insight business growth

8/14/2019 Insight Business Growth

1/15

InsIght BusInessgrowth September 2008


2/15

InsIght BusIness growth 0InsIght BusIness growth

LICK PAge nuMBer to JuMP to ArtICLe

BusInessgrowthIntroduCtIon

Just over a year onfrom the onset of thecredit crunch, and theslowdown in the global

economy, the threat of in ationand high oil price continueto cast a long shadow overcorporate pro tability and theability of executives to managetheir businesses. World nancialmarkets remain jittery andsusceptible to further shocksfrom the banking system.

Consumer con dence isundermined by weakness in thehousing and mortgage markets.

Yet against all this, opportunitiesfor growth still exist for thosesmall-to-mid sized companiesthat are innovative, competitiveand nimble. From enterpriseresource planning, supplychain management, customerrelations management, product-life management and supplier

relationship management,the use of technology andbusiness software solutionscan help companies stay aheadof their competitors and rideout the economic downturn.

This selection of articles,each of which has appearedin the pages of the Financial Times , provides an overviewto business growth in aneconomic downturn.

0

weePIng AwAy AeCtors ChAos

03 07 3 7 5AsK the exPert: ussLowdown goesgLoBAL

AddIng It to thesMe tooLKIt

how to MoveforwArd froMguessworK tohArd fACts

froM BABy stePs togIAnt growth

reAPIng hugeBenefIts froMsoMe sIMPLetIdyIng uP

Any executive would liketo say they have the truestatus of their organisations business performance at their

ngertips. Whether they really do will depend largely on the state of the companys business intelligence systems.By Stephen Pritchard

Mothercares success outsideits UK home shows theattractions of a franchisingmodel in an uncertain market, writes Tom Braithwaite

Complexity is a dirty wordin computing. The moreconvoluted something is,the more expensive anddif cult it is to manage, andthe more likely to go wrong.By Danny Bradbury

he nancial system isurdened with overlappingegacy systems that arempeding progress androper risk assessment,eports Ross Tieman

Just when many emergingmarket companies were startingto ex their muscles in theglobal marketplace, the majoreconomies suffered in the wakeof the US subprime crisis andthe credit crunch that followed

Technology vendors arefocusing on small and mid-sizedenterprises and are nding they struggle to cope with complexsystems, says Alan Cane


3/15

InsIght BusIness growth InsIght BusIness growth

It sounds like an apocryphal story, but Nigel Woodward, London- based director of nancial servicesat Intel, insists it is true.

At one of the big UK clearing banks,the core accounting system still does cal-culations in pounds, shillings and pence,he says. Decimalisation was introducedin the UK in 1971, 37 years ago.

The scale of the IT transformationneeded in many areas of the nancialindustry is mind-boggling. Cobbled-to-gether systems are still the bedrock of ahugely expanded sector accounting foran estimated 7 per cent of global grossdomestic product.

While bad systems did not cause thepresent credit crisis, they probably con-tributed. Some big banks failed to keeptrack of the risks as the volumes builtup, says Intels Mr Woodward.

He uses the example of sub-primemortgages. When a bank bought a col-

lateralised debt obligation (CDO), wasthe transaction recorded and tracked back to a residential property in Texas,he asks. The bank might already havehad a full exposure to property in Texas but didnt know.

Technology-enabled scale allowedtraders to run ahead of banks ability tomeasure risk, he says. And when regula-tors and auditors started demanding an-swers about the scale of banks exposure,extracting the information from frag-mented systems and databases was dif -cult and timeconsuming. Hence revisionsto banks pro t warnings, as the scale of risk was progressively uncovered.

Jeremy Badman, partner in thestrategic IT and operations practicefocusing on investment banks at Ol-iver Wyman, highlights the problemthat arose with credit default swaps, amechanism used by banks to lay off riskthat has turned into a market measured

t a cial m i b i -lappi l ac m a a imp ip a p p i k a m , pr ti ma

sweePIngAwAy AseCtorsChAos

Getty

03 0


4/15


seamlessly has won some other big con- verts. Citibank, the worlds biggest with350,000 staff, is among them, replacing59 versions of its old corporate bankingsystem with a single Oracle solution, in which, for example, a base in Singaporeservices 14 banking operations in Asia. Itis, says Mr Hakku, the biggest legacy sys-tem replacement ever.

The idea is that each bit can access allthe data, and off-the shelf packages of analytics, for example, will keep a bankcompliant with Basel II regulations,credit risk, and liability management, while assuring the exibility to add inregulatory changes without compli-cating or compromising performance.Two plus two equals ve, if not 11, MrHakku says.

It sounds like nirvana. A nd today, may- be it is. But will it still be the best answerin 10, or even ve years? We know that

things will change, says Mr Hakku, butthe basic requirement will always be tolook at core data in certain aggregations.

David Hunt, head of technology con-sulting at Capgemini Financial Serv-ices, agrees on the importance of data, but cautions that the IT industry stilldoes not necessarily deliver all the rightanswers. What we are not good at, astechnologists, is doing that low-cost,throw-away innovation, he says.

Yet nancial services rms need toexperiment with products as consumertechnology changes.

Todays private bank customers may be happy to come to the of ce and havea fat cigar, but their inheritors might want to bank on their X-box 360 or mobile phone, says Mr Hunt.

Tomorrows systems wont just needto be agile, he says. In consumer, as well as investment banking, they will

need to support rapid innovation of products, and rapid industrialisationof those that succeed.

It is a far cry from the days when they wrote that program in pounds, shillingsand pence. Financial businesses arelearning that they cannot see far intothe future. System designers must learnnot even to try.

Jerry Norton, head of nancial serv-ices at consulting and software groupLogica, deserves the last word. A lay-ered approach that separates funda-mental systems from distribution chan-nels can help. But fundamentally, itsabout philosophy, he says. Most otherthings - consumer products, even build-ings - have a design life-time.

Sure, a general ledger doesnt changemuch. But isnt it time systems were sold with an end-of-use date warning?

trillions of dollars.It started as a market where people

xed deals by phone, recorded them onspreadsheet and faxed contracts. Back-f ce processing was manual. But asolumes increased, settlement remainedanual, and three-month piles of un-atched contracts built up - alarminggulators over uncertain risk positions.The lesson, says Mr Badman, is that

chnology has to support innovation,

nd processes must be industrialiseduickly when a new product is success-ul. The trouble is that many nancialstitutions nd this hard, because they ly on gummed-up legacy systems.Rudy Puryear, global head of the IT

ractice at consultant Bain, explains:Many of the IT solutions have been lay-ed on over 15 or 20 years or more. Ine 1990s everyone went out and wantedbuy a best-of-breed solution and then

ad to bolt that on to the legacy system.hen everybody wanted web access, plusompanies have made acquisitions of ompanies using different systems.

Almost every organisation I havewalked into has a huge amount of un-ecessary complexity in IT. It drivesp cost and it slows down response inrms of time-to-market. We want IT toe an enabler of change. Right now it isery often like a block of concrete, add-g rigidity to organisations.His recommendations? You have to

cognise that you have a complexity roblem and that it is bad. It is drivingp cost and constraining the ability tospond to the market-place and it is

sing up more and more IT dollars.You have to start saying you are not

oing to introduce more complexity.You have to create a future-state viewf where you want to migrate this to in,ay, ve years time. You need to pushlot of shared, common, off-the-shelf

olutions. So, as you make incrementalecisions, you can measure it againstow it helps you towards your desiredve-year target.

One example of this kind of thinkingaction is Oyster, a ticketing system

or Transport for London, by which us-s pay fares with a smart card, whichores cash, and can be used to pay for

travel and other services.Jonathan Charley, head of bank-

ing, Europe, at EDS, which advised onOysters creation, says it was built as astand-alone solution because to inte-grate it into an existing system wouldhave been a huge challenge. The sys-tem was built on an off-the-shelf pack-age of services-oriented architecture,put together like Lego br icks.

Clipping on ready-made exible unitsthat can take over tasks fragmentedacross existing systems seems a promis-ing way forward. Charles Marston, whopreviously worked in the interest ratederivatives operation of a bank, foundedsystems and software company Calypsoin San Francisco in 1997 to develop a uni- versal front and back of ce platform.

Today, Calypso offers an off-the-shelf system that can be used to trade a hostof nancial instruments, from spot for-eign exchange via derivatives to equitiesand commodities, yet which also sup-ports straight-through back of ce taskssuch as settlement, and allows banks tocapture the data they need for risk andcapital management. About 80 institu-

tions have bought the system, includingHSBC, Dresdner and Calyon.

As Peter Van der Vorst, chief nan-cial of cer of Sybase, an integration,data management and platform com-pany, points out, one of the biggestchallenges for many nancial rms iskeeping pace with the need to process vast and booming volumes of informa-tion at appropriate speeds.

So Sybase has just launched a prod-

uct called RAP, designed to handle al-gorithmic computer-based trading,service the data needs of the quantita-tive analysts who write the algo pro-grammes, and deliver the data neededto monitor trades for risk managementand compliance.

Retail institutions, too, are ndinglegacy systems an encumbrance to busi-ness development. Nationwide, a UK building society, has decided to embarkon a wholesale system renewal usingan off-the-shelf solution from softwarehouse SAP.

Darin Brumby, divisional director for business systems transformation at Na-tionwide, says shifting to a new platform will enable it to introduce new products- different kinds of account, for exam-ple, and a suite of mortgages - that thecurrent system cannot support.

It will also allow improvements tofront and back of ce organisation. It istantamount to creating a new buildingsociety around the changed market andcustomer needs. Although it is costly,we think there is a good rst-moveradvantage, he says.

SAP and US rival Oracle believe apre-integrated offering is the best solu-tion. Over the past few years they have been positioning themselves for the co-lossal orders that are beginning to owas nancial institutions start replacinglegacy systems.

Rajesh Hakku, senior vice-presi-dent of financial services at Oracle,reckons the company has spent $30bn buying best-of-breed suppliers anddeveloping a pre-built application in-tegration architecture.

This one-stop-shop purchase of a core banking architecture with the features of your choice that are all promised to work

Alm a i a i I a

alk i a a am c a c mpl i i It. I

i p c a il p

i m im - -ma k . w a It

b a abl c a .r P a , Bai

005

Getty


5/15

InsIght BusIness growth InsIght BusIness growth 007

AsK theexPert: ussLowdowngoes gLoBAL

how damaging has the eco-nomic slowdown in the US,Europe and developed Asia been on the emerging econ-

omies? What pressures have spirallingin ation through high commodity pric-es put on global markets?

Mauro Guilln is Director of theLauder Institute and professor of inter-national management at the WhartonSchool of the University of Pennsylva-nia. His answers to readers questionsare appearing on the following pages.

J ma m i ma k c mpa i a i i m cl i l bal ma k plac , maj

c mi i ak us bp im c i ia c i c c a ll

How successfully, do you think,have Asian emerging economiesdecoupled themselves from thestruggling Western markets? Willrising domestic demand save them?Sohaib Naim, Karachi, Pakistan

Emerg-ing economies have historically been atthe mercy of developments in the richerparts of the world.

Over the last two decades, however,their economic performance has becomeincreasingly decoupled from Europeand North America. This may appear to be paradoxical because the globalization

of markets for goods, services and money was expected to bring about more con- vergence and coordination, not less. Canglobalization and decoupling both be tak-ing place at the same time? The answer isa resounding yes.

Emerging economies have becomeless dependent on rich markets forthree reasons:

First, as you point out, they havedeveloped more of a domestic market,not just for consumer goods but alsofor investment in equipment and in in-frastructure (which is not always tiedto exports). If consumer and businesscon dence does not zzle, growth inemerging economies is likely to con-

Professor Mauro Guilln, Director of the Lauder Institute at the Wharton School of the University of Pennsylvania


6/15

InsIght BusIness growth InsIght BusIness growth 0

nue its upward trend. A second way in which decoupling

as taken place is due to changing pat-rns of trade. Emerging economies arecreasingly trading with each other,us buffering themselves from the

resent downturn in the United Statesnd most European countries. Although China is hugely dependent

n the U.S. market, it is less so today an a decade ago. Chinese exports to

e other three Bric countries, for in-ance, have surged by more than 50er cent from last year, and it is alsoelling ever larger quantities of goods toe oil-rich Middle East. South Korea

nd Taiwan have also bene ted frome development of other emerging

conomies, which has enabled them toversify away from the U.S. market. A third important factor is that pric-

s for raw materials and energy are notkely to fall as a result of the downturn.his is due to surging demand fromhina, India, and the fast-growing Lat-

American economies. Thus, emerg-g economies that are big producers

f commodities will not be hurt by theownturn in the U.S. and Europe, atast not as much as in t he past.In summary, emerging economies

e likely to continue growing even ase rich part of the world slumps. Keep

n eye on in ation, though. It couldpoil the party.

Would you be able to provide anutlook for commodity pricesnd the Brazilian economy in par-cular? Miguel Castellanos, Ft.auderdale, FL

I do not see a fall in commodity rices any time soon. There are two key evelopments to watch:

The rst is to wait and see how deepnd long the economic downturn in the.S. and Europe will be. If it proves shal-w and brief, as a growing cadre of econ-

mists are predicting, then commodity rices will remain at record levels. A second issue to keep in mind is de-and from emerging economies with apidly expanding domestic consump-

tion and capital spending.The latter is growing swiftly in China,

India, Brazil and elsewhere, and it is n otalways linked to exports. Infrastructurespending, in particular, will continueto grow at double-digit rates in many emerging economies, fuelling demandfor all sorts of raw materials.

Energy prices are also likely to continuegrowing as demand in emerging economiesexpands, supply bottlenecks go unresolved,

and political uncertainty remains high incertain oil-producing countries.Brazil is the country of the future,

and this time around it could well re-alize that potential. Its macroeconomicoutlook is strong. Demand for Brazilianmanufactures as well as raw materialsis likely to continue growing in the me-dium run.

Another promising development hasto do with the recent oil nding off-shore. I am personally very optimistic.Brazil is a major exporter of commodi-ties, but the largest category is actually transportation equipment and parts(about 12 percent of the total). GDPgrowth is robust, and in ation low.

Now Americans cant afford tobuy made-in China-deer huntinghides that hang in trees and otherrubbish to clog up their garages,how much will this affect Chineseand other Asian exporters? DavidLyttle, New Zealand

I agree that Americans have spent way too much on consumer durablesand non-durables they really did notneed. Whats worse, most have bor-rowed in a variety of ways in order to in-dulge in such short-sighted behaviour.

The decline of the dollar, thoughin part driven by the yawning gap inmonetary policy across the Atlantic, ismostly a re ection of the ballooning s-cal and trade de cits, and the low sav-ings rate.

Asian exporters will be affected by these developments, but one shouldkeep in mind that, as their domesticconsumer markets grow, they are in-creasingly selling to each other as op-

posed to the United States.Having said that, a long and deep

downturn in Europe and the U.S. wouldhurt them, but not as much as, say, 5 or10 years ago.

What will be the real impact of theslowdown on Third World coun-tries? Jimmy, New York

I do not believe Third World, i.e.truly poor, countries are being hurt by the slowdown in the U.S. and Europe. As long as emerging economies contin-ue growing, demand for energy and rawmaterials will remain solid.

I see the problem in a different area,namely, food prices. Increased demandfrom the rapidly-growing emergingeconomies and wrong-headed biofuelpolicies have caused a quintupling inthe price of some staples such as wheat,corn and beef. This, and not the slow-down, is devastating some of the poor-est countries in the world.

0

How will China retain their subsi-dies in the wake of a decreasingtrade surplus? Will the Chineseresort to de cit spending? PhilVernes, CT

I am deeply concerned aboutgasoline subsidies in China, which runat billions of dollars a year. It is simply foolish for them to continue this cha-

rade. The longer it goes on, the harder it will be for people to adjust to the harshreality of high energy prices. I sincerely hope that they will gradually eliminatethe subsidies. This is a no-brainer.

What is your feeling about the ef-fects of recent crises on Russia, asa major producer of energy prod-ucts? Would it be easier to copewith in ation inside of the country,who owns natural energy sources?Vlad Kamlyuk, Ireland

Russia is enjoying a boom in com-modity and energy markets. Prices arelikely to remain high for the foreseeablefuture, so there will be little incentive forthe country to change direction.

I say this because the downturn in theU.S. and Europe is unlikely to reduceglobal demand by much, as emergingeconomies are still growing and decou-pling has taken hold. In ation is indeeda problem, but de nitely not the mostimportant one in the long run. Russia isrunning the risk of becoming too special-ized in raw materials and energy (already about 80 percent of total exports).

Russian manufacturing was not ingood shape to begin with, and the last few years have been devastating. Many of thecountrys most talented scientists and en-gineers migrated during the 1990s

Wage in ation makes it dif cult forrms to compete internationally. The

service sector is run by state bureaucrats,and there are alarming signs of lack of transparency, even corruption. Whileincreasingly wealthy, Russia could andshould avoid wasting its human capitaland its many other resources.

How, in your opinion, would highcommodity prices affect the eco-nomic recovery of Central andEastern European nations and, inparticular, the Baltic states? Mak-sim Greinoman, Tallinn, Estonia

High commodity prices are gen-erally detrimental to Estonia, Latvia andLithuania because of their dependence

on imports, their large trade de cits,and the in ationary pressures (whichhave thwarted their entry into Europesmonetary union). They do bene t fromprice increases to the extent they exportraw materials such as timber, but on the whole they are mostly hurt by it.

The three Baltic states have grown very rapidly over the last few yearsthanks to a construction boom andto privatization. But the competitive-ness of the manufacturing sector has been undermined by rising wages.The three countries need to increaseproductivity if they are to succeed in afully integrated Europe.

Do you think the Sarbanes-Oxleylegislation in the US and other suchaccounting procedures forcingcompanies to write down losses aremore responsible for current prob-lems than anything else? If thatis the case, shouldnt there be ef-forts to introduce a better system? Nitesh Bansal, India

Sarbanes-Oxley has been (justi -ably) blamed for inducing a number of problems, including the loss of globalcompetitiveness of U.S. nancial marketsand of corporate America in general.

Writing down losses in asset values,however, is a reasonable and highly de-sirable accounting practice prevalentaround the world, which predates re-cent regulatory changes.

Investors expect company accountsto re ect the present market value of their assets.

We are living through a crisis that isfundamentally one of declining con -dence. If companies were able to carry

assets on their balance sheets at thein ated values of the recent past, inves-tor con dence would plummet. I wouldthen fear a drastic drop in stock marketturnover, further fuelling the liquidity problems af icting the global economy since last summer.

Given the improvement in scalposition of emerging market coun-

tries, their increasing importantdomestic demand and their in-frastructure spending plans dothese elements combined justifya re-rating in the relative premi-um investors should seek vis--

vis developed markets? Shouldemerging market equities demanda premium to developed mar-ket equities in the coming years?Jim Shef eld, Charlottesville, VA

International investors demanda premium if they believe that thereare unusual risks. Improvements in s-cal position, trade surpluses, in ation,and robust domestic demand may ormay not reduce the risks. While many emerging economies are now enjoying

scal and trade surpluses, in ation ispicking up speed.

In ation can worsen trade balancesand the exchange rate, thus generatingrisk to the international investor. Someanalysts argue that scal surpluses, while a sign of discipline, may also in-crease the ability of the government tomake the wrong decisions, thus gener-ating uncertainty.

In the long run, I would focus the at-tention on the institutional structuresof emerging economies, on the ability of governments to credibly commit to a setof policies in the long run, and on thefunctioning of the judiciary and the po-litical system in general. I personally be-lieve that there is plenty of institutionalrisk in emerging economies in spite of the relatively favorable macroeconomicoutlook. As a result, I would continue todemand a premium.


7/15


the current stag ation (in theS and some EU members) here

stay, given the current levelf global competition? Now thate Brics nations and major oil

xporters are fast emerging, ise world geared up for dramatic

hanges in the activities of mul-lateral institutions in dealingith issues of global concern?

ugustin Dufatanye, Reykjavik

We are all hoping that stag ationwill not be here to stay. But the signalsnd the indicators are not too encour-ging. The biggest threat is in ation inmerging economies, which could deraile only engines of growth that exist right

ow. In the U.S. and Europe, in ationust be kept in check.Regarding multilateral institutions,

ere has been a urry of activity rede-gning their roles and the voting powerf different countries. We are de nitely atcrossroads, for two reasons.One is the rise of the Brics, that is, their

creasing weight in the global economy.he other is the trade imbalances result-g from the rise in commodity and en-gy prices. On the positive side, we areetter equipped today to deal with thesesues than 35 years ago. Economies andarkets are much more exible today.ut people will need to absorb much of e shock in the form of unemployment,location, and the like.

seems that the markets are beingoiled in a battle between recessionnd in ation. The Fed Reserve hasn ability to raise rates and possiblyecrease the risk associated with

ation. What can we anticipate,hould recession be the overridingctor in the US ,and what are theng term effect on world markets?hould the US Congress intervenend attempt to control the pricese for oil as suggested? Robert J.rnell III, Hardwick, Vermont

Policymakers are definitely inbind.

An economic slowdown with in a-tion is not only dif cult to deal withfrom an economic point of view; it isalso an explosive combination political-ly. Some groups in society detest in a-tion, while others have a more tolerantattitude towards it.

In the U.S. I would not expect any boldaction until after the November election.

There is still hope that the worst of the credit crunch is over, or nearly over,

and that the slowdown will be shal-low and brief. But we still do not haveenough information to make that call.

Regarding the U.S. Congress, I very much doubt that they can affect oil pric-es in the short run. In the long run, leg-islation could encourage both conserva-tion and supply expansion. I would hopethe right incentives are introduced for amassive investment boom in alternativeenergy sources, especially hydrogen au-tomobiles, wind, and solar.

Lastly, the present biofuel incentivesneed to be revisited, given their impacton agricultural markets

How can India maintain a 7 per centto 8 per cent GDP growth over thenext 15-20 years but keep in ationbetween 3 per cent and 4 per cent? Aspi Contractor, USA

As a net importer of commodi-ties and energy, India is indeed proneto erce in ationary pressures, and thiscould derail the very robust GDP growththat the country has been experiencing.

With elections coming soon, it is notclear that the government will do what would be best in the long run.

Prime Minister Singh might betempted to strengthen the base of sup-port for this party, but the public-sectorde cit is already quite large.

The best recipe is to continue intro-ducing reforms and deregulation, espe-cially in the infrastructure and energy sectors of the economy. Policymakersneed to signal very forcefully that they will not let in ationary expectations build up.

Taxes on investment and other bur-dens could be lessened so that both port-

folio and direct investment ows into thecountry at increasing rates. India needsmore foreign investment to fuel growth,especially in the service sector.

Whats your view on the countriesof the old Soviet Union? Some ofthem can hardly be called emerg-ing markets . Dilmurad, Nashville,Tn USA

I am quite optimistic about theprospects for the former Soviet repub-lics bordering on the European Union,assuming they work hard to create robust political and legal institutions overthe next decade or so.

The central Asian republics are a dif-ferent story. They do not have too many options. They are not natural manufac-turing enclaves, given their geographicallocation. They are subject to strong geo-political in uences. Some of these coun-tries have been growing very quickly.

The largest, Kazakhstan, continuesto grow at 5 or 6 percent, but in ation,de cits, and the credit crunch couldslow down the economy.

In the long run, the central Asianrepublics need to come up with somemutual understanding as to how to cre-ate a common market. It does not makesense for them to operate in isolation of each other.

What is the engine for recovery inthe United States if it is not hous-ing, autos, capital spending andcommercial construction? Theseare the typical interest rate sensi-tive areas that normally lead youout of a recession. Rates are ac-tually higher than before the Fedstarted lowering rates for most ofthe above and these areas will re-main weak through 2009 and someof them will be weakening through2009-10. Alex Sinclair, RanchoMirage, Ca

The U.S. economys best chancefor recovery lies in its exibility, its abil-ity to adapt to change. We have already

seen a surge in exports in response tothe weak dollar. Unfortunately, federal,state, and city governments are deeply in de cit, so they cannot help out by ac-celerating infrastructure spending andthe like. Perhaps the most importantengine is con dence.

Consumers and lenders need to re-gain their mutual con dence. Thistrust has been shattered over the last 12months in the wake of the subprime cri-

sis. The damage has not yet been con-tained, and it is spilling over into many different areas.

An economy so dependent on do-mestic consumption cannot possibly grow robustly if there is a lack of con -dence among economic actors. The key is to a recovery lies in rebuilding thefoundations of con dence. The Fed andthe new president elected in November will have to work hard to put the pieces back together.

The global credit crunch seems tohave made Spain awaken to therisks of its economic imbalances.What is your perspective on Spainsability to deal with the crisis? Howdo you see Spain in the future,more like Germany or Italy? CarlosColomer, Madrid, Spain

Spain faces a dif cult situation.

The signs of trouble were already visible a few years ago, but they werecrowded out by the construction boomand the excellent performance of Span-ish rms across the board.

The Spanish economy has long suf-fered from three interrelated problems:sluggish productivity growth, an in a-tion differential with the euro area, andmeager expenditures on innovation andresearch and development. The creditcrunch has added to the problems.

While Spanish banks are very solid(and did not participate in the subprimemarket), they are no longer lendingmoney to each other, and they have tight-ened lending practices. Spanish rms areshielded from the slowdown because of their massive presence in Latin America.But the problems with productivity, in a-tion, and innovation remain.

Spain has recently overcome Italy inper capita income. This is in part due toSpains successes, and in part thanks toItalys many problems, especially withits politicians.

Spain has done well after privatising,deregulating, and opening the econo-my. But these reforms need to be fur-ther deepened. Spain lacks Germanysdiscipline and innovativeness. Germa-ny is an export machine; Spain runs thesecond largest trade de cit in the worldafter the US

The issue right now is whether Spain will avoid a prolonged slowdown oreven recession or not. The next fewmonths are crucial, especially in termsof job destruction.

Can it be said that the subprimecrisis in its totality is a zero-sum

game? If the banks have lost mon-ey some body has gained in thetransactions, so the wealth in theeconomy as whole has not been de-stroyed, only it has been redistrib-uted. So how this is creating slow-down in the economy as a whole?Bikramjit Bhawal, Italy

The subprime crisis has wreakedhavoc on the balance sheets of major -nancial institutions in the U.S. and Eu-rope. That in and of itself is a major prob-lem that no other gains obtained by othereconomic actors can possibly compensate.

Financial stability is very important.It should also be remembered that thecredit crunch is a crisis of con dence,and it will be very dif cult to rebuild.There have been winners, to be sure,including those who shorted nancialstocks, the buyers of certain securitiesat bargain prices, and others.

But the pain being felt around the world is huge. Let us not forget thatmany people are losing their jobs, theirhomes, or both, as a result of this crisis.Plus consumption, a major driver of eco-nomic growth, is on the decline. Wealthhas been wiped out in many different ways because the prices of many differentkinds of assets have declined sharply. Weare now paying for the excesses of the lastfew years, and for the lack of appropriateregulatory oversight

I wished the wins were big enough tooffset the losses. Unfortunately, this isnot a zero-sum situation.


8/15

InsIght BusIness growth InsIght BusIness growth3

t c l a c i mall a mi - iz p i a

a i l c p ic mpl m , a Ala Ca

AddIngIt tothe sMetooLKIt

Getty

the past few years have seen amarked change in the market-ing of software and services. Vendors such as SAP and

Oracle, which had previously con nedtheir attention to the giants of the busi-ness world, have begun to court smalland medium-sized enterprises (SMEs) with a cornucopia of new products.

So many companies that have tra-ditionally focused on large enterprisesare now going into the SME market. Itis amazing. Everything is about SMEs,says Joslyn Faust, principal analyst spe-cialising in the SME market for Gart-ner, the consultancy.

But, she warns, it is not necessarily to everyones bene t. Many of these vendors do not understand that it is atotally different business model. Ser- vice, support and pricing are all very

different. The products need to be very simple and they all need to work to-gether. SMEs are worried that the ITthey are offered will prove to be toocomplicated, too costly or that the ven-dor will consider them too small forproper support, she says.

Buying consumer-grade technology is one answer for very small rms.

Eilert Hanoa, chief executive of Mamut, a European provider of in-tegrated software and internet services for SMEs, shares Ms Faustsconcerns: There is a misconception within the SME sector that technol-ogy is expensive and that it is a luxury a small business cannot afford. MostSMEs have few people to turn to fortechnology advice and this has led toan abundance of fear, uncertainty anddoubt when buying IT.


9/15


and application packages on the sameserver - is becoming increasingly at-tractive to small companies, not simply because of savings on the cost of serv-ers but because of disaster recovery and business continuity.

Martin Niemer of VMware, a leading vendor of virtualisation software, saysthat companies with only four or veservers and fewer than a dozen staff are virtualising their servers as a protection

against downtime, which could costthem a huge amount of money.Typically, VMware consolidates ap-

plications from 10 machines on to asingle server. The latest servers can runas many as 30 virtual machines.

So how do we de ne an SME or SMB(small and medium-sized business)? De -nitions vary geographically. In Europe, asmall company might have 10-49 employ-ees and a medium-sized one, 50-250. Insome regions, 5,000 people might still con-stitute a medium-sized company.

Smaller concerns are generally seenas more exible and agile than theirlarger competitors. Simon Devonshire,head of SME marketing for O, the mobile operator, says small businesses aretypically quicker to adopt new technol-ogies than large corporates.

This is largely the consequence of adifference in the attitude towards tech-nology in small versus larger businesses.In large corporations, new technologiessuch as the latest handheld mobile deviceand laptops are often viewed as a privi-lege, restricted to senior management.

Small businesses are more likely torecognise the business bene t that anew technology will bring as opposedto seeing it as a status symbol.

Again, the technology cannot be de-ployed unthinkingly.

Michel Robert, managing director of the European hosting group Claranet warns that SMEs must be sure theirinvestments will move the business on.Most SMEs dont care if the technol-ogy is the newest or the fanciest or thequickest. They care about reliability and about whether it will take them inthe right direction. SMEs cannot affordto experiment and get it wrong.

He points to the dangers of growing

complexity, which SMEs may be ill-prepared to deal with. He recommendsoutsourcing the bread-and-butter op-erations: This will allow you to focusthe technical resources you have on thefuture and on innovation and on align-ing IT with the business.

The impact of the internet on SMEshas been particularly strong. While acouple of decades ago, an SME might be considering what accounting pack-age to buy, today it is chie y concerned with connectivity.

Chris Stening of Easynet, part of theBSkyB group, says the company hasseen an exponential demand for broad- band from SMEs driven by e-mail, webtraf c and online applications.

The internet has changed the way small businesses think about them-selves, he says.

A company can use a cleverly de-

signed website to make it seem largerthan it really is: equally, a failed inter-net connection can quickly cost a smallcompany more than it can afford.

A survey carried out among UK SMEs by Quocirca, the consultancy, forEasynet Connect, the companys SMEnetwork, says connection has become vital for many: While a quarter of companies could work for days with nointernet connection, most companies

require failures to be xed inside a day.For one in four, time to x is even tight-er at less than an hour and for some no break is acceptable.

In such critical situations, a secondredundant connection has to be worthconsidering, Quocirca recommends.The survey shows that from a simple web presence and e-mail, SMEs areselling online, using internet protocoltelephony and networked video. Almosthalf use the network for remote back-up and disaster recovery.

Are there simple guidelines thatSMEs should follow in their adoptionof IT? Joslyn Faust of Gartner suggeststhat potential buyers should not focuson price too strongly. Free or almostfree does not mean stress-free, she says,adding that new additions must work with existing equipment if the company is not to have problems as it grows.

She also says it is important to makesure that the vendor understands thecustomers business. Too many donot understand these vertical markets, which leads to frustration for their cus-tomers as they get up t o speed.

There are heartening signs, she says,that vendors are working towards theidea of one-stop shopping for SMEs.That is what SMEs have always wanted but what they have not been able to have because of the state of the market. It takesa few years for vendors to get it right.

5

This sorry state of affairs has beenompounded, and in some cases en-ouraged, by an IT sector that has donee SME sector a disservice by downsiz-g enterprise applications for the SMEarket without addressing their need

or less complexity.SAP, however, one of the worlds

rgest software groups, has seen a sig-cant change in its mix of customers

ver the past 10 to 20 years. A t one timewas a provider of enterprise resourceanning (ERP) software only to large

orporates, it now estimates that 70 perent of its customers - about 35,000obally - are SMEs.Simon Etherington, head of the SME

vision for SAP in the UK, says the sec-r is covered by a three-product fam-y: Business One, an out-of-the-boxusiness management system for com-

panies with less than 30m-40m inturnover; Business by Design for largergroups; and Business-all-in-One for vertical industries. These products aregenerally marketed to customers viachannel partners who can offer techni-cal help and business advice.

Are there any companies too small foran SAP offering? If there are, we haventfound them yet, says Mr Etherington.

But he warns that IT is no magic bul-let. The customer, he says, must havea clear vision of what it wants to do, where it wants to go and how it thinksIT can support its objectives.

He says that SMEs may have an ad- vantage because they see their businessprocesses - essentially what the busi-ness does - more clearly than bigger en-terprises. And any IT investment must be treated as a business project rather

than an IT initiative, he counsels.Dawn Baker, head of marketing for

the small business division of Sage, theUK accounting software group, concurs:Small businesses have to make monthly decisions based on cash ow. So an ownermay be faced with the dilemma of wheth-er to take 100 extra as a bonus or use itto buy a piece of software.

Another option, especially for busi-nesses at the upper end of the SMEsector is to look into hosted versus on-premises software solutions, as thismight provide a higher degree of ex-ibility with less up-front investment.Either way, any investment in IT should be linked to a business plan.

Big-ticket technologies such as ERPare not alone in being recon gured to

t a smaller customer. Virtualisation -running a number of operating systems

t i ami c c p i i i

sMe c ac l i p i

a a i i a l amall b i ca

a . M sMe a p pl c l

a ic a i a l a ab a c a ,c ai a b

b i It.eil ha a, Mam

Getty


10/15


A b a -l l c i am l

lik a a a i a i a i

b i p ma c ai ip . w all ill p

la l a c mpa b ii lli c m .

B s p P i c a

the pressure on managers tomake better use of company data - and better understandhow their organisations are

performing - has put business intel-ligence technologies at the top of ITspending in the last two years, ahead of security and compliance.

The CIO has been the custodian of information, and he or she is looking fora layer [of technology] that helps bringdata services together and helps providean information source for the business,says Don Campbell, chief technology of-

cer at BI vendor Cognos.The CEO is looking for decision-

making tools to help guide his com-pany. Companies have made a great

how to MoveforwArd froMguessworKto hArd fACts

7


11/15


from last year and last week, to datathat is hours old, says Royce Bell,CEO of Accenture Information Man-agement Services.

The technology to do this is also im-proving. One bene t of the deal betweenSAP and Business Objects, according toSAP co-chief executive Henning Kager-mann, is that Business Objects will beable to use SAPs know-how to allowmuch faster, in memory analytics for

customers.To date, companies needing real timeor operational business intelligencehave had to turn to smaller, more spe-cialist solutions.

Secure printing and cash manage-ment company De La Rue, for exam-ple, uses portal based BI software fromQlikView to enable its customers tomonitor the performance of banknotesorting machines in their cash centresin real time.

According to Jon Ryley, responsiblefor the project, maintenance costs onthe sorting machines - which cost be-tween 400,000 and 1m each - hashalved, and in-service uptime has im-proved considerably. The data has enabled De La Rue to cut its operationalcosts, and its customers can make bet-ter use of their expensive equipment.

The challenge for companies is to takesuch speci c applications and tie them to-gether across the business, both to reducecosts but also to improve the consistency of the information they deliver.

Real-time business intelligence istheoretically possible but is so expen-sive that few people want to do it, says Andreas Bitterer, research vice-presi-dent at Gartner.

But the move towards real-timetechnologies is reducing latency [inBI], which is helping companies touse BI with operational data. They aremoving from gathering data weekly orhourly to every ve minutes, so you can base business decisions on more or lessreal-time events.

For some companies, the analysisand reporting capabilities included inERP or CRM (customer relationshipmanagement) will be suf cient. Both

Oracle and SAPs recent acquisitionshave signi cantly added to their BIfunctions, and other vendors, includingMicrosoft, have also worked to improveBI within their applications.

Cosalt, a supplier of maritime safety equipment, is using the business intelli-gence functions in its ERP system - from vendor IFS - to track sales performance,especially from smaller orders.

The system has improved what we

call our bread and butter sales. We aretargeting orders under 10,000, because we had focused on big orders, but 70 percent of our business is from smaller dealsand tracking them has made a big im-provement year on year, says managingdirector Winston Phillips.

The challenge for businesses, as they grow, is to tie such systems together tocreate an enterprise view of businessintelligence. Companies also need to takeon board emerging capabilities - such asenterprise performance management -and the pressure from a new generationof knowledge workers to have BI analyt-ics tools on their desktops.

Rather than rely on specialist ana-lysts to compile reports for the CFOonce a quarter, more rms want to usethe latest BI systems to support deci-sion-making from shop oor or callcentre to boardroom.

A large data warehouse with the lat-est data mining and analytics tools isthe tidiest solution, but it inevitably means a hefty investment in both cashand development time. None the less,companies in sectors as diverse as re-tail and energy have made such invest-ments, and seen signi cant nancialreturns. But the warehouses have to be well engineered to ful l this task.

It is still a challenge for most organ-isations to create a BI system to opti-mise their enterprise performance, anddo so in a timely manner, says EddieShort, vice president and global leaderof business information managementat Capgemini. Traditional BI involves building huge data warehouses, andthat brings with it a lot of latency.

For smaller companies, and thosethat cannot justify a state of the art data

warehouse, the hope is that speci c business intelligence projects, or in- vesting in a centralised BI system thatdraws data from the underlying busi-ness applications, will bring most of the bene ts. But the bene ts will not come without both effort and investment.

Most organisations have data allover the place, in many different sys-tems, in applications and databases,says Gartners Andreas Bitterer. Those

cases require a lot of data integration,metadata, and data quality efforts to yield good BI results, as most sourcesdiffer in the way they store, de ne, provide common data.

To be successful, it will also require acultural change. Good business intelli-gence means greater transparency, withstaff sharing the data behind their deci-sions, both up and down the manage-ment chain.

It also means using what Accentureterms bounded decision-making. Thepoint is neither to put every employeeon the board, nor to let the board try torun the factories, just because they haveaccess to the data.

Start with measurable key perform-ance indicators, advises Oracles PaulRodwick. Then use BI to help individ-uals make factual, not gut decisions.

If you have anarchy, its because peo-ple dont have the right facts or dont un-derstand how decisions might affect thecompany. So they need to understandthe key performance indicators, beforethey can do their own analysis.

0

vestment in collecting the data, butow want to derive value from it.

This shift has made BI the focus of auying spree by enterprise technology endors: in March, Oracle paid $3.3bnor BI specialist Hyperion, and thisonth rival SAP agreed to buy Busi-

ess Objects, for 4.8bn ($6.8bn).These deals are signi cant, and not

ust because they represent continuingonsolidation in the market for large

usiness software systems.Companies selling enterprise re-ource planning (ERP) software, suchs SAP and Oracle, recognise thatboards of directors want more thanust the raw data that systems such asRP produce. They want to be able tonalyse that information to support de-sion-making and to make more accu-te forecasts and plans.Unfortunately, better decision-mak-

g demands far more than just plug-ng in a business intelligence applica-on to the company network. A large enterprise might well havedozen or more business intelligence

ystems, data mining systems, enter-rise performance management suitesnd reporting and analysis tools. Thiseates a huge burden for the CIO to

upport, and leaves line-of-businessanagers unsure of which sources of

ata to rely on. As a result, companies are often forceddeploy a further set of tools on top of

eir existing data warehouse and busi-ess management technology, in order toroduce a consistent set of reports.

Conventional business intelligence,whether done in a standalone tool or

a spreadsheet such as Microsoft Ex-el, is based mostly on analysing pastata. This information is typically days,eeks or even months old.But companies increasingly want update, or even real time business in-

lligence data. They might want this tonable senior managers to make accurateecisions more quickly, but it is just askely to be driven by a need to give front-ne staff better tools to make choiceshen they are in front of the customer.The trend in the past 18 months

as been away from [analysing] data

t i pa

m a ba a m [a al i ]a a m la a a

la k, a a ai l .r c B ll, AccI ma iMa a m s ic

Henning Kagermann, co-chief executive of SAP

Mr Kagermann and John Schwarz, chief executive of Business Objects

Business Objectives Of ce


12/15


M ca cc i i uK m a ac i a a c i i m l

i a c ai ma k , i t m B ai ai

froMBABystePsto gIAntgrowth

In 1984 Mohamed Alshaya, the young scion of a wealthy Kuwaitidynasty, educated at Wharton business school and working at

Morgan Stanley in New York, receiveda telephone call from his father.

You had better come back to thefamily, said the elder Mr Alshaya, with a summons Mohamed had alwaysknown would come. Business schooland the bank had been mere stag-ing posts before a return to the family company. But before the journey homethere was one last educational stop forthe suave son - a stint on the shop oorin a Mothercare store in Manchester.

The apparently unlikely link that thendeveloped between Mothercare and the

Middle East is much closer today. TheUK mother-and-baby products retailerhas been the most important partnerfor M H Alshaya, which has expandedfrom a relatively small family conglom-erate into one of the worlds most suc-cessful franchise operators.

Franchising has its share of believersand sceptics. Critics argue that allow-ing a third party to manage your brandand take pro ts off the back of it cannever be the right way to proceed.

But now the model may be cominginto its own. Retailers in the US, UK and much of Europe are seeing the fall-out from the credit crisis translate intoslowing sales. Those that laid the foun-dations early for expansion in emerg-

Getty


13/15


- even insurmountable - barriers. Pigsare cute in some countries and offensivein others, notes Mr Gordon. Purple,says John Lappas, the Greek franchiseefor Mothercare, is funereal in Greece but ne in Romania, where Mr Lappashas recently introduced Mothercare.More practically, pushchairs with broad wheels are good news in sandy coun-tries but also in snowy ones.

Choosing the wrong partner in fran-

chising, however, only crystallises therisk. As the chief executive of one fran-chiser recalls: The franchisee startedopening stores without telling us, whichis a no-no. They broke the rules. They were effectively stealing from us.

Trust is essential for both parties, with both able to affect brand value and bothinvested nancially and emotionally in itssuccess. Mr Lappas attests to the impor-tance of the relationship with the retail-ers management: Mr Ben Gordon is theperfect manager. We feel con dent that we will not die with them.

Mothercare allowed its new Indianfranchisee to develop its own billboardadvertising campaign, with the sloganBaby is coming . . . plastered all overMumbai. BS Nagesh, chief executive of Shoppers Stop, Mothercare franchiseein India, says he values that freedomand wryly notes the principal bene t of becoming the Indian franchisee of oneof the worlds leading mother-and-baby brands: With a never-ending population boom we could see the opportunity.

That con dence was not so great inthe past decade. Both Mr Alshaya andMr Lappas say they were worried by Mothercares dwindling success in theUK and un-impressed with the previ-ous managements ability to cope, a development that underlined the risk for afranchisee of owning a business built ona waning brand.

Increasingly, however, retailers are try-ing to have their cake and eat it. GavinGeorge, head of retail at nancial servicescompany Ernst & Young in the UK, whohas helped retailer New Look launch inRussia and Argos launch in India, says:We ensure that every franchise agree-ment has a buyback [clause].

Zara, part of Spains Inditex group,

has always preferred to have full con-trol of its overseas stores and has bought bigger slices of joint venturesand franchises in Germany and Russia.UK fashion retailer Next has bought itsfranchisee who operated in the CzechRepublic, Slovakia and Hungary. Marksand Spencer bought out its joint venturepartner in Greece and the Balkans.

Although the franchise model hasfallen in and out of fashion over the past

decades, it may be that the close relation-ship such as that between Mothercareand Alshaya becomes rarer as the biggest brands come to feel increasingly con dentabout operating in emerging markets.

That offers potentially greater re- wards for those companies with theskill and capital to go it alone, but it alsoextends the list of pitfalls they must facedirectly - from legal risks to the morearcane but equally explosive elements

of pigs and the colour purple.Saturation forces British brands toeye overseas opportunities

A number of global brands have been at it for years: McDonalds and,subsequently, Starbucks are prime ex-amples of US companies building their businesses by embracing internationalfranchising as a lower-cost, lower-riskalternative to wholly-owned stores.

But in pure non-food retail, Ameri-can companies are not such an im-portant force in franchising and inter-national expansion. Spains Zara andSwedens H&M have been the leadingmovers in fashion over the past decade. And a large number of UK brands have been quietly expanding overseas forsome years.

UK brands are more known to theIndian consumer than the American brands, says B.S. Nagesh, chief ex-ecutive of Shoppers Stop, the Indiandepartment store operator and Moth-ercare franchisee. I, as a middle-class[shopper], could relate.

From a retailers perspective, bar-ring the current economic slowdown,the US offers decent medium-termgrowth opportunities and some bignames in the US, such as AmericanEagle, have seen no need to expandtheir operations overseas.

Gavin George, head of retail at Ernst& Young, the nancial services compa-ny, argues that for the UK, on the otherhand, staying put is foolish.

For us, there isnt much choice any more, he says. If the UK is either ma-ture or saturated, the pressure to moveelsewhere is compelling.

f m a ail p p c i , ba i

c c micl , us

c m i m- m pp i ia m bi am i

us, c aAm ica ea l , a

pai p a i

a

g markets are reaping the dividendss fast overseas growth helps offset therrid markets at home.This is an incredibly important

me to push hard, says Ben Gordon,hief executive of Mothercare. The re-il markets are being built now. Theands are being built now. Alshaya now operates 116 Mother-

are stores, but it also has dozens moreranded stores in the Middle East ands far as Poland and Russia, with brandsnging from Topshop to Starbucks.his year the company expects turno-er of more than $2bn (1bn), up from1.6bn last year.

Mohamed, on the back of Mothercare,as built a 1bn company, says Mr Gor-on, whose admiration for his Kuwaitiartners success is plainly reciprocated.

For the brand owner, the appeal of anchising lies in its low-risk structurend speed: little capital has to be de-

ployed, the franchisee bears most of thecost of store openings and staff, payscost-price for the products and a royalty to the franchiser when they are sold.

Some people say to me Gosh, youregiving away net margin, says Mr Gor-don. Then I say: We are charging aroyalty and frankly youd have to dopretty well to outperform. Today, thecompany - with a market capitalisationof less than 350m - has about 500stores in 48 countries and internationalsales are expected to overtake the UK inthe next few years.

We have got 400 stores in the UK with a 60m population, says Mr Gor-don. Youre not expecting that ratioin India but in Greece were more thanthat [ratio] now. If you did it yourself, youd do it at a 10th of the speed.

The structure also mitigates the dif-culty of operating in countries where

local laws and culture can prove testing

3

r ail i us, uKa m c e pa i all-

m c i c i ia la i l i

al . t a lai a i

a l pa i im i ma k a

api i ia a a

lp ima k a m

Mothercare store UK

Starbucks Saudi Arabia


14/15


its IT operation and bring it in line withthe needs of business managers. Thecompany is also one year into what MrBrumby sees as a three-year programmeto cut the complexity of its applications base; it has already cut its 300 softwareapplications by 50.

It is reaping the benefits. Four yearsago, the company had different inven-tory management and maintenancesystems for its businesses, meaning

that it could not centrally controlstock and had limited insight into its warranties. Replacing the applica-tions with SAPs enterprise resourceplanning (ERP) system enabled thecompany to use a single applicationfor inventory and maintenance acrossall 20 of its operating companies.

The bene ts were enormous, saysMr Brumby, not only in process con-trols and improved operational ef -ciency but, more importantly, we wereable to embed the standard operatingprocedures of the organisation into thatplatform, which of course you cant do with 20 separate platforms.

Application consolidation can deliver big cost-savings, says Eric Stephens, en-terprise architect for health insurancecompany Excellus BlueCross BlueShieldof Rochester, New York. It takes morepeople more time to maintain arcanecollections of interconnected software,and as the applications age, the skills tomaintain them may disappear.

Another driver is agility, says MrStephens. He is working on a project to whittle the companys 500 applicationsdown to about 35. The health insur-ance sector is heavily regulated, whichforces the IT department to make lotsof compliance-driven, time-consumingchanges to its software.

Having an ecosystem of softwarethats easy to maintain helps with agil-ity and adapting to market changes, butalso lets you drive down costs, he says.

Excelluss rationalisation programmeinvolves listing each application along with the business functions it serves.The team ended up with a spreadsheetdocumenting software attributes in 70columns.

This data was given to a consultancy.

It mapped each application on to a grid, with one axis describing the business t,and the other describing the technical t.This gave Excellus information on whichapplications to ditch, keep, or replace.

Consolidation can be a slow processthat only delivers bene ts over time and boards with short-term expectationsmay eschew such strategic initiatives.

Excelluss board was willing to fundthe project as part of a wider initiativecalled IT Evolution, which aimed toalign the companys IT with the way the business worked.

Sometimes the opportunity for changearises because the business is in a state of

ux. George Glass, chief architect at BT,is reducing 3,500 applications to 500. He was able to do it partly because the com-pany wanted to replace its telecommuni-

cations network with a new one designedto support internet protocol.This initiative, called the 21st Centu-

ry Network, needed big changes in theapplication base. If youre having to doit anyway, do it right, with strong engi-neering principles, with disciplined de-sign practices, says Mr Glass. His teamdecided to set out its application needsin terms of the services they would provide to customers. They de ned 14 corefunctions the applications must sup-port, and came up with 160 services thatthese functions had to provide, such asenabling customers to check for avail-ability of a BT service. They then beganto develop them.

Reusability gured heavily in MrGlasss strategy. A software service thatenabled a customer to check for prod-uct availability might initially be used tocheck for, say, the availability of broad- band services within a certain postcode.Over time, however, developers mightenhance that service to support othertypes of product and customer.

Consolidating applications is asmuch a cultural as a technical chal-lenge. Persuading BTs software devel-opers to adhere to reuse standards wasone of the toughest parts of the process,says Mr Glass.

He got the go-ahead from manage-ment to tie developer compliance intoperformance reviews and bonuses, whichgave his team the power to drive the mes-sage home. BT has deployed 61 of the 160services and has switched off 719 of itssoftware applications. It hopes to closeanother 1,000 in the next year.

f a a , c mpa a ii ma a ma mai a c

m ib i . r placi

applica i isAP p i

c pla im abl

c mpa ai l applica i

i amai a c acall 0 i p a ic mpa i

Moir Lockhead, chief executive First Group

5

unfortunately, because comput-ing infrastructures develop er-ratically, many businesses endup with hundreds of poorly

documented software applications, in-stalled by forgotten development teamsand long-departed managers. Many of these applications do the same thing, andthey rarely talk to each other.

Some companies try to consolidateapplications; boiling them down to asimpler set of systems. One such is UK transportation giant, First Group.

Darin Brumby, its CIO, explained: A lack of business ownership and spon-sorship of projects in the past had ledto a sea of data, but no information forthe decision makers.

First Groups consolidation processis part of a larger initiative to stabilise

C mpl i i a i i c mp i .t m c l

m i i , m p ia i c l i i ma a , a mlik l .B da B a b

reAPIng hugeBenefIts froMsoMe sIMPLetIdyIng uP

Getty


15/15

Editor: Robert OrrArt Direction: Erica Morgan

For all enquiries regarding Financial TimesInsight products, please contact

Alastair MackieDigital Solutions ManagerFinancial Times

One Southwark BridgeLondon SE1 9HLUnited Kingdom

+44 (0) 20 7873 3000

insight business growth

Documents