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Value Creation from IS Integration: From ASP to Web Services?


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Value Creation from IS Integration: From ASP to Web Services?

  1. 1. Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University Business School, UK June 2004
  2. 2. Overview <ul><li>EPSRC and ESRC Funded Research Project 2000-2004 </li></ul><ul><li>The ASP market - A Flawed e-business model? </li></ul><ul><li>Web Services - Integration: The Missing Link? </li></ul><ul><li>Case Study – Implementing A Compliance System in the Financial Services Sector </li></ul>
  3. 3. Research studies <ul><li>£193,000 from EPSRC: ‘ Assessing the deployment, hosting and integration of business-critical information systems by application service providers’ (BC-ASP). October 01-September 03. </li></ul><ul><li>£258,000 (plus £195,000 to Fullard Learning Ltd and Ltd) from ESRC: ‘ Developing a risk-assessment framework for deploying, hosting and integrating vertical and horizontal information systems by application service providers’ (ASP-VH). March 02-February 04. </li></ul>
  4. 4. ASP Definition <ul><li>“ An ASP manages and delivers application capabilities to multiple entities from data centres across a wide area network (WAN)”. </li></ul><ul><li>ASP Industry Consortium </li></ul>
  5. 5. Ecosystem For Hosted Applications
  6. 6. Early predictions – ASP Market $23 Billion by 2003 Forrester, 2000 DataQuest, 2000 $22.7 Billion by 2003 $19.2 Billion by 2003 Yankee Group, 2000 $24 Billion by 2005 IDC, 2001 $18 Billion by 2005 Gartner Group, 2001
  7. 7. Spending on ASPs <ul><li>IDC says companies spent roughly $245 million on application service provider (ASP) services in 2001 </li></ul><ul><li>Manufacturers spent $221 million on ASP services in 2001 </li></ul><ul><li>But 60% of ASPs predicted not to survive! (Gartner Group) </li></ul>
  8. 8. Key Drivers of the ASP Industry <ul><li>BUSINESS DRIVERS </li></ul><ul><li>Adopt a ‘Utility model’ </li></ul><ul><li>Software provided as a </li></ul><ul><li>service </li></ul><ul><li>Focus on core competencies </li></ul><ul><li>Reduce total cost of </li></ul><ul><li>ownership (TCO) </li></ul><ul><li>Better value proposition </li></ul><ul><li>Agility and flexibility </li></ul><ul><li>MARKET DRIVERS </li></ul><ul><li>Global competition </li></ul><ul><li>New business (e.g. ERP vendors) </li></ul><ul><li>Faster time to market </li></ul><ul><li>De-regulation, consolidation, standardisation </li></ul><ul><li>Global IT skill shortage </li></ul><ul><li>TECHNICAL DRIVERS </li></ul><ul><li>Access to technical expertise </li></ul><ul><li>Information delivered through internet and corporate intranets </li></ul><ul><li>Global access to information </li></ul><ul><li>Parallel to converged networks </li></ul><ul><li>Standardised solutions </li></ul><ul><li>Net-centric applications </li></ul>
  9. 9. A comparison of traditional and application outsourcing   Traditional Outsourcing Application Outsourcing Software licence owned by the customer Software licence owned by the vendor One to one relationship between vendor and customer One to many relationship between vendor and customers Legacy software application paid for by customer No up-front costs to customer Price based upon s/w license and maintenance Price based upon usage Software as a product Software as a service S/W application located at customer site S/W application located at supplier site
  10. 10. ASP and Integration <ul><li>Integration of applications across multiple platforms, sites and environments </li></ul><ul><li>Business process re-design through integration </li></ul><ul><li>To create a ‘seamless’ IT organisation </li></ul><ul><li>Integration of billing information into auditing and reporting systems </li></ul><ul><li>To create an infrastructure for better manageability </li></ul><ul><li>To achieve faster software application implementation </li></ul><ul><li>Resultant synergy from combination of applications </li></ul>
  11. 11. Scale, Scope and Integration - Definitions <ul><li>Scale – the extent to which a firm enters into outsourcing contracts in relation to vendor capabilities </li></ul><ul><li>Scope – the extent to which it is possible to source specific activities, tasks, processes or applications from a third party vendor </li></ul><ul><li>Integration – the extent to which software applications can be integrated across business processes </li></ul>
  12. 12. Scale, Scope and Integration of Outsourcing: the key challenge Scale 000s Scope Complexity Integration Full Service Providers (FSPs) Projected Market Actual Market Pure-Play ASP (, Netledger) Enterprise ASP, (J.D.Edwards, SAP, Corio, Aristasoft)
  13. 13. Examples of Flawed ASP business models <ul><li>Enterprise ASPs – Difficult to sell ‘vanilla ERP’ to SMBs (example – JD.Edwards) </li></ul><ul><li>Vertical ASPs – Customisation and integration/not one-to-many (Aristasoft) </li></ul><ul><li>Pure-play ASPs – No profits from commodity software applications (email) (E-Carisma) </li></ul><ul><li>Infrastructure ASPs – Over-capacity of network/datacentres, no channel to market (Cable & Wireless) </li></ul>
  14. 14. The first-phase ASP market – a false start <ul><li>One-to-many became same-for-all </li></ul><ul><li>No profits from commodity software applications (email, MS office, etc) </li></ul><ul><li>ASPs focused too much on marketing – not on revenue generation </li></ul><ul><li>SMBs were unconvinced about the benefits of the ASP model </li></ul><ul><li>ASPs failed to ‘create value’ for customers </li></ul><ul><li>Technology platforms/software not web-centric </li></ul>
  15. 15. ASP and Web Services <ul><li>Convergence between telecommunications and computing industries will continue </li></ul><ul><li>Market consolidation of ASP vendors </li></ul><ul><li>Web services will facilitate BPO </li></ul><ul><li>Value creation through customization and integration </li></ul><ul><li>ASP vendors need to develop business models which address scale, scope and integration </li></ul>
  16. 16. ASP and Web Services <ul><li>Commodity ASP </li></ul><ul><li>1990s </li></ul><ul><li>One-to-many – point solution </li></ul><ul><li>24x7 availability </li></ul><ul><li>High scalability </li></ul><ul><li>Economies of Scale </li></ul><ul><li>Efficiency (of business applications) </li></ul><ul><li>Individual performance improvement </li></ul><ul><li>Utility pricing models </li></ul><ul><li>Packaged ‘Stand-alone’ applications </li></ul><ul><li>Functional data/information </li></ul><ul><li>Application integration </li></ul><ul><li>Remote C/V relationship </li></ul><ul><li>Application outsourcing </li></ul><ul><li>Service Level Agreement (SLA) </li></ul><ul><li>Application-centric </li></ul><ul><li>Continuous improvement </li></ul><ul><li>Inter-departmental change </li></ul><ul><li>Technology peripheral to core business </li></ul><ul><li>Silo effect </li></ul><ul><li>Web Services </li></ul><ul><li>2000+ </li></ul><ul><li>Many-to-many - Enterprise-wide </li></ul><ul><li>24x7 availability </li></ul><ul><li>Unlimited Scalability </li></ul><ul><li>Economies of Scale and Scope </li></ul><ul><li>Adaptiveness (to business change) </li></ul><ul><li>Enterprise-wide improvement </li></ul><ul><li>Multiple, fluctuating pricing models </li></ul><ul><li>Component based applications </li></ul><ul><li>Business Intelligence </li></ul><ul><li>Synergy of combination of applications </li></ul><ul><li>Loosely-coupled C/V relationship </li></ul><ul><li>Business process outsourcing </li></ul><ul><li>Multiple SLAs </li></ul><ul><li>Industry-centric </li></ul><ul><li>Changing Industry/market dynamics </li></ul><ul><li>Industry-wide change </li></ul><ul><li>Mixed technology portfolio </li></ul><ul><li>Synergistic (more than the sum of the parts) </li></ul>
  17. 17. Web Services Definition <ul><li>‘ Web Services are loosely coupled software components delivered over Internet standard technologies. A Web Service represents a business function or business service and can be accessed by another application…over public networks using generally available protocols..’ (IDC, 2001). </li></ul>
  18. 18.   Stage 1 Stage 2 Stage 3 Stage 4 Phases of Web Services Adoption Source: Marks and Werrell, 2003 Integration Collaboration Innovation Domination <ul><li>Experimentation with Web Services with small, internal integration projects </li></ul><ul><li>SOAP-enablement of legacy applications and ERP, CRM systems </li></ul><ul><li>Fast cycles of learning reach the limits of early Web services, unprepared IT architectures </li></ul><ul><li>Increase in shared information across the business </li></ul><ul><li>Experimentation with WS outside firewalls </li></ul><ul><li>Increasing interaction with trading partners and customers </li></ul><ul><li>Close trading partners implement Web services to drive shared value </li></ul><ul><li>External trading partners begin sharing information to drive industry value chain benefits </li></ul><ul><li>Lessons from integration and collaboration applied to new processes and business models </li></ul><ul><li>New distributed WS processes and applications drive business change </li></ul><ul><li>Dramatic business results are achieved as WS are applied in many ways, driving new value propositions </li></ul><ul><li>First movers begin to assert their dominance over respective markets and industries </li></ul><ul><li>Industry dominance achieved by innovating new business models as well as out-executing competitors </li></ul><ul><li>Web services leaders win through rapid innovation and cycles of learning </li></ul><ul><li>Web services mastery creates new company and industry structures as boundaries are redefined </li></ul>
  19. 19.     Attribute Firm A Firm B Existing system Four different systems that could not connect with each other Excel spread sheets and paper based deal tickets Size Part of a group that employed 22,000. The 120 users managed corporate pension plans, private clients and wealthy individual investors. Twelve dealers. Thirty employees, the four fund managers also dealt their own trades. Infrastructure Windows NT, LAN and WAN. All Oracle and SQLServer database systems in US Windows XP. SQLServer database In-house skills Expert DBA, network teams, 24hr help desk, in-house training No expert IT skills Implementation Team Over 20 at its peak (1 external) 2 core people (both external) Compliance Rules Over 25,000 Over 350 Accounts and Positions 15,000 accounts: 250,000 positions 25 accounts, 2,500 positions Securities Traded Debt (10%) Equity (60%) Unit Trusts (10%) Money Market (10%) Foreign Exchange (10%) Debt (60%) Derivative (35%) Equity (5%) Time to implement 3 years 6 months
  20. 20. The flow of information within Firm A and B
  21. 21. Web Services Web Reports Excel/Access Windows Messaging Internet and Intranet Database Client Order Management System Value Added Web Services
  22. 22. Conclusion <ul><li>Market driven towards using Web services for straight through processing </li></ul><ul><li>From One to Many (ASP) to Many to Many (Web Services) </li></ul><ul><li>Speed of Integration improved with standardisation of interfaces (XML) </li></ul><ul><li>Increased liquidity (i.e. allows more buyers/sellers to trade simultaneously) </li></ul>