financial world 94 it delivers competitive advantage

8/6/2019 Financial World 94 IT Delivers Competitive Advantage

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I n fo rrnation Te hnobgya:ndhe Bottom LineA decadeago.crit icsquestionedhe returnon investt. ltentro m informationtechnology. ut t imes have changed. \ew lT nretr icsconfirnr he powerof

infornrationechnologyo help conrpaniesarttain usiness objectivesancl profit goals.From a look at how lT enables reengineeringnd globalexpansion o afr Lrpdate n theclient/serverarchitecture nd stand-out echnologies uch as electronic ata interchange,this special ection xamineshe growthof the lT ndustry nd ts nrpact n the bottom ine.

FII\ANCIAL V{ORLD FW) NO\EX\,tsER, L994


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unprofitableand which business ro-cesses re inefficient,and they leveragetechnology to identify new markets.Finalll', IT distributed throughout acompany ncreases fficiency y deliv-ering nformation rvl.rercnd when it'snccclccl.A New Yardstick\ \ ' t r51rp-pl rg1. ., \ \ 'SKI' l ' l lCS,t r r r rowcan we tell if ani.'of thescs)'stcms reworking?Tl'reanswer s,you can...andyo u can't.

Traditional ROI. which has itsroots n the nrauufacturingra,stipu-lates that an investment'sworth isdirectll' related o how much it cansave n labor or materialscosts. Bydefinition,ROI doesn'taccommodatewhat companies are hoping toachievewith information technology:improved businessprocesses,marketand customer-service upport, andcompedriveness.

To analyze IT expenditures andoutcomes, ompanies re turning to anew subscience. nformation eco-nomics.By using weights o prioritizethe intangiblebenefitsof IT projects,man:lgers an measurehemalongsidedollar figurcsof ROI. After layingoutcorporateobjectives nd categories frisk and assigningweights to both,proposedprojects re scoredbasedonhow well ther"ll reachobjectives ndon what levelof risk thev carry.Thena peer-revieu'ornmirtee nalvzes achproposal to screen or oversightsorexaggerations. nd finally,cornpaniesfollow up to determinewhether Lrc'n-efits eallyoccurred.

No t only does information cco-nomics help close the gap benveenfinancial professionals nd informa-tion executives,t can havea p


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In fact, business-processeengineering involves radically restructur-ing a company'sprocesseso that cus-tomers rather than operationsare thefocus of all businessactivity. Becauserethinking business rocessesequiresrethinking business policies them-selves,analysts advisecompanies oview information technology as a toolto help enact change rather than thereason or the change.

Companies ocus on process atherthan on functional lines to ensureevery employee is adding value andnot simply routing or processinggoodsor information. "Reengineeringmeans inding the cleanest, traightestline between raw materials [or ser-vices] and the customer,"saysAllanFrank, national partner in charge ofenabling technologiesat KPMG PeatMarwick in Radnor, Pa. This oftenmeans changing from a verricalstruc-ture, with individual departmentsreporting to higher-upsall the way tothe top of the company, o a horizon-tal configuration, where the flow ofinformation, goods or services akesprecedence.

The shift is usually achievedwithnew, often open, networked computersystems hat allow workers to shareand route information acrossdepart-

fied their business-process-reengineer-mg goals:o provide anybody-to-anybodycom-municationso offer accesso shared nformationo allow the firm to locate functionswhere needed n the organizationr let workers capture information atlts source.Reaping Reengineering'sRewardsv HATDo SUCH OFTY usirress ndsystemsgoals provide to corpora-tions?Plenry, ay reengineering dvo-cates, if carried out properly. Sinceeven Michael Hammer, co-author ofReengineeringthe Corporation, hasconceded hat nearly two-thirds of all

ments. Frank suggests our wavs IT i.--r


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$? tc I t r 0 i l 1 i l $ t f f it i l t 0 tas separate iefdoms, finance, manu-facturing, marketing and inventorywork with the same body of informa-tion. Sharing information not onlyspeeds he process,t improves accu-rrcy by reducingor altogetherelimi-nating he numberof timesdata mustbc rekeyed.Reengineeringoften brings intocxistencc nterdisciplinaryeams thatallolv a corporation to have severalareasof expertise oncentratingon thesame problem at once. Such hybridteamscan providechecksand balancesthat keep workers focusedon overallbusiness oalsrather than on the goalsof their individual departments.The ClienUServerComputing ArchitectureATMANYCOMPANIES,eengineeringhascome to mean the sheddingor sidelin-ing of expensive, rigid maffiame pro-grams for client/server's ess e4pensive,highly flexible computing pladorm. A1993 survey of more than 400 CIOs,conducted by Deloine 6c Touche'sInformation Technology ConsultingGroup, found that a mere27 percentofrespondents'critical applicationswererunning on client/serversystems,but awhopping 93 percent of respondentsexpected this figure to double in theircorporations by 7995.Similarly,nearlyhalf of the 224 CIOs surveyedby CSCIndex Inc. listed client/server as themost important emerging technologyfor 1.993.

A simple description of theclient/serverarchitecn:re--a computernetwork in which client PCsor work-stations running user-interface andother software are able to requestser-vices from a server that maintainsdatabases,processes equests andensures data integriq'--doesn't beginto explain its nearly explosive mpacton corporate information systems.

Because lient/server ystemsequiremuch smaller and less expensivemachines-personal computers orworkstations rather than terminals,and a local area network (LAN) fileserver rather than a mainframe

(although mainframes can act in this , the horizon are new applications acapacity)----cost er MIPS is cheapeq 1 application-development tools thmaintenance s easier and hardware I can suppoft very large implemenand software upgrade costs are lower. i tions, as opposed to the small pilIn addition, client/server s an open i projects that have dominated corpsystem, so companiesfreed from the i rate client/server hus far. Applicaticonstraintsof the one-computer/onc- innovation salsoexpectedo broadvendor syndrome can shop for the i significantll'as s


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Client/Server UsageC-onrpaniesn all industriesexpeaed o dnmatically incmsethe number o[ dient/seruer ppl ications n use hi s I'ear

Financial SeryiesE-Halft CanItr-Banking,|rhrinsThtrsporlationG-ln$nne

RetailllEnMardasturingEnerg, Oil & Gas

Foody'Co6urer Mucls

PrblishintE-Distributiono% 5% 1(}% ts% 2046 25% 30't 35%

Percentage ot Applicatims Using Clieni/SenerSource: eloine Touche.99 3

or more than all the hardware andsoftware combined.

"If your CIO tells you that rearchi-tecting all your systems o client/serverrvil l save money, be skeptical.Everything I've seensuggests hat thetotal costs of client/server comput-ing-hardware, sofrware,conversionof existing systems,developmentofnew systems,raining, management-will be hieher han the cosrsof main-franre conrpuring,"says Charlcs B.V'ang, ouncler ncl ltO of Compr,rrerAssociatesnrernrrrionalnc., in hisbr>ok,TechnoVisiott.On e way to avoidor ar leasrmini-mizeproblems s to plancarefullyandimplement slowly, experts and ven-dors advise.The biggestmistake isrushing to migrate applicationsbeforeardculating the anticipated paybackand determiningthe costs nvolved.

In decidingwhich sys-tems to move frorn ulegacy system ro acl ient /server envi ron-ment, managersshouldidentify which systemsrepresent the highestbusinessvalue and aremost in need of cli-ent/server's distributedbenefits. CIOs shouldprovide and CFOsshould demand to seedemonstrable addedvalue. For example, ISmanagers at spr in tCorp.'s Long DistanceDivision argued-cor-rectly, ir turned out-that a move to a cli-ent/server system forbillingprocedures ouldallow customer-serviceagents to answer in-quiriesor check the sta-rus of large accounts n45 secondsnstead f the24 hours required toprint and analyze infor-mation from a legacysystem.

Client/server vendorsand consultants advise companies tostart with a few applications o gettheir feet wet, then select wo or threestrategic but low-risk candidates forpilot projects. FinallS organizationsshould developa two-year transitionplan during which they migrate appli-cations10 or 20 at a time. To mini-mize programming costs, expertsadvisecompanies o reusewhatevercode hey can,particularly f the busi-ness-specificogiccodefrom the lega-cy systemwirssound n the first place.The Global GorporationONCE COMPANYas eengineeredtsbusiness rocessesor maximum effi-ciency,mostoften by moving to a flex-ible client/server etwork, itt primedto start competing head-on in themuch-toutedglobal economy of the1.990s. eing ruly global rather than

merely nternationalmeansan orzation'sworldwidebusinessniintegratedenough o achieve tralignment that delivers signireturns in economies of scalscope.

Information technologytakesand center stage n this push foral coordination. The sheer olutimesyou need o communicateets up multiple times," saysChoate,vice presidentand mandirector of [T at Anhur D. LittCambridge,Mass. "IT letsyouup the rate of those nteractionsmonize them and shortencorruntions distances between reemployees." nformation techncirn function as a great equChoatesa,vs.lt letsyou call anan applearound he world."Companies consolidatedomesticand internationaldatters, for example, to dramatreduce their communicationsDigital Equipment Corp.,maintains what's widely viewedlargestprivate network in the worsaid to have reduced total [Tbetween25 and 30 percentby coidating a number of worldwidecenters.On a broader evel,successfal companiesuse echnology otion as a virrual organization"sends"expertise nd data wherwhen they are needed.The infotion travels; the people stayRemote communications inkscompanies o stay extremely lin changingmarketsby assemblhoc "teams" of workersand resfor particularprojects vithouthto relocate nyone.

As trade barrierscontinr"rerrncl conomies ontinue o conrhe sanre lementshat madeccnies"vinnersn their ocalmarkeincreasingly eterminewho canpeteon the world stage.Analystmanagers agree that an lT:insadvantageon the home frontserveas a launching pad for wwide market dominance.

financial world 94 it delivers competitive advantage

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