The Next Big Thing
Posts about next generation technologies and their effect on business.

Are standard processes constraining our agile needs?

Complex process.pngLately I’ve been in a number of discussions about processes and automation. When you look at traditional ERP/CRM systems, they have already automated the processes and it is up to you to figure out how to run your business within them.

 

As we develop more sophisticated systems that can begin to recognize patterns of behavior, new software solutions that adapt to changing needs are possible. One area of this effort is adaptive case management.

 

Adaptive Case Management (ACM) is information technology that exposes structured and unstructured business information (business data and content) and allows structured (business) and unstructured (social) organizations to execute work (routine and emergent processes) in a secure but transparent manner.”

 

I usually talk about standards as allowing us to focus our innovation. In the case of processes though I have to ask: Is the future less about standard ways of doing things and more about adaptive approaches that adjust dynamically to the needs of the day? I think it is.

CRM, Cloud computing, 2013 and changes in IT spending

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Recently Gartner put out a press release saying Cloud and CRM will drive enterprise software spending in 2013 and 2014. I found this focus on CRM a bit confusing based on all the other demands on spending. One of the interesting areas is the use of private clouds. HP has some new hardware coming out soon that should be of interest to anyone interested in cloud hardware.

 

See if moonshot will be right for you. Many of the issues defined as tech trends, should be addressed more effectively and economically by the moonshot approach than traditional hardware. 

To Matter or Not to Matter

It's been five years since Nicholas Carr tossed his "IT Doesn't Matter" hand-grenade into the CIO's bunker. He followed it a year later with his book Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. Carr argued that IT was no longer a source of differentiation because it was available to everyone. With no monopoly on IT, there could be no advantage from IT. The resulting furor was entertaining as CIOs defended their position, both themselves as individual CIOs and the CIO position itself as a legitimate executive role in business.

Since Carr's original May, 2003 article, CRM software vendor Salesforce.com has multiplied its revenue from $51 million (with 5,700 customers and 76,000 subscribers as of January 31, 2003) to $748.7 million (with 41,000 customers and 1,100,000 subscribers as of January, 31, 2008).

This example cuts two ways. It challenges Carr's argument in that Salesforce.com's unique IT assets, a CRM application and the infrastructure to deliver it as on-demand Software-as-a-Service (SaaS), and the growing number of customers and subscribers, have created a differentiated competitive advantage worth $8 billion in market value. For Salesforce.com, IT clearly matters, at least for their CRM service offering. IT underlies their very business. The same could be said of Google, or eBay, or dozens of other companies that wouldn't exist or have their market valuations without IT.

On the other hand, Salesforce.com doesn't need to have unique payroll or benefits administration IT systems or even the staff to perform these business functions. They would gain no shareholder value by performing these functions better than their competitors because they are not competing in the payroll or benefits administration services markets. So they should hire another service company, one who specializes in payroll and benefits administration, to perform these business functions for them. This service provider would bundle the IT assets with the staff needed to perform payroll and benefits administration.

The difference has to do with Geoffrey Moore's general business strategy concepts of "core" versus "context" from Living on the Fault Line, and their alignment with in-sourcing versus outsourcing, as I discussed in "Outsourcing and BATOG". CRM services are part of Salesforce.com's core, but payroll and benefits administration are part of their context. Salesforce.com has invested in its IT solution for CRM and has created significant shareholder value by doing so; on the other hand, it shouldn't be wasting its valuable IT resources on payroll and benefits administration, both context activities.

For each of Salesforce.com's customers, CRM applications and the infrastructure they run on are part of the customer's context; for these companies, there is no advantage to having their own custom CRM application, or their own dedicated IT infrastructure to run it on. By hiring Salesforce.com's CRM software-as-a-service solution, which has unique advantages in the CRM industry, these companies waste no IT investment or management budget on building custom CRM applications or infrastructure. They can focus their IT efforts on their core activities, which depend on the markets they are in and their individual competitive business strategies.

This discussion helps to resolve the conflict between Carr and his detractors. IT has to matter for a company's core activities, but IT shouldn't matter for a company's context activities. In fact, the company shouldn't have any IT for their context activities; they should outsource these functions, including the IT needed to perform them. Their own IT staff would then be free to focus on the company's core activities.

In summary, Carr and his opponents are both right (and both wrong if their conclusions are applied too broadly). On one hand, Carr's argument that differentiated IT cannot increase shareholder value is correct, as long as this principle is applied only to context activities. On the other hand, his opponents' argument that IT can provide significant business value is also correct, as long as it is applied only to core activities. The key is to keep IT strategy aligned with business strategy.

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About the Author(s)
  • Steve Simske is an HP Fellow and Director in the Printing and Content Delivery Lab in Hewlett-Packard Labs, and is the Director and Chief Technologist for the HP Labs Security Printing and Imaging program.
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