Creating or having your own website is all about sharing your information, products and services to the world. For corporate websites, online storefront generates a different source of revenue for them – mostly targetting the global market. For personal or services websites, there could be other sources of revenues but the most popular is what we call “Ad Networks”.
An advertising network (also called an online advertising network or ad network) serve advertising on your website and share advertiser revenue for qualified clicks each time your site visitors clicks on ads. Treat these companies as advertising agents wherein they will have online advertising inventory. They will invite companies to advertise online and unless it’s specified by the advertiser where they want their ads to be placed, advertising agents will be the ones to help advertisers place their ads online – sites that are most relevant to the advertiser’s campaign.
Online advertising inventory can be found on websites, in RSS feeds, on blogs, in instant messaging applications, in adware, in e-mails, and on other sources.
Online advertising is no longer limited to banner ads, it now includes: rich media, text links, and e-mails. Some of the larger networks include AdBrite, Casale Media, Google’s AdSense, Pulse 360, Right Media’s Remix Media Network, RealTechNetwork, Tribal Fusion, ValueClick, FeedBurner’s Ad Network (FAN) and Yahoo! Search Marketing.
There are two types of advertising networks: first-tier and second-tier networks. First-tier advertising networks have a large number of their own advertisers and publishers, they have high quality traffic, and they serve ads and traffic to second-tier networks. Examples of first-tier networks include the major search engines like Google Adsense and Yahoo.
Second-tier advertising networks may have some of their own advertisers and publishers, but their main source of revenue comes from sydincating ads from other advertising networks.
Ad Networks targets both the advertisers and publishers. The advertisers will be the one to pay for their online campaigns, while publishers can join ad networks so that the ads can be displayed on their site and payments can be made based on either CPM or CPC.
CPM is a type of advertising that pays per impression. For instance if the campaign states $10 CPM, you would be making $10.00 USD per thousand impressions, or 1 cent per ad view. CPC stands for cost per click, and payment is based on the number of clicks delivered from your site. Simply put, in CPM campaigns – publishers will be paid once the ads are displayed. On the other hand, in CPC campaigns – publishers will be paid based on the number of ad clicks it generates.
For the publishers, the most important thing for them is the ad rates of course – how much will they get out of the ads that were placed on their ads, and will they be paid on time. Some ad networks will accumulate the publisher’s ad revenue till it reaches $50 to $100, before a payout is done by the ad networks to publishers.
Not all publisher applications are approved, it is therefore a challenge to website owners to come up with websites that adhere to certain standards in as far as content and design is concern. If and when your application is approved, you will be given an administration page wherein you will be able to check your website ad performance, select which ad campaign will you allow to be displayed on your site, payment history and others.
For advertisers, the primary concern is for their online campaign to be delivered correctly and to the right audience, their brands be protected online and the bottomline is of course – for the online campaign to generate revenue for them in the real world. Some of the things advertisers should watch out for in selecting ad network partners are: advertising rates.,
ad types and formats, targeted advertisements capability, percentage of default ads and flexibility of contract.
Advertisers should also look for ad network partners that are capable in providing comparable and complementary audience composition, reach and frequency, with stringent quality controls and the ability to demonstrate measurable lift in key brand metrics. The key is to be able to measure the impact in the efficiency of your overall online brand marketing objectives.
The entire online advertising ecosystem is a win-win situation for every player. Each have their own role, and everyone should be innovative enough to maximize their online intentions.
Emilio “Jun” Bernardino (November 9, 1947–March 24, 2007)
If you’re a basketball fan, I am sure you have heard of the name Emilio “Jun” Bernardino – the fifth commissioner of the Philippine Basketball Association (PBA) and the longest serving at that. I always see him on TV everytime I watch the PBA games as the TV crew will pan the camera to him and acknowledge him as PBAs commissioner. Never did I know that this man they call “Jun B” will play an important role in my life.
I met Sir Jun when I made a proposal to computerized the Philippine Basketball Association (PBA). Being a PBA fan, I wanted the PBA to be like the National Basketball Association (NBA) in as far as gathering the statistics is concerned. I want the scores and players performance to be available in real time and even as the game progresses. I went to Sir Jun’s office (at the Cuneta Astrodome then) and presented my idea. He simply listens and after my presentation he told me to prepare a formal proposal since he had to present my idea to the board. I remember he told me “I may be the Commissioner but I am only a servant to the Board”.
Sir Jun was very supportive with my idea, he gave me his ideas on how he wanted the system to be. He wanted the system to provide information for the fans to enjoy the game even further and for the teams to use those information to come up with better strategies.
One day, Sir Jun told me that the PBA board wanted me to present my idea. He told me that each team will be sending their I.T. representatives to listen – that made me nervous. I asked Sir Jun if he will be there. He simply said – I like your idea and I believe in you and your plans for the PBA, I have opened the doors for you – what happens next is all up to you. He put his hands on my shoulder and gave it a gentle squeeze and said “You can do it”.
That was enough encouragement for me. The day of of the presentation came. My team and I presented the system to the representative of each team which lasted for like three hours. After the presentation, they told me that they will evaluate everything and will get back to me. After a week or two, Sir Jun informed me that my proposal was approved and the PBA wanted me to work on the project as soon as possible. That gave birth to the PBA’s computerized system called “ASSIST”.
What started out as a professional relationship was slowly turning into a trusting friendship. It took me more than a year to finish the system, and during this time I have to be at the venue everytime there is a game. I will be at Cuneta Astrodome and Araneta Coliseum to watch the game and see how further can we improve this system. And most of the time, I will be seated with Sir Jun at the Commissioners row to watch the game. There was even a time when he asked the TV crew to include me during his PBA TV coverage and to acknowledge me as the one doing the PBA system.
One afternoon while I was checking the PBA system, Sir Jun called me and asked me if I have any plans of sharing my computer knowledge to a bigger audience. He suggested that I produced a TV show about computers since there was none at that time. I told Sir Jun that coming out on TV is not my cup of tea. From that day on, Sir Jun will constantly remind me of his suggestion and I will just say thank you.
He even suggested that we form our own TV production outfit as his way of supporting me – I jokingly suggested the name “JBL Productions Inc.” which stands for J=Jun/Jerry, B=Bernardino, L=Liao, a name he liked a lot. Until after much prodding, I finally told Sir Jun that I will try. He was so happy then and he told me to come up with a concept paper and submit it to Mr. Bobong Velez for VTV 13 then. I did exactly what Sir Jun told me. Unfortunately at that time, there was no available air-time.
Weeks after I submitted my concept paper to VTV, Sir Jun again asked me for developments. I told him that there was no available airtime and VTV then find a computer show out-of-sync with their programming since VTV was into sports. What Sir Jun did after that really convinced me that he really believes in my talent. Sir Jun called Bobong Velez at once after hearing about the airtime problem and after their conversation – Sir Jun told me that I already have my airtime and I have to produce my pilot episode. This gave birth to the country’s first computer TV show – INFOCHAT.
Yes my friends, outside of my family, Mr. Jun Bernardino was the first person to believe in my talent. Not only did he believe it – he really supported it. And to tell you the truth, with all his help – Sir Jun never asked for anything in return, not even a single favor. Everytime we meet, I will always tell him this – “Without Mr. Jun Bernardino – There is no Jerry Liao”. He will just smile and again say “I simply open the doors for you – what happens next is all up to you.
I did INFOCHAT for 10 years and as much as we don’t see each other as often as before – our closeness and our friendship is always there. I met Sir Jun at Edsa Shangrila Hotel after his hospitalization, and I asked him how he is doing. He said he’s doing fine and he congratulated me for all my achievements and said he knew all along that I will go places. The last time I saw Sir Jun was at St. Luke Hospital during my wife’s treatment. We were at the lobby then and he said he was looking for me because he needed my help for a computerization project. I gave him my new business card and he asked me what I was doing at the hospital then. I told him that my wife was undergoing cancer treatment. You can automatically sense the concern in his eyes and he told me to be strong and have faith in God. He said that he will pray for my wife’s recovery and he will get in touch with me as soon as he finalizes the details of his project. A call he never made, and never will.
March 24, 2007 – my friend passed away at 1:30 a.m. from a heart attack after attending the birthday celebration of another basketball pioneer Moying Martelino. I learned about it March 25 Sunday. I was already in bed watching the late night news when I learned about his passing. I cried knowing what happen to Sir Jun. I prayed to God to take care of my friend in heaven.
To my “Kume” as I always call him – Thank you Sir for supporting me and for believing in me. I will never forget you for as long as I live. Again, I will tell you one last time and to all my readers “That Without Mr. Jun Bernardino – There is no Jerry Liao”. You will always be my “Commissioner”. Rest in peace my dear friend. Until we meet again.
The SAP Financing Program
by: Jerry Liao
For most Filipinos, financing is a popular way of owning things – popular in owning cars, houses, furniture, gadgets, entertainment systems and others. And if you go to most of the malls, car dealers and appliance stores, you will notice that not only do they offer financing services but they also offer it with zero interest rates. It’s an attractive way to own things combined with easy payment schemes.
We are very used to financing tangible things, but what if we finance something that is intangible – like software and services?
Just recently, SAP Philippines in partnership with Orix Metro launched a program called SAP Financing. SAP Financing offers companies of all sizes an affordable, all-inclusive, and predictable financing option. With SAP Financing, you can plan the overall cost of your IT investment up to four years – enabling you to simplify your budgeting process and lower your TCO.
The new financial services are tailored to meet the specific cash-flow requirements of the customer and conveniently cover the costs of software, hardware, internal and external implementation services and maintenance during project installation for SAP solutions. As a result, you benefit from: competitive finance rates; manageable, fixed monthly payments that cover your entire IT solution; optimized cash flow; more capital available for other strategic investments; accelerated return on your investment; and you get a wide range of innovative products and reliable, customer-driven service from SAP with both financial and technological expertise. With SAP Financing, you gain complete financial transparency in your SAP solution, predictable costs throughout the solution life cycle, and a low-risk option for leveraging the solutions you need for success.
According to Bernadette Astudillo, Senior Vice-President of Orix Metro, clients can avail of a loan starting from as low as Five Hundred Thousand Pesos (P 500,000.00) to as high as Two Hundred Twenty Million pesos (P 220,000,000.00) payable in 12 months to 48 months.
After the presentation, my very first question to Ms. Astudillo was what will happen if the client defaulted. Ms. Astudillo said that regardless of what happens, the company should finish its obligation since it’s an outright loan.
Since SAP described the financing program as a predictable I.T. cost solution, I asked Mr. Patrick Tan, channels manager for SAP Philippines this question: “How predictable is predictable?”
Mr. Tan said that it is hard for them to give a definite amount since application development involves a lot of process including services. That was the answer I was hoping I won’t hear that day but I did. The predictability SAP was referring to was the monthly amortization, and they are exactly right because I.T. cost is very unpredictable because of the very reason given by Mr. Tan.
Now there are three players in this game: the client, SAP and Orix Metro. The clear winner here is SAP since Orix Metro will pay SAP upfront. Orix Metro will shoulder all the risk and will run after the client if in case the client fails to pay. That is why Ms. Astudillo said they will be very careful in approving client applications.
And the most important player is the client. The client will definitely benefit from this program since they don’t need to shell out a big investment.
Problem is, we are talking about software here. Software is an intangible thing. And as software vendors are saying: “your software should grow with your company.” In other words, the real cost of your software will be difficult to determine.
Plus the idea that I have to pay for my software even if am already out of business is frightening. Not that I don’t want to fulfill my obligations but the fact that I went bankrupt despite using your software only means one thing – the software didn’t help my business grow.
I think the real strategy of SAP here is to provide their clients or would be clients another option of buying their software. Yes, anyone can avail of their software through financing but this will give SAP a great opportunity to sell their products “in cash”. SAP will be able to show their clients the savings they will get if in case they opt to pay for the software outright. I may be wrong about this but the mere fact that SAP will be paid in cash by Orix Metro goes to show that the important thing is for SAP to sell their products in cash.
I would dare say that the SAP Financing fits the bigger enterprise but not the Small-Medium Enterprise (SMEs). My philosophy here is if you cannot afford to buy SAP outright, then go and look for something cheaper without sacrificing quality.
Let me just share with you what a friend of mine once told me; he said and I quote “If you have the money to buy a luxury car, I advise you not to buy it. If you really want to own a luxury car, make sure you have the money to buy three (3) luxury cars.” The same can be applied to high-cost software.
After nine years of service, Microsoft Philippines Corporate Affairs Director Mark Yambot has decided that it’s time for him to move on. Yambot recently resign from his post to pursue other career opportunities. It was reported that Yambot will be moving to ABS-CBN.
During his stint as Corporate Affairs Director, Yambot was tasked to establish and maintain a relationship between Microsoft and the government on one hand and the private sector on another. He has been active in involving Microsoft in projects that will benefit the general public, some of which are the Partners in Learning project, Microsoft Career Day, Software Innovations Philippines and others.
Yambot is a B.S. Business Administration graduate of the University of the Philippines and took up his M.B.A. at the Asian Institute of Management.
PlayStation 3 to Help Study Causes of Cancer
by: Jerry Liao
If you think gaming consoles like Playstation 3, Xbox 360 and Wii are machines that can be used just for gaming alone, you better think again.
Sony Computer Entertainment Inc. (SCEI) announced that PLAYSTATION 3 (PS3) computer entertainment systems will have the capability to connect to Stanford University’s Folding@home program, a distributed computing project aimed at understanding protein folding, misfolding and related diseases. Stanford University is leveraging PS3’s powerful Cell Broadband EngineTM (Cell/B.E.) – and what will be an even more powerful distributed supercomputing network of PS3 systems – to help study the causes of diseases such as Parkinson’s, Alzheimer’s, cystic fibrosis and many cancers.
Because the process of folding proteins is so complex, computers are used to perform simulations to study the process. Since these simulations can take up to 30 years for a single computer to complete, Folding@home enables this task to be shared among thousands of computers connected via the network, utilizing distributed computing technology. Once the data is processed, the information is sent back via the Internet to the central computer.
The Cell/B.E. processor inside each PS3 is roughly 10 times faster than a standard mainstream chip inside a personal computer (PC), so researchers are able to perform the simulations much faster, speeding up the research process.
Folding@Home is a distributed computing project – people from through out the world download and run software to band together to make one of the largest supercomputers in the world. Folding@Home uses novel computational methods coupled to distributed computing, to simulate problems thousands to millions of times more challenging than previously achieved.
“Millions of users have experienced the power of PS3 entertainment. Now they can utilize that exceptional computing power to help fight diseases,” said Masayuki Chatani, Corporate Executive and CTO Computer, Sony Computer Entertainment Inc. “In order to study protein folding, researchers need more than just one super computer, but the massive processing power of thousands of networked computers. Previously, PCs have been the only option for scientists, but now, they have a new, more powerful tool—PS3.”
The PS3 client will also support some advanced visualization features. While the Cell microprocessor does most of the calculation processing of the simulation, the graphic chip of the PLAYSTATION 3 system (the RSX) displays the actual folding process in real-time using new technologies such as HDR and ISO surface rendering. It is possible to navigate the 3D space of the molecule using the interactive controller of the PS3, allowing us to look at the protein from different angles in real-time.
“We’re thrilled to have SCE be part of Stanford University’s Folding@home project,” said Vijay Pande, Associate Professor of Chemistry at Stanford University and Folding@home project lead. “With PS3 now part of our network, we will be able to address questions previously considered impossible to tackle computationally, with the goal of finding cures to some of the world’s most life-threatening diseases.”
With the latest system software update expected to become available at the end of March, Folding@home icon will be added to the Network menu of the XMB (XrossMediaBar). PS3 users can join the program by simply clicking on the Folding@home icon or optionally set the application to run automatically whenever PS3 is idle. Starting with Folding@home, SCE will continue to support distributed computing projects in a wide variety of academic fields such as medical and social sciences and environmental studies through the use of PS3 and hopes to contribute to the advancement of science.
Other I.T. companies who are helping the Folding@Home program are: Intel, Google, Dell, Apple, Omnipod and others.
The concept is very much like Grid Computing, which is the clustering of remotely distributed computing. The principal focus of grid computing to date has been on maximizing the use of available processor resources for compute-intensive applications. It applies the resources of many computers in a network to a single problem at the same time – usually a scientific or technical problem that requires a great number of computer processing cycles or access to large amounts of data.
Grid computing along with storage virtualization and server virtualization enables a Utility Computing. GUI: Graphical User Interface program interface based on graphics capabilities of the computer to create screens or windows.
Gaming consoles has continuously evolved to become a machine not just for gaming, but it can now be regarded as a super machine ready for entertainment, business, and now for research work. That’s technology working for the betterment of mankind.
Bayan Telecommunications Inc. – Shaking-Up the The Telecommunications Industry
by: Jerry Liao
One time, my friends and I engaged in a healthy discussion. The topic – which communication means is more economical? Making calls on a mobile phone or communicating by sending Short Messaging Service (SMS)?
Like any other discussion, there are those who said texting is cheaper while the others said making calls is much much cheaper. Of course, both sides are correct depending on the number of text sent and the number of minutes you’re connected. Let us say that per message sent is worth One (1) peso and the per minute call is worth Six (6) pesos. A conversation consumated by sending a combined text message of less than Seven (7) messages is cheaper than making a voice call. Any conversation consumated using more than Seven (7) text messages will make voice calls cheaper, that is if the conversation can be consumated within the One (1) minute voice call.
But what if unlimited text is in place combined with unlimited voice calls? Then the scenario I stated above is no longer valid. The next question is – Is there such a thing? Yes, with the recent offerings of Bayan Telecommunication Inc.
Last March 15, 2007, I attended a press conference by Bayan Telecommunication Inc. Yes, you heard it right, they are no longer called BayanTel but Bayan Telecommunications Inc. Aside from the new name, Bayan Telecommunication Inc. is also parading a new logo and their new offerings:
- operates one of the most far-reaching fiber-optic backbones in the country.
- owns major cable systems in Asia and the transpacific.
- Voice over Internet Protocol (VoIP) services.
- Wireless Landline Service called SPAN.
- Quick Repair promise with money back guarantee program.
Bayan Telecommunication Inc. Chief Executive Consultant Mr. Tunde Fafunwa explains that in the money back program, if a phone or DSL connection remains un-repaired for more than 24 hours, a 1-day refund (equivalent to 100 pesos) will be given for every four hours the problem stays unsolved. If a subscriber’s connection is out for more than 72 hours, his or her service fee for the month will be waived.
Among the services, I would say I am more interested with the Wireless Landline Service called SPAN. The SPAN service aims to deliver “the key benefits of landline and wireless services in a single package. The SPAN phone is as big as a regular mobile phone. It also has the intelligence of the standard mobile phone such as phone directory, caller ID, stopwatch, timer, call logs, and others. The service also allows text messaging. You can send a text to any SPAN users, as well as existing users of other mobile services.
It also has the same feature as the conventional landline phone like Caller ID, Caller Waiting, 3-Way Calling, Call Forwarding and a unique offering that no other fixed line service provider has – MOBILITY. SPAN uses a CDMA mobile phone which the user can carry with him/her anywhere but is actually a landline phone with landline and mobile phone features.
To get the SPAN service, subscribers only have to buy the CDMA mobile phone (price ranges from P 2,800.00 to P 7,000.00 depending on the mobile phone model) and a monthly recurring rate of P749 VAT inclusive. Mr. Fafunwa told me that they are now working on affordable subcription plans to lower down the cost of the CDMA mobile phones – an example is if the customer sign-up for a term of one year, maybe the handset can be provided free of charge.
So what do you get out of your SPAN phone? Unlimited SPAN to SPAN voice call, unlimited SPAN to any landline voice call and unlimited SPAN to SPAN text messaging service. A One (1) peso fee will be charge for SPAN to other networks text messaging and a long distance fee will be also be charged for long distance calls. The attractive part of this new service is the unlimited SPAN to any landline voice call, as I have said awhile ago – its a mobile landline for only P749 VAT inclusive.
During my interview with Mr. Fafunwa, my first concern was network capacity. Mr. Fafunwa said that currently, their infrastructure can only accomodate 50,000 to 75,000 subscribers but expansion is ongoing. There target within the year is to have 100,000 subscribers. Bayan Telecommunications Inc. intends to expand the coverage of SPAN in the whole of Metro Manila and the key cities nationwide. Based on my experience, network quality and service suffers everytime the subscriber’s base grows. If this happens, then we can be assured that price increase will follow or certain new procedures will be implemented. Let’s face it, no matter how attractive the offering is – it is still business.
To be honest, I am a bit hesitant to write this story, because when I visited the official website of Bayan Telecommunication Inc. (http://www.bayantel.com.ph/), I was surprised to see an outdated website. It still has its old logo and its old name, and the latest press story dated way back April 4, 2006. This will give people an impression that the company has no activity from April 4, 2006 to date. If Bayan Telecommunication Inc. is serious about this new rebranding, I believed updating the website is a vital component.
Anyway, maybe due to its preparation – the I.T. group of Bayan Telecommunication Inc. or whoever is in charge of their website may have overlooked this angle so I am giving them some liniency. Anyway, the SPAN service to me is still revolutionary despite the outdated website. And what excites me really is we can expect anytime soon the other telecommunication provider to follow or at the very least adjust their rates. In other words, we the user will benefit from this and will continue to enjoy affordable communication rates.
Congratulations to Bayan Telecommunications Inc.
A couple of weeks back, a friend of mine who is running a number of businesses here in the Philippines asked me a question — “What is outsourcing?”
I wanted to answer right away but I did not know where to start. Not because I didn’t know the answer but I was a bit surprised that my friend knew the word “outsourcing” but was not aware of what it meant.
I tried to give my friend the simplest answer possible, so I told him: “You know how to drive but you’re asking someone (driver) to drive for you, that’s outsourcing.” Not the best example, I know. I know for a fact that my friend hires an agency to handle their HR needs, so I told him that’s outsourcing. They also hire the services of a firm that handles their deliveries — that is outsourcing. They also hire the services of an accounting firm to handle most of their financial and government transactions — that is again outsourcing. And of course, the most popular and widespread method of outsourcing — call centers — to handle customer needs, queries and complaints.
In other words, outsourcing is the delegation of an internal process to an external entity specializing in the management of that operation. It involves transferring or sharing management, control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client.
Reasons for outsourcing
The top reasons I can think of why majority of the companies are outsourcing their processes are: Cost reduction, focus and access to expertise. Most businesses are outsourcing their payroll, HR, legal, marketing operations so that they will receive a higher level of service quality and expertise without adding too much cost. Other possible reasons why companies decide to go outsourcing: solve worker shortage, speedup time to market cycles, maximizing in-house resources and more.
Now regardless of your reason why you chose to outsource, the next most important thing you should know is how to choose the right outsourcing partner. Who should you work with considering that you’re practically sharing risk and management tasks in a way. First of course is you have to work with an outsourcing company that is reputable. Before you sign any contract, you may want to visit their workplace first for a couple of times and observe their operations. Also, try to look beyond cost-savings. Consider the long-term partnership you will be having with the company — their capability to innovate and grow with your company. For offshore outsourcing companies, you have to consider the culture and the time difference.
Outsourcing results take time before they show, so don’t be too much in a hurry. You should also plan carefully which process or jobs you will outsource. Whether you like it or not, there will be jobs that are better done internally than given externally. Also do your computation. Cost does not only involve money but also time — will it be faster and more effective if you do it within the company?
The next challenge is how to measure the outsourcing arrangement success. Your Return of Investment (ROI) will be one determinant. Before you even start outsourcing, you need to establish your goals and define metrics for calculating project progress. It won’t be easy but it’s important to develop this method of measuring success, at the beginning of the process. Give a lot of attention with your Service Level Agreements (SLA), it doesn’t have to be complicated or over-specific but make sure it requires meeting certain obligations and/or project time frames. Review your SLA from time to time during the project to ensure that you’re meeting your goals. When outsourcing’s value is accurately measured, it makes future project fund allocation easier to obtain and justifies the means to its end. Do it right and you’ll be sure to reap the rewards.
Just remember, not because most companies are into outsourcing means you should also join the bandwagon. Assess your needs before you decide to engage yourself into outsourcing services. If you think your company is doing fine without going into outsourcing, then stay that way. The bottomline is whether it’s done internally or externally, you have to be effective and efficient.
I.T. Services Delivery Shift
by: Jerry Liao
New ways of doing things brought about by the advancement in technology and user empowerment are the two main reasons that triggers changes in the business world. New infrastructure and new strategies are formulated and are put in place by companies so that they can be ahead or at least be at par with competition. Changes are inevitable and companies who cannot adapt to these changes will face difficulties in the years ahead. But what happens if these changes were to happen within the I.T. sector?
Every day, people use computers in new ways. Computers are increasingly affordable; they continue to be more powerful as information-processing tools as well as easier to use. Market forces of commoditization, miniaturization, industrialization, and globalization, along with changing buyer sentiments, will accelerate a shift in the dominant form of IT delivery by 2012 — from buyers self-integrating technology to having it assembled and managed by outside providers. These four underlying drivers aren’t new, but their convergence will accelerate this market shift and make it stick: stable operations farmed out to third parties, new IP sourced from open communities and solution brokers, emerging technologies going to market wrapped in process bundles, and new software investments based on subscription rather than ownership. The resulting IT ecosystem structure will place those technology suppliers with the strongest delivery capabilities at the hubs. But in order to stay in the game, today’s vendors and service providers will need to overcome their own inertia around the development and management of IP, their rigid engagement models, and their dated partnering strategies.
According to a recent report from Forrester Research, IT leaders such as IBM, HP, SAP, Microsoft, and Oracle will need to change the way they operate over the next five years to accommodate a major shift in the delivery of IT services. Instead of buyers integrating technology themselves, it will be assembled and managed by outside providers.
Forrester sees this shift creating a new IT ecosystem in which the top vendors will have to partner to deliver solutions and services. Four groups will be formed to provide IT services:
- Operations consortia members: Future members, such as Dell, EDS, IBM, HP, and Accenture, will deliver a utility-like service to the enterprise.
- Component communities: Composed of companies like SAP, Microsoft, Google, and salesforce.com, this group will create and source IP.
- Process transformers: Companies such as Accenture, Microsoft, IBM, Capgemini, and Oracle will create the bundles that embed emerging technologies and concepts into a managed offering.
- Solutions brokers: These will often assemble the IP of platforms, apps, and devices into bundles sold directly to the marketplace or to other process transformers. Examples include Accenture, Salesforce.com, Keane, Oracle, and Infosys.
IT buyers will also face new challenges in effectively harnessing the support and help available from service providers. As commoditization, miniaturization, industrialization, and globalization necessitate a change in the IT landscape, buyers will need to adapt to the ever-quickening pace of competitive change. In addition to this, buyers will face the growing complexity of the integrated components of a Digital Business Architecture, such as IP telephony, utility computing, and virtualized storage and business service management tools.
Andrew Parker, Vice President at Forrester, states: “The underlying drivers of commoditization, miniaturization, industrialization, and globalization outlined in our report aren’t new, but their convergence will accelerate this market shift and make
it stick. We’ll see stable operations farmed out to third parties, new IP sourced from open communities and solution brokers, emerging technologies going to market wrapped in process bundles, and new software investments based on subscription rather than ownership.”
The report raises the following issues, and it’s essential that all IT companies address them:
- IT is increasingly driven by the business, which in turn wants services, not assets. Sixty-three percent of respondents report that, compared with two years ago, their IT strategy is more influenced by business leaders outside of the IT organization. A similar number (64%) feel that business leaders will have even more control over IT two years from now.
- Balancing best-of-breed against fewer vendors requires an intermediary. Buyers want the reduced hassle of dealing with fewer suppliers, but at the same time, they want to keep their technology options open and their technology advances flowing. CIOs can’t have both unless a trusted intermediary is added to the mix, whether it’s for brokering deals, managing providers, or informing the resulting architecture.
- The desire of IT shops to do-it-themselves is waning. SAP and Oracle increasingly position themselves more as software platforms than as packaged apps, but a component- or SOA-based world won’t fit together neatly on its own. In its latest survey, 43% of CIOs professed a preference for service providers to assemble best-of-breed solutions for them. Adding edge technologies like RFID, mobility, and business rules software creates a pace of change too great for most IT shops to keep up with.
- Outsourcing is now viewed as more than just an available tactic. Outsourcing used to be seen as a salve for failing organizations, but now 53% of respondents consider business process outsourcing or IT outsourcing as key to their company’s strategy. Even among those who don’t outsource, one in four feel that outsourcing will increase in importance for their
business during the next two years.
Forrester surveyed more than 200 CIOs. They also interviewed 17 technology and service providers: Accenture, BMC Software, British Telecom, Capgemini, Computer Sciences Corporation, Getronics, Hewlett-Packard, IBM Software Group, Infosys, Keane,
McKinsey, Microsoft, TPI, Oracle, SAP, salesforce.com, and Wipro.
If companies will take this research seriously, then we can expect some re-allignment happening soon. I.T. companies are so competitive that they will definitely take a look at these changes and will see what they can do in order to meet the challenges of the future.