Challenges and opportunities Department of Informatics micke@informatik.umu.se
Outline Introduction The growing IT dependency Mobility Openness Outsourcing (sourcing) The web as a platform Organizing the IT function 1
Introduction Difficult to say something about future challenges and opportunities What is a challenge or opportunity for an organization depends on The business The competitors The strategy of the organization, c.f. banks The size of the organization The geographic of the organization Types of customers In-house competence Today, discuss some general challenges and opportunities. Might not be that for all org 2
The growing IT-dependency IT-dependency of type-1 - Traditionally the comparative advantage of IT over humans in certain respects, such as routine calculations, performing standard operations procedures on huge sets of data etc., were exploited to gain efficiency - Successful to the extent that should IT malfunction normal organizational activities are impossible to uphold - In this sense most (large) companies need IT to perform essential activities - Present level of rationalization of earlier manual work makes it impossible to go back - In this sense most companies are dependent of IT today - We call this an IT-dependency of type 1 3
The growing IT-dependency IT-dependency of type-2 - Based on a more advanced utilisation of IT - Beyond automation of manual routines - Utilisation of digital data enables new products or services - American Airlines SARBE-system > Began as a simple seat-reservation system > Developed into frequent-flyer program > Changed the whole air-line industry 4
The growing IT-dependency In this process these systems went from being useful to being essential assets, equal in importance to an airline s fleet (Copeland & McKenney, 1988) In American the dependency of IT is different than in type 1 It has gone much deeper into the business processes of the company, almost to the extent of defining them We call this an IT-dependency of type 2 5
The growing IT-dependency The success of systems like SABRE initiated a new line of development Many hot topics during the last 10 to 20 years is part of such a development: BPR, data warehousing, data mining, ERP Modo Paper (the ORBIT project) were on its way to an IT-dependency of type 2 6
Mobility The number of mobile technologies (cell phones, tablets, etc.) and the number of users are growing The has meant that many organisations, both private and public, have started to develop mobile services, e.g. North Kingdom Both web based and apps (both in form of web gateways and standalone appplications) But, some recent statistics (nationmaster.com) Taiwan: 106.45 cell phones per 100 people Italy: 92.65 Sweden: 88.5 USA: 48.81 Burma: 0.03 7
Mobility Many countries has less than 20 cell phones per 100 people => Mobile services For many organizations it is hard to find reliable answers to questions like To which extent should we develop and offer mobile services? Our own competence? Do we have services that can be done on a cell phone? What kind of mobiles does our customers have? Will customers use mobile services? App statistics Mobile services for employees? Mobile services for suppliers & partners? However, some countries, mostly in Asia and Africa, seem to be skipping fibre and move straight to a 3G/4G infrastructure => Will be hard to offer advanced web services 8
Mobility Organisations going for mobile services will also have to do with Apple (App Store) and Google (Google play, merged Android Market and Google music) Google and Apple own the main distribution platforms! Both Apple and Google have procedures and rules for what can be published on their platforms Producing apps means that organizations must conform to those procedures/rules However, there are some uncertainties You ll never know when Google or Apple decides to change As the number of apps grow it is becoming increasingly difficult to find them 9
Openness Openness is a trend with two major sub-domains; Open Source and Open innovation Open Source Software which source code is free to use, read, modify and to redistribute The openness of the software is regulated through different licences Open-source software are often developed in a grassroot manner where developers co-operate in loose forms Well-known examples are Linux, OpenOffice, Mozilla/ Firefox New business models, e.g. the software is free but you pay for support 10
Openness Open innovation (source openinnovation.eu) From closed innovation processes to more open ways of innovating Open innovation; combining internal and external ideas as well as internal and external paths to market to advance the development of new technologies, products & services, e.g. Spotify - Facebook, iphone - App developers Not all good ideas are developed within the own company, and not all ideas should necessarily be further developed within the own firm s boundaries. Open innovation can be done in several ways Active search for new ideas and technology outside the organization Co-operation with suppliers, customers and/or competitors Further development or out-licensing of ideas and technologies that do not fit the strategy of the company 11
Openness 12
Openness 13
Openness Closed Innovation Principles Open Innovation Principles The smart people in the field work for us. To profit from R&D, we must discover it, develop it, and ship it ourselves. If we discover it ourselves, we will get it to the market first. The company that gets an innovation to the market first will win. If we create the most and the best ideas in the industry, we will win. If we create the most and the best ideas in the industry, we will win. If we create the most and the best ideas in the industry, we will win. External R&D can create significant value: internal R&D is needed to claim some portion of that value. We don t have to originate the research to profit from it. Building a better business model is better than getting to the market first. If we make the best use of internal and external ideas, we will win. We should profit from others use of our IP, and we should buy others IP whenever it advances our business model.! Source:!Openinnovation.eu! 14
Openness Both sub-domains raises questions with respect to IS strategy Can we use Open Source (a kind of open innovation)? Do we have the competence for using Open Source? Can we license our products as open source (a kind of open innovation)? Can we create open innovation through participation in open source development projects? Are there ways in which we can use open innovation as a part of our IS strategy? For instance, to develop strategic IS or co-use strategic competences with partners and/or competitors? 15
Outsourcing (sourcing) Describes almost any corporate activity that is managed by an outside vendor Most commonly used to denote the transfer of the management of an organisation s computer facilities to an outside agent 3 main advantages Greater economies of scale can be gained by a third party that is able to pool the activity of a large number of firms Greater ability of a specialist outsourcing firm to keep up with the latest developments in its field, especially important in the IT domain Enables small firms to do things for which they could not justify hiring full-time employees Main disadvantage; loss of control when handing responsibility for particular processes to others 16
Outsourcing (sourcing) Outsourcing is not a new phenomenon; e.g. advertising, but it has increased a lot the last 10-20 years Most processes can be outsourced, even manufacturing A lot of the increase is due to outsourcing of IT services; accounting, server maintenance, data warehousing, e-mail, etc. Today, outsourcing contracts often is structured as a partnership agreement, an increase in the clients volume of business is reflected in the outsourcer s scale of charges, e.g. Visma Sirius => Both parties in some way share the risks and rewards of the outsourced activity 17
Outsourcing (sourcing) What should be outsourced? Until the last years The non-essentials! Accounting, pay-roll, security, maintenance, etc. But times are changing! Companies increasingly see their future in the e-world, where they have little experience, no reservoir of skilled staff and no structure to retain them. Cloud solutions! (Macaulay & Cook, 2002) Divide the outsourcing process into 3 stages (Macaulay & Cook, 2002) Initial review: have we got our strategy right? External selection and negotiation: have we anticipated and covered key points? Getting the outsourcing to work: are we prepared to be flexible and to work together to achieve results? 18
Outsourcing (sourcing) What are the primary goal of outsourcing? Tap into scarce expertise? Reduce costs? Offer a bigger or better service? Outsourcing give raise to questions like for instance (Macaulay & Cook, 2002) What impact will it have on the customer? Will it save us money? Will it give us competence we lack? Can the outsourcer provide a better service, both internally and externally? Can we afford to risk getting left behind as technology advances in for instance call centres and e-commerce, but equally can we take the risk that it might all go sour? How risky is it not to have our own competence in e.g. IT? 19
The web as a platform A strong trend the last 10-15 years has been the development in which the web more and more is becoming a platform for many companies Platform in at least three senses E-service/e-commerce platform, e.g. banks, retailers (e.g. IKEA), public administration institutions, procurement, inter organisational co-operation (e.g. Dell), etc. Platform for information, marketing and customer relations (communication) Platform for the development of new services and systems A new situation for many organizations! Requires new ways of developing systems Earlier: Developing for internal users Today: Developing for customers 20
The web as a platform Requires new competences New skills in systems development New skills in customer communication, two-way instead of one-way New skills in marketing New skills in how to sell products New skills in customer support Requires integration! Example: Banks However, organizations also need to think of the statistics πππsource: OECD and Strategy Analytics (T-Connect) and OECD, ICT database and Eurostat, Community Survey on ICT usage in households and by individuals, November 2011) 21
The web as a platform 22
The web as a platform 23
The web as a platform In many countries, especially in Africa and parts of Asia, far less than 20 % of the population has broadband Internet access And, what is called broadband isn t always that impressive The web as platform gives raise to questions as What services can/should we provide on the web? Should we offer all our services on the web? Should we offer some or all services off-web? How will our customers/suppliers/partners react? Do we have the competences required? Which regions of the world are important to our business? 24
Organizing the IT function All the challenges/opportunities (and some more ) we have discussed have implications on how to organize the IT function Should it be centralized or decentralized? Does all parts of the organization require the same IT services and support? Should we have a large IT function with in-house competence or a small one and outsource? Which technologies should we go for? Which competence do we have and which do we need? How important is IT to our business? 25