Emerging Businesses, Integration Issues and their Risks

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Jon Carrow is the Director of Global IT Sourcing & Acquisition for Wyeth, a $14B research-based, global pharmaceutical company which focuses on the discovery and development of some of today's most innovative medicines. He is responsible for the firms global IT acquisition strategy.

Jon will discuss different perspectives on emerging business models during his opening keynote at the Chicago conference, specifically addressing items such as Business Process Outsourcing (BPO), Web Services, Cost-based vs. Price-based models, finishing with his thoughts on what capabilities will be critical for businesses to develop to face these challenges.

Jon will also discuss how the US has historically been most successful leveraging a product technology model, but is struggling with the shift into a world increasingly oriented towards process technology, relying too heavily on past successes. There are a number of risks involved when technology products are developed and leveraged without a full understanding of the underlying changes that will take place in the business processes. Systems are more than just the sum of their parts.

Jon will describe why he thinks that business processes and microcost structure flexibility, rather than our products, are the real areas of competition over the coming years suggesting that BPO, if not considered with this new paradigm, will make you less agile. Jon will talk about the BPO model and the inherent risks involved as firms continue to look at outsourcing increasingly strategic business processes.

Challenging the current definitions and models of Web Services in the business integration space, Jon thinks the best near term candidates for Web Services are mid-size firms. According to Jon, one of the issues to be resolved with Web Services is figuring out a usable pricing model, suggesting that if firms cannot budget with confidence, adoption will be hindered.

In addition, Jon will discuss the polarizing of the consulting industry into two camps; one of knowledge sharing and one of knowledge retention. The traditional model, which he defines as being built on knowledge transfer, is being (dangerously) replaced by Knowledge-retention consulting increasingly focused on specific, non-repeatable deliverables. These types of companies often are not as interested in permanently fixing problems, which would prevent further consulting opportunities.

Another emerging model Jon describes is the shift from price variability to cost variability as a means to stabilize profits while leveraging efficiencies. The way companies traditionally have dealt with the variables of supply and demand has been to raise or lower prices on their products. Jon said we are now shifting to a cost variable model, where firms need to both understand and be able to adjust their costs, at a micro level, depending on their customer and the competition.

In order to adjust costs, you need to know all the cost factors in your business. For example, if IT is a shared service, it is no longer viable to simply charge off the costs to overhead, or even in Business Unit sized chunks. It must be defined by the service it delivers, to whom the service goes, and how it is charged. The price of products is a marketing and sales function. On the other hand, deciding the cost based on how much service the customer receives is a different equation.

The last topic Jon will address is shared services and other general contractor models. As an example, Jon posed the following question: if a companys external sales force has a CRM tool, should their internal IT relationship managers have a similar tool to deal with their internal IT clients? Every business unit has a relationship manager for IT. Jon said, We have never gone through the process to say, By the way, here is the business we are in and this is what it costs to sell what we are selling.IT finds out what their clients want and then comes up with a solution, trying to leverage standards; this more simplistic approach isnt going to work as it did in the past. Viable Shared Service organizations will need to bump it up a few more notches.

Looking at the lessons of business process outsourcing, Jon says the US has leveraged technology using an analytical approach. We isolate what is broken, take it out, fix it, and put it back. However, this ignores the effect on the overall system. What we miss with process technology is that changing one part and putting it back in affects the entire system, which puts new pressures on all the rest.

When asked, Jon says hed rather be considered a Do-ruinstead of a guru.Thinking about all these new capabilities is important, but actually implementing them is where the challenges (and fun) are, and where the most help is needed.

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