Value Creation from IS Integration: From ASP to Web Services?
- 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. Overview EPSRC and ESRC Funded Research Project 2000-2004 The ASP market - A Flawed e-business model? Web Services - Integration: The Missing Link? Case Study – Implementing A Compliance System in the Financial Services Sector
- 3. Research studies £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. £258,000 (plus £195,000 to Fullard Learning Ltd and DCS.com 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.
- 4. ASP Definition “ An ASP manages and delivers application capabilities to multiple entities from data centres across a wide area network (WAN)”. ASP Industry Consortium
- 5. Ecosystem For Hosted Applications
- 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. Spending on ASPs IDC says companies spent roughly $245 million on application service provider (ASP) services in 2001 Manufacturers spent $221 million on ASP services in 2001 But 60% of ASPs predicted not to survive! (Gartner Group)
- 8. Key Drivers of the ASP Industry BUSINESS DRIVERS Adopt a ‘Utility model’ Software provided as a service Focus on core competencies Reduce total cost of ownership (TCO) Better value proposition Agility and flexibility MARKET DRIVERS Global competition New business (e.g. ERP vendors) Faster time to market De-regulation, consolidation, standardisation Global IT skill shortage TECHNICAL DRIVERS Access to technical expertise Information delivered through internet and corporate intranets Global access to information Parallel to converged networks Standardised solutions Net-centric applications
- 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. ASP and Integration Integration of applications across multiple platforms, sites and environments Business process re-design through integration To create a ‘seamless’ IT organisation Integration of billing information into auditing and reporting systems To create an infrastructure for better manageability To achieve faster software application implementation Resultant synergy from combination of applications
- 11. Scale, Scope and Integration - Definitions Scale – the extent to which a firm enters into outsourcing contracts in relation to vendor capabilities Scope – the extent to which it is possible to source specific activities, tasks, processes or applications from a third party vendor Integration – the extent to which software applications can be integrated across business processes
- 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 (One-ClickHR.com, Netledger) Enterprise ASP, (J.D.Edwards, SAP, Corio, Aristasoft)
- 13. Examples of Flawed ASP business models Enterprise ASPs – Difficult to sell ‘vanilla ERP’ to SMBs (example – JD.Edwards) Vertical ASPs – Customisation and integration/not one-to-many (Aristasoft) Pure-play ASPs – No profits from commodity software applications (email) (E-Carisma) Infrastructure ASPs – Over-capacity of network/datacentres, no channel to market (Cable & Wireless)
- 14. The first-phase ASP market – a false start One-to-many became same-for-all No profits from commodity software applications (email, MS office, etc) ASPs focused too much on marketing – not on revenue generation SMBs were unconvinced about the benefits of the ASP model ASPs failed to ‘create value’ for customers Technology platforms/software not web-centric
- 15. ASP and Web Services Convergence between telecommunications and computing industries will continue Market consolidation of ASP vendors Web services will facilitate BPO Value creation through customization and integration ASP vendors need to develop business models which address scale, scope and integration
- 16. ASP and Web Services Commodity ASP 1990s One-to-many – point solution 24x7 availability High scalability Economies of Scale Efficiency (of business applications) Individual performance improvement Utility pricing models Packaged ‘Stand-alone’ applications Functional data/information Application integration Remote C/V relationship Application outsourcing Service Level Agreement (SLA) Application-centric Continuous improvement Inter-departmental change Technology peripheral to core business Silo effect Web Services 2000+ Many-to-many - Enterprise-wide 24x7 availability Unlimited Scalability Economies of Scale and Scope Adaptiveness (to business change) Enterprise-wide improvement Multiple, fluctuating pricing models Component based applications Business Intelligence Synergy of combination of applications Loosely-coupled C/V relationship Business process outsourcing Multiple SLAs Industry-centric Changing Industry/market dynamics Industry-wide change Mixed technology portfolio Synergistic (more than the sum of the parts)
- 17. Web Services Definition ‘ 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).
- 18. Stage 1 Stage 2 Stage 3 Stage 4 Phases of Web Services Adoption Source: Marks and Werrell, 2003 Integration Collaboration Innovation Domination Experimentation with Web Services with small, internal integration projects SOAP-enablement of legacy applications and ERP, CRM systems Fast cycles of learning reach the limits of early Web services, unprepared IT architectures Increase in shared information across the business Experimentation with WS outside firewalls Increasing interaction with trading partners and customers Close trading partners implement Web services to drive shared value External trading partners begin sharing information to drive industry value chain benefits Lessons from integration and collaboration applied to new processes and business models New distributed WS processes and applications drive business change Dramatic business results are achieved as WS are applied in many ways, driving new value propositions First movers begin to assert their dominance over respective markets and industries Industry dominance achieved by innovating new business models as well as out-executing competitors Web services leaders win through rapid innovation and cycles of learning Web services mastery creates new company and industry structures as boundaries are redefined
- 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. The flow of information within Firm A and B
- 21. Web Services Web Reports Excel/Access Windows Messaging Internet and Intranet Database Client Order Management System Value Added Web Services
- 22. Conclusion Market driven towards using Web services for straight through processing From One to Many (ASP) to Many to Many (Web Services) Speed of Integration improved with standardisation of interfaces (XML) Increased liquidity (i.e. allows more buyers/sellers to trade simultaneously)
Editor's Notes
- #22: Why do companies want Web Services? Ability to operate the OMS in different time zones (New York –5, London +0 Japan +9) across the Internet. This enables all of the users to access the system without any special software (e.g. Citrix). Not bound to the machine in the office but you can use any web based machine. All users can run from the same database. All of the compliance rules and administration are centralised. System rollout is therefore both easier and quicker. Maintenance has the same benefits The software is installed and tested in one place rather than having the issues of rolling the software out to every desktop. Performance is improved on resource intensive events because these are running on dedicated servers rather than on the client’s machine. As the client grows so too can the system, by using more servers (scalability). Move towards straight through processing (STP) has forced vendors to look to a common standard to link their products together: XML and Web Services are an essential tool for this to take place. This seamless interface to brokers, accounting systems and custodians both saves time and reduces human error. Other internet vendors also provide services than can only be used across the internet. For example: FXall for foreign currency trade execution can quote half of all requests within a second LiquidNet allows buyers and sellers to anonymously negotiate trades across the internet MarketAxess, an internet based multi-dealer platform is the industry’s leading bond price data system TradeWeb, on-line fixed income dealing Omgeo, the leading electronic trade allocation and acceptance service Eagle Investment Systems – Data integrity 7. Bloomberg provides information such as real time pricing