Business Network Transformation

It is nearly impossible to imagine any company in this global economy that operates isolated and does not interact with suppliers, partners and vendors at some stage. This global ecosystem is remoulding relationships between companies in new and often uncomfortable ways. Companies are organizing collaborative partnerships globally to support their business operations locally. That extends their business value and gain competitive advantage. These enterprises are seeing beyond conventional business boundaries to lower costs, increase profit and improve quality of service they provide by tapping into applications, personnel, and infrastructure irrespective of where they reside. So, companies are looking to gain competitive advantage by leveraging these novel opportunities arose from intercompany interactions.

Though Business Network Transformation is not a new concept, this idea had been kept apart from action due to IT limitations. Companies traditionally focused on customers, internal processes and cost cutting to differentiate their business in this ecosystem. But IT has changed this perception recently. Enhanced IT capabilities for communication, collaboration and information sharing caused increasing global competition. Companies realised a new way of doing business – “working together while working for others”. Examining their value chains and understanding this competitive weapon resulted in formation of Business Networks.

This paper contains the following topics;

Business Network transformation explained with example

How IT helps business networks and role of IT in business network transformation

Service Oriented Architecture (SOA) explained with 3 success stories

Relating Service Oriented Architecture to Enterprise Resource Planning packages

Conclusion

Business Network Transformation

According to Philip Lay and Geoffrey Moore, Business Networks are “groups of companies that work together toward a specific objective for mutual financial benefit”. The example below helps to understand Business Network Transformation.

Business network of Cellular Phone Company:

Partners:

Mobile handset makers, Chipset provider, Network switching manufacturer, Contract manufacturers, Wireless carriers, Routing Vendors, Application enablers, Service providers – voicemail, email, mobile search, banking, video streaming etc., Advertisers – banks, pharmaceuticals, CPG companies etc., Consumers – mobile phone owners, dealers enterprises etc.

Strategic Objective:

A multi channel marketing strategy to transit from manufacturing handsets and equipment to a software service provider.

Business process and IT implications:

Demand data should be visible to ensure high level of retail stock through rapid supply chain response. This implies binding marketing programs and sell-out data to improve marketing return on investment.

This example shows a company with collaborating partners in a business network and their strategic objective to transformation.

As the definition of business networks has become known to everyone, the pace in which these networks are created and transformed and what IT resources are needed for this transition became a challenge.

Role of IT in Business Network Transformation

Potential to compete in this global market depends on business’s network of people and flexible processes. New technologies like Service Oriented Architecture (SOA) and Software as a Service (SaaS) enable these networks to amplify opportunities and flourish. Effective and efficient communication by sharing information across its ecosystem of suppliers, employees, customers and distributors is enabled by implementing such service oriented architecture and services. Utilising these capabilities, companies can provide improved customer experience due to improved intercompany interaction. These potentials also enable seamless interaction with intra company systems focusing on improving value chain.

Taking full advantage of these global opportunities from business networks and becoming globally integrated enterprise demands high level of flexibility. Businesses need to merge newly acquired business potentials and technologies with legacy applications. Existing IT infrastructure must be adaptable to changes in business models and must be ready to accommodate them. Information is already being shared internally across departments within the business but now it has to be shared externally across business partners, across countries and continents. Business processes must be agile and consistent alignment between business and IT is critical.

Service Oriented Architecture (SOA):

Service oriented architecture (SOA) enables business organizations to achieve this agility needed to compete in global ecosystem. It divides the business into functional components that are easy to be drawn together quickly and economically. They are flexible enough to reuse in meaningful combinations to meet evolving business needs. These components are called ‘Services’. These combinations of services enable efficient collaboration and communication across company lines and unearth information buried within business processes.

According to IBM, Service Oriented Architecture (SOA) is “A business-centric IT architectural approach that supports integrating your business as linked, repeatable business tasks, or services.” Service oriented architecture is essentially collection of services. These services are loosely coupled and implemented in standard ways. In other words, caller needs no knowledge of the technology or location of service provider. For example ‘Create invoice’ as a service can be invoked by any other business unit or from any business application when invoice needs to be created.

SAP defined Enterprise SOA as “A blue print for an adaptable, flexible and open IT architecture for developing services-based, modular business solutions.”

Three features of an SOA:

These three features provide value in a business by implementing SOA.

Software reuse:

Reusing components is one of the important advantages of SOA. Reusable components enable companies to avoid redundancy. For example a business has many functional silos and each silo usually needs information from other silo such as customer information or invoice. When these silos are using disparate technologies and are operating on different platforms, they need duplicate instances of this information in each silo. SOA creates single version of such services which can be shared across all functional silos.

Composite applications:

Composite applications are new cross-functional applications formed by combining functionality from many existing systems. For example, SOA enables companies to provide a single point access to a range of products through a self service portal for business partners. Usually this portal might be a combination of different processes with different technologies supported by IT services.

Standard interface:

Caller of a service does not need to have knowledge about service’s location or technology platform on which it was developed. Interface to services in SOA takes standard form. This facilitates a flexibility to run services where they are needed irrespective of location and technology with greater ease. It can also increase IT efficiency, improve quality of service and reduce costs.

Coming to business partners, these loosely coupled, standard interfaced services provide extra benefits. Partner need not to be aware of progress of implementation of a service, as SOA provides transparency of location and technology. Standard interface enables partners to call a service having minimum information about the service.

In essence, the below are the benefits fall into three business categories:

Business Effectiveness:

Business agility

Greater speed in responsiveness to market

Competitive advantage

Improved business process efficiency

Accuracy in deployment of resources according to business needs

Cost factor:

Maintenance costs are reduced

Minimum skills and efforts needed for business change

Optimized price due to choice of platform, technology and location

Risk factor:

Incremental deployment

Enhanced IT quality

Optimized payback times

Enterprise Resource Planning and Service Oriented Architecture:

A single system capable of accommodating business data which is centralised and accessible across all functional areas in the company was the basic concept of ERP. Before ERP era, data would flow across business units but not stored in one system. The single system was the selling point of all ERP vendors like SAP, IBM, Microsoft, Oracle etc. ERP implementation requires no service work to integrate smaller components but ERP implementation normally required greater customization. Without customization, ERP software packages seldom matched business processes and getting to the ready to work status. Though implementing ERP results many advantages, it has few drawbacks in terms of cost, customization and timeline for implementation. So ERP implementation and support are expensive and time consuming. It is also costly in the area of upgrading because it is tightly coupled package. The evolution of Service oriented architecture concept focused on these pitfalls of ERP. The Enterprise application vendors used client server technology in 1990s and web client technology in 2000s. Now they are transiting to Service oriented architecture approach to ERP. This blend of ERP based on SOA is the best of breed approach facilitating customers to have more options to select services from any vendor. SOA can be said as father of modern IT architectures. Due to this combination, ERP components became services in Service oriented architecture. The below two are leading ERP vendors who recently released their ERP package based on SOA,

SAP – Enterprise SOA:

SAP NetWeaver is the new product based on SOA. SAP NetWeaver is a platform on which other components such as Finances, Human Resource, Business Intelligence, Business process outsourcing etc are implemented. It boasts the advantages based on its SOA features such as web connections, Business network transformation etc.

Oracle – Oracle Fusion Middleware:

Fusion Middleware is Oracle’s product based on SOA. It is a family of products seamlessly integrated to run agile business applications. Business Intelligence, User Interface, Content management, SOA & Process Management etc. are components in this package.

IBM – Smart SOA:

Smart SOA is a set of guiding principles derived from solidified best practices and documented projects. They have created entry points to each of their products such as Business Intelligence, BPM etc. These entry points are undertaking “well defined, focused and individual project to meet individual business need”.

The role of SOA in Business Network Transformation can be easily understood from the success stories below.

Ergon takes oil business to the web

Ergon is United States based Petroleum Company. It is a privately owned company with 2,500 employees. It specializes in petroleum products with up and downstream operations like refineries, sales and final trucking.

Business need:

Ergon wanted to integrate internal processes to improve access to the information and to deliver that information to its customer. The company wanted to introduce self service portals and automated workflows to accelerate budget approval processes.

Solution:

Ergon has more than 50 operations within the business and each of which is a distinguished profit centre that reports back to the headquarters. They implemented SAP business workflow on existing SAP infrastructure to support purchasing and to automate approval of requisitions. Ergon also implemented IBM TotalsStorage DS6800 and changed its databases to IBM D2 facilitating upgrade their ERP to SAP ECC 6.0 in future.

Benefits:

Enterprise wide:

SAP standardized their business processes. SAP enabled Ergon’s employees to gain consolidated view of individual workflow and to make better deals with their vendors. SAP ECC 6.0 based on SAP NetWeaver fetches more options for Ergon in the future. Portals enabled users to view core functionality tailored close to business needs. SAP NetWeaver created single enterprise platform.

They could successfully align their business needs with their SAP ERP solution with greater flexibility and helping Ergon’s transition to SOA.

Business flow:

Ergon implemented SAP business workflow to support purchasing process as part of its ongoing enhancements to internal efficiency. SAP workflow tool accelerated approval of requisition process. This saved lot of administrative time by generating automated routing and emails. SAP business workflow reduced administrative workload and accelerated purchasing. After successful implementation of workflow tool and gained benefits from it, Ergon is now looking to extend this tool into other functional areas such as human resources.

Storage Performance:

Information access rates were improved and they saved 10-12 hours per weekend on database maintenance. This enabled freeing technical staff and to achieve better throughput for live users. They could increase the access up to 17 times faster than before. DS 6800 made reports and transactions through SAP applications run much more quickly. Storage performance is increased with new storage systems DS6800 and DB2 for business critical SAP systems.

Stability:

SAP and IBM worked together and IBM’s DB2 is constantly supporting SAP applications. As performance and availability have become important aspects in extending SAP applications to more functional areas, this combination of SAP applications and IBM DB2 on IBM hardware using AIX operating system is helping Ergon to deliver excellent response times.

Bezeq setup SOA:

Bezeq is Israel based leading telecommunications provider. It is a privately owned company with 7,700 employees and with revenue of US $ 1 Billion. Its product and services range includes, domestic, international and cellular phone services, internet and data communication services.

Business need:

Bezeq wanted to maintain focus on new vision that is customer facing. In the highly competitive industry they wanted to keep their market shares regulated tightly. Field technicians needed equipment with mobile capabilities such as to prepare electronic bills, or customer receipts etc. They also planned to architect a reusable set of web services.

Their objectives were to avoid constraints of location with handheld mobile devices and to provide application developers with a reusable set of services.

Solution:

Bezeq implemented SAP NetWeaver technology platform including exchange infrastructure, enterprise portal components and Web Dynpro development environment for mobile computing.

Benefits:

Enterprise wide:

End to end business process integration was made possible by implementing SAP NetWeaver. This platform also enabled real time monitoring of field repair procedures. As NetWeaver is based on SOA, Bezeq was able to achieve improvements in processes surrounding service calls. Bezeq achieved speed in service completion from assignment to invoice. It has time to focus on streamlining its core telecommunications processes.

Avoiding constraints of physical location:

Field technicians are given PDAs to receive service calls through which they can order replenishments which also updates central inventory and customer records. They can use these PDAs from their homes and even while travelling. They can even get work related messages and use their cars as local and mobile warehouse for receiving and distributing parts to customers.

Reusable services:

For mobile computing, team has chosen Web Dynpro development environment. It is actually to program technician PDAs to access directly SAP NetWeaver portal component. Access to back end functionality that calls to the back end SAP system was encapsulated as reusable we services. Reduction in costs and risk in terms of both time and money is ensured by this use of encapsulated web services that is also flexible and reusable.

Business model evaluation:

Equipment and supplies are optimally allocated and managed using tools that technicians use. Company eliminated hour long scheduling session and consequently saved significant amount of money. They started saving 3, 250 hours a week. Bezeq has also reduced average response times to service requests from 6 days to 2 working days that should help increase customer satisfaction.

Wipro Technologies helps its customers to make it quick

Wipro Technologies is a division of Wipro Limited, the first global IT services organization to be certified in PCMM level 5 and SEI CMM level 5 and with annual revenue is US $4.3 Billion and 99,965 employees. They are one of the largest product engineering and support service providers globally. They have comprehensive research and development and provide IT solutions and services like systems integration, information systems outsourcing, software application development, package implementation and maintenance services.

Business need:

Wipro wanted to improve business process agility so as to improve customer experience for large automotive manufacturer in North America to increase competitive advantage. They also wanted to avoid difficulties involved in service level agreements in the areas of service contracts, monitoring agreements and track design times by deploying IT management tools. Wipro planned to increase security level in exposing IT services of the auto manufacturer.

Solution:

Wipro implemented Oracle products and services including Oracle Fusion Middleware, Oracle SOA suit including web services manager and BPEL process manager. They also implemented Oracle Enterprise manager an ERP solution that includes Tuning pack, Diagnostics pack, Management pack for SOA and Configuration management pack.

Benefits:

Enterprise wide:

Oracle’s customer, the automotive manufacturer could roll out new services quickly and leveraged existing IT infrastructure and investments. They could successfully manage the implementation including services by various stakeholders, business units and vendors. Business to consumer portal enabled Wipro’s customer to access information online. They also gained the ability to analyse their IT infrastructure, capacity planning and service planning.

Oracle SOA Suite:

As customer deployed Oracle SOA suite, it enabled them to roll out new services in fast pace while leveraging existing IT investments. Business to consumer portal developed using this suite allowed automotive manufacturer to access information such as vehicle service alerts, campaign information, recall information and credit card reward points online. They also built a composite application enabled by SOA suite to aggregate account information gathered from disparate functional units in the business. Earlier, this application development used J2EE and took over one year and now with SOA suite it took 90 days.

As part of SOA suite, Web services Manager assure Oracle’s customer to have the appropriate authorisation to access services.

Oracle Enterprise Manager:

This product from Oracle enabled its customer to proactively analyse IT infrastructure, service performance and capacity planning. As part of Enterprise Manager, Diagnostic pack enabled the automotive manufacturer to view problem areas in a single view.

These success stories reveal how SOA enables businesses to gain competitive advantage by strengthening their business network and internal capabilities.

Conclusion:

In this commoditizing global economy it is critical to have the ability to operate effectively in business networks and to sustain competitive advantage. This ability to operate business effectively is made easy by Best of Breed IT solution (SOA and ERP) enabling businesses to excel at global scale. But the businesses have a challenge to come out of the shell to invest on these technologies to stand at the top in their niche markets. They also gain advantage of auditing their current infrastructure, business processes and integrate them to achieve single view.