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IT globalisation de-mystified

IT globalisation de-mystified

Globalisation has been hailed as essential for an efficient world economy, but this 21st century connectivity has facilitated the world's current financial turmoil.

Globalisation has been hailed as essential for an efficient world economy, but this 21st century connectivity has facilitated the

world's current financial turmoil. What IT strategies should now be

given priority? In today's increasingly unified world economy, it's

increasingly difficult for countries to remain immune to problems

happening on the other side of the planet. This particular downside of

globalisation has been the platform for the current financial crisis

that was precipitated by the sub-prime mortgage crisis and resulting

credit crunch in the US.

"We are now discovering that when America's economy sneezes, the rest

of the world gets sick very soon," said Ross O. Storey, managing

editor, Fairfax Business Media, at recent executive briefing,

organised by CIO Asia, which examined the topic 'IT Globalisation

De-Mystified'.

At the event, senior IT executives, from Progress

Software and Deloitte Consulting, shared their thoughts on Service

Oriented Architecture, Business Process Management, the Real-time

Enterprise and Business Visibility.

Storey said that, while the traditional response to today's global

financial woes would be to cut spending, delay projects and reduce

jobs, these moves could be long term mistakes for organisations. IT

departments have faced tightening budgets for several years and any

further cuts could "exacerbate rather than enhance an enterprise's

ability to ride out the current financial storm", he said.

"If enterprises take a more strategic view, then one argument CIOs

could mount is that now is precisely the time when IT budgets should

be increased, to maximise efficiency, productivity and profits for the

business," Storey said.

In these difficult times, Lee Dai, professional services director,

Asia, Progress Software, said that CIOs have to provide answers to

questions like: "What are we getting out of the systems that we have

purchased, what are we getting out of the databases and ERPs?"

All these systems had to work together efficiently and this was where

integration could enable the CIO to get a better view his existing IT

environment, added Lee.

Lightning fast business

The accelerating speed of business processes is also driving the IT

integration case forward. "Basically the speed of business is

increasing even in this downturn," remarked Lee. In the consumer PC

space, a built-to-order desktop now only took one day to be delivered

to the customer, compared to four weeks in the past.

"The fast changing pace of the business is another reason that is

driving everyone towards a better integration of technologies." In

such a challenging environment for IT, Service Oriented Architecture

(SOA) had come into its own.

SOA = Real Life

For senior IT executives to better present the case for investing in

SOA, Lee said SOA made sense and was here to stay because it resembled

daily and business services found in real-life.

"Life is actually full of services from calling from a mobile phone or

paying for purchases with credit cards," he said. "But we, as service

users, do not have to know what goes on behind the scene."

Lee maintained that JAVA has kept its popularity because, being

object-based, like SOA, it too closely resembled day-to-day activities

in people's lives.

"Because JAVA is real life, it looks at things as objects, just like

real life where everything is an object too. So is SOA, which I think

will be around for a long time too, because similarly, SOA mimics what

life is all about," said Lee.

"Basically what we are seeing is that SOA has replaced Enterprise

Application Integration (EAI) as the key means to carry out

integration and to align the business with IT," observed Lee. "You can

mix and match the services so that you can build capabilities for

business processes faster."

However, while SOA is quite well known in the Asia pacific, Lee said

many IT executives did not realise precisely why they needed SOA.

Often, he said, they can be confused by reasons offered to them from

vendors, leading to the cynical view that SOA stood for 'Snake Oil

Architecture'.

"Service reusability is a reason that people talk about that can

reduce costs and make IT more efficient, but is this really true?"

said Lee. "I remember back in the days when I was selling EAI, the

same reasons were given as well, so service reusability is not a good

enough reason alone for me to do SOA."

Another common reason given for SOA adoption is that it offers a

distributed environment to match businesses that are spread out

geographically. "This is good too, but is nothing special about SOA

either. I can probably do the same with EAI. SOA is also modular and

agile.

"For example, if a C-level executive is asking you, 'why do you spend

half a million dollars on an SOA solution?' I hope your answers are

broader than these, or you could be in trouble."

BPM? Not quite there

SOA is often paired with Business Process Management. But Lee felt

that BPM technology has its limitations and might not be the panacea

that IT executives are seeking.

BPM is used to model business processes but Lee said that, in many

organisations, "you have a lot of unspoken and unwritten business

processes. People just know that when something happens they need to

do something else, they don't know all the processes that are

working," said Lee.

"So many big business organisations have a lot of business processes

that are probably not very well defined. This is the first challenge

for BPM."

Another test for BPM is that there could be vast numbers of business

process working within the organisation. "How many do you think you

can model with a BPM tool? The answer is not as many as you think."

Instead of attempting to define business processes, Lee recommended IT

executives let their own infrastructure reveal the actual nature of

their companies' business processes. To do that, employ business

process visibility or discovery tools to complement your BPM system,

said Lee.

Look forward, not backward

During tough times, Lee recommended that IT executives kept abreast of

technology and tools that were being developed.

"In such difficult market conditions, the general tendency is to cut

back and be more conservative. In fact these are the times that you

actually want to look at new technologies, because when things

recover, you can leverage on the lessons learned during the tough

times and be a step ahead of the competvition."

According to Lee, businesses today are driven by events. "According to

research from Gartner, some of the large companies have millions of

business events per second. If you are a telco and one of your users

makes a phone call, then that is an event."

And organisations are using business intelligence to track events and

make business decisions. However, he said that most of these solutions

in the market were backward looking. But, with businesses needing

real-time information, making decisions based on historic data, was

like driving by looking in the rear view mirror.

"If you look at the financial companies in the world, all these

businesses were selling the Collateral Debt Obligations (CDOs) and the

subprime mortgages, just as housing prices were deteriorating," said

Lee. "What then happened was that buyers continued to make their

purchases not knowing that housing prices were dropping."

And it was not an event that happened over two weeks or two months but

something that had been going on over two to three years, according to

Lee. "The housing prices had peaked back in 2005 and have consistently

been dropping. While the prices were sliding, people were still buying

without knowing the actual trend."

"In some ways, the buyers were living in the past," observed

Lee."Looking at historic data to make major business decisions, may be

okay in certain times. But when times are changing, or when you are at

an inflection point for the business, it could turn out to be

catastrophic."

There has even been an argument that, with a higher level of

analytics, financial services regulators would have had a better sense

of what global financial institutions had been doing, said Storey.

"They might have discovered the cash liquidity risks and prevented

what has happened," he said.

Real real-time business

"We're not saying that business intelligence is not a good way to go,

but you need real time business intelligence," said Lee. And one way

to achieve that was through Event Driven Architecture (EDA), he

suggested.

"In financial services, if the broker is telling you trading activity

from an hour ago, I am going to ask him why is he giving information

that is an hour-old. I want the real-time data, not something that is

an hour-old or even five minutes-old."

With SOA in place, it fits very well for the real-time business, said

Lee. The next step would be the use of an integration backbone, like

the Enterprise Service Bus (ESB).

There is a convergence of services and events vis-à-vis SOA and EDA,

said Lee. "The adoption of ESB is going to help in the implementation

of large scale SOA/EDA infrastructure."

The next valuable tool was customisable dashboards. These serve to

visualise the 'need to know' data because "if you cannot visualise the

data, you cannot really know what is really happening."

According to Lee, tools enabling real-time business capabilities are

already in use in the market today. In the case of Progress Software's

customers, from the algorithmic trading sector in the finance

industry, the CEP platform was used for real time trading.

"They are basically looking at multiple data streams including NASDAQ

and news wires. Based on these data, they make real time decisions.

They also have a customised dashboard to show how much money you are

making and the current position within the portfolio."

Aligning business with IT

In CIO Asia's State of the Asian CIO 2007 study, the issue of aligning

IT and business goals was the stand-out management priority for 2008.

"This consistently rates as the highest priority for senior IT

executives in Asia," said Storey.

In the current increased pressure to cut costs and run the business

more efficiently, IT departments should start looking themselves as an

internal service provider with the various business groups as clients.

The IT division cannot be servicing all IT initiatives on a

non-chargeback basis. "In short, the IT department can no longer just

be a cost centre where you always have to beg for investment from the

CEO," said Atsushi Moriya, director, Japanese practice, Deloitte

Consulting.

With such a model, the IT department can operate as a business with

appropriate financial transparency and commercial discipline, while

also focusing on delivering cost efficient and competitive

services."You are selling your services and products internally, as if

you are the external vendor," said Moriya. However, he said, such a

trend has only been prevalent so far, among the American or

European-based firms, he observed.

Evolving to a chargeback model, IT departments should look at

attaining at least the level that is resource-based, suggested Moriya.

In such a framework, IT services consumption is traced by account

codes assigned to each user. Costs are traced to hardware rather than

by activities.

Goals, goals, goals

In terms of setting out targets, Moriya recommended a concept where

the CIO would be working in alignment with the CFO. IT departments

would have to stock-take the valuable initiatives and projects, align

them to the portfolios, and then always map them to the enterprise

business functions, to get a clear picture of the contribution that IT

was making. For instance, cost reduction opportunities could be found

in the area of maintenance contracts. By validating inventory against

billings, up to 30 per cent costs could be shaved, said Moriya.

"Then set financial targets, value insights, then bring those back to

quantify the cost and the benefits, and summarise financial

implications," he said.

Moriya also recommended benchmarking IT initiatives. "There are always

such measurements in logistics, finance and sales," he explained. "We

should set KPI for IT initiatives and quantify IT services, so that

you can claim some extra performance, and inform the CEO or CFO about

the performance."

Playing the long game

In today's difficult economic climate, Lee recommended IT executives

to get tough in the face of pressure. "Now is the time to start

looking at investing and paying attention to the new technologies that

are coming, because otherwise, when the economy recovers, one will

already be behind," he explained.

IT can become a valuable weapon against economic downturn, Storey

suggested. In CIO Asia's State of the Asian CIO 2007 study,

respondents listed "creating competitive advantage" as one of the main

impacts of IT on their enterprises, he said. "So now is the time to

make strategic investments so that one can position the organisation

better than the rest of the competition when the crisis recovers,"

said Progress Software's Lee.

Fairfax Business Media

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