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Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University Business School, UK June 2004
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Page 1: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Value creation from IS Integration: From ASP to Web

Services?

Wendy.L.Currie

Warwick Business School

Presentation atESRC Seminar – Nottingham University Business School, UK

June 2004

Page 2: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Overview

EPSRC and ESRC Funded Research Project 2000-2004

The ASP market - A Flawed e-business model?

Web Services - Integration: The Missing Link?

Case Study – Implementing A Compliance System in the Financial Services Sector

Page 3: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Research studies

£193,000 from EPSRC: ‘Assessing the deployment, hosting and integration of business-critical information systems by application service providers’ (BC-ASP). October 01-September 03.

£258,000 (plus £195,000 to Fullard Learning Ltd and DCS.com Ltd) from ESRC: ‘Developing a risk-assessment framework for deploying, hosting and integrating vertical and horizontal information systems by application service providers’ (ASP-VH). March 02-February 04.

Page 4: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

ASP Definition

“An ASP manages and delivers application capabilities to multiple entities from data centres across a wide area network (WAN)”.

ASP Industry Consortium

Page 5: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

InternetService Provider

Data CenterCo-Location

A pplicationServiceP rovider

IndependentSoftwareVendor

NetworkService

Provider

Te leco

End User

Business/ IT Consultants

Ecosystem For Hosted Applications

Page 6: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Early predictions – ASP Market

$23 Billion by $23 Billion by 20032003$23 Billion by $23 Billion by 20032003

Forrester, 2000

DataQuest, 2000$22.7 Billion by $22.7 Billion by 20032003$22.7 Billion by $22.7 Billion by 20032003$19.2 Billion $19.2 Billion by 2003by 2003$19.2 Billion $19.2 Billion by 2003by 2003

Yankee Group, 2000

$24 Billion by $24 Billion by 20052005$24 Billion by $24 Billion by 20052005

IDC, 2001

$18 Billion by $18 Billion by 20052005$18 Billion by $18 Billion by 20052005

Gartner Group, 2001

Page 7: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Spending on ASPs

IDC says companies spent roughly $245 million on application service provider (ASP) services in 2001

Manufacturers spent $221 million on ASP services in 2001

But 60% of ASPs predicted not to survive! (Gartner Group)

Page 8: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Key Drivers of the ASP Industry

BUSINESS DRIVERS

•Adopt a ‘Utility model’•Software provided as a service•Focus on core competencies•Reduce total cost of ownership (TCO)•Better value proposition•Agility and flexibility

MARKET DRIVERS

•Global competition•New business (e.g. ERP vendors)•Faster time to market•De-regulation, consolidation, standardisation •Global IT skill shortage

TECHNICAL DRIVERS

•Access to technical expertise•Information delivered through internet and corporate intranets•Global access to information•Parallel to converged networks•Standardised solutions•Net-centric applications

Page 9: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

A comparison of traditional and application outsourcing

 

Traditional Outsourcing Application Outsourcing

Software licence owned by the customer

Software licence owned by the vendor

One to one relationship between vendor and customer

One to many relationship between vendor and customers

Legacy software application paid for by customer

No up-front costs to customer

Price based upon s/w license and maintenance

Price based upon usage

Software as a product Software as a service

S/W application located at customer site

S/W application located at supplier site

Page 10: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

ASP and Integration

Integration of applications across multiple platforms, sites and environments

Business process re-design through integration To create a ‘seamless’ IT organisation Integration of billing information into auditing and

reporting systems To create an infrastructure for better

manageability To achieve faster software application

implementation Resultant synergy from combination of

applications

Page 11: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Scale, Scope and Integration - Definitions

Scale – the extent to which a firm enters into outsourcing contracts in relation to vendor capabilities

Scope – the extent to which it is possible to source specific activities, tasks, processes or applications from a third party vendor

Integration – the extent to which software applications can be integrated across business processes

Page 12: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Scale, Scope and Integration of Outsourcing: the key challenge

Scale000s

Scope Complexity

IntegrationFull Service Providers (FSPs)

Projected Market

Actual Market

Pure-Play ASP(One-

ClickHR.com, Netledger)

Enterprise ASP,(J.D.Edwards, SAP, Corio, Aristasoft)

Page 13: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Examples of Flawed ASP business models

Enterprise ASPs – Difficult to sell ‘vanilla ERP’ to SMBs (example – JD.Edwards)

Vertical ASPs – Customisation and integration/not one-to-many (Aristasoft)

Pure-play ASPs – No profits from commodity software applications (email) (E-Carisma)

Infrastructure ASPs – Over-capacity of network/datacentres, no channel to market (Cable & Wireless)

Page 14: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

The first-phase ASP market – a false start

One-to-many became same-for-all No profits from commodity software

applications (email, MS office, etc) ASPs focused too much on marketing – not

on revenue generation SMBs were unconvinced about the benefits

of the ASP model ASPs failed to ‘create value’ for customers Technology platforms/software not web-

centric

Page 15: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

ASP and Web Services Convergence between telecommunications and

computing industries will continue Market consolidation of ASP vendors Web services will facilitate BPO Value creation through customization and

integration ASP vendors need to develop business models

which address scale, scope and integration

Page 16: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

ASP and Web Services

Commodity ASP 1990s

• One-to-many – point solution• 24x7 availability• High scalability• Economies of Scale• Efficiency (of business applications)• Individual performance improvement• Utility pricing models• Packaged ‘Stand-alone’ applications• Functional data/information • Application integration• Remote C/V relationship• Application outsourcing• Service Level Agreement (SLA)• Application-centric• Continuous improvement• Inter-departmental change• Technology peripheral to core business• Silo effect

Web Services2000+

• Many-to-many - Enterprise-wide• 24x7 availability• Unlimited Scalability• Economies of Scale and Scope• Adaptiveness (to business change)• Enterprise-wide improvement• Multiple, fluctuating pricing models• Component based applications• Business Intelligence• Synergy of combination of applications• Loosely-coupled C/V relationship• Business process outsourcing• Multiple SLAs• Industry-centric• Changing Industry/market dynamics• Industry-wide change• Mixed technology portfolio• Synergistic (more than the sum of the parts)

Page 17: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Web Services Definition

‘Web Services are loosely coupled software components delivered over Internet standard technologies. A Web Service represents a business function or business service and can be accessed by another application…over public networks using generally available protocols..’ (IDC, 2001).

Page 18: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

 

Integration Collaboration Innovation Domination

•Experimentation with Web Services with small, internal integration projects•SOAP-enablement of legacy applications and ERP, CRM systems•Fast cycles of learning reach the limits of early Web services, unprepared IT architectures•Increase in shared information across the business

•Experimentation with WS outside firewalls•Increasing interaction with trading partners and customers•Close trading partners implement Web services to drive shared value•External trading partners begin sharing information to drive industry value chain benefits

•Lessons from integration and collaboration applied to new processes and business models•New distributed WS processes and applications drive business change•Dramatic business results are achieved as WS are applied in many ways, driving new value propositions

•First movers begin to assert their dominance over respective markets and industries•Industry dominance achieved by innovating new business models as well as out-executing competitors•Web services leaders win through rapid innovation and cycles of learning•Web services mastery creates new company and industry structures as boundaries are redefined

Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3 Stage 4Stage 4

Phases of Web Services Adoption

Source: Marks and Werrell, 2003

Page 19: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Attribute Firm A Firm B

Existing system Four different systems that could not connect with each other

Excel spread sheets and paper based deal tickets

Size Part of a group that employed 22,000. The 120 users managed corporate pension plans, private clients and wealthy individual investors. Twelve dealers.

Thirty employees, the four fund managers also dealt their own trades.

Infrastructure Windows NT, LAN and WAN. All Oracle and SQLServer database systems in US

Windows XP. SQLServer database

In-house skills Expert DBA, network teams, 24hr help desk, in-house training

No expert IT skills

Implementation Team Over 20 at its peak (1 external) 2 core people (both external)

Compliance Rules Over 25,000 Over 350

Accounts and Positions 15,000 accounts: 250,000 positions 25 accounts, 2,500 positions

Securities Traded Debt (10%) Equity (60%)Unit Trusts (10%)Money Market (10%)Foreign Exchange (10%)

Debt (60%)Derivative (35%)Equity (5%)

Time to implement 3 years 6 months

Page 20: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

OMS AccountingSy stem

FM and DealersFirewall

Firewall

eMailand Fax

WEB

Orders

Orders

Data Translation

Cash Flow

Reports

Trade Matching

Attribution

FI Data Deriv ativ eData

IndexData

SecurityDetail

Brokers

Custodians

The flow of information within Firm A and B

Page 21: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Web Services

Web Reports

Excel/Access

Windows Messaging

Internet and Intranet

Database

Client

OrderManagementSystem

Value Added Web Services

Page 22: Value creation from IS Integration: From ASP to Web Services? Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University.

Conclusion Market driven towards using Web

services for straight through processing

From One to Many (ASP) to Many to Many (Web Services)

Speed of Integration improved with standardisation of interfaces (XML)

Increased liquidity (i.e. allows more buyers/sellers to trade simultaneously)


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