TechnologyMaking technology deliver.

Making technology deliver.

Significant value is created by effectively managing end-to-end processes rather than the application of cost-saving measures where IT provides the automation necessary to reduce cost. Take the example of order-to-cash.

From the moment an order is placed, a chain of events is triggered that could include inventory, manufacture, logistics, warehousing, distribution, customer care and account settlement. Each of these processes may reside inside a department or cross a departmental boundary but each process consumes the outputs of others in a sequence that will be determined by the way the organisation is modelled. Any breakdown in tying these processes together will lead to delay and incur cost.

But tying applications together so they can efficiently consume and expose data has never been easy and is almost always expensive. A lethal combination of complexity and cost has prevented many mid-sized organisations from being able to optimise their business processes. But the emergence of so-called web services may change that.

Web services can be thought of as packages of process and data that can be consumed wherever they are needed. This could be something like credit checking or an accounts payable routine. At a more granular level, a web service could be a standard way to sequence and track numbers – this is the basis on which FedEx has built out its web-based tracking system.

It is thought that web services will significantly lower integration costs, largely because services will be built around standards. In doing so, they open the door for massive efficiencies that to date are estimated to cost anything up to 35% of the total delivered cost of many goods and services. That’s the good news. The bad news is that few application vendors have the appetite for doing this in any serious way because they fear losing control of the processes they have built into their applications and which they believe gives them a degree of account control in their customer base. This is short sighted.

As organisations move towards being process driven, the opportunity to develop collaborative relationships with partners and customers takes on real meaning but there is no guarantee that these partners will use the same software. This makes the creation of applications around something like web services more urgent because interoperability between applications inside these extended value chains is a must.

Some organisations will want to ‘own’ aspects of the end-to-end process – product design is a good example. Others will be prepared to share processes – like credit checking or inventory listings. Web services could be the technology that finally democratises the way technology delivers benefit but as always with a technology fad, the proof will be in the outcomes.

  • Dennis Howlett is a freelance writer and co-founder of Webster Buchanan Research.

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