“Gettingtheright informationtotherightplaceattherighttime.”ThustheNHSdemandsafaster access,morereliableaccess,andaccountableandsecuresystemwithguaran- teedsynchronizationwithotherinternalsystems. DuetoASPbeingarelativelynewconcept,largemembersofthehealthsector react to the model with confusion. Although an ASP manages and delivers applications capabilities to multiple entities from data centres across a wide area network (WAN), a virtual private network (VPN), or an intranet, there are also vertical ASPs that target a specific market/sector. An ASP could be a commercial entity, providing a paid service to customers or, conversely, a not-for-profitorganizationsupportingendusers(Currie,2000).Thevertical ASPmodelwouldbecriticalforthoseresearchingintoNHSISTstrategyand outsourcingsincetheywillbeamajorforcewithinthesoftwareandcomputing servicesindustry.Themodelwouldincludethesefourkeyfactors: Figure 10.1. Improving reliability in health data distribution using ASP TEAM LinG
  • 182. From ASP to Web Services: Identifying Key Performance Areas and Indicators 161 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Thesupportingtechnologicalframework,includingcameras,scanners, telephones, fax machines, computers, switches, disks, CD, video and audio, platforms, cable wires, satellites, optical fibre, microwave nets, televisions,monitors,andsoforth; • Theavailableinformationwhetherintheformoftext,sound,images,data, storedinthemanydifferentarchivalfacilities,andtheapplicationsand softwareneededtoaccess,manipulate,organize,anddigest; • The governance, management, and use of information, including the standards to ensure interoperability, interconnectivity, reliability, and securityofsystems,andthephysical,technological,andlegalmeansto protecttheprivacy,confidentiality,andsecurityofpersonalinformation (Figure10.2);and • Thepeopleandorganizationsinvolvedincreatingtheinformation,devel- opingtheapplicationsandsystems,constructingthefacilities,andthose usingthismodeltodeliver,maintain,andimprovehealth-relatedservices forthebenefitofall. Therapiddevelopmentandwide-scaleimplementationofinformationtech- nologies,inawidevarietyoftrusts,hasprovidedthecapabilitytoachievethe visionofincreaseduseofevidence-baseddecision-makingprocesses(Figure 10.2). At the same time, the increasing pressures to contain and reduce costs have made the new information systems a potential agent of change. The evidenceonwhichcliniciansbasedtheirdecisionsiscrucialtoimprovingthe management and cost efficiency of the NHS. The development of a national healthinformationsystemaccessible toallthoseintheNHSwillensurethat accurate, up-to-date information is on hand when it is needed. Enterprise ASP Pureplay ASP VerticalService Provider H orizontalASP ASP Enablement Full Se rvice Provision Custom er ASP Aggregator M odel ERP CRM e-Procurem ent Asset M anagem ent Docum ent Management Financial HR eM ail W eb Hosting Regional NHS Trust Figure 10.2. Evolutionary healthcare ASP aggregator model (Currie, 2000) TEAM LinG
  • 183. 162 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. KPAs for ASP and Web Services Value Creation in Healthcare The complexity of the regulatory and partnership contract “chains” within healthcare (Institute of Medicine, 2002; Wanless, 2002) has resulted in extraordinaryobscurityinthesecurity,access,andcontrolrequirementsfor participatingorganizations: SchlumbergerSema,EMIS,andMcKessonare three major German, British, and American healthcare enterprises, respec- tively.Theyhavemorethanfiveoperatingcompanieseachwithcomplicated “contractingchains.”SuchcomplexitycreatestwoprimaryproblemsintheUK healthsector: • Gettingandregisteringtheexistenceofrequiredhealthcarebusinessand software processes and data in “real time”; and • Allowingonlythosewhoneedaccesstosoftwareprocessesandpatient data to do so selectively and under knowable and auditable circum- stances. The research operationalized five KPAs (Currie, 2003), which are potential sourcesofvaluecreationfromASP:deliveryandenablement,managementand operations,integration,client/vendoralliances/partnerships,andbusinesstrans- formation. This framework, we argue, is also relevant for evaluating Web services. Each category is discussed below in the context of healthcare organizations. Delivery and Enablement A commonly used sales pitch on the part of ASPs was to offer 24x7 software applicationsavailability,thoughcustomers’requirementsvariedaccordingto the nature of the business use. However, this could not serve healthcare organizations’needforextensivecommunicationandinterconnectivityarising from adoption of standards and integrated IS (Institute of Medicine, 2002). These organizations have a current need to identify new opportunities in the availabilityofdatabases(FerlieShortell,2001;Majeed,2003;Wong,2001) about patient and other medical records. The anticipation is to link TEAM LinG
  • 184. From ASP to Web Services: Identifying Key Performance Areas and Indicators 163 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. interorganizational,interfunctional,andinterpersonallevelsofhealthcarepro- cesses via Web services, through which they can reshape and improve their corebusinessprocesses(Gerowitz,Lemieux-Charles,Heginbothan,Johnson, 1996). IT managers interviewed within the NHS were disappointed at the currentlackofcapacitytoaccessenterprise-wideinformationfromdatabases. Their major requirement is for IS that provides numerous opportunities to coordinateorganizationalactivitiesbyfacilitatingcommunicationandinforma- tion exchange across departments, branches, partners, and patients carers withouttheneedtogothroughhorizontalorverticalchainsofcommand. ASPsresistedthisdemand,ascustomizationwouldleadtoreducedprofits,or evenafinancialloss.Theabilitytoofferscalabilityofthesoftwareapplication wasanotherfacetofdeliveryandenablement.Generally,thelesscomplexthe application,theeasieritwastoscaletohighnumbers.Toalargeextent,e-mail was the easiest application to offer, as there was no need for customization. From the data analysis, the largest single issue in terms of delivery and enablement was the fear about data security and integrity. Most ASPs possessedlargeITcapabilityintheformofdatacentres;manypure-playASPs outsourced this facility (Kern et al., 2002). Yet security of patient data was a serious impediment, as many potential customers in the health sector were reluctanttoexperimentwithanASPbusinessmodel,whichwasimmatureand poorlysupported. Management and Operations OneoftheperceivedbenefitsofASPisthathealthcareorganizationswouldbe abletoconcentrateontheircorecompetencies(Perseid,2003).ASPvendors arguedthattheremotedeliveryofsoftwareapplicationswouldreleasemanag- ers from the perennial problems of running in-house IT departments. This wouldallowthemmoretimetodevelopITande-businessstrategyratherthan theday-to-dayoperations.Thisjustificationhasbeenusedintraditionalforms of outsourcing over many years (Willcocks Lacity, 1998). Our findings suggestthatmostofthesoftwareapplicationsofferedbyvendorswereloosely definedashorizontalbusinessapplications(i.e.,accounting,HR,fixedasset management software, etc.). Even where healthcare organizations were de- ployingASPformorecomplexapplications,therewaslittleevidencethatthe scale and scope of usage amounted to extra time for managers to engage in otheractivities.Otherbenefitstofirmsweredefinedintermsofcostsavings. TEAM LinG
  • 185. 164 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Many vendors used TCO models to show how IT costs would be reduced using a remote software delivery model. Our findings pointed to a lack of relevanceinTCOmodels,particularlyfortheNHSwithincreasingdemandson low IT budgets. One NHS IT manager said: Our overall IT spending is only about £150 k per annum. I don’t think using a Web service solution will necessarily save us much money. But if it means fewer headaches with physicians using IT, then I would be prepared to pay more for Web services! Considering Web services are new technologies that sprung from the ASP businessmodelandareusedmostlytoautomatelinkagesamongapplications, they are generally anticipated to make critical systems connections not only possiblebutalsoeasyandcheap(Kreger,2003;SleeperRobins,2001).IT managersbelievemakingconnectionsbetweenNHSorganizationsandtheir applications exponentially increases the complexity and cost to their jobs. Indeedbusinessactivities,fortheNHS,involvecommunicationsandtransac- tionswithotherorganizations,suchastradingpartners,suppliers,andpatients. Hagel (2002) argues that organizations with better and cheaper connections withoneanothercouldgaincostsavingsintheshorttermandlookforwardin the longer term to collaborating more innovatively to give customers more value. Integration Despite poor results from ASP in regard to integrating disparate software applications,Webservicescouldpotentiallymakeasignificantdifferencein integratingsoftwareapplicationsacrossmultipleplatforms,sites,anddepart- mentsofhealthcareorganizations.AcommonlycitedbenefitfromASPfirms was that software applications across business and IT functions could be integratedtofulfilthegoalofenterpriseapplicationintegration(EAI).Many ASPsplannedtodevelopawideportfolioofbusinessapplications(including ERP, CRM, accounting and financials, logistics, etc.). But most of these applicationswere“standalone,”providedonaone-to-manymodel.WithWeb services, these applications could eventually be integrated to provide the customerwithacomprehensiveenterprisesolution(Majeed,2003). TEAM LinG
  • 186. From ASP to Web Services: Identifying Key Performance Areas and Indicators 165 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. AnimportantquestioniswhetherWebservicescanbedeployedandmanaged within healthcare; where there is a need for patient data and processes to be integrated, possibly across multiple platforms, environments, and sites. To manage such real-time procedure requires the integration of complex enter- priseinformation(Figure10.3). • Manufacturing:Integratedglobalpharmaceuticalinformationondrugs manufacturingprocess • Metadata: Information about what is contained in these phases of development • Clinical:Clinicaltrial,sideeffects,outcomes,andin“real-life”effectsof drugs • Validation:Strategicplanningdataonthevalidationofthedrugforthe targetpatients • Administrative:Healthcareclaims,membership,diagnostic,andtreat- mentdata • Financial:Design,development,pricing,deployment,andpatientintel- ligencedata Figure10.3illustratesthedatamodelfortheintegrationofinformationacross thevaluechainofahealthcareorganizationthatismultivendorandmultisource. Suchorganizationencouragesthedefinitionandsharingofdata—withinthe organization and among partners and regulators. Two “stacks” of data are articulatedinFigure10.3: • Clinical:Thedataandinformationsupportingmedicalandresearchand development(RD)ofnewdrugentities • AdministrativeandFinancial:Thedataandinformationsupportingthe processes of drug approval, production, distribution, and patient care monitoring Interviews with medical practitioners in the NHS found that integration of softwareapplicationswasnotan immediatepriority,orrather,notapriority theywerepreparedtopayfor.SohowcanASPandWebservicesbenefitthe NHS?ManyorganizationsintheNHSweredeployingASPsolutionswhich TEAM LinG
  • 187. 166 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. werenon-missioncritical,forexample,e-mail,ratherthanERP.Onemedical consultant,usinganelectronicdiaryapplication,commented: We were not particularly looking for a Web service solution to organize our time management. However, when a vendor approached us with a product for diary scheduling, we thought to give it a try. The main advantage of this is that you can make changes to patient appointments from a remote location and submit the data to the surgery. It is particularly useful for staff working away from the surgery for long periods, but the current shortage of GPs in the NHS does not encourage that. Client Vendor Alliances/Partnerships TheASPbusinessmodelwaspremisedontheformationofstrategicalliances and partnerships with technology and service providers (Currie et al., 2004; Ferergul, 2002). Yet many of these partnerships and alliances proved to be Research Clinical Trials Metadata Security Access andControls Manufacturing Financial Sys Target Group Regulations Product Optimisation Distribution Enterprise Network Architecture Clinical Processes Administrative and Financial Systems Integration Architecture External and Internal Organisations Research Target and Discovery Product Optimisation Clinical Trials Strategic Planning Financial Accountability Distribution and Support Regulatory Approval Security, Access, and Controls Regulatory Agencies Service Providers Patients Organisations Technology Partners In-House Server Figure 10.3. Complex data generated by healthcare enterprises value chain (Perseid, 2003) TEAM LinG
  • 188. From ASP to Web Services: Identifying Key Performance Areas and Indicators 167 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. unsustainableandinsecure.Forexample,largetechnologysectorfirms,such atelecommunicationsfirms,sawopportunitiesinpartneringwithindependent software vendors (ISVs) to offer hosted software applications on a utility model.Thecomingtogetherofautilitymodelofpricingwithanewdelivery mechanismforsoftwarewasperceivedasapromisingopportunity.Inaddition, hardwaremanufacturerssawbenefitsofdevelopingnewbusinessbymanufac- turing “thin client” PCs where data would be stored remotely, that is, on the serverfarmsownedbythetelco.Whilstthesearrangementslookedlikeawin- win scenario for all, the reality proved otherwise in most cases. Indeed, the venture between Cable Wireless a-Services™, Microsoft and Compaq, designedtoofferhostedapplicationswasshortlived,lastingundertwoyears. ThemainreasonforthiswastheimmaturityoftheASPmodel. Within the context of healthcare organizations, the complexity is likely to increase,particularlyasmanagementdecisionstoprocuresoftwarearelikely to be taken at a much higher level than middle management, for example. Research into two NHS organizations found disappointing results from the ASPbusinessmodel.TwoNHSorganizationshadtoaltertheirstrategieswhen theirserviceproviderswentoutofbusiness. Bothorganizationslosttimeandmoneyinresolvingtheproblemandareless likelytouseanASPinthefuture.Whilstpredictingthefinancialstabilityand viability of ASPs is difficult to do in an unpredictable market, the degree of commitment to a strategic alliance or partnership from a large technology providerorISVisequallyproblematic.Ourfindingssuggestedthatevenwhere largefirms(telcos,ISVs,hardwaremanufacturers,etc.)enteredintoastrategic alliancewithASPs,thiswaseasilyunravelledifthebusinessobjectiveswere notachievedwithinaspecifictimeperiod.AsgreaternumbersofASPsfailed, ASP adoption rates became fewer. Surviving vendors could not convince potentialcustomersthattheASPbusinessmodelofferedthemnewbenefitsfor outsourcingtheirbusinesssoftwareapplications. Business Transformation AmorenebulousaspecttoASPisbusinesstransformation.Withthegrowthin healthcareICTs,managersandmedicalpractitionersarefacedwithaconfusing array of software applications from a variety of ASP vendors. The business transformationalcharacteristicsofdifferentofferingswerenotwellarticulated TEAM LinG
  • 189. 168 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. by ASP vendors, as many were unable to provide practical examples of performanceimprovementinspecifichealthcare/technologyactivitiesortasks (Currie et al., 2004). Today, many pundits claim that Web services would integrate ICT with patient care. They also suggest that using Web services solutionswouldhelpthehealthcareorganizationskeeppacewiththelatestICT andgivethemallthebenefitsofoutsourcing,whichhadpreviouslyaccruedonly tolargefirms.Forthehealthcareorganization,severalfinancialandfunctional benefitsarerealized(GuahCurrie,2002): • Theinternalandexternaldivisions,partnerships,andregulatoryagency relationshipscanberealisticallyautomatedforthefirsttime,sinceaccess is defined by Web services. • Systems integration costs are dramatically reduced and interfaces are standardized, by as much as an order of magnitude. • Dataintegrationisfacilitatedasdatabaseproliferationceases. Ourresearchfindingssuggestthathealthcareorganizationswereawareofthe hypotheticalbenefitsofe-business.However,theywereunabletorelatethese benefitstotheirday-to-daypracticalhealthcareoperations.ManyNHSstaff simplydescribedtheASPbusinessmodelas“areturntoservicebureausunder a different name,” rather than an ICT innovation which would enhance their businessprocesses.Thebusinesstransformationalcharacteristicsofthemajor- ity of ASP offerings were also low, as this was dependent upon integration (Table10.3).NHSdidnotdeploysoftwareapplicationsforcriticalhealthcare activities,andmanymanagerswerereluctanttodosobecauseoffearsofdata security. Results from the Questionnaire Survey AgainstthebackgroundofthefiveKPAs(seeCurrie,2003)asdiscussedinthe previous section, the questionnaire survey was developed to elicit data and informationonhowpotentialandexistingASPcustomersevaluatearangeof KPIsinrelationtotheirownbusinessrequirements.Usingascaleof0–4(0= TEAM LinG
  • 190. From ASP to Web Services: Identifying Key Performance Areas and Indicators 169 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. notapplicable;1=notimportant;2=quiteimportant;3=veryimportant;4= critically important), respondents were asked to rank each KPI across the approximatelysixKPAs.Aquestionnairesurveyinstrumentisreproducedin Appendix 2. It is outside the scope of the present chapter to discuss all the findingsfromthequestionnairesurvey,particularlythesampleorganizations previousoutsourcingexperience.Allrespondentsgavetheirjobtitle,company address,andotherdetailsaboutproduct/serviceofferingsandsizeofcompany. Forexample,thetradefairsattendedinthehealthsectoraimedtosellthelatest IT products and services to healthcare professionals. Many ASPs therefore targetedspecificverticalsectorssuchashealthtoenablethemtopenetratethis market more successfully, as general e-business trade fairs were unlikely to attracthealthcarepersonnel. Othervariationsinprioritiesemerged.Forexample,whilstthehealthsector sharedsimilarconcernswiththeothersectors(apartfromtravel)ingivingahigh prioritytodatasecurityandintegrity,italsoidentifiedallowingmanagersto concentrate on their “core” competencies as an important KPI. This may reflect the significant changes within the health sector marked by increased paperwork and other forms of bureaucracy. Using an ASP model was thereforeperceivedashavingsomeadvantagesinthisactivity. Key Performance Indicators Average Score for All Sectors Average for Healthcare Organisations Delivery and Enablement 24x7 software applications availability 2.69 2.29 Delivery of end-to-end solution 2.62 2.57 Ability to migrate existing data 2.76 3.14 Data security and integrity 3.33 3.57 Disaster recovery, backup, and restore procedures 3.28 3.57 Plan to access all software applications online 2.20 2.57 Integration Integration of software applications across multiple platforms, sites, and environments 2.37 2.0 Business process redesign through software applications integration 2.10 2.0 To create a “seamless” IT organisation 2.30 2.57 To create an IT infrastructure for better manageability 2.42 2.86 To achieve faster software application implementation 2.41 2.14 Resultant synergy from combination of applications 2.10 1.86 Table 10.3. Scores of key performance indicators subdivided into areas TEAM LinG
  • 191. 170 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Table 10.3. (continued) Key Performance Indicators Average Score for All Sectors Average for Healthcare Organisations Management and Operations To allow management to concentrate on core activities 2.85 3.14 To reduce total cost of ownership (TCO) through software applications outsourcing 2.64 2.71 To eliminate the problem of managing IT 2.35 2.57 To pursue e-business strategy 2.0 1.57 External (hosted) applications infrastructure better value for money 2.25 2.14 External (hosted) software applications infrastructure more cost effective than traditional outsourcing 2.07 2.0 Greater flexibility of outsourcing as opposed to in-house management of software applications 2.06 1.71 Business Transformation To keep pace with the latest information and communications technologies (ICT) 2.31 1.57 To integrate ICT with the core business 2.65 3.14 To treat ICT as a service to the core business only 1.96 2.14 Strategic plan to increase ICT outsourcing 1.79 2.14 To gain senior management support for ICT 2.27 3.29 Client/Vendor Relationships Desire to develop strategic partnerships with vendors 1.97 1.86 Outsourcing success depends on good service-level agreement (SLA) 3.04 3.71 Financial stability of vendor critical to outsourcing decision 2.93 3.43 Single point of contact (with vendor) 2.71 3.57 Responsiveness of vendor to ICT changes 2.61 3.57 The strength of the strategic partnerships between vendors 2.42 3.0 Mergers/acquisitions/takeovers between vendors 2.14 2.86 Total score in this section 92.89 97.84 The integration of ICT with the core business was highlighted by health as important,butlesssofortheotherthreesectors.Inhealthcare,inparticular,the lack of integration of ICT has resulted in numerous disparate software applications,althougheffortsarenowinplacetodeviseanationalITstrategy for healthcare (Guah Currie, 2002). An interesting finding was that a strategicplantoincreaseIToutsourcingwasgivenrelativelylowpriorityin allsectors(apartfromhealth).Whereasthehealthsectorwaslikelytoincrease itsIToutsourcingasaresultofanationalITstrategy,theothersectorsdidnot perceive this KPI as a high priority. Within the sectors, finance, IT, and manufacturing,IToutsourcingisnowrelativelymature,asopposedtotravel. Within the area, business transformation, only two KPIs—to integrate IT TEAM LinG
  • 192. From ASP to Web Services: Identifying Key Performance Areas and Indicators 171 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. with the core business (finance and health) and to gain senior management supportforIT(health)—scoredhigherthan3.Inthecaseofthelatter,itisnot surprisingthatthecentralizednatureofITprocurementinhealthcareprecludes IT vendors from gaining access to key personnel (Guah Currie, 2004). Oneofthesurprisingfindingsfromthequestionnairesurveyinrelationtothe ASPvendorrhetoricwasintheareaofintegration.ContrarytoASPsalesand marketingliterature,whichemphasizestheimportanceofintegration(particu- larlyenterpriseapplicationintegration),norespondentsinthesamplescored higherthan3foranyKPIwithinthiscategory.Indeed,theKPI,strategicplan toincreaseICToutsourcing,wasnotseenasanimportantprioritybysample firms andgaining senior management support for ICT was only considered a priority in healthcare organizations. It is therefore suggested that, without these two KPIs being perceived as highly important, the responsibility for negotiatingSLAsislikelytobedelegatedtomorejuniormanagementandIT staff,possiblyincreasingrisk.Thisobservationhasalreadybeenmadeinthe outsourcingliterature(WillcocksLacity,1998). Our results, however, pointed to relatively low scoring for these KPIs, suggestingthatASPvendorshadpossiblymisinterpretedtheneedsofpotential customers.Clearly,mostofthesalesandmarketingrhetoricofASPvendors appeared to echo the messages given to the large customer. Questions therefore arise as to the extent these messages were relevant for healthcare organizations, in particular, that a healthcare organization would reduce its TCO of IT using an ASP solution despite a low annual IT spend, or that efficiencywouldbegreatlyimprovedwith24x7softwareavailability. Discussion and Conclusion Thischapterhasprovidedasnapshotofresearchresultsderivedfromafive- yearstudyonthedeployment,hosting,andintegrationofASP(Currie,2003; Currieetal.,2004).ItfocusesspecificallyontheUKhealthcaresector,which is receiving a major investment in IT over the next 5 years. Whilst it is not possibletodrawdefinitiveconclusionsfromtheresults,thevariationsinthe prioritieswithinandacrossthefiveKPAspointstosomeinterestingobserva- tions.Theresultsdiscussedinthispaperareindicativeoftheproblems,which besetthefirstwaveoftheASPmarket,mostnotably,afailureofASPvendors to provide an attractive value proposition to organizations (Hagel, 2002). TEAM LinG
  • 193. 172 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Existing literature on healthcare systems have identified four basic types of applicationsdetailedbelow(FerlieShortell,2001;Haines,2002;Majeed, 2003):groupcollaboration;healthcaresupportsystems;businessintelligence; and e-commerce. The fourth category is a combination of one or more of the othertypesbutimplementedusingInternettechnology GroupCollaboration:TheoriginalpurposeoftheInternetwasessentiallyto enable(academic)groupcollaboration.Proprietarygroupcollaborationappli- cationsintheNHSareconsequentlyundergreatpressurefromtheirlow-cost, tested, and robust Internet equivalents (Laroia, 2002; Majeed, 2003). Healthcare Process Systems: Although the Internet does offer process systems capability, it is unsophisticated and unstable by comparison to the tried-and-trusted but proprietary commercial equivalents. The Internet was never designed to offer more than a very basic transaction capability as is currently required to support healthcare processes. Patient Intelligence: Patientintelligenceusuallyinvolveslookingforpatternswithinverylargedata sets,intheorderofmillionsofindividualdataitems.Viewingreportsandsimple graphics is easily supported; however, complex manipulation of graphical information does not work well using today’s Internet technology due to network capacity restraints. E-Commerce:Atitsmostbasic,e-commerceis buying and selling over the Internet, whether to consumers or business to business.NHSsystemsmaynotrequireafinancialtransactionsystembutthe needtointeractwithpatientsispromotinge-commerce-typesystemtoahigher positiononNHSIAstrategicagenda. Whilst the ASP market continues to undergo large-scale change, which is a symptomofcompetinginahighlyvolatileanddynamicmarketplace(Eisenhardt Martin,2000),themainfindingfromtheresearchstudyhasbeenthefailure of vendors to create value for potential and some existing customers. By delineatingKPIsacrossfiveKPAsastheresultsfromthequestionnairesurvey pointtosomeinterestingfindings,whichprovideasnapshotofhowpotential and existing customers of ASPs evaluate the ASP or software-as-a-service model.Furtherresearchisnowunderwaytoprovidemoredetailedvendorand customer scenarios across vertical sectors (i.e., health and finance) and product/services offerings (i.e., ERP) to provide specific examples of how vendorsmaytailortheirofferingstomorecloselymeettheneedsofcustomers. Thisisparticularlyimportantgiventhecurrentcynicismandmythssurrounding thebusinessvalueofe-business(Howcroft,2001). Anyhealthcareorganizationtemptedtofillthegapswitholdertechnologies shouldbewaryofcreatinghybridsthatwilllimititsoptionswhenWebservices TEAM LinG
  • 194. From ASP to Web Services: Identifying Key Performance Areas and Indicators 173 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. alternativesbecomeavailable.Proprietaryextensionstofillgapsinthefeatures ofWebservices,forexample,shouldbeimplementedasmoduleswithclearly defined interfaces (Kreger, 2003). In this way, it will be easier to replace the proprietaryextensionswithevolvingWebservicesstandardsastheybecome available. Finally, a staged, pragmatic implementation of Web services at the edge of enterprisesisbynomeanswithoutpitfalls.Thisapproachgivesorganizations timetolearnaboutthesetechnologiesandtodevelopinsightsintothebroader operationalandstrategicpossibilitiesofstrategiccollaborations.IntheUK, NHS executives were lulled into complacency by the simple and mundane nature of Web services. By their early tactical implementations, they have overlookedthebroaderopportunitiesandlostvaluabletime—NHS-Directis a good example (Wanless, 2002). It is management’s attitude that will ultimately determine who creates value with Web services (Gerowitz et al., 1996). References Ahn, J.G., Leem, C.S., Yang, J.H. (2001). Jae Geun AhnA framework for certificationandauditofapplicationserviceprovider.ApplicationSer- vice Provider, 10(3), 239–252. Amit,R.,Zott,C.(2001).Valuecreationine-business.StrategicManage- ment Journal, 22, 493–520. Arnott, S. (2002). Broadband NHS is in the pipeline. Computing, March, 1. ASP Industry Consortium. (2000). Industry news. www.Aspindustry.org Avison,D.E.,Fitzgerald,G.(2003).Wherenowfordevelopmentmethod- ologies? Communications of the ACM, 46(1), 79–82. Banker, R., Kauffman, R. (1988). Strategic contributions of information technology: An empirical study of ATM networks. Proceedings of the Ninth International Conference on Information Systems, Minneapo- lis,MN. Bennet,C.,Timbrell,G.(2000).Applicationservicesproviders,willthey succeed? Information Systems Frontiers, 2(2), 195–211. TEAM LinG
  • 195. 174 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Cassidy, J. (2002).Dot.con: The greatest story ever sold. London: Penguin. CBDI Report. (2003). Insight for Web service and software component practice. Web Services Usage Survey, February/March. Currie,W.,Desai,B.,Khan,N.(2004).Customerevaluationofapplication services provisioning in five vertical sectors. Journal of Information Technology, 19(1), 39–58. CurrieW.L.(2000).ExpandingISoutsourcingservicesthroughapplication serviceproviders(ExecutivePublicationSeries.CSIS2000/002). Eisenhardt,K.,Martin,J.A.(2000).Dynamiccapabilities:Whatarethey? Strategic Management Journal, 21, 1105–1121. Ferergul, C. (2002). Best practices in Web hosting service level agree- ments. Stamford, CT: Meta Group. Retrieved May, 2002, from http// techupdate.zdnet.com/techupdate/stories/ main/ Ferlie,E.B.,Shortell,S.M.(2001).Improvingthequalityofhealthcarein the United Kingdom and the United States: A framework for change. Milbank Quarterly, 79, 281–315. Gerowitz,M.,Lemieux-Charles,L.,Heginbothan,C.,Johnson,B.(1996). Top management culture and performance in Canadian, UK and US hospitals. Health Services Management Research, 6, 69–78. Guah, M.W., Currie, W.L. (2004). Application service provision: A technologyandworkingtoolforhealthcareorganisationintheknowledge age. International Journal of Healthcare Technology and Manage- ment, 6(1/2), 84–98. Guah,M.W.,Currie,W.L.(2002).EvaluationofNHSinformationsystems strategy: Exploring the ASP model. Issues of Information Systems Journal, III, 222–228. Hagel, J. III (2002). Out of the box: Strategies for achieving profits today and growth tomorrow through Web services. Boston: Harvard Busi- ness School Press. Haines, M. (2002). Knowledge management in the NHS – Platform for change.RetrievedNovember2002,fromwww.healthknowledge.org.uk Howcroft, D. (2001). After the goldrush: Deconstructing the myths of the dot.com market. Journal of Information Technology, 16(4), 195–204. Institute of Medicine. (2002). Crossing the quality chasm: A new health systemforthe21st century.Washington,DC:NationalAcademyPress. TEAM LinG
  • 196. From ASP to Web Services: Identifying Key Performance Areas and Indicators 175 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Kakabadse, N., Kakabadse, A. (2002). Software as a service via applica- tionserviceproviders(ASPs)modelofsourcing:Anexploratorystudy. Journal of Information Technology Cases and Applications, 4(2), 26–44. Kern,T.,Lacity,M.,Willcocks,L.(2002).Netsourcing:Rentingbusiness applications and services over a network. New York: Prentice Hall. Kreger,H.(2003).FulfillingtheWebservicespromise.Communicationsof the ACM, 46(6), 29–34. Laroia,A.(2002).LeveragingWebservicestoconnectthehealthcareenter- prise. Retrieved February, 2002, from http://e-serv.ebizq. net/wbs/ larois_1.html Majeed,A.(2003).TenwaystoimproveinformationtechnologyintheNHS. British Medical Journal, 326, 202–206. Orlikowski, W.J., Tyre, M.J. (1994). Windows of opportunity: Temporal patternsoftechnologicaladaptationinorganisations.OrganisationSci- ence, May, 98–118. Perseid Software Limited. (2003). The strategic value of Web services for healthcare and the life sciences. Retrieved August 2003, from www.perseudsiftware.com Sleeper, B., Robins, B. (2001). Defining Web services. Accessed April 2002, from www.stencilgroup.com Susarla,A.,Barua,A.,Whinston,A.B.(2003).Understandingtheservice component of application service provision: An empirical analysis of satisfaction with ASP services. MIS Quarterly, 27(1), 91–123. Wanless, D. (2002). Securing our future health: Taking a long-term view (finalreportofanindependentreviewofthelong-termresourcerequire- ment for the NHS). London. Walsham, G. (1993). Interpreting information systems in organisations. Chichester,UK:Wiley. Weill, P., Vitale, M.R. (2001). Place to space–Migrating to eBusiness models. Boston: Harvard Business School Press. Willcocks, L., Lacity, M. (1998). Strategic sourcing of information systems.Chichester,UK:Wiley. TEAM LinG
  • 197. 176 Guah and Currie Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Wong,S.(2001).Webservices:Thenextevolutionofapplicationintegration. Retrieved November 2002, from www.grgcc.com/pdf/WebServices TheNextEvolutionofApplicationIntegration.pdf Yin, R.K. (1994). Case study research: Design and methods. Sage Publi- cations. Zmud, R.W. (1988). Building relationships throughout the corporate entity. Washington, DC: ICIT Press. TEAM LinG
  • 198. Section III Thriving or Not TEAM LinG
  • 199. 178 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterXI FutureTrends Matthew W. Guah, Warwick University, UK Abstract Now that we have seen what organizations are doing with Web services, the rest of this book will look at how Web services will affect Internet strategies in the next decade and possibly beyond. This chapter begins with financial forecasts from the professionals and later warns that organizations must first be in the position to refine their business models, crystallize their value propositions and strengthen the quality and management strategies of their services. Introduction Whatremainsunclearintheearlypartofthe21st centuryconcerningthelinkage betweenInternetinvestmentproductionandtheapplicationserviceprovider (ASP)marketistheextenttowhichtherateofASPlikeservicesproductivity will continue to rise in the face of slower advances in Internet stock market. According to Forester Research, the proportion of ASP business in the TEAM LinG
  • 200. Future Trends 179 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. outsourcing market peaked at about $800 m in 2000 and was projecting for $25bnby2005.However,itactuallydeclinedbytheyear2001(duepartlyto theeffectofthestockmarketcollapse)andiscurrentlybeingprojectedat$15 bnby2006.TheoverallbusinessinterestsintheASPmodelwillcontinuetorise withproportionallyhigherratesofinvestmentbyvendorsversustraditional outsourcing.Weattributethisoptimisticforecasttofourtrends: 1. Continuingimprovementsincapabilitiesandcost-performancecharac- teristicsofremotesupportservicesbyvendors; 2. Improvementsincapabilitiesandcost-performancecharacteristicsofthe technologyatthesystemorapplicationlevel; 3. Continualdevelopmentofthetelecommunicationsinfrastructuretosup- port ASP performance; and 4. Gradualreductionofinstitutionalandsocialbarrierstotheintroductionof ASP model as a viable business strategy. Future Analysis It does not make sense to emphasis the social and technical resources and constraintsofanewindustry(likeASP)withoutthinkingaboutthefutureofthe resulting information system. While no one can say, with any degree of certainty,whatthefutureholds,itisalwayspossibletospeculateonthenature ofchanges.Suchconsiderationoffutureconditionsusuallyhelpstoavoidsome oftheproblemsidentifiedduringtheearlystagesofISanalysis.Land(1987), in his study of future environments and conditions, came up with a theory of “future analysis.” Here are four areas of our concern from Land’s future analysistheory: 1. Predictionofpossiblechanges:Thisarealooksatthekindsofchanges that are possible, that is, technological, legal, political, or economic. It requirestheinvestigationofthecontextandsituationoftheorganization in which the work is being done. Other items needed to help with this investigationincludestructureplansandpredictionofmid-termdevelop- mentoftheinstitutionthatcouldbemediumplan.Thisismeanttodevise anappropriatesystemanalysisstageofthedevelopmentprocessthereby TEAM LinG
  • 201. 180 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. givingsomeideaofthetypeofexpansion,contraction,andchangethatwill occurandwithwhichtheincomingsystemwillhavetodeal. 2. Likely outcome of system: Here one takes a peep into the future assumingthelikelyeffectsofanimprovedinformationsystem.Thereare certainlyallkindsofdisruptiveandconstructiveeventsthatmayberelated tothedevelopmentofanewsystem.Afewofthemostpertinentoneswith regardstoASPimplementationarestaffredundancy,changeofloyaltyof existingISstaffs,newreportingprocedures,andsoforth. 3. Features susceptible to change: This looks at the features of the proposedsystemthataremoresusceptibletochange.Questionssuchas, wherewouldoneexpectthenewsystemtochangefirstandwhetherthis can be planned for, come into play here. Other issues involved here are if certain data would need to be collected or some existing collection procedureswouldneedtochange.Andevenifsomeexistingsectionsor divisionswouldcontinuetomaintaintheirstructures. 4. Horizonofthesystem:Onewouldlookattheextentandhorizonofthe system.ItisatthisstagethatanASPwouldbegintothinkintermsofthe long-termview.Whileweadmitthisisobviouslyguesswork,itgivesone a sense of humility in the initial design and requires an ASP vendor to speculateastohowwhatisbeingplannedtodaymaybethebuildingblock forfurtherdevelopmentsintothelong-termfuture. Thepursuitoftechnicalefficiencyintheoperationofvariouscomplextechnolo- gies required by ASP to operate in the 21st century will continue to require skilfulmanagementofthesetechnologies,andthetechnicalpersonnelneeded tooperateandmaintainthetools.Anintelligententerpriseactivitywilllargely beconcernedwithmanagingthetechnicalattributesofASPtoolsandnotwith the management of the use and intellectual content of the information and knowledge.Whilesuchmanagementwillfocusoninternaloperations,andare largely a middle-management and professional-staff function, that stage of information-managementdevelopmentwillcontinuetoexpandasmorecom- plextechnologies(i.e.,Webservices)areintroducedinintelligententerprises. It can be argued that an enterprise could well rest at a plateau where cost savingsareusuallyquitesignificant,butsuchenterprisewillsoonencounter unanticipateddifficultiesbecauseoforganizationalandoperationalproblems. OnesuchisusuallythefactthatintegratingtheASPtechnologiesoftendemands newstructuresandfunctionsthatmanybusinessesarenotpreparedtoassume. TEAM LinG
  • 202. Future Trends 181 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. If the use of ASP, as a converging technology is to be effective, much more emphasis will need to be placed on business management of information resources and management personnel who will define and direct the use of these assets and resources in the organization. Even more pressing are the pressures for change in adopting a more management-oriented view of this domainthatarearisingfromvariousstakeholders(bothinternalandexternal) who are beginning to recognize the enormous potential for profitability and productivity embedded in the emerging products and services of the ASP industry. Software as a Service Webservicesenvironment-basedcomputingislikelytoevolverapidlyinthe hostingrealm.ASPsthereforeneedtoidentifyandpartnerwithinfrastructure vendorsabletohelpthemfullycapitalizeonthistrend.Webservicesarerapidly movingtotheforefrontofmajorserviceproviders’strategiesforthenextphase of Internet-centric computing. Web services began to constitute one of the computing industry’s most important trends during 2002 and potentially providealmostlimitless,newserviceandrevenueopportunities.Thequestion thusfarhasbeen,“AreASPswillingandpreparedtoexploitWebservices?” Inthefirstfewyearsofthe21st century,virtuallyeverymajorITinfrastructure vendor has identified support for Web services as a strategic priority. These vendorshaveeachdeterminedthatakeysuccessfactorfortheirbusinesstogo forwardseriouslydependsonitsabilitytosupportwhatcouldlikelybecome a flood of Web services components. ThispreparesthewayforWebservicestoaidthesoftware-as-a-servicestrend to gain significant market traction and appeal. Many research studies have shownthatASPsaretotallyconfusedaboutwhatWebservicesactuallyareand the promises they hold for the IT industry (Kakabadse Kakabadse, 2002; Currie,Desai,Khan,2004).Verylittlesenseismadeoftheresponsefrom questionssuchas“WhatexactlyareWebservices?”,“WhatdoWebservices do for businesses?”, “How can ASPs benefit from Web services?”. LikeallotherpreviousnewtechnologiesintheITindustry,Webserviceshave yet to emerge with a universally agreed-upon definition. However, many proponents describe Web services as discrete software components that run ontopoftheInternetasthoughitwereahugedistributedoperatingsystem.This TEAM LinG
  • 203. 182 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. means Web services are analogous to software components, making up the elementsofafullapplicationthatrunsonasingle-serveroperatingsystem. AlthoughWebservicesprovidesomevaluablepieceoffunctionality,theydo not individually provide all of the business logic necessary for a complete applicationorhostedservice.SuchafeaturerequiresindividualWebservices tointeractwitheachotherandwithotherWeb-basedapplicationstocomplete whatever task they are chartered to do. Here is where the idea of standard interfacesandmessagingprotocolscomein. ApplicationdevelopmentcanthereforecreateWebservicesfromscratch,or encompass pieces of legacy code with software wrappers that add the applicationprogramminginterfaces(APIs)necessaryforthelegacycodeto functionasWebservices.Astheyarebuiltwiththesameopenstandards,Web servicesbuilttorunononeoperatingsystemorwithinoneinfrastructurecan automatically interact with Web services running on a completely different softwareinfrastructure. OnelittleissueofcomplicationisthefactthatWebservicestendtofallintotwo broadcategories: 1. SomeWebservicescanfunctionprimarilyasbuildingblockcomponents thatotherWebservicesapplicationscanaccessandexploitdirectlyand automatically. These Web services allow for no user interface and no interventions. 2. OtherWebservicesrequireuserinvocationandinteraction. Considering Web services are an even newer phenomenon than ASP, the scopeofWebservicesfunctionalityisratherbroadandthestagesofaclearand commondefinitionarestillevolving.AsITgiants—forexample,IBM,SUN, Microsoft, CISCO, and so forth—gain more experience in deploying and improving Web services development, the definition will be refined and standardized. All service providers need to think of Web services as part of theircontinuumofthesoftware-as-a-servicemodel.Webservicesshouldnot be considered as a disruptive approach to hosted services, but rather as an additional step forward for IT service provision. They could provide a standardizedwayfordifferentservicesandapplicationstointeroperate,which will greatly reduce the integration hurdles ASPs have been facing for a long time. In the process, Web services will also have given ASPs an increased TEAM LinG
  • 204. Future Trends 183 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. flexibilitytocreateanddelivermorecustomizedoruniquehostedsolutionsfor theircustomers. In similar regards, ASPs would not always be able to ensure that individual Webserviceswillbedevelopedorrunontheinfrastructureoftheirchoice.That isbecauseWebservicesarecreatedanddistributedbymultipleentities.ASPs mustthereforedevelopanddeploytheirownserviceswithinfrastructurethat complies with Web service standards; to be certain that their services can efficientlyinteractwith,andtakeadvantageof,otherWebservicecomponents. Most of these initiatives will only take if ASPs identify and partner with infrastructurevendorthatcanhelpthemfullycapitalizeonthistrend. After the Dot.com Era Manyindustryreviewersarebeginningtopredicttheendofthebadtimeforthe IT industry (Cassidy, 2002) and that the worst days have past. While the current economic slump is slowing much industry activity, the fundamental drivers for software as a service remain strong, and business interests are continuingtopushthisbusinessmodelinexorablyforward.However,manyare lookingtoseeASPsevolve.Theymustrefinetheirbusinessmodels(Lacity Willcocks, 2002), crystallize their value propositions (Currie, 2004), and strengthenthequalityandmanagementstrategiesoftheirservices(Davenport Stoddard, 1994; Dotan, 2002; Kauffman, McAndrews, Wang, 2000). Cassidy (2002) demonstrates that the infrastructure decision is becoming simpler because several brand-name vendors moved to field preintegrated suitesofapplicationsondifferentplatformelements.Nevertheless,ASPsare not doing enough to unravel the mysteries of a new business model based on Webservicestechnologies.Thisisprobablythemostdifferentiatingchallenge. VeryfewASPsarebeginningtoshowtheirclearunderstandingthattheneed to exploit this new business model early will gain an edge. They are also adjustingmoreflexiblyandrapidlytomarketdemandsbydeliveringmoreofthe newservicesandcapabilitiesthatWebserviceswillengender.Aclearwarning isthatASPsthatareslowtoembraceWebservicescouldverywellbecaught short,ascompetitorsmovetotakeadvantageofthesemultiplyingcomponents. TEAM LinG
  • 205. 184 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. References Cassidy, J. (2002). DOT.CON: The greatest story ever sold. London: Penguin. Currie,W.,Desai,B.,Khan,N.(2004).Customerevaluationofapplication service provisioning in five vertical sectors. Journal of Information Technology, 19(1), 39–58. Currie,W.L.(2004).Theorganizingvisionofapplicationserviceprovisioning: A process-oriented analysis. Information and Organization, 14, 237– 267. Davenport,T.H.,Stoddard,D.B.(1994).Reengineeringbusinesschangeof mythic proportions. MIS Quarterly, 18(2), 121–127. Dotan, T. (2002). How can ebusiness improve customer satisfaction? Case studies in the financial services industry.Journal of Information Tech- nology Cases and Applications, 4(4), 22–48. Kakabadse, N., Kakabadse, A. (2002). Software as a service via applica- tionserviceproviders(ASPs)modelofsourcing:Anexploratorystudy. Journal of Information Technology Cases and Applications, 4(2), 26–44. Kauffman,R.J.,McAndrews,J.,Wang,Y.(2000).Openingthe‘blackbox’ of network externalities in network adoption. Information Systems Research, 11(1), 61–82. Lacity, M., Willcocks, L. (2002). Regional perspectives: Survey of IT outsourcing experiences in US and UK organizations. In Advanced topics in global information management (pp. 160–189). Hershey, PA: Idea Group. Land, F. (1987). Is an information theory enough? In Avison et al. (Eds.), Information systems in the 1990s: Book 1—Concepts and method- ologies (pp. 67–76). (AFM Exploratory Series no. 16). Armidale, Australia:NewEnglandUniversity. TEAM LinG
  • 206. A 21st -Century Tool for Intelligent Enterprises 185 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterXII A21st -CenturyToolfor IntelligentEnterprises Matthew W. Guah, Warwick University, UK Abstract This chapter suitably summarizes all the points covered in this book by applying them to 21st -century intelligent enterprises. By addressing the business issues and management concerns of a 21st -century intelligent enterprise,wehopethischapterpointsmedium-andlarge-sizedbusinesses in the proper direction, to manage application service provider (ASP) resources and strategies to their competitive advantage. With the phenomenon of ASP in its infancy, we draw from works of IS pioneers Markus, Porter, Checkland, and others. Their intellectual contributions, plus findings from research work at CSIS, provide a framework for discussion. ASP delivers personal productivity software and professional support systems, assisting an intelligent enterprise in processing information, solving business problems, developing new products, and creating new knowledge. The need to exploit ASP capabilities to preserve and enhance organizational knowledge is clearly defined by this chapter. TEAM LinG
  • 207. 186 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Introduction Todealwiththiscomplextopicwehavestructuredthischapterintofourmain areas:Background,Concerns,Recommendations,andFutureTrends. Background presents the central theme of the historical shifts from a main- frametoaclient-server,andnowtoanASPstrategyforintelligententerprises. An observer of the client-server technology would have found the task of accuratelydiscerningthepathofthattechnologyduringthelastdecadeofthe 20th centuryverydifficult.Similarly,therealityoftheASPtechnologyhasnot fully burst on the business scene, but has evolved over some 5 to 10 years. Moreover, statistical evidence to define this emerging social and economic realityhaslaggedbehindthewritersandcommentatorswhohaveidentifiedthe importantfeaturesofthissignificantchange. Next,ConcernsdiscussestheenginethatisdrivingtheASPindustry.Justas thesteam,electric,andgasolineenginesbecamethedrivingforcesbehindthe Industrial Revolution of the early 1900s, so the Internet and high-speed telecommunications infrastructure are making the ASP a reality today. A resulting“informationprocessing”industryisthebusinesssectorthatisprovid- ing the impetus for this revolution, with its increasingly improving array of hardware,software,andinformationproductsandservices.Thesetechnolo- gies,inturn,arehavingandwillcontinuetohaveprofoundimpactsonbusiness management,competitiveadvantage,andproductivity. Havingsetthestagebydescribingthechangingbusinessenvironmentofthe intelligent enterprise, Recommendations then move to the need for each enterprisetofundamentallythinkitscorporatestrategy.ForASPvendors,itis notjustaquestionofsellingaproduct,butofsellingasolutiontoacustomer’s problem.Thisiswherethelinesbetweendeliveringtheservicesandbetween traditionalversusemergingmarketsareblurringandchanging. ThequalitativedimensionisasimportantinanASPindustryasthequantitative dimension.Qualitycontrolmustbebuiltintothefrontendoftheservicedelivery cycle, not viewed as a last-minute check to be done just before contracts are reviewed.Hereiswherethehumanfactorisintroducedintoourdiscussion.In essence the intelligent enterprise is a distributed network of human talent. Within the individual enterprise, outmoded human resources management philosophiesmustbereplacedbymodernapproachesthatmaximizethebrain contributiontotheproductsandservices,notjustthebrawncontribution.The emphasis of ASP in intelligent enterprises is on working smarter, not just TEAM LinG
  • 208. A 21st -Century Tool for Intelligent Enterprises 187 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. harder.ASPstrategyrequiresbusinessestorethinknotjusttheelementsofits economic milieu, but its political and social contexts as well. This does not suggestsomekindofradicalshiftawayfromtheprofitmotivetothequality-of- lifemotive.Butwedoendeavourtopointoutthatthisstrategypresentsboth risks and opportunities for every business in the 21st century. Much of this discussionimplicitlyrecognizesthatdoingbusinessinanintelligententerprise forcessuppliers,producers,andconsumersintofarcloserproximitywithone anotherthanisthecaseinanindustrialeconomy. Finally,weexaminetheproblemofredefiningsuccessinthebusinessenviron- mentofthe21st centuryinFutureTrends.Centraltothisdiscussionistheidea ofaddingvalueateachstageoftheinformationsystemslifecycle.ASP,asa formoftechnologicalaccomplishment,haslittlemeaningforintelligententer- prises, however, unless ASP’s Web services can be linked to business innovation.Thechallengeforbusinessprofessionalsistofindwaystoimprove businessprocessesbyusingWebservices. Thischapterhasbeenwrittentotakethereaderintothe21st -centuryISstrategy paradigm. Utmost attention is paid to integrate the current business and managementideaswiththedeploymentofASPasoneofthenewinformation technologies.Yet,thechapterisrootedintheconceptsthathaveemergedover thedecadesofdevelopmentoftheISdiscipline.ASPintermsofitsproducts and services has continued to evolve over its short history. As these changes haveprogressed,thelandscapeoftheInternettechnologyhasbecomecrowded with new services, technologies, products, and transmission media. As the Internethascontinuedtoevolvewiththediscoveryofnewtechnologiesandthe integrationof“older”technologiessuchasmobilecomputersandbroadband communications,newopportunitiesandmarketswithinthisareaofbusiness have opened up. ASP, as a form of electronic commerce, is the sharing of businessinformation,maintainingbusinessrelationships,andconductingbusi- nesstransactionsbymeansofcomputertelecommunicationsnetworks.Similar tothedevelopmentoftheInternet’sWorldWideWeb,ASPhasbeenchanging both the ways organization deal with one another and the way internal corporateprocessesarecarriedoutwiththeassistanceoftelecommunication infrastructures. The capabilities offered by ASP present an opportunity to redesignthebusinessprocessesofintelligententerprisesinordertoreachnew levelsofperformance. Theresearchwhichunderpinsthischapterwasnotconductedinisolationofthe workofothersintheISandrelatedfields.Intheremainderofthischapter,some oftheexistingliteraturewillbediscussedunderthevariousheadingsoftheory. TEAM LinG
  • 209. 188 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Manyexamplesandcasesthroughoutthetexthavebeendrawnfrominterna- tionalbusinessareas.Thepurposeistodescribesomeinterestingwork,which wasforerunnerandinspirationfortheresearch,whilemaintainingtheroleof theory and case studies within the interpretive tradition of IS research. The epistemology can be viewed as broadly interpretive, seeing the pursuit of meaningandunderstandingassubjective,andknowledgeasasocialconstruc- tion. Background Change usually takes a long time, and the technology that transformed enterprises and the economy is no exception. Why should anyone be over- wroughtabouttheslowgrowthofASP?Ittookmainframecomputersadecade or two to become central to most firms. In fact when IBM marketed its first mainframe computer, it estimated that 20 of these machines would fulfil the world’s need for computation! Minicomputers moved into companies and schools a little faster than mainframes, but they were also considerably less expensive.EventheubiquitousPCtook5to10yearstobecomeanimportant part of work life. The road travelled by these pioneers was rocky. Actual accomplishmentsseldommatchedthoseinitiallyenvisioned.Thereweresev- eralreasonsforthisshortfall—agenerallackofcomputerliteracyamongusers, agenerallackofbusinessliteracyandanignoranceofthemanagementroleby information specialists, computing equipment that was both expensive and limitedbytoday’sstandards,andsoon(McLeord,1993).SomeISreviewers believe that one error in particular characterized the early systems above all other: They were too ambitious. Firms believed that they could build giant informationsystemstosupportallmanagers.Withthebenefitsofhindsight,one can now describe systems designed then as being snowballed or the task attempted being unmanageable. However, some firms stuck it out, invested moreresources,andeventuallydevelopedworkablesystems—althoughmore modestinsizethanoriginallyprojected,whileotherfirmsdecidedtoscrapthe entiremanagementinformationsystemideaandretreatedtodataprocessing. Whenthefirstcomputerswereappliedtobusinessproblemsinthe1950s,there weresofewusersthattheyhadalmosttotalinfluenceovertheirsystems.That situationchangedduringthe1960sand1970sasthenumberofusersgrew.It thenbecamenecessarytoconsiderthecombinedneedsofalluserssothatthe TEAM LinG
  • 210. A 21st -Century Tool for Intelligent Enterprises 189 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. systemscouldfunctioninanefficientmanner.Duringthe1980sthesituation became even tighter when a new player entered the picture—the enterprise (McLeord,1993).Astageoforganization/staffrelianceoninformationsys- temsstartedinthemid-1980swithdemandsthatinformationsystemsincreased operational efficiencies and managerial effectiveness. On the backs of such evolution, strategic information systems gained importance as systems ex- pectedtohelporganizationscompete.Inthe21st century,informationsystems aredevelopedinanenterpriseenvironment. 21st Century: The Age of Information Society Beniger puts forth a seemingly influential argument that the origin of the informationsocietymaybefoundintheadvancingindustrializationofthelate 19th century(Beniger,1986).Accordingly,asindustrialplantsincreasedtheir processingspeed,theneedforincreasedresourcestocontrolmanufacturing and transportation resulted to a feedback loop wherein enterprises had to processinformationeverfaster.Fittingly,thedemandforsophisticatedinfor- mationprocessingequipmentresultedinthedevelopmentofcomputers.While the subsequent new technologies further pushed the development of an information society, the continuing cycles of demand pull and supply push account for the progress in the field. TheInternetissimplyaglobalnetworkofnetworksthathasbecomeanecessity inthewaypeopleinenterprisesaccessinformation,communicatewithothers, anddobusinessinthe21st century.TheInternetcontainsadistributedsoftware facilitythatorganizestheinformationonitintonetworkofinterrelatedelec- tronicdocumentscalledWorldWideWeb(WWW).WWWhaschangedthe faceofcomputing,bothindividualandenterprisesresultingintheexpansionof electroniccommerceattainment.TheInternetisregardedinthe21st centuryto be beyond a means of communication. It is also a source of information and entertainment that facilitates the development of electronic commerce. The initialstageofe-commerceensuredthatalllargeenterpriseshavecomputer-to- computerconnectionswiththeirsuppliersviaelectronicdatainterchange(EDI) therebyfacilitatingorderscompletedbytheclickofamouse.Unfortunately, mostsmallcompaniesstillcannotaffordsuchdirectconnections.ASPsensure TEAM LinG
  • 211. 190 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. accesstothisservicecostinglittleandusuallyhavingastandardPCissufficient toenterthismarketplace. The Internet has been a subject of enormous hype and speculation since its explosion in late 1980s. However, ASP can most certainly be said to be responsibleforthelatestdebatesurroundingitsusageforpurposesfarbeyond its original scope. By the late 1990s ASP-like business models were been applied by a proliferation of small businesses in the Western world thereby creatingwhatsometimesseemedacultstatuswithpeoplefrommanypartsof societytalkingabouta“newbreedofintelligententrepreneurs.” Beyondtheproblemsthatmayarisefromthesystematizationofinformation,we suggest there is within the discipline of ASP a model of infrastructure and contextwhichisfoundational,butinadequate.ThisisthecodemodelofASP, derivingfromtheworkofSleeperandRobins(2002)takingapragmaticlook attheemergingWebservicesmarket.Wewilldrawonanumberoftheoretical sources in a search for an improved foundation. A link is also made to the environmentrealitytheoryofperceptionproposedbyLittle(1999). Emergence of ASP TheearlyphaseofASPmodelappearedtorevisittheservicebureaumodelof the 1960s and 1970s (Currie, 2000). During this period, many companies signed outsourcing contracts with a service bureau. The fashionable term outsourcing was rarely used, as the more narrow facilities management contractsinvolvedmainframesdatacentresandbespokesoftware.Theservice bureaumodelwasmoderatelysuccessfulalthoughthereweremanytechnical, communications,andfinancialproblemswhichprecludeditfrombeingaviable optionformanycompanies. In this era, outsourcing will continue to undergo a significant shift from the centralizedcomputingofthe1960sand1970s,thedistributedcomputingofthe 1980s and 1990s, through to the remote computing in the 21st century. ASPs will play a central role since they will increasingly offer a utility model to customers where they will purchase applications on a pay-as-you-use basis (Currie,2000). Asthesehistoricalstageshaveevolved,thebasicstrategicresourcesandtools ofeconomicactivityhaveshifted,ashasthenatureofworkandculture.Inthe post-Net era, a term coined by editors of Issues of Strategic Information Systems for its special issue in 2002, the application of knowledge and TEAM LinG
  • 212. A 21st -Century Tool for Intelligent Enterprises 191 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. intellectualtechnologyinresponsetotheorganizedcomplexityoftechnology, organizationalandsocialinstitutionsbecomethecriticalfactorofproduction andservices. Thefindingsofourpreviousstudyprovidedsubstantialevidenceforthereality of the ASP industry in the United States and the transitional phase which the national economy has moved through in progressing to the ASP technology (Currie,2000).Moreover,thestudyalsoprovidedsupportforthenotionthat the basic sources of wealth had shifted from capital to information and knowledge resources. If ASP is a technological and economic reality, then whatisitsimpactonbusiness?Attheoutset,itisclearthattheInternet’simpact on business will evolve over time and will redefine our understanding of business management, competition, and productivity. While we have been livingwiththeconsequencesoftheInternetformanyyears,ourunderstanding oftheseshiftsinhumaneventshaslaggedbehindthereality. Ironically,thisdelayedeffecthasbeenparticularlyacuteinEuropeinrecent years,ascomparedtoJapanandtheUnitedStates.Forexample,intheUnited States, preliminary planning in moving that IT outsourcing toward an ASP modelemergedasageneralbusinessgoalinearly1980sandbylatel990shad beentranslatedintoafull-scaleeconomicdevelopmentstrategy.Moreover,by the late 1990s, the United States was beginning to assess its economic developmentstrategiesintheASPindustry,andtheimpactssuchpronounced shiftsinITindustryprioritieswouldhaveonbusiness. Eventoday,EuropeanbusinessandpoliticaldebatesoverISstrategicpolicy remaintiedtotraditionalviewsofoutsourcing.Manyseniorexecutivesstill remain sceptical or openly critical of the ASP phenomenon. These attitudes among corporate executives and senior managers betray some fundamental misunderstandingsnotonlyofthecurrentstateoftheASPindustryinEurope, butalsoofthetermsandconditionsunderwhichtheadvancedASPindustry intheUnitedStateswillcompetewithEuropeanbusinessinthefuture. Nearlyeveryparticipantinourresearchwithsmall-andmedium-sizedcompa- nies(SME)intheUKagreesthatimplementingASPsolution(whichsometimes results into automating certain work flows) without first making necessary fundamental changes and improvements are the wrong way to go about businessimprovement.That’sbecausenewandbetterproductsoftenreplace existing ones. At the same time much needed skills may not be backed up by positiondescriptionsandfunctionalstatements.Andtoooftenthepoolingof parallelandsimilaroperationsisnotconsideredwhenimplementinganASP solution. TEAM LinG
  • 213. 192 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Preliminary findings of our research show some conflicting stakeholders perceptionsforasuccessfulimplementationofsuchamodel.Thisnotonlyleads toabetterunderstandingoftheethicalissuesinvolvedbutalsoofthecomplex relationoftheseethicalissueswithothertechnical,organizational,andsocial issuesthatneedtobemanagedeffectively. Concerns AsevidencerelatingtherealityandbasicfeaturesoftheASPmarketcontinues to grow, there begins to be less concern about confirming that any structural economicshifthascontinuedhistorically,andmoreconcernaboutunderstand- ing how the ASP industry is performing, and its impact on productivity, investment,corporatecapitalformation,laborforcecomposition,andcompe- tition. The relationship between the traditional outsourcing and the “latest wave”e-sourcingontheonehand,andInternetinvestmentproductivityonthe other, is at the centre of the IT strategic problem confronting corporate managementinthe21st century. Intelligent Enterprise Business Environment Anintelligententerpriseexistswithinseveralenvironmentalelements.Theseare theenterprisesandindividualsthatexistoutsidetheintelligententerpriseand haveeitheradirectorindirectinfluenceonitsbusinessactivities.Considering intelligententerprisesareoperatingindifferentsectors,areaofemphasisand withdifferentpoliciesandstrategies,theenvironmentofoneenterpriseisoften notexactlythesameastheenvironmentofanother. Thebusinessenvironmentforintelligententerprisesincludestheenterpriseitself and everything else that affects its success, such as competitors, suppliers, customers, regulatory agencies, and demographic, social, and economic conditions.AproperlyimplementedASPbusinessmodelwouldprovidethe meansoffullyconnectinganintelligententerprisetoitsenvironmentalelements. As a strategic resource, ASP helps the flow of various resources from the elementstotheenterpriseandthroughtheenterpriseandbacktotheelements. Someofthemorecommonresourcesthatflowincludeinformationflowfrom customers,materialflowtocustomers,moneyflowtoshareholders,machine flowfromsuppliers,andpersonnelflowfromcompetitorsandworkers’union. TEAM LinG
  • 214. A 21st -Century Tool for Intelligent Enterprises 193 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Lookingattheenvironmentofintelligententerprises,onecanseeageneralized theory of enterprise’s perception (Little, 1999). The theory is sufficiently imaginativelymotivatedsothatitisdealingwiththerealinnercoreoftheASP problem—withthosebasicrelationshipswhichholdingeneral,nomatterwhat special form the actual case may take. Anintelligententerprisecansucceedonlybyadaptingitselftothedemandsof its external environment, which is often represented by a number of groups (formallycalledstakeholders)thataffecttheorganization’sabilitytoachieveits objectives or those affected by it. Stakeholders other than participants and customersformanotherimportantpartofthecontext.Stakeholdersarepeople withapersonalstakeinanASPsystemanditsoutputseveniftheyareneither itsparticipantsnoritscustomers.Permanentamongsuchgroupsarecustom- ers, distributors, competitors, employees, suppliers, stockholders, venture capitals,tradeassociations,governmentregulators,andprofessionalassocia- tions.Animportantrolefortheinformationsystemsistokeeptheorganization informedoftheactivitiesofallthesestakeholders. Zwass (1988) describes an organization as an artificial system. He further defines an organization as a formal social unit devoted to the attainment of specificgoals.Withnotificationthatabusinessenterprise,asasystem,hasto generateprofitthoughitmayalsopursueotherobjectives,includingemploy- mentprovision,andcontributingtoitscommunitygenerally.Zwass(1988)also restricts the value measurement of an artificial system to two major criteria: effectiveness (the extent to which a system achieves its objectives) and efficiency(theconsumptionofresourcesinproducinggivensystemoutputs). Consideringthatintelligententerprisescompeteinaninformationsociety,the requirementsforsuccessfulcompetitiondependsontheenvironment.Inthe case of ASP, such environment presents several serious challenges, and the role of intelligent enterprises information systems has evolved over time as competingenterprisesattempttomeetthesechallenges.Fewenterpriseshave, however,identifiedopportunitiesfordeployingstrategicinformationsystems that have proven success in the competition process by analyzing the forces actinginthemarketplaceandthechainsofactivitiesthroughwhichtheydeliver products and services to that marketplace. Infrastructure Issues Infrastructure is the resources the system depends on and shares with other systems.Infrastructureistypicallynotunderthecontrolofthesystemsitserves TEAM LinG
  • 215. 194 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. yetplaysanessentialroleinthosesystems.ForASPthetechnicalinfrastructure typicallyincludescomputerhardware,telecommunicationfacilities,andappro- priatesoftwaredesignedtorunontheInternet.Examininginfrastructuremay revealuntappedopportunitiestouseavailableresources,butitmayalsoreveal constraintslimitingthechangesthatcanoccur. Evaluationofinfrastructureisoftendifficultbecausethesameinfrastructure maysupportsomeapplicationsexcessivelyandothersinsufficiently.Drawing fromPorterandMillar’s(1985)theorythat“Informationsystemsarestrategic to the extent that they are used to support or enable different elements of a enterprise’sbusinessstrategy,”thischapterproposesaframeworkthatISin largerorganizationalsystemsmayenabletheireffectiveoperationormaybe obstacles (Porter Millar, 1985). In an earlier paper, we use the United Kingdom’sNationalHealthService’ssysteminfrastructureandcontextastwo distinctmeansofdeterminingimpactonlargersystems(GuahCurrie,2002). Infrastructure affects competition between businesses, geographic regions, andevennations.Inadequateinfrastructurepreventsbusinessinnovationand hurtsintelligententerpriseefficiency.Whileeveryinternationalbusinessman/ women can see that things have changed vastly in most of Africa and South America,thesignificanceofinfrastructureasacompetitiveenablerorobstacle has clearly not changed. That is because infrastructure consists of essential resourcessharedbymanyotherwiseindependentapplications.Alocalregion’s physicalinfrastructureincludesitsroads,public,transportation,powerlines, sewers, and snow removal equipment. Its human and service infrastructure includespolice,fire,hospital,andschoolpersonnel.Aregion’sphysicaland humaninfrastructurecanbeeitheranenableroranobstacleandisthereforea central concern in many business decisions. The importance of certain IS infrastructureelementsserveasakeymotivationforthesuccessfulimplemen- tationofASP.TherequiredISinfrastructureraisesabroadrangeofeconomic, social, and technical issues such as who should pay for infrastructure? Who shouldhaveaccessto/controloverthemandatcost?Whichtechnologyshould itinclude?WhereASPisinvolved,theeconomicquestionoftenputstelephone companiesagainstcablecompanies,bothofwhomcanprovidesimilarcapa- bilitiesformajorpartsofthetelecommunicationssystem.Fromcertainview- points, it can be considered the responsibilities of government to ensure a nationalITinfrastructureisavailableasakeymotivationforthepreviouslybuzz words“informationsuperhighway.” Justaslocalregionsdependonthetransportationandcommunicationinfra- structure, infrastructure issues are important for ASP implementation and TEAM LinG
  • 216. A 21st -Century Tool for Intelligent Enterprises 195 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. operation. These systems are built using system development tools; their operationdependsoncomputersandtelecommunicationnetworksandonthe ISstaff.Deficienciesinanyelementofthehardware,softwareorhumanand serviceinfrastructurecancrippleaninformationsystem.Conversely,awell- managedinfrastructurewithsufficientpowermakesitmucheasiertomaximize businessbenefitsfromASP. Inadequacy of Existing Infrastructure Most people would agree that motorways such as the M4, M6, and M1 together with railways up and down the country are a part of the UK’s transportationinfrastructure.Transportationisvitaltotheeconomy;itmakes themovementofgoodsandpeoplepossible.Economicinfrastructureprovides afoundationonwhichtobuildcommerce.Isthereatechnologyinfrastructure? At the national level, there is a communications infrastructure in the form of networks that carry voice and data traffic. In recent years, the Internet has become an infrastructure that ties a wide variety of computers together. The Internethighlightsthefactthataninnovationwhichbeganasanexperimentcan maturetobecomepartoftheinfrastructure. InfrastructurebeginswiththecomponentsofASP,hardware,telecommunica- tion networks, and software as the base. A human infrastructure of IS staff membersworkwiththesecomponentstocreateaseriesofsharedtechnology services. These services change gradually over time and address the key businessprocessesoftheintelligententerprises.Noninfrastructuretechnology isrepresentedbyapplicationsthatchangefrequentlytoservenewstrategies andopportunities(Weill,Broadbent,Butler,1996). Itsoundsinpracticethatmuchofthejustificationforinfrastructureisbasedon faith. Weill (1993) did find one firm with a creative approach to paying for infrastructure. The company required careful cost-benefit analysis of each project.Whenthisshowedhigher-than-necessarybenefits,itwasloadedwith infrastructure costs to take up the slack. In essence, the company added in “infrastructuretax”toprojects,notunlikeairlinetickettaxestopayforairports. Infrastructureisvital,butinvestmentsinitarehardtojustifyifyouexpectan immediatereturn.TheSingaporeexamplepresentstheclassiccaseforinfra- structure;asmallamountinvestmentandguidancecreatesafacilityonwhich many organizations can build. Networking in Singapore has the potential to transform the nature of commerce on the island and to help achieve the city- state’sgoalsforeconomicdevelopment. TEAM LinG
  • 217. 196 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Telecommunications: Facilitating ASP Emancipation Telecommunicationsistheelectronictransmissionofinformationoverdis- tances. In recent years this has become virtually inseparable from computer withapairedvaluethatisvitalforintegratingenterprises.Mostenterprisesin the 21st century have access to some form of telecommunication network, which is simply an arrangement of computing and telecommunications re- sourcesforcommunicationofinformationbetweendistantlocations.These enterprisesareusuallyusingoneoftwotypesoftelecommunicationsnetworks which can be distinguished by their geographical scope: local area network (LAN)andwideareanetwork(WAN).LANisaprivatelyownednetworkthat interconnectsprocessors,usuallymicrocomputers,withinabuildingorona compoundthatincludesseveralbuildings.Itprovidesforahigh-speedcommu- nicationwithinalimitedareawhereuserscansharefacilitiesconnectedtothe network.Ontheotherhand,WANisatelecommunicationnetworkthatcovers a large geographical area which large businesses need to interconnect their distantcomputersystems.Computernetworksdifferinscopefromrelatively slow WAN to very fast LAN. There are several topologies and channel capacitiesresponsible,whichtheobjectiveofthischapterdoesnotpermitof adetailedexploration. ASPs use WAN as a fundamental infrastructure to employ a variety of equipment so that the expensive links may be used efficiently. The various equipmentscontrolthemessagetransfersandmakesharingthelinksamonga number of transfers possible. An increasing number of ASP customers have user PCs that are connected to a LAN that communicate with the WAN via a gateway. In certain cases the ASP may offer common carriers and provide value-addedservicethatcanbecombinedwithprivatenetworkstocreatean overallenterprisenetwork. Asane-commercephenomenon,afewoftheessentialsofanASPinfrastruc- ture are common carriers, value-added networks, private line, and private networks. Common carriers are companies licensed, usually by a national government,toprovidetelecommunicationsservicestothepublic,facilitating thetransmissionofvoiceanddatamessages.Asmostcountriespermitonlyone common carrier, the service can be broken down and leased as value-added networkstovendorswhothenprovidetelecommunicationservicestotheirown customers with added values that could be of various sophistication. For increasedspeedandsecurity,anenterprisemaynotwanttosharewithothers andcouldtaketheoptionofleasingitsownprivatelinesorentirenetworksfrom TEAM LinG
  • 218. A 21st -Century Tool for Intelligent Enterprises 197 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. acarrier.Ithasbeenproventhatleasinglinkscanresultinsavingsfromhigh- volumepoint-to-pointcommunications. TheabovearetheapparatusthroughwhichanASPusestelecommunications togiveitscustomerthecapabilitytomoveinformationrapidlybetweendistant locations and to provide the ability for their employees, customers and supplierstocollaboratefromanywhere,combinedwiththecapabilitytobring processing power to the point of the application. As shown earlier in this chapter, all this offers an ASP customer the opportunities to restructure its businessandtocapturehighcompetitivegroundinthemarketplace. Security Considering the ASP industry is riding on the back of Internet’s overnight success,thehighlypublicizedsecurityflawshaveraisedquestionsaboutASP’s suitabilitytoserveasareliabletoolforthepromotionofintelligententerprises forthe21st century.AnASPvendorcouldbeforgivenforthinkingtheprimary servicetoitscustomersistoprovideconnectionsbetweenpossiblymillionsof computerslinkedtothousandsofcomputernetworks.However,thepreven- tion of unauthorized users who steal information during transmission, who sabotage computers on the network, or who even steal information stored in thosecomputersaremajorpartsofthevendor’sresponsibilities.Exploitingthis flawmightpermithackerstogaincontrolofdesignatedserversandthenaccess ordestroyinformationtheycontain.Aslongastheserisksarenotasfarfetched asonemighthope,customerswouldcontinuetobewaryabouttheuptakeof ASP business model (Currie, Desai, Khan, Wang, Weerakkody, 2003). The many break-ins and other general security problems occurring with Internet/intranet demonstrate some of the risks of engaging in any form of businessmodellinkingtotheInternet.ManyASPvendorshavetriedtoreduce thedangerusingfirewallsandencryptions,butsuchmaneuversnotonlyreduce risk,buttheyalsoreducetheeffectivenessofanetworkedenvironment.The IT community has generally accepted that effective use of encryption and firewalltechniquescouldeliminatemuchoftheriskrelatedtounauthorized access and data theft. Doesanymathematicalencryptionguaranteeabsolutesecurity?No.Justasa physical lock cannot provide absolute safety, encryption cannot guarantee privacy—ifathirdpartyusesenoughcomputersandenoughtime,theywillbe able to break the code and read the message. However, by choosing the TEAM LinG
  • 219. 198 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. encryptionmethodcarefully,designerscanguaranteethatthetimerequiredto breakthecodeissolongthatthesecurityprovidedissufficient.Itisadvisable that intelligent enterprises keep this principle in mind when thinking about Internetsecurity.Whensomeoneassertsthatanencryptionschemeguarantees security,whathe/sheactuallymeansisthatalthoughthecodecanbebroken, theeffortandtimerequiredisgreat.Thus,anencryptionschemethatrequires longer time to break than another scheme is said to be “more secure.” However, a good proportion of the SMEs surveyed did not appreciate that many ASP vendors have tried to reduce the danger using what is called firewalls—computersthatinterceptincomingtransmissionsandcheckthemfor dangerouscontent.Somefearthatthemereprocessofdownloadinginforma- tion across the Internet may entail hidden risks. As far as performance goes, somevendorsareconsideringarrangementswithnationaltelecommunication giantsforbetterdataaccessfacilitiesoverWAN.Thetrendtowardsderegulating telecommunicationsmustcontinuegloballyfordataratestobecomeamuch lessimportantrestrictioninthefuture. Obstacles to a Commercial Future Thepowerfultrendtowardanetworkedsocietyhasmanycomponents,starting withthefactthatuseofonlinenetworksisexploding.Intelligententerprisesof the21st centuryrequiretoolsthattakeadvantageofthemillionsofpeoplewho have used computer networks for business and personal uses. These enter- prisesoomphonthefactthate-mailsandelectronicbulletinboardsarenotonly commonplaceinleadingbusinessesbutalsousedforpurposesrangingfrom answering customer service inquiries to exchanging views about personal topics and politics. Reinforcing these trends, ASP vendors are building the network capabilities into their products for intelligent enterprises to see the Web services as an important turning point for commercial opportunities because it has made the Internet so much more accessible and adaptable for nontechnicalbusinessusers. Many obstacles are currently apparent, however, when one looks at the possibilitythatASPwillbecomeamotivationaltoolforintelligententerprises inthe21st centuryandamajordeterminantforthefutureofInternetinfluence ontheworld’spopulation. The areas of concern, relate to organization, security, online performance, freedom and control, competition, and hype versus substance. The issue of TEAM LinG
  • 220. A 21st -Century Tool for Intelligent Enterprises 199 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. organizationisbasedonthewayASPhasevolved.TheASPindustrylacksthe type of clear organization that would make it easy to use as a reliable and profitable business model. Although ASP vendors’ former capacity was dauntingandstrategywasunproven,theadventofWebserviceswillmakeit far easier to comprehend and even adapt. LookingbackattheInternet’shistory,oneseesmanyincidentsthatraiseissues about freedom and control. Major Western nations (United States, UK, France, etc.) have either proposed or passed legislation related to criminal penaltiesfortransmitting,accessing,orinterceptingdataoftheInternetillegally. AlthoughtheInternethasbeenunregulatedinthepast,seriousconsiderationof ASP-likebusinessmodelcouldresultinmorelegislation. ASP as Competitive Investment Thefundamentaldefinitionofwhatconstitutesamission-criticalapplication remainsrelativelyunchanged;itisthoseapplicationswhereeventhesmallest amountofdowntimewillhaveasignificantnegativeimpactonanenterprise’s operational efficiency and bottom line. But the nature of what intelligent enterprises now deem to be mission-critical systems has altered with a far greaterrangeofapplications. Onewaytointerestamanagerinanewinnovationistoshowthatacompetitor is planning to adopt this innovation. Intelligent enterprises do respond to competition to avoid being put at a disadvantage. Banks provide a good exampleofinvestmentintechnologyforcompetitivereasons.Inanearlystudy ofATMdeployment,BankerandKauffman(1988)foundthatATMadoption providedalimitedadvantagetocertainbanks.Thefindingssuggestanearly advantagefrominstallingATMsandjoiningalargenetwork.Customersclearly likeATMsandtheinterconnectionstothebankingnetworkitprovides:there is very little reason for a bank not to join an ATM network. In fact, because competitors offer ATMs and are in networks, a new bank is almost forced to investinthistechnology.In2002,ATMsarecertainlycompetitivenecessities forbanking.SomebanksareclosingexpensivebranchesandinstallingATMs instead.However,sinceallbankscanfollowthisstrategy,itisunlikelyonewill gainasignificantadvantagefromit. TheairlineindustryoffersanotherexampleofISasacompetitivenecessity.To startanairlineinthe21st century—especiallyintheUKandUnitedStates,you wouldhavetoinvestinsomekindofASPserviceformakingareservation.The TEAM LinG
  • 221. 200 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. travellingpublichasbecomeaccustomedtobeingabletomakereservations andobtainticketseasily,eitherphysicalorelectronic. Investmentsforstrategyandtomeetacompetitivechallengemaynotactually benefittheenterprisemakingthem.Anenterprisemaybeforced,asinthetwo examples mentioned earlier, to adopt new technology to stay even with the competition. In this case, it is not so much return on investment in ASP, but ratherwhatisthecostofnotinvesting.Willanenterpriselosecustomersand market share because it does not have a particular technology in place? Can you enter a new line of business without investing in the technology that competitors have adopted? What kinds of services do customers expect? ASP Implementation Strategies Thestrategyonechoosesforimplementationhasadirectimpactonthelevel of investment required for an ASP initiative. One strategy is to hire external expertise;eithertodeveloptheentireapplicationortoworkwiththeinternal ISstaff.ConsultantshavebeenavailablefordevelopingASPinvestmentssince the first systems appeared. Consultants will provide advice, and many will actually undertake the development of the IT application. Carried to an extreme,theenterprisecanoutsourcethedevelopmentandeventheoperation of an ASP application. There are a number of network providers who offer completexSPservices(vertical,horizontal,pureplay,etc.)andanenterprise mightoutsourceitselectronicdatainterchangeeffortstothem. Themajoradvantageofusingconsultantsandoutsourcingistheavailabilityof external expertise. ASP is so complex and difficult to implement that most intelligententerprisesincludeabudgetforhelpfromaconsultingenterprisethat hasextensiveexperiencewiththispackage.Whentheenterpriseentersintoa consultingoroutsourcingagreementforanASPinitiative,itshouldbeaware oftheneedtomanageitsrelationshipwiththesupplier.Enterprisesthathave delegatedtheresponsibilityfordevelopinganewASPapplicationtoanoutside enterprisegenerallyhavebeenunhappywiththeresults.Managersstillhaveto monitortheagreementandworkwiththesupplier.Thereareexamplesofmany very elaborate management committees and structures established at enter- prises such as Microsoft, UNISYS, and IBM to manage outsourced IS. Evidencewithinthepast3yearshaveshownthatsituationcandevelopinwhich large numbers of insurmountable problems arise with issues that, in an ASP vendor’s opinion, were going to cause lasting impediments to the ultimate TEAM LinG
  • 222. A 21st -Century Tool for Intelligent Enterprises 201 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. systemsimplementation.Amongseveralvendoroptionsweretheseprimary four: 1. ImplementedtheISasbestastheycouldwithintheseconstraints; 2. Demonstrated unpalatable objection to the problem owners and set conditionsforeventualcompletionsofwork; 3. Strove to ignore the problems and created the system as if they did not exist;and 4. Completelyrefusedtocontinueworkregardlessofsystemphase. Whileeachoftheabovecourseshasquiteaseriousimplication,thefirstoption was most taken. IntelligententerprisesshoulddeterminetheuptakeofASPbasedontheirlong- termISplanandonrequestsforinformationsystemsbyvariousstakeholder, that is, the prospective users, corporate management, internal IS team, customer,andsupplieraccessibility.ItisnotsufficienttoimplementASPforthe competitive edge the system may give the enterprise or the high payoff the system promises. The past phase of ASP has proven that not all systems that appearpromisingwillproducesufficientbusinessresultstojustifytheiracqui- sition.However,itisnosurprisethatcertainintelligententerprisesstillfindit difficulttoevaluatetheworthofprospectivenewtechnology. BorrowingfromCheckland’sHumanActivitySystem(HAS)concept,anASP vendorwillhaveproblemswithcertainstakeholdersandsurroundingissues (Checkland Scholes, 1990): 1. Client: the system’s beneficiary can be difficult to identify due to the outsourcingnatureofASPbusinessarrangements. 2. Owner: the eventual system owner may be anywhere between the negotiatingpartytoafourthpartysomewhereandinsomecasesnotable toparticipateintheoriginalnegotiations. 3. Actor:theseareoftenindividualsandgroups—ofvarioustypesandwith various needs—who are usually involved in the system are different stages. 4. Objective:whattheprojectisintendedtoachieveishighlydependenton theprocessanditcanoftenbedifferentforvarioususersandstakehold- ers. TEAM LinG
  • 223. 202 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 5. Environment:thesituationinwhichthesystemwillbedevelopedand implementedgrosslyaffectsthefinaloutcomeoftheprocess. 6. Expectation: there are often as many assumptions of a project as the numberoftimesitisdiscussed.Moreimportant,theseassumptionstend tochangeasonegoesthroughvariousstagesofthesystemdevelopment andimplementation. Theissuehereisnotjustoneofinvestment;italsoinvolveslearningandtime. There is a learning curve, sometime quite steep, with new technology. If the enterprisehasnotdevelopedamoderninfrastructureovertime,itwillhaveto investmoreforanewASPinitiativebecauseoftheneedtobuildinfrastructure. It will also have a longer development time as the IS staff learns about this infrastructureanddevelopsthenewapplicationsthatrequireit. Problem, Solution, or Opportunity? OnestimulusforASPsolutionimplementationisitsintentiontotransformthe enterprise. In this light, the investment in ASP is part of a larger change programmethatismeanttoenableintelligententerprises’virtualandmultiple- team structures. The resulted contributions can be described as part of the outcome of a general change effort. Change is also an opportunity. For most ofthecompaniesinvolvedinourresearch,managementdecidedonadesired organization structure and used IT investments to help create it. Managers planned for change and welcomed it as an opportunity to make the entire organizationfunctionbetter.Changeisalwaysathreat,asstaffsareforcedto alterbehaviorthathasprobablybeensuccessfuluntilnow.However,asshown insomeoftheexamplesinthisbook,changeisalsoanopportunitytoreshape intelligententerpriseandmakethemmorecompetitive. The push towards greater connectivity is a major factor driving ASP invest- mentsinthe21st century.TheUK’sDepartmentofTradeandIndustry(DTI) hasencouraged(somewouldsaymandated)acertainlevelofEDIcompliance forcompaniesthatwishtodobusinesswithit.Industryassociationsencourage companiestocommunicateelectronically.Efficientcustomerresponse,EDI, just-in-time, continuous replenishment programs, and the Internet are all examplesofdifferentkindsofelectronicconnectivity. TEAM LinG
  • 224. A 21st -Century Tool for Intelligent Enterprises 203 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. For the successful implementation of ASP in the 21st century, organizations must maintain a socio-technical perspective, thereby avoiding the purely technologicalapproachtoachievinghigherproductivity.Ratherbalancingthis actwiththeconsiderationofsocialandhumanaspectsoftechnologybringsthe added value of creating a workplace that will provide job satisfaction. Such information systems must be designed to fit the needs of its users and the organization at large and be capable of evolving as these needs invariably change.Suchethicalconsiderationsofinformationsystemshavemovedintothe forefrontasinformationsystemshavebecomepervasiveinmodernbusinesses. Ethics,forthemostpart,involvemakingdecisionsaboutrightandwrongand notnecessarilyaboutpossibleandimpossibleandremotelyrelatestoproduc- tionincreaseordecrease.Themajorethicalissuesthathavebeennoticedtobe affectingintelligententerprisesinformationsystemsinthe21st centurycanbe summarizedintoprivacy,accuracy,property,andaccess. In an effort to modernize every challenging intelligent enterprise in the 21st century seems to be jumping on the ASP bandwagon. There comes a point whentheindustryanalystsshouldimplementthecriticalsuccessfactor(CSF). The CSF methodology—developed by John Rockart of the Massachusetts Institute of Technology—is defined as those few critical areas where things mustgorightforthebusinesstoflourish—derivesorganizationalinformation requirementsfromthekeyinformationneedsoftheindividualexecutivesor managers. CSF methodology is oriented toward supporting an enterprise’s strategicdirection.BycombiningtheCSFsofthesemanagers,onecanobtain factors critical to the success of the entire enterprise. Such an approach has been proven to be useful in controlling quality of the information system in certainverticalsectors(BergeronBégin,1989). Effects of ASP on IS Departmental Staff Employee involvement is an employee’s active participation in performing workandimprovingbusinessprocess(Alter,1996).Theold-fashionedview ofemployeeinvolvement—employeefollowingtheemployer’sinstructionin returnforawage—encouragesemployeestobepassive,takelittleinitiative, andoftenviewthemselvesasadversariesoftheenterpriseanditsmanagement. Incontrast,trulyinvolvedemployeesfeelaresponsibilitytoimprovetheirwork practiceswiththehelpofmanagersandothersintheenterprise. ASPcandirectlyaffectemployeeinvolvement.ASPcangenerallybedeployed inwaysthatincreaseordecreaseemployeeinvolvementintheirwork.AnASP TEAM LinG
  • 225. 204 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. businessmodelthatprovidesinformationandtoolsforemployeesincreases involvementbecausetheyreinforcetheemployee’sauthorityandresponsibility forwork.Ontheotherhand,anASPbusinessmodelthatprovidesinformation tomanagersorqualityinspectorsbutnottheiremployeescanreduceinvolve- mentbyreinforcingthesuspicionthattheemployeeisnotreallyresponsible. Thehumanandservicesideoftheinfrastructureinintelligententerprisesoften gets short shrift in discussions of new systems or system enhancements. Businessprofessionalsareoftensurprisedattheamountofeffortandexpense absorbedbythehumaninfrastructure.Thetendencytowardsorganizational decentralizationandoutsourcingofmanysystem-relatedfunctionsmakesit even more important to include human infrastructure in the analysis of new systems. Human Factors in ASP Technologies Development Therapidrateofdevelopmentofthesetechnologicalmiracles,astheywould havebeenviewedfromanearlierage,hascreatedamomentumofitsown,and it is not surprising that concomitant concerns have also developed about the impactandinfluenceofASPonhumansociety.Theshrinkingoftimeandspace enabledbyASPhasbenefitsintermsoftaskefficiencyandwidercapabilityfor communication,butitislessobviousthateaseofmanagementorevenstress at work are improved at a deeper level (Markus, 1983). TheabovediscussionshouldnotbetakentoimplythatASPmodelsdetermine thedirectionofintelligententerprisemanagement.Thedevelopmentandtheuse ofanASPsolutioniswithinmanagementcontrolandthereisnoinevitablefuture path. However, it can be argued that the quantity and quality of debate about the human and societal impact of computers and related technology has not matchedthatrateofdevelopmentofthetechnologiesthemselves(Walsham, 1993). For example, the debate concerning ASP and its Web services in intelligententerpriseslargelycentresonquestionsofstrategicimportanceand valueformoneyratherthandeeperissuesofhumanjobsatisfactionandquality oflife. While the mechanistic view of enterprise formed the early foundation of an intelligententerprisemanagement,theimageofenterprisesasorganismshas arguablybeenthemostinfluentialmetaphorformanagementpracticeoverthe lastfewdecades.Thecorporealviewseesintelligententerprisesasanalogous tolivingsystems,existinginawiderenvironmentonwhichtheydependforthe TEAM LinG
  • 226. A 21st -Century Tool for Intelligent Enterprises 205 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. satisfactionofvariousneeds.Theoriginsofthisapproachcanbetracedback totheworkofMaslow(1943),whichdemonstratedtheimportanceofsocial needsandhumanfactorsinworkactivitiesandenterpriseseffectiveness.Itthen emphasized that management must concern itself with personal growth and development of its employees rather than confining itself to the lower-level needsofmoneyandsecurity. WithrespecttosocialrelationsasconsideredinWebmodels,itisimportantto notethatparticipantsincludeusers,systemdevelopers,seniormanagementof thecompany,andanyotherindividualsorgroupswhoareaffectedbytheASP business model. Kling (1987) notes that computing developments will be attractivetosomeenterpriseparticipantsbecausetheyprovideleveragesuch as increasing control, speed, and discretion over work, or in increasing their bargainingcapabilities.Fearoflosingcontrolorbargainingleveragewilllead someparticipantstoopposeparticularcomputingarrangements,andtopro- posealternativesthatbetterservetheirinterests. It could be said that the above comprises the analysis of what Checkland (1983)definesastheHAS.HAScanbeseenasaviewonthesocial,cultural, ethical,andtechnicalsituationoftheorganization.Bothmodelsdealwithone old problem that continues to trouble information systems today. That is, thinking about the means by which to deal with the two aspects of any new system(humanbeingsandtechnology)andhowtheycanbestcommunicate witheachother.AsitrelatestoASP,theindustrymustbringtogethertheright mixofsocial(humanresources)andthetechnical(informationtechnologyand othertechnology)requirements.Hereiswherethekeyhardwareandidentified humanalternatives,costs,availability,andconstraintsaremarriedtogether. AsynopsisofanISproblemusuallyappearschaoticandincomprehensible.An exampleistheNHSISstrategyasofDecember2001(GuahCurrie,2002). The use of a problem framework will not only show the essence of a view of theproblemcontextbutalsodemonstratethatgettingthecontextandmeaning of the problem right is more important than presentation. The primary tasks should reflect the most central elements of what is often called “problem setting.” ASPvendorsshoulddemonstrate,whenreviewingagivensituation,thatany incoming IS is intended to support, develop, and execute primary tasks originally performed by humans. They should be aware of issues that are matters of dispute that can have a deleterious affect upon primary tasks. In terms of the IS, the issues are often much more important than the tasks. Consideringitisnotpossibletoresolveallissueswithanygiventechnology, TEAM LinG
  • 227. 206 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. theyshouldalwaysbeunderstoodandrecognized.Thatisbecauserealityreally is complex, so the ASP industry should never approach a problem situation withaconceitedorinflatedviewofitsowncapacity.Notallproblemscanbe mapped, discussed, and designed away. Often the ASP industry will be requiredtodevelopaformofamnesiatowardscertainproblemsthatareeither imponderableortoopolitical,intermsoftheorganizationorbusiness(Guah Currie, 2002). A detailed understanding of the above will help in providing a reasonable answer to certain essential questions that are necessary for an ASP to satisfactorilyproduceworkingsolutionsforitscustomers.Afewofthegeneral questions are who is doing what, for whom, and to what end? In what environmentisthenewsystemtobeimplemented?Towhomisthefinalsystem goingtobeanswerable?Whatgapswillanyadditiontotheoldsystemfillwithin thenewsystem? Socio-Technical Issues AnintelligententerprisenormallyhasseparateobjectiveswhenlookingatISin termsofsocialandtechnicalrequirements.Whilethesocialobjectivesreferto theexpectationsofmajorstakeholders(i.e.,employees),thetechnicalobjec- tives refer to capacity of the organization as a whole to react to key issues. Because the social objectives of an ASP solution can broadly be seen as the expectations of the system in terms of the human beings who are going to be workingwithit,theywillvaryfromoneproject/contracttoanother.Astheyare oftenundervalued,managementdoesnottendtofeelthatthesocialneedsof asystemareascriticalforsystemdevelopmentastechnicalissues.Theymay involvedifferentwaysoforganizingindividualstoundertaketheworkrequired forthesystem,simultaneouslyachievingtheauthoritativeinfluence. Thetechnicalobjectivesaretheprimarytasksonehopesthatthesystemwill needtoundertakeandwouldthereforeneedtobeveryspecific.Itisimportant thatASPvendorsindicatetotheircustomersthedepthofdetailitneedstogo into. Selecting Information Systems ASPsolutionscomeinvariousforms.Ideally,selectingamongthealternatives shouldbebasedonclearlystateddecisioncriteriathathelpresolvetrade-offs TEAM LinG
  • 228. A 21st -Century Tool for Intelligent Enterprises 207 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. and ASP uncertainties in light of practical constraints and implementation capabilities. The trade-offs for intelligent enterprises include things such as conflictingneedsofdifferentbusinessprocesses,conflictsbetweentechnical purityandbusinessrequirements,andchoicesbetweenperformanceandprice. Theuncertaintiesincludeuncertaintyaboutthedirectionoffuturetechnology andaboutwhatisbestfortheenterprise.Implementationdecisionsarealmost nevermadebyformulabecausesomanydifferentconsiderationsdonotfitwell intounderstandableformulas. Althoughtheseideasprovidesomeguidanceandeliminatesomeoptions,there isnoidealformulafordecidingwhichsolutionandcapabilitiestoinvestin.Many ISdepartmentscoulddoubleandstillnothaveenoughpeopletodoallthework users would like. In practice, many IS departments allocate a percentage of their available time to different project categories, such as enhancements, majornewsystems,andusersupport.Butwitheachcategory,theystillneed to decide which systems to work on and what capabilities to provide. Cost- benefitmayhelpwiththesedecisions. Cost-benefit analysis is the process of evaluating proposed systems by comparing estimated benefits and costs (Alter, 1996). While the idea of comparingestimatedbenefitswithestimatedcostsmaysoundlogical,thereare several limitations in terms of ASP business model. One could see the appropriateness when the solution’s purpose is to improve efficiency. But wherethesystemismeanttoprovidemanagementinformation,transforman enterprise,oreventoupgradetheISinfrastructure,itbecomesterriblydifficult to predict either the benefits or the costs of the solution. Considering cost- benefitanalysesareusuallydonetojustifysomeone’srequestforresources,the numbers in a cost-benefit study may be biased and may ignore or understate foreseeablesolutionrisks(Alter,1996).Keyissuesforcost-benefitanalysis includethedifferencebetweentangibleandintangiblebenefits,thetendencyto underestimatecosts,andtheeffectofthetimingofcostsandbenefits. Agent-Based Approach to ASP MostoftheASPapplications,mentionedinthischapter,automatesomeaspect oftheprocurementprocesses,therebyhelpingdecisionmakersandadminis- trationstafftocompletetheirpurchasingactivity.Anagent-basedapproachto ASPiswellequippedtoaddressthechallengesofmultimarketpackagetoe- procurement. This section of the chapter is devoted to looking at the goal- TEAM LinG
  • 229. 208 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. drivenautonomousagentswhichaimtosatisfyuserrequirementsandprefer- ences while being flexible enough to deal with the diversity of semantics amongstmarkets,suppliers,serviceproviders,andsoforth. Service agents within the ASP model are the system’s gateway to external sourcesofgoodsandservices.Theseagentsareusuallyawareofthesource’s market model and of the protocols it uses (Zhang, Lesser, Horling, Raja, Wagner,2000).Serviceagentsarenotonlyabletodeterminewhichrequests it can service, but also proactively reads these requests and tries to find an acceptablesolution. Agent technology has been widely adopted in the artificial intelligence and computer science communities. An agent is a computational system that operatesautonomously,communicatesasynchronously,andrunsdynamically on different processes in different machines, which support the anonymous interoperationofagents.Thesequalitiesmakeagentsusefulforsolvingissues ininformation-intensivee-business,includingspeakingontology,advertising, serviceexchange,knowledgediscovery,andsoforth.IntheASPindustry,the interoperationandcoordinationacrossdistributedservicesisveryimportant. Thedesireformorecostefficiencyandlesssuboptimalbusinessprocessesalso drivestheemploymentofagenttechnologyintheASPbusinessmodel.Thishas resulted to the support of agent technology, more ASP agents seem to be appearingontheInternetprovidinge-servicesaswellasexchanginginforma- tionandgoodswithotheragents.TheinteroperationofASPagentsleadstothe formation of the e-Business Mall, which is an interaction space of agent communitiesundervariousbusinessdomains. Asindicatedinthischapterandelsewhereinthisbook,thesignificantproblems in the ASP business model are the information deficiency and asymmetry between the business participants. It is also difficult for each participant to exchange information products and services in an efficient manner, and to partnerinanintelligententerprise.Thesocialnatureofknowledgesharing— especiallycriticalbusinessknowledge—carrieshighcomplexity.Thecapabil- ity advertisement and knowledge discovery, upon which agent-based ap- proachtoASPdepends,canonlybeachievedbymessageinteractionamong dynamic processes. Knowledge or service relevance is one basis for such approach to be introduced to real-life business procedure and service con- tractinginthe21st centurybyintelligententerprises. TEAM LinG
  • 230. A 21st -Century Tool for Intelligent Enterprises 209 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Tangible and Intangible Benefits Benefitsareoftenclassifiedaseithertangibleorintangible.Thetangiblebenefits of ASP solution can be measured directly to evaluate system performance. Examplesincludereductioninthetimeperphonecall,improvementinresponse time,reductionintheamountofdiskstorageused,andreductionintheerror rate. Notice that tangible benefits may or may not be measured in monetary terms. However, using a cost-benefit framework for ASP solution requires translatingperformanceimprovementsintomonetarytermssothatbenefitsand costs can be compared. Intangiblebenefitsaffectperformancebutaredifficulttomeasurebecausethey refer to comparatively vague concepts. A few of the intangible benefits of a solutionare: • Bettercoordination • Bettersupervision • Bettermorale • Betterinformationfordecisionmaking • Abilitytoevaluatemorealternatives • Abilitytorespondquicklytounexpectedsituations • Organizationallearning Althoughthesegoalsareworthwhile,itisoftendifficulttomeasurehowwell they have been accomplished. Even if it is possible to measure intangible benefits,itisdifficulttoexpresstheminmonetarytermsthatcanbecompared withcosts.Alltoooften,projectcostsaretangibleandbenefitsareintangible. Althoughhardtoquantify,intangiblebenefitsareimportantandshouldnotbe ignored.ManyofthebenefitsofISareintangible. The Law of Confidence Thelawofconfidenceprotectsinformation.Unlikecopyrightandpatentlaw, thelawofconfidenceisnotdefinedbystatuteorderivesalmostentirelyfrom classlaw.Thescopeofthisbranchofintellectualpropertyisconsiderableand TEAM LinG
  • 231. 210 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. it protects trade secrets, business know-how and information such as lists of clientsandcontacts,informationofapersonalnature,andevenideasthathave not yet been expressed in a tangible form (Bainbridge, 2000). A typical examplewouldbeanideaforanewsoftwareprogram.Thecontentsofmany databases owned by intelligent enterprises will be protected by the law of confidence.However,themajorlimitationisthattheinformationconcerned mustbeofaconfidentialnatureandtheeffectivenessofthelawofconfidence islargelyorcompletelydestroyediftheinformationconcernedfallsintothe publicdomain;thatis,ifitbecomesavailabletothepublicatlargeorbecomes common knowledge to a particular group of the public such as computer software companies. Nevertheless, the law of confidence can be a useful supplement for intelligent enterprises to copyright and patent law as it can protect ideas before they are sufficiently developed to attract copyright protectionortoenableanapplicationforapatenttobemade.Beingrootedin equity,thelawofconfidenceisveryflexibleandhasprovedcapableoftaking newtechnologicaldevelopmentsinitsstride. Recommendations Blurring In-House IT and ASP Services OneimpactoftheASPindustryonbusinessistheblurringoftheoldboundaries in IT services between in-house and ASP vendors. In the traditional view, servicesaremerelyanadd-ontothein-housesector—theyarebydefinitionat least,“nonproductive.”InASP,serviceseithersupportthegrowthandsurvival ofthein-houseITdepartment,ortheyareperceivedassociallydesirablebut noteconomicallyessential.Thus,ITconsultancyservicesareimportantsup- port services for short-term strategies, while “pay as you go” is perhaps nice forbusinessbutnotessentialtothesurvivalofASPindustry.Atthecentreof theASPindustryandcriticaltoitswealth-producingcapacityistheneedfor partnership,aroundwhichancillaryservicesrevolve. What is commonly overlooked in this view is, first, the notion that the relationshipbetweenin-houseandASPisoneofinterdependence,notdepen- dence. And second, that the categories of ASP and in-house are not distinct andisolateddomains,butrepresenttwosidesofacontinuum.Thus,contrary tothetraditionalview,inASPthegrowthofserviceshelpssupportthegrowth TEAM LinG
  • 232. A 21st -Century Tool for Intelligent Enterprises 211 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ofin-house.Astheindustryevolvesandbecomesmorecomplex,theneedfor newservicesandspecializationinthedivisionoflaborcontinuestoincrease.In- housemigratesintostrategicmanagementandmonitoringofITstandardwhile ASPmigratesintovalue-addedservicessothat“businessITbecomesaservice in a package form.” As the boundaries between in-house and ASP become moreblurredthroughtheuseofimprovedcommunicationstechnologies,the opportunitiesforentrepreneurscontinuetoincrease. Entrepreneurial Opportunities As the ASP industry matures, a premium is placed on ideas and strategic use ofdataflowtechnologyfornewbusinessdevelopment,ratherthanoneconom- icsofscaleorcostdisplacementalone.Theentrepreneur,therefore,becomes the primary user of new technology and ideas for strategic advantage. As a premiumisplacedoninnovativeideas,smallbusinessesacquireanadvantage in being flexible enough to evolve new products and services. Moreover, as suchinnovationprecedes,theroleofsmallbusinessassourceofemployment continuestoincreaseinsignificance,particularlyintheASP-likepartnerships. Inevitably,evenlargecorporations(e.g.,IBMandmostmajorplayers)inthe ASPindustry,areprovidingopportunitiesforcorporateentrepreneurstotest new ideas under conditions where “normal” corporate constraints on risk- takingandnewinvestmentsininternalideasarerelaxed.Corporationsaslarge asIBMareprovidingopportunitiesforentrepreneurstoflourishinternally.The term“intrapreneur”hasbeencoinedtodescribethisinternalentrepreneur. When technological innovation is the main force leading to lower costs, the firm’sabilitytocreateacompetitiveadvantagedependsonitstechnological skills.Technologicalinnovationsoftenbringcostsdown—sometimessignifi- cantly—thus making the cost reduction solely attributable to economies of scaleseemscomparativelyminor.Theenterprisesresponsiblefortheseinno- vationsdrawasignificantcompetitiveadvantagefromthemintermsofcost, notablywhentheysucceedinmaintaininganexclusiverightuponthemforalong period. Vendors can only benefit from experience through sustained effort, efficientmanagement,andconstantmonitoringofcosts(Dussauge,Hart, Ramanantsoa,1994). TEAM LinG
  • 233. 212 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Web Services and New-Game Strategy An ASP may deploy one or more of Porter’s classic theories of competitive strategies: differentiation, cost leadership, focused differentiation, or cost (Porter,1985).Theuseofsuchcompetitivetacticsmayincludeinternalgrowth orinnovation,mergersoracquisitions,orstrategicallianceswithotherenter- prisesormembersofthesamegroupofenterprises.However,mostenterprises electtousethenew-gamestrategywhichcanbedefinedasadeliberateattempt tomodifytheforcesshapingcompetitionandthedefinitionofthebusinessby particularcompetitors(Buaron,1981).LetustakeMicrosoftandOracle,both bigplayersintheASPindustry.Thedifferencebetweenspontaneouschange intheircompetitiveenvironmentsandnew-gamestrategieshaslesstodowith theobjectivecharacteristicsoftheASPphenomenonthanwiththeirindividual attitudeswithrespecttoASPphenomenon.Inthefirstcase,changesareseen asexternaltothem,requiringadaptation.Inthesecondcase,however,certain initiativesbythemareresponsibleforsomechangesintheindustryandthey havethereforedeliberatelybasedtheirstrategyonthem.Suchstrategiesalter thepaceofthechange,generallymakingitmorerapidanddirectthefocusof changeinwaysthatwillbestbenefittheinnovatingenterprise(s). Web services technology is one of the most important foundations for ASP new-game strategies. Thus, by accelerating the pace of Web services in the industry,acompetitorwithgoodcapabilityinthetechnologyreinforcesitsown competitiveposition.Therearenumerouspaperswarningthatsuchaccelerated Webserviceevolutionincreasesthedifficultythatothercompetitorshavein adapting to ASP (Gottschalk, Graham, Kreger, Snell, 2002; Hondo, Nagaratnam, Nadalin, 2002; The Stencil Group, 2002; Wilkes, 2002). By modifyingthenatureandtherelativeimportanceofthekeyfactorsforsuccess intheASPindustry,Webservicetechnologicalchangesthatareintroducedby one or more of the vendors can lead to favorable changes in the competitive environment.Inanindustrybuiltuponhighvolume,newtechnologiesthatare introducedbysomeofthecompetitorsthatnullifyorminimizetheimpactof scalecansignificantlyalterthenatureofthecompetitiveenvironmentbymaking sizeadrawbackratherthananadvantage.Thus,referringbacktotheexample ofASPcontentdistribution,theseinnovationsweredrivenbytheactionsofa few relatively small competitors, Microsoft and IBM. The changes that occurred in the competitive environment were thus the result of new-game strategiesdesignedtochangetherulesofcompetitiontotheiradvantage:under the new rules, it was no longer a disadvantage to be a small producer. The TEAM LinG
  • 234. A 21st -Century Tool for Intelligent Enterprises 213 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. competitive impact of such strategies is especially strong when the other competitors cannot use the same type of technology because it is not easily available,forlackoftraining,orforfinancialreasons. Duringtheperiodwhenanenterprisecontrolsanexclusivetechnology,itcan easilyrecoupitsinvestmentthroughhighprices;butbythetimethistechnology becomesmorewidelydispersed,pricestendtofalldramaticallywiththeadvent ofnewentrants.Theseinvestmentsareasignificantentrybarriertocompeti- tors. However, the enterprise still manages to retain dominant position and goodlevelofprofitabilityinbusiness,sinceithadrecoupeditsinitialinvestment manytimesover. Dynamics Competitiveness Though the big vendors’ strategy depends on several factors, it is not etched in stone; rather, it will vary with the changes in the industry’s key factors for successandtherelativeadvantagethatitstechnologyrepresents.Twotypesof competitivebehaviorwithrespecttotechnologycanbeobserved: • Switchingfromadifferentiationstrategybasedonatechnologicaladvan- tage to a cost leadership strategy based on scale, accumulated experi- ence, and a dominant market position; and • Constantefforttoinnovateandimprovetechnology,therebymaintaining adynamiccompetitiveadvantage. Oracle’srelativesuccesssofarcanprovethatfirmsdisplayingthefirsttypeof strategicbehavioraregenerallythosethathavebeenabletoattainadominant positionbecauseofexclusivetechnology.Astheirtechnologybecomesdif- fusedovertime,however,theytendtoresorttocompetitiveadvantagebased upontheiraccumulatedexperience,goodreputation,anddistributionnetwork. Thesecondtypeofstrategicbehaviorforvendorsconfrontedwiththeerosion of their technology-based competitive advantage is a sustained effort to improveoreven“reinvent”theirtechnology;ratherthan“milking”theirinitial technological advantage, such firms choose to create a new competitive advantagethroughtechnologicalinnovation. AvitaldifferencebetweentheASPmodelandtraditionalsystemlifecycleis that error in this initial phase may not proof fatal. That is because the model TEAM LinG
  • 235. 214 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. supportsasmoothandeasilycontrolledchangemethodevenafteritgoesinto operation,mainlyduetoitsthird-partycontrollingnature. ASP Becomes a Part of Strategy ItiseasytofocusonindividualASPinvestmentsratherthantheircumulative impact.Intelligententerprisesbudgetforindividualapplicationsoftechnology andtheISstaffworksonaprojectbasis.Forsomeintelligententerprises,the combinationofallitsindividualinvestmentsintechnologyfarexceedstheir individualimpact.AgoodexampleisSAP.Here,continuedinvestmentsinASP changedthesoftwareprovisionindustryandSAP’sownviewofitsfundamen- talbusiness. By becoming a necessity ASP may not create much benefit for intelligent enterprisesthatinvestinit,exceptthatASPallowstheenterprisetocontinue in a line of business. Who does benefit from investments of this type? The cynical answer might be the vendors of various kinds of ASP product and service. However, a better response is that customers benefit from better qualitygoodsandservices,andespeciallybettercustomerservice. Looking at our two earlier examples, customers are much better off with the presence of ATM and CRS. An ATM is convenient and allows one to access cashwithoutpresentingacheckathisorherownbank.WithanATM,youdo not have to worry about a foreign bank accepting your check; from ATMs around the world you can withdraw cash. While airlines have certainly benefited from computerised reservations systems, so have customers. You can use a CRS to compare flights, times, ticket prices, and even on-time statistics for each flight. A consumer can make a reservation on a flight and complete the transaction over the telephone or the Internet. Economists talk aboutaconceptcalled“consumersurplus.” Howdoesconsumersurplusrelatetoinvestmentsinstrategicandcompetitive information technology? From a theoretical standpoint, consumer surplus increasesaspricesdrop.ThecompetitiveuseofASPreducescostsandprices throughapplicationslikethoseinbankingandairlines.Thecompetitiveuseof ASP has, in many instances, reduced prices (or held down price increases), whichcontributesdirectlytoconsumersurplus.Technologicalcompetitionmay notalwayscreateaneconomicconsumersurplus,butitdoesprovidebenefits in the form of service and convenience. A bank ATM can save time for the customer,somethingthecustomermaybeabletovaluefromadollar/pound TEAM LinG
  • 236. A 21st -Century Tool for Intelligent Enterprises 215 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. standpoint. The fact that two firms (IBM and Microsoft) had a similar Web servicelaunchedwithinfewmonthsofeachothermeansthatthetechnology wasnotabletodeliverasustainableadvantagefromitsinvestment.Neitherwas abletoraiseitspricesdirectlytopayfortheirWebservices,sothebenefitsfrom theirinvestmentsinASPallwenttothecustomers. WhilethestrategiesofASPvendorscanthuschangeovertime,aclearstrategic direction is indispensable to success. In addition, the transition from one strategytoanotherisaverydifficultandriskyundertaking,sinceitrequiresa completereorientationofthevendors’effortsandradicallydifferentpatterns of resource allocation. As we have seen, technology is often a major factor behind both differentiation and cost leadership strategies. It is also a critical factorin“new-game”strategies. Future Trends Whatremainsunclearintheearlypartofthe21st centuryconcerningthelinkage between Internet investment production and the ASP market is the extent to whichtherateofASP-likeservicesproductivitywillcontinuetoriseintheface ofsloweradvancesinInternetstockmarket.AccordingtoForesterResearch the proportion of ASP business in the outsourcing market peaked at about $800 m in 2000 and was projecting for $25 bn by 2005. However, it actually declined by the year 2001 (due partly to the effect of stock market collapse) and currently being projected at $15 billion by 2006. The overall business interestsintheASPmodelwillcontinuetorisewithproportionallyhigherrates of investment by vendors versus traditional outsourcing. We attribute this optimisticforecasttofourtrends: 1. Continuingimprovementsincapabilitiesandcost-performancecharac- teristicsofremotesupportservicesbyvendors; 2. Improvementsincapabilitiesandcost-performancecharacteristicsofthe technologyatthesystemorapplicationlevel; 3. Continualdevelopmentofthetelecommunicationsinfrastructuretosup- port ASP performance; and 4. Gradualreductionofinstitutionalandsocialbarrierstotheintroductionof ASP model as a viable business strategy. TEAM LinG
  • 237. 216 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Web Services In the seemingly fast-paced world of the 21st century, change is the only constantandthereforeeventhorizonsareimmediate.Consideringthatintelli- gent enterprises cannot predict what they will need or how they will act in a year’s time. Web services are enterprise current tools best suited with the abilitytobridgethemultiplicityandcomplexityofexistingITinfrastructures. SuchusefulnessofASPtoanintelligententerpriseisasimportantasanyother inthe21st -centurycollaborativebusinessenvironment.Webservicesareself- contained, modular business process applications that Web users or Web- connected programs can access over a network—usually by standardized XML-basedinterface—andinaplatform-independentandlanguage-neutral way.Thismakesitpossibletobuildbridgesbetweensystemsthatotherwise wouldrequireextensivedevelopmentefforts.Suchservicesaredesignedtobe published,discovered,andinvokeddynamicallyinadistributedcomputing environment.Byfacilitatingreal-timeprogrammaticinteractionbetweenappli- cations over the Internet, Web services may allow companies to exchange informationmoreeasilyinadditiontootherofferingslikeleverageinformation resources,andintegratebusinessprocesses. Users can access some Web services through a peer-to-peer arrangement rather than by going to a central server. Through Web services, systems can advertise the presence of business processes, information, or tasks to be consumed by other systems. Web services can be delivered to any customer device and can be created or transformed from existing applications. More importantly,Webservicesuserepositoriesofservicesthatcanbesearchedto locatethedesiredfunctionsoastocreateadynamicvaluechain.Thefutureof Web services go beyond software components, because they can describe theirownfunctionalityaswellaslookforanddynamicallyinteractwithother Webservices.Theyprovideameansfordifferentorganizationstoconnecttheir applicationswithoneanothersoastoconductdynamicASPacrossanetwork, nomatterwhattheirapplications,design,orrun-timeenvironment. Web services represent a significant new phase in the evolution of software developmentandisunsurprisinglyattractingagreatdealofmediaandindustry hype.LikealmostallnewInternet-relatedtechnologies,theimmediateoppor- tunitieshavebeenoverstated,althoughwebelievetheeventualimpactcouldbe huge.ThiscanbedemonstratedbytheimmediateandkeyroleofWebservices whichistoprovideparadigmshiftinthewaybusinessmanagesITinfrastruc- ture.Itprovidesintelligententerpriseswiththecapabilityofoverturningthe TEAM LinG
  • 238. A 21st -Century Tool for Intelligent Enterprises 217 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. acceptednormsofintegrationandtherebyallowingallbusinessestorapidlyand effectivelyleveragetheexistingITandinformationassetsattheirdisposal. Intelligententerprisescurrentlyrunninganoutsourcingservicearealreadyseen to be one of the early gainers of the Web service revolution. However, there will be others as enterprises discover the hidden value of their intellectual assets. Considering most enterprises have until now used the Internet to improveaccesstoexistingsystems,informationandservices,weenvisagethe dayswhenWebservicespromisenewandinnovativeservicesthatarecurrently impossible or prohibitively expensive to deploy. With such developments anticipated to promote the ASP business model, Web services integration is considered to be at the heart of this expectation. Through this process of connectingbusinesses,ASPwillbeabletoquicklycapitaliseonnewoppor- tunitiesbycombiningassetsfromavarietyofdisparatesystems,creatingand exposing them as Web services for the end-game of fulfilling customer expectations. ItisourviewthatanyintelligententerpriseconsideringASPbusinessmodel shouldatleastinvestigatethepotentialimpactofWebservicesintegrationas thiswillsoonerorlaterbecomeanotherpermanentbusinessnecessityandnot a competitive advantage material. Those intelligent enterprises that have adoptedoursuggestedapproachwillnotonlygainadvantagenowinbusiness for lower costs and better return on assets, but are also expected to develop valuable experience for the first decade of the 21st century. Considering Internet’shistory,asWebservicesbecomesthestandardandtheexpertiseof ASP become more established, it should become the norm. Future Analysis It does not make sense to emphasize the social and technical resources and constraintsofanewindustry(e.g.,ASP)withoutthinkingaboutthefutureof the resulting information system. While no one can say, with any degree of certainty,whatthefutureholds,itisalwayspossibletospeculateonthenature ofchanges.Suchconsiderationoffutureconditionsusuallyhelpstoavoidsome oftheproblemsidentifiedduringtheearlystagesofISanalysis.Land(1987), in his study of future environments and conditions, came up with a theory of “future analysis.” Here are four areas of our concern from Land’s future analysistheory: TEAM LinG
  • 239. 218 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 1. Predictionofpossiblechanges:Thisarealooksatthekindsofchanges that are possible, that is, technological, legal, political, or economic. It requirestheinvestigationofcontextandsituationoftheorganizationin which the work is being done. Other items needed to help with this investigationincludestructureplansandpredictionofmid-termdevelop- mentoftheinstitutionthatcouldbemediumplan.Thisismeanttodevise anappropriatesystemanalysisstageofthedevelopmentprocess,thereby givingsomeideaofthetypeofexpansion,contraction,andchangethatwill occurandwhichtheincomingsystemwillhavetodealwith. 2. Likely outcome of system: Here, one takes a peep into the future assumingthelikelyeffectsofanimprovedinformationsystem.Thereare certainlyallkindsofdisruptiveandconstructiveeventsthatmayberelated tothedevelopmentofanewsystem.Fewofthemostpertinentoneswith regardstoASPimplementationarestaffredundancy,changeofloyaltyof existingISstaffs,newreportingprocedures,andsoforth. 3. Features susceptible to change: This looks at the features of the proposedsystemthataremoresusceptibletochange.Questionssuchas wherewouldoneexpectthenewsystemtochangefirstandwhetherthis can be planned for, come into play here. Other issues involved here are if certain data would need to be collected or some existing collection procedureswouldneedtochange,andevenifsomeexistingsectionsor divisionswouldcontinuetomaintaintheirstructures. 4. Horizonofthesystem:Onewouldlookattheextentandhorizonofthe system.ItisatthisstagethatanASPwouldbegintothinkintermsofthe long-termview.Whileweadmitthisisobviouslyguesswork,itgivesone a sense of humility in the initial design and requires an ASP vendor to speculateastohowwhatisbeingplanedtodaymaybethebuildingblock forfurtherdevelopmentsintothelong-termfuture. Thepursuitoftechnicalefficiencyintheoperationofvariouscomplextechnolo- gies required by ASP to operate in the 21st century will continue to require skilfulmanagementofthesetechnologies,andthetechnicalpersonnelneeded tooperateandmaintainthetools.Anintelligententerpriseactivitywilllargely beconcernedwithmanagingthetechnicalattributesofASPtoolsandnotwith the management of the use and intellectual content of the information and knowledge. While such management will focus on internal operations, and largely a middle-management and professional-staff function, that stage of information-managementdevelopmentwillcontinuetoexpandasmorecom- TEAM LinG
  • 240. A 21st -Century Tool for Intelligent Enterprises 219 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. plextechnologies(i.e.,Webservices)areintroducedinintelligententerprises. It can be argued that an enterprise could well rest at a plateau where cost savingsareusuallyquitesignificant,butsuchenterprisewillsoonencounter unanticipateddifficultiesbecauseoforganizationalandoperationalproblems. One of such is usually the fact that integrating the ASP technologies often demandsnewstructuresandfunctionsthatmanybusinessesarenotprepared toassume.IftheuseofASP,asaconvergingtechnologyistobeeffective,much moreemphasiswillneedtobeplacedonbusinessmanagementofinformation resources and management personnel who will define and direct the use of these assets and resources in the organization. Even more pressing are the pressures for change in adopting a more management-oriented view of this domainthatarearisingfromvariousstakeholders(bothinternalandexternal) who are beginning to recognize the enormous potential for profitability and productivity embedded in the emerging products and services of the ASP industry. Conclusion Wecansafelyconcludethatpolicymakersinallfields,notjustinIS,areforced intoill-consideredconclusionsandrecommendationsbecausetheystillview their management strategies in pre-Internet terms. Moreover, they are still constrainedbystatisticalcalculationsbasedonoutmodedandobsoleteclas- sificationapproaches,aswellasoninvalidassumptionsaboutthefundamental sourcesofprofitandcapitalformation. Recent evidence shows that European business continues to lose important sectorsoftheeconomytointernationalcompetitionbecauseseniormanagers havebeenslowtomodifyandrethinkbusinessstrategyandmanagementinthe post-Net-era versus pre-Net-era. Seen in this light, the emergence of ASP business model has had and will continue to have pronounced impacts on businessmanagementandstrategy. Throughtheskilfuluseofnew“intellectualtechnology”suchasmoreefficient broadband utility, better and more integrated system, automated reporting processes, combined with new uses of computers, wireless technology, and computernumericalcontroldevices,theproductivityofresearchanddevelop- ment(RD)inbusinessstrategyischangingintheASPindustry.Anyargument that the ASP industry is in decline seriously misreads the nature of the TEAM LinG
  • 241. 220 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. transformationsoccurring.Indeed,ratherthanwringingone’shandsaboutthe demise of the ASP industry, it is more appropriate to perceive that the ASP industryisleadingtoamorematurestageofbusinessmodeldevelopmentusing newideasandnewtechnologiesascriticalfactorsofserviceprovision. ISstaffmembersareimportantstakeholdersinmostASPsolutionssincethey areresponsibleforsystemoperationandenhancement.Asprofessionalsinthe field,theyhaveadeeperunderstandingthanbusinessprofessionalsaboutwhat ittakestobuildandmaintainasolidASPsolution.Theyalsohaveaclearerview of the technical relationships between different systems and of policies and practicesrelatedtosystems.Businessprofessionalsinintelligententerprises should not ignore the technical infrastructure and context issues identified above;rathertheyshouldalsorealizethatISstaffareusuallymuchmoreaware ofthetechnicalstructureandrationaleinbothareas. While“themorethemerrier”almostalwaysappliesforsomecharacteristicsof ASPsolutionsuchascustomersatisfactionandinformationquality,theright levelsofmanyothercharacteristicssuchascapacity,security,andflexibility should be a compromise between problems of excess and problems of deficiency.Thereareofteninstanceswhentoomuchcapacitymeanslesscould havebeenspent,whereastoolittlecapacitylimitsdepartmentalprocessoutput. Likewise, too much consistency may mean IS departmental staff cannot use their creativity to respond to changes, whereas too little makes the business processinefficientandtheresultschaotic. The pressure of new business environment in the 21st century has resulted in time-based competition. Such competition takes place where those first to market have a chance to preempt the competition. This does not only mean developinganewproductfasterthanyourcompetitors,butitalsorequiresthe associateddeliverymechanism:firsttogiveaquoteontheproductprice,first todevelopanagilemanufacturingsystemtoinstantaneouslymovetheassembly line to a different product, or first to deliver the product to the customer. ASP is one of the main sources of competitive advantage for intelligent enterprisesinthe21st century.Itcanlowercoststhroughscaleorexperience. ASPcanalsocontributetothedifferentiationoftheorganization’sproductsor services,becomingthefoundationofadifferentiationstrategyenablingthefirm to avoid direct price competition. Lastly, ASP technological change plays a crucialroleinnew-gamestrategieswherefirmsdeliberatelychangetherulesto theiradvantagebymodifyingtheforcesshapingcompetitionintheindustry. ASPplaysasignificantroleinstrategymaking,andselectionoftechnologies by the intelligent enterprise is a task which must be done with great care. TEAM LinG
  • 242. A 21st -Century Tool for Intelligent Enterprises 221 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Another noticeable reason for implementing ASP solution is oriented to the business objective of gaining competitive advantage in business unit and corporatestrategyandnotexclusivelytocost-effectivemanagementofinfor- mationresourcesandtechnologies.Theprimaryfocushereisonbusiness-unit strategy and direction, and on integrating the business unit’s external and internalenvironments.Animportantfactortobeconsideredisthequalityofthe intelligenceanalysisandinformationcollectionandprocessingperformedby managersandstaffratherthanontheuseoftheinformationtools. Infrastructureissomethingthatanintelligententerpriseneeds.Aninvestmentin ASP infrastructure is an investment for the future; it provides the resources neededtotakeadvantageoffutureopportunities.Asubstantialportionofan intelligententerprise’sASPbudgetmaybedevotedtoinfrastructure,which meansthatitwillbedifficulttoshowareturnonthisinvestment. TheInternetrepresentsamajorinfrastructurethatisavailabletoindividuals, businesses,andgovernmentsaroundtheworld.TheDepartmentofDefence and the National Science Foundation subsidized the development of this network;currentlyusersoftheNetfinanceit.Itisdoubtfulthatonecouldobtain the date, or evaluate the pound value of the impact of the Net, to do a return- on-investmentcalculationforthisinvestment.ItseemsclearthattheInternethas providedmanydifferentkindsofvaluetoitsusers,whichiswhatonehopesfor inmakinginfrastructureinvestments. Two key points of this chapter are that not all investments in ASP should be expected to show a measurable return, and investments can have value to an intelligent enterprise even without demonstrable financial return. In many organizations,thereseemstobeastrongbeliefthateveryinvestmentismade withtheexpectationofapositivereturn. ObtainingvaluefromISisimportantforintelligententerprisestosurviveand flourish in the highly competitive economy of the 21st century. Many of us believe that the information system holds the key to success as companies developsystemsthatprovidethemwithacompetitiveadvantage.ISalsolets managers create dynamic, new organization structures to compete more effectively.Intelligententerprisesthatcreatevaluethroughinformationsystems will be the winners in the 21st century. Of course, it is not always the case that the consumer is the only winner from strategicinvestmentsinASP.WehaveseenthattheairlineCRSvendorsgained significantdirectandindirectrevenuefromdeployingtheirsystemstotravel agents.Itisalsopossiblethatastrategicapplicationcanresultingreatersale TEAM LinG
  • 243. 222 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. foranentireindustry.ItwillbeinterestingtoseeifASPincreasessalesforthe telecommunicationsinfrastructureprovidersindustriesthatparticipateinitby making it easier for consumers to order their products and services. Value can be said to have many different definitions when looking at ASP investments,whicharenotalwayseasytoestimateormeasure.Suchacomplex investment problem means that managers have to gather information and consider a variety of factors in making their decisions about allocating re- sourcestoASPinitiatives.Uponmakingthedecisiontoallocate,theyhaveto monitor carefully the conversion of the investment into an ASP solution, as creatingvalueisamajorchallengethatrequiressignificantmanagementeffort andattention. Itisimportantforanintelligententerprisetohaveastrategy,plan,andvision forASPsolution.Thedownturnofthefirstphasehasclearlyshown,insome cases, that businesses overall strategy were more important in deciding to implementanASPsolutionthanwastheeconomicanalysisfortheinvestment. It would seem unethical to provide a formula for combining all the criteria mentioned in this chapter to come up with a decision to implement an ASP solution.Readerswouldnoticesomeoftheissuestouchedonarequantitative whileothersarequalitative.OrganizationsthatcamethroughASPfirstphase somehowsuccessfully,madewisedecisionsaboutinvestmentsinASPimple- mentation. Managers in these businesses view ASP solution as an asset and believethattheirASPinvestmentsproducevaluefortheorganization.Notonly can you see that they had strategy and vision for the technology but also that theyareactivelymanagingtheirASPsolution.Theresultingeffectistheydonot sitaroundandlookforvaluefromASPsolution;rather,theycreatevaluefrom ASPsolution. We hope this chapter has presented sufficient evidence to establish the following: 1. ThereisvaluefrominvestinginASP. 2. Each type of investment has a potentially different opportunity for a payoff, and for some applications, we may not be able to show a quantitativereturn. 3. The process of moving from the investment to an actual IT initiative is filtered by conversion effectiveness; there have been widely varying degreesofsuccessindevelopingapplicationsfromITinvestments. TEAM LinG
  • 244. A 21st -Century Tool for Intelligent Enterprises 223 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ConsiderthepossibleupsidebenefitsthatmightcomefromanASPinvestment. This approach is both quantitative and qualitative. For some types of ASP investments, you will have to rely more on qualitative arguments because potentialbenefitsaredifficulttomeasureandtoestimate.Inothercases,there arewell-knowncapitalbudgetingapproachesonecanapplytoprovidesome guidanceontheinvestment. Themanagerofanintelligententerpriseneedstokeeptheabove-mentioned findingsinmind.TheysuggestthatinmakingdecisionsaboutASPinvestment, youshould: 1. Determinethetypeofinvestment,forexample,infrastructureorcompeti- tivenecessity; 2. Estimatethelikelyreturnfromtheinvestmentgivenitstype; 3. Estimatetheprobabilitythattherewillbeareturn; 4. Estimatetheprobabilityofsuccessfullyconvertingtheinvestmentintoan application. Informationsystemsinthe21st centuryvirtuallyenablenotonlyallbusiness processes but also the coordination of multiple processes for intelligent enterprises.Businessprocessherereferstoasetofrelatedtasksperformedto provideadefinedworkoutput—anewlydesignedproduct,acustomizedorder deliveredtothebuyer,orabusinessplan—whichshoulddeliverawell-defined valuetoeitheraninternalorexternalcustomer.Manyprocessesinatraditional business could be radically changed to take advantage of the capabilities offeredbyASP.Thegreaterthescopeoftheprocessinnovation,thelargerthe benefitsthatmaybeexpectedwhichobviouslymeansthegreatertherisktothe project. While many process innovations fail, those that succeed tend to dramaticallyimprovetheperformanceoftheenterprise. The purpose of this chapter has been to provide a view of the historical evolution of the ASP phenomenon as a prelude to defining a conceptual frameworkforunderstandingISstrategyforintelligententerpriseinthe21st century.Thereaderhasalsobeenprovidedwiththemajorstepsinevaluating thestrategicvalueofimplementinganASPsolutioninthecontextofimproving theoverallbusinessperformanceandcompetitiveadvantage. Suchinitialsuccessinthedevelopmentofbusinessrelationship,outsidethe traditionallineofoutsourcing,fuelledtheexpansionandwidediffusionofthe TEAM LinG
  • 245. 224 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. capacityofASPvendorstohavefar-reachingimplicationsformanyaspectsof the service industry. Whether the ASP industry could be part of the future of everyintelligententerprisedependsinpartonitshistory,management,current capabilities,andonthedirectionsitmightdevelop. Rethinking your business in terms of Internet economy, formulating new strategiesforgainingcompetitiveadvantage,andraisingthelevelofawareness ofpeoplethroughoutyourenterprisetothenotioninformationitselfcanand should be looked upon as a strategic corporate asset, are great steps but only the first steps for success in the 21st century. In addition, both structural and procedural changes must take place for an intelligent enterprise to put its convictionsintooperation.CouldASPprovideyouwithsuchnecessarytool thereby directing your focus into the reality of a 21st -century intelligent organisation? References Alter, S. (1996). Information systems: A management perspective (2nd ed.).Benjamin/Cummings. ASPIndustryConsortium.(2000). Industry news(www.aspindustry.org). Bainbridge, D. (2000). Introduction to computer law (4th ed.). Longman PearsonEducation. Banker, R., Kauffman, R. (1988). Strategic contributions of information technology: An empirical study of ATM networks.Proceedings of the Ninth International Conference on Information Systems, Minneapo- lis,MN. Beniger, J.R. (1986). The control revolution: Technological and economic originsoftheinformationsociety.Cambridge,MA:HarvardUniversity Press. Bergeron, F., Bégin, C. (1989). The use of critical success factors in evaluation of information systems: A case study. Journal of Manage- ment Information Systems, 5(4), 111–124. Buaron, R. (1981). New game strategies. The McKinsey Quarterly, Spring. Checkland, P.B. (1983). Systems thinking, systems practice. Chichester, UK:Wiley. TEAM LinG
  • 246. A 21st -Century Tool for Intelligent Enterprises 225 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Checkland, P.B., Scholes, J. (1990). Soft systems methodology in action. Chichester,UK:Wiley. Currie, W., Desai, B., Khan, N., Wang, X., Weerakkody, V. (2003). Vendor strategies for business process and applications outsourcing: Recent findings from field research. Hawaii International Conference onSystemsSciences,Hawaii,January. Currie, W.L. (2000). Expanding IS outsourcing services through applica- tion service providers. Executive Publication Series. CSIS2000/002. Dussauge, P., Hart, S., Ramanantsoa, B. (1994). Strategic technology management: Integrating product technology into global business strategies for the 1990s. Chichester, UK: Wiley. Gottschalk, K., Graham, S., Kreger, H., Snell, J. (2002). Introduction to Web services architecture. IBM Systems Journal, 41(2). Guah,M.W.,Currie,W.L.(2002).EvaluationofNHSinformationsystems strategy: Exploring the ASP model. Issues of Information Systems Journal, October. Hondo, M., Nagaratnam, N., Nadalin, A. (2002). Securing Web services. IBM Systems Journal, 41(2). Kling, R. (1987). Defining the boundaries of computing across complex organisations: In R. Boland R. Hirschheim (Eds.), Critical issues in information systems research. New York: Wiley. Land, F. (1987). Is an information theory enough? In Avison et al. (Eds.), Information systems in the 1990s: Book 1–Concepts and methodolo- gies(pp.67–76).Armidale,Australia:NewEnglandUniversityPress. Little,G.R.(1999).Paper1:Theoryofperception.RetrievedJune2002,from www.grlphilosophy. co.nz Markus, M.L. (1983). Power, politics and MIS implementation, Communi- cations of the ACM, 26(6), 430–445. Maslow,A.H.(1943).Atheoryofhumanmotivation.PsychologicalReview, 50, 370–396. McLeord Jr., R. (1993). Management information systems: A study of computer-based information systems (5th ed.). New York: Macmillan. Porter, M.E. (1985). Competitive advantage. New York: Free Press. Porter,M.E.,Millar,V.E.(1985).Howinformationgivesyoucompetitive advantage. Harvard Business Review, 62(4), 149–160. TEAM LinG
  • 247. 226 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Sleeper,B.Robins,B.(2002).Thelawsofevolution:Apragmaticanalysis oftheemergingWebservicesmarket.AnanalysismemofromTheStencil Group. Retrieved April 2002, from www.stencilgroup.com The Stencil Group. (2002). Understanding Web services management: An analysis memo. Retrieved May 2002, from www.stencilgroup.com Walsham, G. (1993). Interpreting information systems in organisations. Chichester,UK:Wiley. Weill, P. (1993). The role and value of IT infrastructure: Some empirical observations. In M. Khosrow-Pour ad M. Mahmood (Eds.), Strategic information technology management: Perspectives on organisational growth and competitive advantage (pp. 547–572). Hershey, PA: Idea GroupPublishing. Weill, P., Broadbent, M., Butler, C. (1996). Exploring how firms view IT infrastructure.Melbourne,Australia:MelbourneBusinessSchool. Wilkes, L. (2002). IBM seeks partners to drive adoption of XML Web services. Interact, February. Zhang,X.,Lesser,V.,Horling,B.,Raja,A.,Wagner,T.(2000,pp.49–57). Resource-boundedsearchesinaninformationmarketplace.IEEEInternet Computing: Agents on the Net, 4(2). Zwass, V. (1998). Foundations of information systems. Irwin/McGraw- Hill. TEAM LinG
  • 248. Conclusions 227 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ChapterXIII Conclusions Matthew W. Guah, Warwick University, UK Abstract This chapter recaps the strategic direction of Internet-based business models over the last decade and points organizations to modify and rethink their business strategies and organization management after the dot.com era. It also reiterates a few implications for an organization’s decision to invest in Web services and looks at the issues involved in managing transitions to Web services. This is followed by a look at Web services as a form of challenge to new organizational arrangement. The chapter concludes with factors to consider when implementing and evaluating a successful Internet strategy. Introduction Wecansafelyconcludethatpolicymakersinallfields,notjustinIS,areforced intoill-consideredconclusionsandrecommendationsbecausetheystillview their management strategies in pre-Internet terms. Moreover, they are still TEAM LinG
  • 249. 228 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. constrainedbystatisticalcalculationsbasedonoutmodedandobsoleteclas- sificationapproaches,aswellasoninvalidassumptionsaboutthefundamental sourcesofprofitandcapitalformation. Recent evidence shows that European business continues to lose important sectorsoftheeconomytointernationalcompetitionbecauseseniormanagers have been slow to modify and rethink business strategy and management in post-Net era versus pre-Net era. Seen in this light, the emergence of ASP business model has had and will continue to have pronounced impacts on businessmanagementandstrategy. Throughtheskilfuluseofnew“intellectualtechnology”suchasmoreefficient broadband utility, better and more integrated systems, automated reporting processes, combined with new uses of computers, wireless technology, and computernumericalcontroldevices,theproductivityofresearchanddevelop- ment(RD)inbusinessstrategyischangingintheapplicationserviceprovider (ASP) industry. Any argument that the ASP industry is in decline seriously misreads the nature of the transformations occurring. Indeed, rather than wringing one’s hands about the demise of the ASP industry, it is more appropriatetoperceivethattheASPindustryisleadingtoamorematurestage of business model development using new ideas and new technologies as criticalfactorsofserviceprovision. Stakeholders ISstaffmembersareimportantstakeholdersinmostASPsolutionssincethey areresponsibleforsystemoperationandenhancement.Asprofessionalsinthe field,theyhaveadeeperunderstandingthanbusinessprofessionalsaboutwhat ittakestobuildandmaintainasolidASPsolution.Theyalsohaveaclearerview of the technical relationships between different systems and of policies and practicesrelatedtosystems.Businessprofessionalsinintelligententerprises should not ignore the technical infrastructure and context issues identified above;rathertheyshouldalsorealizethatISstaffareusuallymuchmoreaware ofthetechnicalstructureandrationaleinbothareas. While“themorethemerrier”almostalwaysappliesforsomecharacteristicsof ASPsolutionsuchascustomersatisfactionandinformationquality,theright levelsofmanyothercharacteristicssuchascapacity,security,andflexibility should be a compromise between problems of excess and problems of TEAM LinG
  • 250. Conclusions 229 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. deficiency.Thereareofteninstanceswhentoomuchcapacitymeanslesscould havebeenspent,whereastoolittlecapacitylimitsdepartmentalprocessoutput. Likewise, too much consistency may mean IS departmental staff cannot use their creativity to respond to changes, whereas too little makes the business processinefficientandtheresultschaotic. Competition The pressure of new business environment in the 21st century has resulted in time-based competition. Such competition takes place where those first to market have a chance to preempt the competition. This does not only mean developinganewproductfasterthanyourcompetitors,butalsorequiresthe associateddeliverymechanism:firsttogiveaquoteontheproductprice,first todevelopanagilemanufacturingsystemtoinstantaneouslymovetheassembly line to a different product, or first to deliver the product to customer. ASP is one of the main sources of competitive advantage for intelligent enterprisesinthe21st century.Itcanlowercoststhroughscaleorexperience. ASPcanalsocontributetothedifferentiationoftheorganization’sproductsor services,becomingthefoundationofadifferentiationstrategyenablingthefirm to avoid direct price competition. Last, ASP technological change plays a crucialroleinnew-gamestrategieswherefirmsdeliberatelychangetherulesto theiradvantagebymodifyingtheforcesshapingcompetitionintheindustry. ASPplaysasignificantroleinstrategymaking,andselectionoftechnologies by the intelligent enterprise is a task that must be done with great care. Another noticeable reason for implementing ASP solution is oriented to the business objective of gaining competitive advantage in business unit and corporatestrategyandnotexclusivelytocost-effectivemanagementofinfor- mationresourcesandtechnologies.Theprimaryfocushereisonbusiness-unit strategy and direction, and on integrating the business unit’s external and internalenvironments.Animportantfactortobeconsideredisthequalityofthe intelligenceanalysisandinformationcollectionandprocessingperformedby managersandstaffratherthanontheuseoftheinformationtools. TEAM LinG
  • 251. 230 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Infrastructure Infrastructureissomethingthatanintelligententerpriseneeds.Aninvestmentin ASP infrastructure is an investment for the future; it provides the resources neededtotakeadvantageoffutureopportunities.Asubstantialportionofan intelligententerprise’sASPbudgetmaybedevotedtoinfrastructure,which meansthatitwillbedifficulttoshowareturnonthisinvestment. TheInternetrepresentsamajorinfrastructurethatisavailabletoindividuals, businesses,andgovernmentsaroundtheworld.TheDepartmentofDefence and the National Science Foundation subsidized the development of this network;currentlyusersoftheNetfinanceit.Itisdoubtfulthatonecouldobtain the date, or evaluate the pound value of the impact of the Net, to do a return- on-investmentcalculationforthisinvestment.ItseemsclearthattheInternethas providedmanydifferentkindsofvaluetoitsusers,whichiswhatonehopesfor inmakinginfrastructureinvestments. ASP Value Two key points of this chapter are that not all investments in ASP should be expected to show a measurable return, and investments can have value to an intelligent enterprise even without demonstrable financial return. In many organizations,thereseemstobeastrongbeliefthateveryinvestmentismade withtheexpectationofapositivereturn. ObtainingvaluefromISisimportantforintelligententerprisestosurviveand flourish in the highly competitive economy of the 21st century. Many of us believe that the information system holds the key to success as companies developsystemsthatprovidethemwithacompetitiveadvantage.ISalsolets managers create dynamic, new organization structures to compete more effectively.Intelligententerprisesthatcreatevaluethroughinformationsystems will be the winners in the 21st century. Of course, it is not always the case that the consumer is the only winner from strategicinvestmentsinASP.WehaveseenthattheairlineCRSvendorsgained significantdirectandindirectrevenuefromdeployingtheirsystemstotravel agents.Itisalsopossiblethatastrategicapplicationcanresultinboostingsales foranentireindustry.ItwillbeinterestingtoseeifASPincreasessalesforthe TEAM LinG
  • 252. Conclusions 231 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. telecommunicationsinfrastructureprovidersindustriesthatparticipateinitby making it easier for consumers to order their products and services. Value can be said to have many different definitions when looking at ASP investments,whicharenotalwayseasytoestimateormeasure.Suchacomplex investment problem means that managers have to gather information and consider a variety of factors in making their decisions about allocating re- sourcestoASPinitiatives.Uponmakingthedecisiontoallocate,theyhaveto monitor carefully the conversion of the investment into an ASP solution, as creatingvalueisamajorchallengethatrequiressignificantmanagementeffort andattention. Implications for the ASP Investment Decision Itisimportantforanintelligententerprisetohaveastrategy,plan,andvision forASPsolution.Thedownturnofthefirstphasehasclearlyshown,insome cases, that business’s overall strategy was more important in deciding to implementanASPsolutionthanwastheeconomicanalysisfortheinvestment. It would seem unethical to provide a formula for combining all the criteria mentioned in this chapter to come up with a decision to implement an ASP solution.Readerswouldnoticesomeoftheissuestouchedonarequantitative whileothersarequalitative.OrganizationsthatcamethroughASPfirstphase somehowsuccessfullymadewisedecisionsaboutinvestmentsinASPimple- mentation. Managers in these businesses view ASP solution as an asset and believethattheirASPinvestmentsproducevaluefortheorganization.Notonly can you see that they had strategy and vision for the technology but also that theyareactivelymanagingtheirASPsolution.Theresultingeffectistheydonot sitaroundandlookforvaluefromASPsolution;rather,theycreatevaluefrom ASPsolution. Wehopethispaperhaspresentedsufficientevidencetoestablishthat 1. thereisvaluefrominvestinginASP; 2. eachtypeofinvestmenthasapotentiallydifferentopportunityforapayoff, and for some applications, we may not be able to show a quantitative return;and TEAM LinG
  • 253. 232 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 3. the process of moving from the investment to an actual IT initiative is filtered by conversion effectiveness; there have been widely varying degreesofsuccessindevelopingapplicationsfromITinvestments. ConsiderthepossibleupsidebenefitsthatmightcomefromanASPinvestment. This approach is both quantitative and qualitative. For some types of ASP investments, you will have to rely more on qualitative arguments because potentialbenefitsarehardtomeasureandtoestimate.Inothercases,thereare well-known capital budgeting approaches one can apply to provide some guidanceontheinvestment. Themanagerofanintelligententerpriseneedstokeeptheabove-mentioned findingsinmind.TheysuggestthatinmakingdecisionsaboutASPinvestment, youshoulddothefollowing: 1. Determinethetypeofinvestment,forexample,infrastructureorcompeti- tivenecessity. 2. Estimatethelikelyreturnfromtheinvestmentgivenitstype. 3. Estimatetheprobabilitythattherewillbeareturn. 4. Estimatetheprobabilityofsuccessfullyconvertingtheinvestmentintoan application. Informationsystemsinthe21st centuryvirtuallyenablenotonlyallbusiness processes but also the coordination of multiple processes for intelligent enterprises.Businessprocessherereferstoasetofrelatedtasksperformedto provideadefinedworkoutput—anewlydesignedproduct,acustomizedorder deliveredtothebuyer,orabusinessplan—whichshoulddeliverawell-defined valuetoeitheraninternalorexternalcustomer.Manyprocessesinatraditional business could be radically changed to take advantage of the capabilities offeredbyASP.Thegreaterthescopeoftheprocessinnovation,thelargerthe benefitsthatmaybeexpectedwhichobviouslymeansthegreatertherisktothe project. While many process innovations fail, those that succeed tend to dramaticallyimprovetheperformanceoftheenterprise. The purpose of this chapter has been to provide a view of the historical evolution of the ASP phenomenon as a prelude to defining a conceptual frameworkforunderstandingISstrategyforintelligententerpriseinthe21st century.Thereaderhasalsobeenprovidedwiththemajorstepsinevaluating TEAM LinG
  • 254. Conclusions 233 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. thestrategicvalueofimplementinganASPsolutioninthecontextofimproving theoverallbusinessperformanceandcompetitiveadvantage. Suchinitialsuccessinthedevelopmentofbusinessrelationship,outsidethe traditionallineofoutsourcing,fuelledtheexpansionandwidediffusionofthe capacityofASPvendorstohavefar-reachingimplicationsformanyaspectsof theserviceindustry.WhetherornottheASPindustrycouldbepartofthefuture of every intelligent enterprise depends in part on its history, management, currentcapabilities,andonthedirectionsitmightdevelop. Rethinking your business in terms of Internet economy, formulating new strategiesforgainingcompetitiveadvantage,andraisingthelevelofawareness ofpeoplethroughoutyourenterprisetothenotioninformationitselfcanand should be looked upon as a strategic corporate asset, are great steps but only the first steps for success in the 21st century. In addition, both structural and procedural changes must take place for an intelligent enterprise to put its convictionsintooperation.CouldASPprovideyouwithsuchnecessarytool thereby directing your focus into the reality of a 21st -century intelligent organization? Blurring In-House IT and ASP Services OneimpactoftheASPindustryonbusinessistheblurringoftheoldboundaries in IT services between in-house and ASP vendors. In the traditional view, servicesaremerelyanadd-ontothein-housesector—theyarebydefinitionat least,“nonproductive.”InASP,serviceseithersupportthegrowthandsurvival ofthein-houseITdepartment,ortheyareperceivedassociallydesirablebut noteconomicallyessential.Thus,ITconsultancyservicesareimportantsup- port services for short-term strategies, while “pay as you go” is perhaps nice forbusinessbutnotessentialtothesurvivalofASPindustry.Atthecentreof theASPindustryandcriticaltoitswealth-producingcapacityistheneedfor partnership,aroundwhichancillaryservicesrevolve. What is commonly overlooked in this view is, first, the notion that the relationshipbetweenin-houseandASPisoneofinterdependence,notdepen- dence. And, second, that the categories of ASP and in-house are not distinct andisolateddomains,butrepresenttwosidesofacontinuum.Thus,contrary tothetraditionalview,inASPthegrowthofserviceshelpssupportthegrowth TEAM LinG
  • 255. 234 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. ofin-house.Astheindustryevolvesandbecomesmorecomplex,theneedfor newservicesandspecializationinthedivisionoflaborcontinuestoincrease.In- housemigratesintostrategicmanagementandmonitoringofITstandardwhile ASPmigratesintovalue-addedservicessothat“businessITbecomesaservice in a package form.” As the boundaries between in-house and ASP become moreblurredthroughtheuseofimprovedcommunicationstechnologies,the opportunitiesforentrepreneurscontinuetoincrease. Entrepreneurial Opportunities As the ASP industry matures, a premium is placed on ideas and strategic use ofdataflowtechnologyfornewbusinessdevelopment,ratherthanoneconom- icsofscaleorcostdisplacementalone.Theentrepreneur,therefore,becomes the primary user of new technology and ideas for strategic advantage. As a premiumisplacedoninnovativeideas,smallbusinessesacquireanadvantage in being flexible enough to evolve new products and services. Moreover, as suchinnovationprecedes,theroleofsmallbusinessassourceofemployment continuestoincreaseinsignificance,particularlyintheASP-likepartnerships. Inevitably,evenlargecorporations(e.g.,IBMandmostmajorplayers)inthe ASPindustryareprovidingopportunitiesforcorporateentrepreneurstotest new ideas under conditions where “normal” corporate constraints on risk takingandnewinvestmentsininternalideasarerelaxed.Corporationsaslarge asIBMareprovidingopportunitiesforentrepreneurstoflourishinternally.The term“intrapreneur”hasbeencoinedtodescribethisinternalentrepreneur. When technological innovation is the main force leading to lower costs, the firm’sabilitytocreateacompetitiveadvantagedependsonitstechnological skills.Technologicalinnovationsoftenbringcostsdown—sometimessignifi- cantly—thus making the cost reduction solely attributable to economies of scaleseemscomparativelyminor.Theenterprisesresponsiblefortheseinno- vationsdrawasignificantcompetitiveadvantagefromthemintermsofcost, notablywhentheysucceedinmaintaininganexclusiverightuponthemforalong period. Vendors can only benefit from experience through sustained effort, efficient management and constant monitoring of costs (Dussauge, Hart, Ramanantsoa,1994). TEAM LinG
  • 256. Conclusions 235 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Web Services and New Game Strategy An ASP may deploy one or more of Porter’s classic theories of competitive strategies: differentiation, cost leadership, focused differentiation, or cost (Porter,1985).Theuseofsuchcompetitivetacticsmayincludeinternalgrowth orinnovation,mergersoracquisitions,orstrategicallianceswithotherenter- prisesormembersofthesamegroupofenterprises.However,mostenterprises electtousethenew-gamestrategywhichcanbedefinedasadeliberateattempt tomodifytheforcesshapingcompetitionandthedefinitionofthebusinessby particularcompetitors(Buaron,1981).LetustakeMicrosoftandOracle,both bigplayersintheASPindustry.Thedifferencebetweenspontaneouschange intheircompetitiveenvironmentsandnew-gamestrategieshaslesstodowith theobjectivecharacteristicsoftheASPphenomenonthanwiththeirindividual attitudeswithrespecttoASPphenomenon.Inthefirstcase,changesareseen asexternaltothem,requiringadaptation.Inthesecondcase,however,certain initiativesbythemareresponsibleforsomechangesintheindustryandthey havethereforedeliberatelybasedtheirstrategyonthem.Suchstrategiesalter thepaceofthechange,generallymakingitmorerapidanddirectthefocusof changeinwaysthatwillbestbenefittheinnovatingenterprise(s). Web services technology is one of the most important foundations for ASP new-game strategies. Thus, by accelerating the pace of Web services in the industry,acompetitorwithgoodcapabilityinthetechnologyreinforcesitsown competitiveposition.Therearenumerouspaperswarningthatsuchaccelerated Webserviceevolutionincreasesthedifficultythatothercompetitorshavein adapting to ASP (Gottschalk, Graham, Kreger, Snell, 2002; Hondo, Nagaratnam, Nadalin, 2002; The Stencil Group, 2002; Wilkes, 2002). By modifyingthenatureandtherelativeimportanceofthekeyfactorsforsuccess intheASPindustry,Webservicetechnologicalchangesthatareintroducedby one or more of the vendors can lead to favorable changes in the competitive environment.Inanindustrybuiltuponhighvolume,newtechnologiesthatare introducedbysomeofthecompetitorsthatnullifyorminimizetheimpactof scalecansignificantlyalterthenatureofthecompetitiveenvironmentbymaking sizeadrawbackratherthananadvantage.Thus,referringbacktotheexample ofASPcontentdistribution,theseinnovationsweredrivenbytheactionsofa few relatively small competitors, Microsoft and IBM. The changes that occurred in the competitive environment were thus the result of new-game strategiesdesignedtochangetherulesofcompetitiontotheiradvantage:under the new rules, it was no longer a disadvantage to be a small producer. The TEAM LinG
  • 257. 236 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. competitive impact of such strategies is especially strong when the other competitors cannot use the same type of technology because it is not easily available,forlackoftraining,orforfinancialreasons. Duringtheperiodwhenanenterprisecontrolsanexclusivetechnology,itcan easilyrecoupitsinvestmentthroughhighprices;butbythetimethistechnology becomesmorewidelydispersed,pricestendtofalldramaticallywiththeadvent ofnewentrants.Theseinvestmentsareasignificantentrybarriertocompeti- tors. However, the enterprise still manages to retain dominant position and goodlevelofprofitabilityinbusiness,sinceithadrecoupeditsinitialinvestment manytimesover. Dynamics Competitiveness Though the big vendors’ strategy depends on several factors, it is not etched in stone; rather, it will vary with the changes in the industry’s key factors for successandtherelativeadvantagethatitstechnologyrepresents.Twotypesof competitivebehaviorwithrespecttotechnologycanbeobserved: • Switchingfromadifferentiationstrategybasedonatechnologicaladvan- tage to a cost leadership strategy based on scale, accumulated experi- ence,andadominantmarketposition • Constantefforttoinnovateandimprovetechnology,therebymaintaining adynamiccompetitiveadvantage PHASES TARGET OBJECTIVES CHALLENGES Initiation Statement of problem IS expectations Changes in expectations by time Development Deciding what the system should deliver Users’ quite often lack a total understanding output Implementation IS running as part of the process to support business goals achievement Power and control issues within organization Operation and Maintenance Enhance system and correct bugs Diagnose/correct problems within time pressure Table 13.1. ASP model system life cycle (1) TEAM LinG
  • 258. Conclusions 237 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Oracle’srelativesuccesssofarcanprovethatfirmsdisplayingthefirsttypeof strategicbehavioraregenerallythosethathavebeenabletoattainadominant positionbecauseofexclusivetechnology.Astheirtechnologybecomesdif- fusedovertime,however,theytendtoresorttocompetitiveadvantagebased upontheiraccumulatedexperience,goodreputation,anddistributionnetwork. Thesecondtypeofstrategicbehaviorforvendorsconfrontedwiththeerosion of their technology-based competitive advantage is a sustained effort to improveoreven“reinvent”theirtechnology;ratherthan“milking”theirinitial technological advantage, such firms choose to create a new competitive advantagethroughtechnologicalinnovation. AvitaldifferencebetweentheASPmodelandtraditionalsystemlifecycleis that error in this initial phase may not proof fatal. That is because the model supportsasmoothandeasilycontrolledchangemethodevenafteritgoesinto operation,mainlyduetoitsthird-partycontrollingnature. Table 13.1 describes the four general phases of any IS, which also serves as a common link for understanding and comparing different types of business processesusedforbuildingandmaintainingsystemswithintheASPmodel. ASP Becomes a Part of Strategy ItiseasytofocusonindividualASPinvestmentsratherthantheircumulative impact.Intelligententerprisesbudgetforindividualapplicationsoftechnology andtheISstaffworksonaprojectbasis.Forsomeintelligententerprises,the combinationofallitsindividualinvestmentsintechnologyfarexceedstheir individualimpact.AgoodexampleisSAP.Here,continuedinvestmentsinASP changedthesoftwareprovisionindustryandSAP’sownviewofitsfundamen- talbusiness. By becoming a necessity ASP may not create much benefit for intelligent enterprisesthatinvestinit,exceptthatASPallowstheenterprisetocontinue in a line of business. Who does benefit from investments of this type? The cynical answer might be the vendors of various kinds of ASP product and service. However, a better response is that customers benefit from better qualitygoodsandservices,andespeciallybettercustomerservice. Looking at our two earlier examples, customers are much better off with the presence of ATM and CRS. An ATM is convenient and allows one to access cashwithoutpresentingacheckathisorherownbank.WithanATM,youdo TEAM LinG
  • 259. 238 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. not have to worry about a foreign bank accepting your check; from ATMs around the world you can withdraw cash. While airlines have certainly benefited from computerised reservations systems, so have customers. You can use a CRS to compare flights, times, ticket prices, and even on-time statistics for each flight. A consumer can make a reservation on a flight and complete the transaction over the telephone or the Internet. Economists talk aboutaconceptcalled‘consumersurplus.’ Howdoesconsumersurplusrelatetoinvestmentsinstrategicandcompetitive information technology? From a theoretical standpoint, consumer surplus increasesaspricesdrop.ThecompetitiveuseofASPreducescostsandprices throughapplicationslikethoseinbankingandairlines.Thecompetitiveuseof ASP has, in many instances, reduced prices (or held down price increases), whichcontributesdirectlytoconsumersurplus.Technologicalcompetitionmay notalwayscreateaneconomicconsumersurplus,butitdoesprovidebenefits in the form of service and convenience. A bank ATM can save time for the customer,somethingthecustomermaybeabletovaluefromadollar/pound standpoint. The fact that two firms (IBM and Microsoft) had a similar web servicelaunchedwithinfewmonthsofeachothermeansthatthetechnology wasnotabletodeliverasustainableadvantagefromitsinvestment.Neitherwas abletoraiseitspricesdirectlytopayfortheirWebservices,sothebenefitsfrom theirinvestmentsinASPallwenttothecustomers. WhilethestrategiesofASPvendorscanthuschangeovertime,aclearstrategic direction is indispensable to success. In addition, the transition from one strategytoanotherisaverydifficultandriskyundertaking,sinceitrequiresa completereorientationofthevendors’effortsandradicallydifferentpatterns of resource allocation. As we have seen, technology is often a major factor behind both differentiation and cost leadership strategies. It is also a critical factorin“new-game”strategies. Internet Strategic Direction Toomanyorganizationstodaypracticethebeliefthattheycangeneratenew Internet strategic direction faster than their rivals. Such belief leads to the repetitionofthefollowing: TEAM LinG
  • 260. Conclusions 239 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Formulatevisions • Preparelong-termplans • Documentstrategicmilestonesandhowtomonitortheirachievements • Setoutphrasesintheorganization’smissionstatementrelatingtoInternet strategy • Design strategy to persuade people (staff and customers) to share the sameculture • Encouragewidespreadparticipationandconsensusforthestrategy • Installcontrolsystemsfortopexecutiveseasilysetthedirectionandkeep incontrol Whiletheabovemighthaveprovensuccessfulingeneralmanagementstrategy forbusinessesinthelaterdecadesofthe20th century,theycouldnotpossible work for the Internet strategy in the 21st century. The simple reason is due to itsdependenceontheprincipleoffindingthestableequilibriumorganization paradigm.Notonlyaresuchparadigmsconsistentwithourscientificeducation, but they also turn to reinforce the message that an organization either install stabilityandachievesuccessoritwillexperienceinstabilityandthusfailure. DuetotherapidlychangingnatureoftheInternet,successfulInternetstrategies cannotflowfromchoicesbetweenstabilityandinstability.Itratheremerges from choices of both stability and instability. Any organization that finds its current Internet strategy to be successful must learn that future success will depend on its ability to change the way it focuses on the adjustment of such strategytothefutureneedsofthebusiness.Onlybysodoingcanmanagement seethatcreativityisintimatelyconnectedwithinstability,tension,conflict,and thechangingperspectivestheInternetenvironmentprovokes. Asthewell-publicizedexampleofIBMhasshown,organizationsthatstickto the old stable equilibrium way of seeing their strategic direction will simply repeattheirpastorevenimitatetheircompetitorswhohavealreadymovedon tobetterstrategies.SuchapproachtoInternetstrategyintroducestheconcept offacingtheunknownhead-oninsteadofsidesteppingbypretendingthatitis approximatelyknown.TheresultofthisriskyapproachistomanageInternet strategyinawaythatisfarfromcomfortingbutfarmoredynamicandfarmore usefulinturbulenttimes.Suchapproachhastodowithcreatingtheconditions anITdepartmentcanself-organizetoinnovate.Italsomeansacceptingthatthe department has not idea what the long-term future holds for any emerging TEAM LinG
  • 261. 240 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. technologiesbasedontheInternet.Thisapproachisaboutsustainingcontra- dictory positions and behavior in an organization. Such approaches are now being used by Nokia which has budgets and production schedules as well as hierarchieswithpowerconcentratedatthetop.However,Nokiaalsoenables individualsandgroups—indifferentcountries—topursuenewideasinrelative freedom. SuchapproachtoInternetstrategycanallowforthepositiveuseofinstability andcrisistogeneratenewperspectives,provokingcontinualquestioningand organizationallearningthroughwithunknowablefuturescanbecreatedand discovered. The approach also faces reality and accepts the consequent increaseinlevelsofanxietyasnecessaryforcreativeactivity.Afterobserving thisapproachtoInternetstrategy,onecanseethatstableequilibriumparadigm isadefenceagainstanxietyandonewhichblockscreativeworkinacontinu- ouslychangingindustry. Why do we need a new approach to managing Internet strategies? 1. Thecurrentapproachisnotservingthebusinesseswellenough.Organi- zations are continuously changing their Internet strategies and in some cases,ataphenomenalcosttotheentirebusiness—oftenresultingtostaff losingtheirjobs.Aclearjustificationhereisthewasteofresourcesand asubstantialdisruptiontopeople’sliveswhenthesestrategiesfailandthe organizationshavetoabsolvethecosts.Italsoslowsdownthelearning processofmanagingtheInternet—andinformationtechnologyingen- eral—when we have to keep going back to square one, starting with a smallsizeandallitsassociatedgrowingpains.Organizationsthatquite oftenfailtosucceedwithInternetstrategieslearntherealitythatthestable equilibrium will not work. Instead, continuing success lies far from equilibrium. 2. Modern technologies have shown that old approaches are based on rarelyquestionedassumptionsaboutthenatureofsystems.Nearlyallold approaches to Internet strategies in the 20th century say that success requires cohesive teams that share a vision and a culture, that pursue a strategicintentinarational,orderlymannerleadingtoadaptationtothe business.Theyaimtomaketheorganization’sfutureknowable.Onlythen cantheybepresumablysubjecttorationalcritique. TEAM LinG
  • 262. Conclusions 241 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Thissectionhasexploredwhatthenewfar-from-equilibriumparadigmmeans inrelationtoInternetstrategyandwhatdifferencethechangeoffocusmakes totheactionsthatanorganizationmustdesigntoachievesuccessfulInternet strategies. Such attempt to refocus can have profound consequences for the entire approach an organization adopts to the strategy for Web services. Web Services and Your Organization Thedebateontheeffectsofemerginginformationtechnologyinorganizations was initiated in the late 1950s. That was when Leavitt and Whisler (1958) statedintheirpapertitled“Managementinthe80s”: Over the last decade a new technology has begun to take hold in American business, one so new that its significance is still difficult to evaluate. The new technology does not yet have a single established name. We shall call it Information Technology. It is composed of several parts. One includes techniques for processing large amounts of information rapidly, and it is epitomised by the high speed computer. (p. 41) Much of the then debate (see Myers, 1967) centered on the issue of whether computertechnologywouldbeusedtocentralizedordecentralizedproduction operations control. It also involved the question of the intermediate layer between top management and the workforce was appeared to be leading to two extreme points of either erosion or enhancement as a consequence of computerization(Stewart,1971;Whisler,1970).Itseemedclearedthenthat middle management would be replaced by information systems that were completelycontrolledbycomputers.Alsothatremainingmanagerswouldbe reducedtoabasicroutinemonitoringfunction(MunfordWard,1965)and eveniftheeffectofcomputerizationonmanagementwassmall,juniormanage- mentandsupervisoryjobswouldbecomepartiallyorfullyexterminated. Two different studies in the mid-1960s by Munford and Banks (1967) and Whisler(1967)claimedthatinformationtechnologywouldleadtothefollow- ing: TEAM LinG
  • 263. 242 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. • Reductioninthenumberofclericalstaff • Displacementofdepartmentsthroughincreasedintegration • Centralizationofcontrol • Erosionofthecontrolresponsibilityofcertaincategoriesofsupervisors InoureffortstoexaminetherelationbetweenWebservicesandorganizations’ adaptation,theseearlydebatesraisedseveralmajorpointsforfurtherempha- ses: • That Web services may enable an organization to either centralize or decentralizedecision-makingauthority.ThatisbecauseWebservicesdo not determine organizational structure. Instead, the determination of organizationalstructureisdonebythewayWebservicesareintroduced and used. • ThoseWebservicesstrategies,whichpromotecentralization,arelikelyto erodethecontrolresponsibilitiesoflowerlinemanagement,supervisory, andoperativestaffs. • That Web services strategies, which promote decentralization, could either reduce or increase the control responsibility of supervisory for lower-levelmanagers. Theaboveclearlygoestosaythattheseearlystudiesindicatedtheimportance ofexaminingtheprocessbywhichemergingtechnologies(i.e.,Webservices) areintroducedintoanorganisation.TheorganizationalsignificanceofWeb services derives from their ability to capture, store, manipulate, and rapidly distributeinformationonwhichdecisionscanbemade.Forthemostpart,these systemshavebeenusedtoimprovetheefficiencyofhierarchicalorganizations, throughreplacingtraditionalmanualreportingsystemsofcommunicationand control.Thus,itisnottheinformationbeingprocessedthatisnew,rather,the suddenavailability,accuracy,andimmediacyofthisinformationtomanage- mentwhichhaschangedthenatureofoperationscontrolwithintheseorgani- zations.Webservicescanprovide—throughmaintainingahistoricalrecordof fluctuationinsupplyanddemandofvariousresources—managementsareable to evaluation potential strategies for changing the future level or method of resource provision. As Web services bring about new diversity of operator tasks and seems to be showing the potential for improving management TEAM LinG
  • 264. Conclusions 243 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. decisionmakingthroughtheprovisionofaccurateup-to-dateinformationon currentorpastperformance,theconsequenceofchangefortheorganization andcontrolofworkremainsanimportantareaofmanagerialchoice.Suchis theimportanceofexaminingtheprocessbywhichWebservicesareintroduced intoorganizations.Thisisoneoftheobjectivesofthisbook. Managing Transitions to Web Services EnsuringthesmoothtransitionsofWebservicesisaboutmanaginganunfold- ing,nonlinear,dynamicprocessinwhichplayersandactionsareneverclearly defined. During the period an organisation is in the process of managing transition to Web services, there are likely to be a number of unforeseen contingencies.Thesemaynecessitateamodificationofintendedpathwaysand stated objectives of achieving whatever the intended future state of that organizationwasanticipated.Theneedtorevisestrategiestomeetthedemands ofunpredictableeventsmayformpartofthatpredefinedtaskofevaluationand appraisal. This may result from the response of individuals or groups to problems arising from the transition to Web services process. Whether the individualtasksarepartoftheholisticplanorevolveovertime,theystillneed to be managed efficiently. The management of such occurrences during the processofWebservicestransitionsiscriticaltosuccessfulestablishmentofany new organizational arrangements. The significance of key stages in Web servicestransitioncentresontheabilityofkeyplayerstomaintainanoverview of the multiple and changing routes that Web services transition and their actionsincreating,displacing,redefining,anddirectingtheongoingdevelop- mentofinformationsystemstrategy. Web services transition is usually not a short-term project that last over few days or weeks. Consequently, its management cannot be a self-contained changewhichisexpectedtotakeashortperiod.Thedynamicsarethatoflarge- scalechangeandofaqualitativelydifferentnature,whichmayrequireahigh degreeofunderstandingandstaminaonthepartoftheserviceproviderandany partywithintheorganisationwhomayhavetodealdirectlywiththemessy,and attimespainfulandunsettling,taskofmanagingWebservicestransition.The complexityanduntidynatureofWebservicestransitions,partlystemfromthe timeframeassociatedthem.Ontheotherhand,theyhighlighttheimportance oftop-levelmanagementinchampioningtheprocessofWebservicestransition towardsitslong-termobjectives. TEAM LinG
  • 265. 244 Guah Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. The importance of different tasks in Web services transition process is to maintainsomeformofcontinuityinsteeringtheprocesstowardsasuccessful end. Such end, in practice, is often continually redefined throughout the transitionprocess.However,thereareanumberoftasksassociatedwithminor transitions within a larger information systems strategic change initiative. Therefore, the management of major Web services application is likely to involveadiverserangeoftransitionaltasks,activities,anddecisionwhichin some cases may appear as discrete and small-scale applications within a broaderandmorelooselycoupledframeworkofe-businessstrategy.Thismay addtothesenseofconfusionandchaos,particularlyduringthebusyperiods of transition when the disruption to the organization production and service operationsmaybeatitsheight.Symptomsofthisstageareasfollows: • Anincreaseinclienttopmanagementconcernbroughtaboutbyadecline inorganizationproduction • A general feeling of frustration and anxiety among the client’s lack of ability to see the end of the transition period • Dissatisfactionandlowmoraleamongtheclerical/administrativestaff waitingtoperformtheirnormaldutiesundertransitionalarrangements • High levels of stress and resistance among project champion and IT departmentalauthoritieswhomaybeexperiencingcriticismsbothfrom topmanagementandtheworkforce At this stage, the power and politics of this transitional process is clearly in evidenceandtheinitialvisionWebserviceimplementationmaybeseriously calledintoquestion.Amajorproblemfacingtheserviceproviders,atthisstage, ishowtomaintainthemomentumofchange.Yettheserviceprovidershaveto allaythefearsandfrustrationsofdifferentemployeegroupswithintheclient organization. Fartheralongthejourney,whentheWebservicetransitionprocessisreaching completionandthehurdles,disruptionsandconflictsbecomeanecdotesand legendary pastimes, a period of comparative stability may occur and act to constrainfurtheremergingtechnologydevelopmentsintheway.Theservice providerssometimesfeelthattheirtaskshavebeencompletedandtheirvision achieved.Projectchampionandstaffoftheclientorganisationmayfindthatless attention is paid to their views as a period of operation using the new applications—sometimesresultingtonewworkarrangements—becomesa TEAM LinG