moving towards an economy of services - soberit.hut.fi · © richard straub 2008 services evolution...

© Copyright 2008 Richard Straub

Moving Towards an Economy of Services

Dr. Richard StraubAdvisor to the Chairman IBM EMEA

Visiting Executive, HSE

The Corporate Perspective

November 14, 2008


Key Focus Items

A “Flat” World ?

Technology Cycles

Technology Revolution cont’d

Shift of Economic Value

Applied e-Business - GIE

Deindustrialization ?


Turbulent Times – Change is accelerating

Complexity & Volatility & Turbulence

Demographics & new Workforce

Global Competition & Co-opetition

Innovation & Risk Management

Speed & Acceleration

“The most valuable asset of a 21st

century institution, whether business or non-business, will be its knowledge workers and their productivity. Peter F. Drucker, Management Challenges for the 21st Century

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn”-Alvin Toffler


Is Technology the big “Flattener” ?


Open World – Closed World

Top DownCentral PlanningCommand & ControlBureaucraticRigidIPRProprietary

Bottom upParticipationAutonomyPragmaticFlexibleIntellectual CapitalCommunity based

Dichotomy Capitalist System and Communist System have waned New Dichotomy – Open and Closed Philosophy/Concept/Attitudes/Values

Closed Open

© 2008 IBM Corporation

The digital natives…..


Technology driving Economic and Social Revolutions


Installation Deployment

Technological Revolutions – Innovation & Creative Destruction

Irruption

The Industrial Revolution

Age of Steam and Railways

Age of Steel, Electricityand Heavy Engineering

Age of Oil, Automobilesand Mass Production

Age of Information and Telecommunications

Frenzy Synergy Maturity

Panic1797

Depression1893

Crash1929

(Dot.comCollapse)

Subprime Crash

Period ofInstitutional Adjustment

1

2

3

4

5

Panic1847

1771

1829

1875

1908

1971

1873

1920

1974

1829

Source: Perez, C., “Technological Revolutions and Financial Capital”, 2002

Crash

• Formation of Mfg. industry• Repeal of Corn Laws opening

trade

• Standards on gauge, time• Catalog sales companies • Economies of scale

• Urban development• Support for interventionism

• Build-out of Interstate highways

• IMF, World Bank, BIS


A Global “Nervous System” as enabling Infrastructure for the digital World

Pervasive Network- More than 1 Billion People online- By 2011 – 2 Billion

Convergence progressing- Networks, Media, Content- Broadband & Multimedia

Interactive Capabilities increasing exponentially- Web 2.0 - Social Networking- Virtual Worlds

What are the Consequences, tomorrow ?


The Technology Revolution is far from over !Virtualization & Cloud Computing

Computing Cloud

Network Cloud

INNOVATIVE BUSINESS MODELS

Clients and Customers

Government/ Academics

Industry(Startups/ SMB/ Enterprise)

Consumers

• A high performance pool of virtualized computer resources

• Cloud applicationsenable the simplificationof complex services

• A cloud computingplatform combines modular componentson a service oriented architecture

• New combinations of services to form differentiating value propositions at lowercosts in shorter time

• Internet protocol based convergence of networks and devices

SIMPLIFIED SERVICES


The Evolution of the e-Business Era – the IT Market View

Source: U.S. Department of Commerce (Sept. 2002), IBM analysis

IT as a percent of U.S. capital

0

5

10

15

%

1960 1970 1975 1980 1985 1990 2000 20101965 1995 2005

Mainframe eraAdminstrativeproductivity

Client/server eraPersonal & departmental productivity

eBusiness eraBusiness productivity& innovation


Objectives for the e-Business Era

Increasing linkage of business performance and IT

More, better, tighter, faster, cheaper integration

Rebalancing of variable and fixed costs

Outsourcing as a continuum – function, application, business process, business transformation outsourcing


BusinessValue

Infrastructure Value

ComponentValue

TECHNOLOGY

Source: IBM Market Intelligence and Corporate Strategy

IT Firms

Existing IT Industry Opportunity: $1.3TCAGR of 5-8%

Traditional view of the IT industry ….


A huge Shift in Value….

BusinessValue

Infrastructure Value

ComponentValue

TECHNOLOGY

Source: IBM Market Intelligence and Corporate Strategy

IT Firms

Business Transformation Services Firms

Business Performance Transformation ServicesOpportunity: $1.4TCAGR: 8-11 %Logistics, Procurement, Customer Service,Sales, Marketing, Finance and Accounting, and more

Existing IT Industry Opportunity: $1.3TCAGR of 5-8%


In the New Landscape – Enterprises integrating globally

Markets

Partners

Resources

Markets

Partners

Resources

Markets

Partners

Resources

Markets

PartnersResources

National (Local)Physical, technology, legal, cultural barriers foretell geographical proximity to clients, resources and partners

Old Paradigm

Companies with global reach typically

operate as independent “local” entities

Multi-National

Markets

Resources Partners

All firms, large or small, mature or emerging, have easier access to global sets of clients, resources and partners enabled by the

global digital infrastructure.

Globally Integrated Enterprise

New Paradigm


Software as Service companies are hot

Software as Service fundings continue to increase as adoption rises.- Over 300 new SaS-related companies were funded in 2005. Even more were funded in

2006.

It’s a much about services as it is about software- The nature of applications is changing, disrupting both the BPO/business services,

and the ISV communities.

The shift from licensed to online "on-demand" software is so powerful right now that many people forget how recent this investment trend is.

Investment started slowly following the failure of ASP’s in the 1990’s. Then in 2003, Emergence Capital created the first fund completely dedicated to funding SaS-related companies.


Support Your Business

Service Your Customers

Setup Your Resources

Build Your Product

A Universe of Modular Business Services Allows Even Small Businesses and Start-ups to Become Globally Integrated

Reach Your Customers

Google Apps for Your Domain

Used by Aural New York


How did the service systems come to be?

0

20

40

60

80

100

120

2000

000 Y

A20

000 Y

A10

000 Y

A20

00 Y

A

1800

1850

1900

1950

2000

2050

Services (Info)Services (Other)Industry (Goods)AgricultureHunter-Gatherer

Estimations based on Porat, M. (1977) Info Economy: Definitions and Measurement

Estimated world (pre-1800) and then U.S. Labor Percentages by Sector

The Pursuit of Organizational Intelligence, by James G. MarchExploitation vs exploration

The Origin of Wealthby Eric D. Beinhocker

© Richard Straub 2008

Services Evolution from Globalization Perspective

• Fragmentation of Value Chains

• Outsourcing of intermediate Inputs and Tasks

• Increasing Provision of Integrated Solutions, consisting of Bundles of Services & Manufacturing Activities

• ICT Capabilities• Digital Delivery of Service Inputs and Outputs• Organization, Coordination and Management of Services Activities

• Competitive Advantage of Manufacturing Firms increasingly derived from Value contributed by Services Processes (shift from producing and selling to servicing Customers)


Thank You !

moving towards an economy of services - soberit.hut.fi · © richard straub 2008 services evolution...

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