Cutting Through the "On Demand" Hype

With ongoing economic uncertainty putting a premium on business agility, technology companies are offering up visions for new computing and business process models. Here's a primer on the new models and their potential implications for the supply and...


Forrester Research debuted its vision for the future of IT in its April 2002 report "Organic IT." In the report, primary author Frank Gillett defines Organic IT as "computing infrastructure built on cheap, redundant components that automatically shares and manages enterprise computing resources software, processors, storage and networks across all applications within a datacenter." Rather than running siloed applications on isolated servers, the Organic IT model calls for shared computing resources and applications that can be linked across business functions and reconfigured using technologies like Web services.

Ignoring (for our purposes) the technical implications of this model, the business impact, according to Forrester, would be to free companies from "rigid technologies" that prevent them from quickly adapting their processes, allowing enterprises to more quickly compensate for, or take advantage of, changing business conditions. Explains Navi Radjou, a principal analyst with Forrester: "Organic IT means that process owners can focus on designing, deploying and optimizing their processes and look to applications that fit into their processes rather than trying to make their processes fit to the alphabet soup of different applications available, such as SCM (supply chain management), WMS (warehouse management systems), ERP (enterprise resource planning) and so on. Organic IT holds the promise of the software adapting to the process rather than the other way around."

In using Organic IT to break the chain binding processes to specific applications, enterprises would have the capacity, Radjou argues in his June 2003 report "Helping Supply Chain Cope with Demand," to better orchestrate sell- and buy-side activities into what he calls "composite processes," or "technology-enabled, cross-organizational process flows designed to share and act on changes in demand." In other words, companies adopting the Organic IT model would become more agile and better able to detect and respond to demand signals.

Meanwhile, late last year IBM rolled out its own grid and utility computing-based vision called as anyone who has been exposed to IBM's marketing machine over the past year knows "e-Business on Demand." IBM is casting on demand as a way to enable enterprises to break down functional barriers and to integrate business processes both internally and with customers and suppliers in a way that lets an entire supply chain respond more rapidly to changes in demand or the competitive landscape.

In practice, the on demand vision provides a platform for IBM and other solution providers pursuing similar visions to offer services in three different markets, as Forrester Research Principal Analyst Ted Schadler describes in his November 13, 2003, report "IBM's On Demand Strategy Goes Beyond IT." Those markets, Schadler writes, comprise business transformation projects (which could lead to business process outsourcing deals), business process integration projects (both within the four walls of a single enterprise and between the enterprise and its trading partners), and standards-based infrastructure projects (which could lead to data center automation or IT outsourcing deals).

Outsourcing of Sorts

The business process outsourcing aspect of on demand could be of particular interest to executives looking to hand over some part of their supply and demand chain to an external service provider. Interestingly, IBM already undertook an initiative of this nature internally in January 2002, creating an Integrated Supply Chain (ISC) group headed by Robert Moffat, the company's senior vice president for supply chain. Under Moffat, this 19,000-employee group consolidated some 30 different supply chains, supporting about 50 divisions within IBM, into a half-dozen supply chains, all but one of which Moffat operates on behalf of the company's divisions, essentially acting as an outside service provider. IBM has reported first-year cost savings from the initiative of $5.6 billion, and Moffat has said that the company also took its inventories to the lowest levels in history, drove on-time deliveries to the highest levels and took nine days out of the cash collection cycle. Those results came both from the consolidation of the supply chains and the company's ability to use the ISC as a channel for disseminating best practices from one group to others within IBM, according to Moffat, who spoke about the ISC at AMR Research's spring executive conference in Scottsdale, Ariz., this past June.

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