c01 digital enterprises short draft

7/21/2019 C01 Digital Enterprises Short Draft

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Note: This is an abbreviated rough draft version from a future book

1Digital Enterprises: An

Overview

Opening Vignette

Pete has a PC Shop in Ann Arbor, Michigan. He started selling PCs and electronic equipments tenyears ago after getting a degree in electronics. He has been mainly doing repairs and reselling. He has

done rather well and has opened several stores that are now assembling brand new PCs. Buoyed byhis success, Pete is now diversifying into a wide range of related products (e.g., software, videogames, and networking hardware/software). He is partnering with retail stores and manufacturers inthe Ann Arbor area. The parts and components will be brought in from suppliers located in the FarEast. Pete has also acquired a chain store and wants to design, build, sell, and repair custom builtdevices and computers.

Pete has so far stayed away from using the technology he sells (other than using the telephone). Buthe has been attending management seminars on e-business and its benefits. He does not completelyunderstand it but he is convinced that it is something very good (they would not be teaching coursesin this area if it was not good!). In addition, he is completing his MBA on a part-time basis and cannotwait to put everything he is learning about business to work. Pete is thinking big. He wants to be like

Dell and Compaq. He especially likes the idea of real-time enterprises where he can monitor hisbusiness activities continuously. He wants to embark on a major corporate wide e-commerce/e-business effort. His plan is to start with a Web site that will be used to market the company productsand services. He then wants to expand this Web site so that the customers can directly order andpurchase the company products and services through the Web site. His goal is to eventually become amajor real-time digital corporation that will serve as a storefront for multiple shops so that potentialcustomers will order a variety of products through him. Pete will receive the orders, and try to fillthem, if he can. Otherwise, he will route the order to one of his business partners.

Pete has no idea how to get there from here. However, as part of his MBA education he has gonethrough several case studies (so what is new!) that give him hope. He has learned through these casestudies that several companies such as IBM, Staples, Federal Express, Proctor and Gamble, General

Electric, Cisco, Dell, Amazon.com, and others have effectively used Internet and the Web to reachmore customers, reduce time to fill orders, improve customer relationships, and increase profitmargins. He is also fully aware that hundreds of Dot-Com companies have failed and Dot-Com stockprices collapsed after many of these companies could not generate enough revenue to stay in business(he also looked at the Web site startupfailures.com). He wants to be aggressive but cautious.

Pete has been talking to his nephew, Bob, who has graduated from the University of Michigan withan MS in computer science. Bob talks endlessly about the elegance of distributed systems and thebeauty of Web technologies, XML, Java, business components, and wireless networks. Bob wants to


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CHAPTER 1: DIGITAL ENTERPRISESAN OVERVIEW

1-2

impress Pete so that Pete will hire him. Pete and Bob have trouble communicating with each other.Pete wants to succeed in business but Bob wants to try every neat thing he has learned. Pete does notknow much about information technologies and Bob has no respect for business types (he still cannottell the difference between credit and debit). They are both driving each other crazy and wish theycould find some way of interrelating business with technology. Pete wants a technical type whounderstands business and Bob wants to talk to a businessman who can spell XML.

Contents

1.1

INTRODUCTION ........................................................................................................................1-2

1.2

DIGITAL ENTERPRISES .............................................................................................................1-3

1.2.1 Overview ...........................................................................................................................1-31.2.2 eBusiness, eCommerce and eGovernment: Examples of Digital Enterprises .............1-51.2.3 Classification of Digital Enterprise Services (eBusiness and eGovernment) ...............1-6

1.2.4 Enterprise Architecture to Support Digital Enterprises ................................................1-71.3

EVOLUTION OF DIGITAL ENTERPRISES................................................................................ 1-101.3.1

The Stage Model of Evolution ...................................................................................... 1-10

1.3.2 The Mega Trends -- A Multidimensional View ........................................................... 1-131.3.3

Web Dimensions -- the Electronic Enterprises ........................................................... 1-15

1.3.4 Mobility DimensionThe Mobile Enterprises ........................................................... 1-151.3.5 Dispersion Dimension - The Global Enterprises ........................................................ 1-161.3.6

Agility Dimension - The Agile Enterprises ................................................................. 1-16

1.3.7 Few Sample Representations ....................................................................................... 1-171.3.8 Highlights of Different Views on NGEs ...................................................................... 1-17

1.1 Introduction

We are living in a digital age that is gradually affecting everyday life, restructuring businessrelationships and enabling new commerce activities, processes, and business models that werepreviously unimaginable. Use of the Internet for entertainment, online purchases, and conductingbusiness grew dramatically in 1999 but slowed down considerably in 2001. Despite the slowdown in2001, the digital environments continue to grow, and the volume as well as the value of Internettransactions continues to increase.

This growth has brought about fundamental shifts in how business is carried out by enterprises, howenterprises do business with each other, how they interact with their customers, and in the mix anddistribution channels of new products and services. In today's marketplace, across all industrysegments, businesses as well as consumers are adopting a digital lifestyle with high reliance oninformation technologies. For example, enterprises around the world are increasingly leveraginginformation technologies to: Broaden their markets by extending their reach globally at minimal additional expense and

enticing new prospects to become customers Enter new business areas through collaborations or expanded services made possible with Web-

based interactions Increase employee productivity by providing easier access to corporate information and services Reduce costs through improved operations that integrate Web access and traditional IT systems


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Achieve operating efficiencies by reducing the number of people making routine decisions, bydecreasing turnaround time, by managing reduced inventories, etc.

Combine faster response times, continuous availability, and an ability to deal with complexitythrough the use of e-business applications to enable business opportunities that couldn't be madeprofitable in a manual implementation.

Despite the economic fluctuations, many companies are moving towards a digital enterprise model byusing e-business for strategic reasons (see the sidebar Why Move Towards Digital Enterprises?).Some companies are very aggressively adopting the digital enterprise model. For example, real-timeenterprise modelsare gaining popularity at the time of this writing. In the real-time enterprises, theinteractions between business activities within an enterprise are conducted, monitored, and controlledelectronically in real time. In addition, external communications with business partners are conductedthrough trading networks that support B2N (business to network) interactions. The Internet-based ITinfrastructure becomes theprimary source of company business in this model. Large corporationssuch as GE have adopted this model (see the sidebar GE Becomes a Real-Time Enterprise). It isalso well known that most current and future military operations are performed through sophisticatedinformation systems that range from real-time embedded systems to chat groups.

While our reliance on these technologies is increasing, so is the concern about the security andreliability of the technologies that are driving the modern digital environments. Imagine, for example,the impact of security attacks on real-time companies such as GE along with several other civilian andmilitary operations that rely 80-90% on IT. This chapter takes a broad look at the issues and developsan overall solution approach that is followed as a roadmap.

1.2 Digital Enterprises

1.2.1 Overview

Simply stated, an enterprise is a group of people with an overall and common goal or set of goals.Different names are used to represent an enterprise: organization, company, or firm. An enterprise canbe formed by at least two people but most enterprises consist of hundreds and thousands of people.Meta organizations (organizations of organizations) are much larger organizations that consist ofgovernments and organizations such as the United Nations, European Union, and the African Union.For the purpose of this book, we consider enterprises in the public as well as private sectors:

Private Enterprises are organizations in the private sector. These enterprises may provideservices in manufacturing, transportation, healthcare, education, technologies and dozens ofother for-profit or non-profit settings.

Government Enterprisesare organizations in the public sector. Governments are responsiblefor the safety and welfare of the publicprivate companies do not have such responsibilities.Thus these enterprises offer public safety (e.g., law enforcement, emergency services), public

welfare (e.g., social services, parks) and other services..Our focus is on digital enterprises in the public plus private sectors. Simply stated, a digital enterpriseis defined as an organization where nearly all significant business processes and relationships withcustomers, suppliers, and employees are digitally enabled and key corporate assets are managedthrough digital means[Laudon & Laudon 2008]. Instead of relying solely on their traditional corecompetencies, these organizations are providing innovative services by clever combinations ofoutsourcing, partnerships, and assemblies of components from multiple suppliers. For example, asystem is specified in Germany, integrated in Spain by packaging components that have been


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developed in China and India, and operated in a service center in Egyptand all this under extremetime constraints. Such enterprises are known by diverse names such as agile enterprises [Dove 2001],specialized enterprises [Pohle 2005], realtime-corporations [Lindorff, 2002], mobile corps [Kalakottaand Robinson 2002], extended/virtual enterprises [Davis 2003] and the like.

In this book, we refer to such enterprises simply as digital enterprises. The drivers for such enterprises

include a) market differentiators that are pushing the companies to higher level services, b)continuous mergers and acquisitions that require frequent changes in business processes, c) pressuresfor quick deployments and quick time to market, d) need to respond to numerous schedule changesand change of plans, e) pressures to respond to new entrants and substitute technologies, and f) quickadjustments needed to cope with changing customer needs and market fluctuations. More than 50consulting assignments with variants of NGEs have raised the following key questions: Are the aforementioned enterprise models fundamentally different or are they variants of a

common model? Are there some common factors that can represent a generic enterprise model? What is the impact of these factors on planning, architectures, and management of such

enterprises? What type of decision support tools are needed to the officials of such enterprises?

This chapter attempts to answer these questions and establishes the outline of this book.

GE Becomes a Digital Enterprise

General Electric (GE) is the world's largest diversified manufacturer, with $155 billion in revenue and460,000 employees in 100 countries. Despite its size and old-economy businesses,Internet Weeknamed GE its e-business company of 2000. GE started conducting purchasing and selling on theInternet in the mid 1990s with some early successes. For example, GE Plastic's distribution arm(Polymerland), began distributing technical documentation over the Web in 1994 and put its product

catalog on the Web in 1995. In 1996, GE Lighting reduced its purchasing cycle from 14 to 7 days andalso reduced its supply prices by 10 to 15 percent because of open bidding on the Internet. In 1997,seven other GE units began purchasing via the Internet.

Fast forward to November, 2002. Gary Reiner, CIO of General Electric Co. at that time, uses a largekeyboard and a huge screen display panel that shows the real-time status of software applicationscritical to GE's day-to-day operations. The screen displays an array of green (indicates good), yellow(not as good as it could be) and red (trouble) icons that represent the status of GE's operations aroundthe globe. For example, Reiner uses the main screen for GE's plastics operation, which flashes a seriesof green lines and a few yellow lines. If red bars appear on the screen, Reiner sends an email to theappropriate division manager asking for an immediate explanation. His goal is to monitor, once every15 minutes, GE's mission-critical operations such as sales, daily order rates, inventory levels, and other

important activities across the company's 13 different businesses around the globe. The icons of up-to-the-minute businessperformance across the company are checked regularly by agentsthat send testtransactions to exercise various business operations such as an online purchase. These transactionstypically take a few seconds to complete and trigger an automatic email or inquiry when the status isyellow or red. The main idea is to respond to changes and manage risks continuously instead of waitingfor end-of-the-month or end-of-the-quarter reports.

GE estimates that its digitization efforts saved the company $1.6 billion in 2001. We said we'd cut $10billion in costs in five years, and we're already a third of the way there, Reiner says.


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Sources:

Dave Lindorff, GE's Drive to Real-Time Measurement, CIO Magazine, November 11, 2002 Umar, A., e-Business and Distributed Systems Handbook: Overview Module, NGE Solutions, May

2003. Available through Amazon.com.

1.2.2 eBusiness, eCommerce and eGovernment: Examples of Digital

Enterprises

Let us start with a definition of e-business, also known as ebusiness and electronic business, anddiscuss how it is related to e-commerce, also known as ecommerce and electronic commerce. Simplystated, e-commerce (EC)is buying and selling over the network (mostly Internet) while e-business(EB)is conducting business, including buying/selling, over the network (mostly Internet). Thus, EB =EC + other activities such as conducting meetings, developing software, and managing customer

relationships. Thus EB subsumes EC (seeFigure 1-1). Since e-business subsumes e-commerce, wewill primarily discuss e-business (EB), unless e-commerce (EC) needs to be distinguished explicitly.Here are a few examples to illustrate the diversity of e-business: Companies such as Amazon.com, eBay, Google and Yahoo are heavily digitized firms that fully

exploit ebusiness operations.

Most banks at present provide ebanking services to a large user base. In addition, some banks arevirtual, i.e., they only exist on the Internet.

Dell Computers uses virtual operations across multiple suppliers to exercise its well-known"build-to-order" model (the computers are assembled in plants that are in close proximity to thejust-in-time parts suppliers).

Many small and large organizations (e.g., GM, Intel, The Limited clothing store) are adopting thereal-time enterprise model where the business activities are monitored and managed in real-time

instead of relying on monthly and weekly reports. Amazon.com has formed partnerships with multiple suppliers (publishers, bookstores) that

participate over the Internet to conduct business transactions (i.e., when you buy a book fromAmazon.com, bookstores close to the shipping address participate in fulfilling the order).

Virtual Phone Companies (VPC) and Telecom trading hubs (e.g., www.telezoo.com) offerinternet plus residential phone services, including spare bandwidth, without owning any physicalassets.

Many sites such as vertical.com, works.com, drugstore.com, and MSN.com tie multipleorganizations transparently over the Internet to conduct business.

National Industrial Information Infrastructure Products (www.NIIIP.org) supports productbuilding across a large number of partners over the Internet.


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eBusiness

eGovernment

Information

Technologies

eCommerce

Figure 1-1: e-Business, e-Commerce and e-Government

eGovernment (also known as eGov, e-Government, electronic government, digital government, oronline government) uses digital technologies between a government and its citizens, relatedbusinesses, its employees, and other government agencies. These digital interactions occur at alllevels of government (city, state/province, national, and international). As shown inFigure 1-1,thereis some overlap between ebusiness, ecommerce and egovernment. This is mainly because manyoperations (e.g., paying employees, advertising, and human resources) in government are similar totheir counterparts in businesses. Here are some examples of egovernment:

Digital Britain, eSingapore and eKorea are examples of ambitious use of digital technologies toautomate most of the government services at country levels.

eTokyo in Japan and iHetauda in Nepal are examples of ambitious automated services at city andcounty levels.

Virtual Parts Supply Base (VPSB,http://www.vpsb.com/)supplies hard to find parts for the USGovernment.

Many examples of egovernment services are published regularly in the Center for DigitalGovernments (www.centerdigitalgov.com/) and the United Nations Public AdministrationNetwork (www.unpan.org).

1.2.3 Classification of Digital Enterprise Services (eBusiness and

eGovernment)

Services in modern enterprises are multidimensional and complex. It is traditional to think of e-business, shown inFigure 1-2,in terms of:

Business to Customer (B2C) applicationsthat are used by the customers. Examples of theseapplications are online-purchasing and web advertising.

Internal (Business to EmployeeB2E) applications that can be further decomposed into:

Individual (departmental) applicationsare intended for a small group or a department. Theseapplications may support, for example, sales activities of a department.

Enterprise applicationsare designed to satisfy the needs of an entire enterprise and are used

commonly throughout an enterprise. For example, a human resource (HR) application is anenterprise application. Most ERP (Enterprise Resource Planning) applications are also enterpriseapplications.

Inter-enterprise (B2B) applicationsthat are used between businesses. These applications areused to exchange orders, products, and payments between companies in B2B trade. Examples ofthese applications, as expected, are B2B applications such as supply chain management andemarkets.
http://www.vpsb.com/http://www.vpsb.com/http://www.vpsb.com/http://www.centerdigitalgov.com/http://www.centerdigitalgov.com/http://www.centerdigitalgov.com/http://www.centerdigitalgov.com/http://www.centerdigitalgov.com/http://www.centerdigitalgov.com/http://www.vpsb.com/


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Business

External

Partner

Network

Customers

Business

To Business

(B2B)

Business

Partner

Business

To Employee

(B2E)

Business

Partner

Business To

Customers

(B2C)

CustomerNetwork

Figure 1-2: e-Business Applications -- High Level View

This ebusiness view presented inFigure 1-2 can be easily mapped to egovernment view by simplychanging the Business to Government and Customer to Citizen. Thus the eGovernmentservices can be briefly summed up as (Jeong, 2007): G2C (Government to Citizens) G2E (Government to Employees)

G2G (Government to Governments) G2B (Government to Businesses)

We can also introduce the following refinements to capture different models: Big Bto small bto capture the differences between large and small businesses. Interactions

between large businesses (B2B) versus large to small business (B2b) differ greatly. For example,

interactions between Walmart to Sears (B2B) are quite different than the interactions betweenWalmart to a small clothing manufacturer in Malaysia (B2b).

Big G to small g to capture the differences between large to small government agencies. Forexample, interactions between US Homeland Security and Immigration Department (G2G) arequite different than the interactions between the Homeland Security to a small city policedepartment (G2g).

We can, of course, go crazy by considering g2g, b2b, g2B, G2b and other such variations.However, each variation can be used to model different types of interactions.

1.2.4 Enterprise Architecture to Support Digital Enterprises

To better understand the complex interactions between business and IT and how IT supports thebusiness, a very simple Enterprise Architectureview is presented inFigure 1-3. This view of anenterprise is presented in terms of three high level layers and their role as drivers and enablers of anenterprise: Business focused layer that concentrates on business strategies, services and business processes:

Business plus technology focused layer that deals with enterprise business applications Technology focused layer that provides the IT (information technology) infrastructure


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Business strategies represent the long range game plan to win in the marketplace. Business strategiesalign the business products/services, processes, and several other activities to survive and succeed inthe marketplace. The term business service and business process are frequently interchanged. For thepurpose of this book, we will use the following definitions;

Business service(BS) is something that is delivered to the customer. For example, dry cleaningservice, house renovation service and online banking represent things that are delivered to the

customer, usually for a fee. A business service may be delivered to internal or external customers.For example, a payroll service is delivered to the employees of a company. Businesses usuallydeliver products, services or both to its customers.

Business process (BP)is a collection of activitiesthat are required to achieve a business goalthe goal may be a business service. At a basic level, a BP can be represented as a flowchart thatspecifies the orchestration of activities needed to complete the goal. For example, for a payroll

service, several BPs have to be carried out (e.g., pay has to be computed, deductions have to beconsidered, overtime may need to be calculated, etc).

Figure 1-3: Key Components of an Enterprise

Thus a business service specifies what a user receives while a business process shows how the service

is provided. In other words, a business service is an external view, while a business process definesthe internal set of activities and their flows needed to provide a service. In many cases, BPs and BSscan be interchanged. For example, for a higher level service (e.g., customer service), many other BSsmay be treated as BPs and combined with other BSs/BPs (e.g., troubleshooting, follow-up, upselling)for customer service. Unless needed, we will use BP or BS to signify the same thing. Businessstrategies, business services and business processes are an extensive area of business activity and arediscussed widely in the traditional business and information systems management literature.

Enterprise business applications are the computer-based information systems that provideautomated support to the business services/processes. These applications are also referred to asenterprise applications, business applications or just as applications in the literature. Whatever thename, these applications are business aware.For example, an airline reservation system contains

business logic and data that is not the same as a hotel reservation system (business awareness).Business applications also provide business value to an enterprise. Obviously, an airline reservationsystem provides business value to the airline business. These applications use informationtechnologies to support the enterprise and thus are enablers to the business processes.

Modern enterprises use applications such as marketing support systems, automated order processingand tracking systems, e-commerce systems, telecommunications provisioning systems, and real-timemanufacturing control systems. These applications consist of a user database (a pool of data), a set of


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programs to access and manipulate the database, and user interfaces to invoke the programs. Abusiness application may also be centralized (all of its components at one site) or distributed (itscomponents reside at different computers on a network). A business application may work within anorganization (Business To Employee -- B2E --Applications), support external customers (Business toCustomer -B2C -- Applications) or may involve business to business interactions (Business to

Business --B2B -- Applications). eBusiness applications are business applications that support the e-

business at B2E, B2C, as well as B2B levels. ERP (enterprise resource planning) systemsprovide acollection of applications, integrated around a common database. We will discuss enterpriseapplications and ERP systems in later chapters.

The information technology (IT) infrastructureis used to build, deploy and operate the businessapplications. IT infrastructure, also sometimes known as computer-communication platform, consistsof technologies such as computers, operating systems, networks, databases, and transaction managers.This infrastructure enables the applications and is business unaware.For example, the same type ofnetworks and computers are used in airline reservation systems as well as hotel reservation systems.The best known infrastructure is the network that interconnects remote applications, databases, andusers. Internet, wireless, and broadband networks are examples of vital network technologies.

An important player in modern enterprises is middleware, an increasingly crucial and, at the sametime, bewildering component of the modern IT infrastructure. Middleware is needed to interconnectand support applications and users across a network. Middleware services typically includedirectories, emails, and facilities to invoke software to access and manipulate remotely locateddatabases an`d applications. Middleware services are typically provided by specialized softwarepackages (for example, Web Technologies is a middleware package that supports groupwareapplications). However, middleware services may be implemented in a combination of databasemanagement systems, computer operating systems, and transaction management systems. Webtechnologies are the most commonly known example of middleware services.

As we will see, the simple but elegant view presented inFigure 1-3 will lead us to the followingstarter definition of an Enterprise Architectures:

Enterprise architecture (EA)= Business architecture + applicationarchitecture + technology architecture (computer platform architecture +network architecture)

Basic Definitions

I nformation System (IS):A formal system that collects, stores, processes, updates, and displaysinformation. An IS can be computer-based or manual.

Computer-Based Information System (CBIS):An automated system that collects, stores,processes, updates, and displays information. A CBIS typically consists of a user database (a poolof data), a set of programs to access and manipulate the database, and user interfaces to invoke theprograms.

Application System:An automated information system. Thus an application system = CBIS. Ourfocus is on business application systems, also frequently referred to just as "applications", thatsupport business functions. Business applications are business aware and represent the businessaware functionality and data.

I nformation Technology (IT):A collection of computer and communication technologies that areused to build, deploy and use the CBIS and other automated systems. These technologies consist ofthe networks, the computers, the operating systems, the middleware and many other components


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such as directories, programming languages, database managers, etc.

Strategy: It is a game plan to win. There are different types of strategies. For example, a legalstrategy is a game plan to win legal cases, a battlefield strategy is a game plan to win battles, abusiness strategy is a game plan to win in the marketplace, and an e-business strategy is a gameplan to win in e-business.

Working Solution: A system (software + hardware) that satisfies the technical as well as

organizational requirements (functional, security, performance, budgetary) and can be deployed,installed, operated, and managed. In our case, a working solution consists of the application systemplus the enabling IT infrastructure.

Enterprise architecture (EA)= Business architecture + application architecture + technologyarchitecture (computer platform architecture + network architecture)

1.3 Evolution of Digital Enterprises

1.3.1 The Stage Model of Evolution

The Internet is gradually restructuring and enabling new business activities, processes, and modelsthat were previously unimaginable. However, the Internet is also heightening customer expectations,increasing competition, and intensifying pressures to reduce costs, improve productivity, and speedtime-to-market. It seems obvious that the most successful companies in this hyper-competitiveeconomy will be those that can effectively leverage the Internet to automate, streamline, and integrateall business processes - from sales and purchasing to product and supply management to delivery andcustomer service. The sidebar "Use of the Internet in Business -- A Quick Summary" highlights thekey points.

The use of Internet in business and government has gone through several stages of evolution.Figure1-4 shows one view that casts this evolution into the following four broad stages.

Stage 1: Simple Web sites for Advertising.This stage became popular in the mid 1990s and isstill the foundation of many corporate Web sites. The basic idea is to use the Web sites todisplay/advertise company products. All other company operations are largely unaffected. Forexample, the customers have to separately order the products that they select by browsingthrough company Web sites.

Stage 2: Basic e-Commerce for Online Purchasing).In this stage, the consumers could selectthe products through the Internet and then also buy them from a single organization. In this casethe service is not only advertised but also delivered over the Internet. In addition, the Web is used

as an interface to corporate applications (i.e., new applications are developed by using the Weband existing applications are given face lifts by using the Web). This stage became popular inthe late 1990s.

Stage 3: Extended/Virtual Enterprises.EEs (Extended Enterprises) go beyond basic e-commerce sites by tying services from multiple businesses through a single Web interface. In thisstage, Web technologies take a central role in gluing services across multiple organizational unitsspanning different organizations. It adds B2B interactions to C2B as encountered in the previoustwo stages. The B2B interactions, although hidden from the users, take place directly between


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business partners. This stage, popular at the turn of the 21st century, is at the core ofcontemporary e-business activities like online shopping, trading between business partners, andintegration of business processes across organizational boundaries (e.g., workflows acrossorganizations through IT). An example of extended enterprises, also known as virtual enterprises,is Amazon.com (when you order a book from Amazon.com, many other suppliers may beinvolved in this transaction).

Stage 4: Next Generation Enterprises (NGEs). This stage goes beyond stage 3 to addintermediaries (trading hubs, emarkets), real-time business monitoring and control, mobility, self-serve customers, and other features. In this stage, gaining popularity at the time of this writing as

" real-time enterpr ises" ,the interactions between business activities within an enterprise areconducted, monitored, and controlled electronically. In addition, external communications withbusiness partners are conducted through trading networks that support B2N (business to network)interactions. The Internet-based IT infrastructure becomes the primary source of companybusiness in this model, In fact, NGEs rely almost exclusively on the Internet-based ITinfrastructure to conduct business and often result in restructuring and transformation of theindustry.

Web Sites

for advertising

Ecommerce

Sites

(Advertising +

Purchasing)

Virtual Shop Web

Sites

+ Purchasing

+ Virtual operations

(multiple orgs)

Advertising

+ Purchasing

+ Virtual operations

(multiple orgs)

+ Mobility + self

serve customers +

no latency

Virtual Shops

Next Generation Enterprises

Simple Ecommerce

Business Services Over the Internet

Stage1

Simple AdvertisingStage2

Stage3

Stage4

Market

Differentiation

Through

Automation

Figure 1-4: Evolution of Digital Enterprises

Our interest is primarily in NGEs -- we will take a closer look at NGEs in Section Error! Referencesource not found.. An interesting example of NGE is General Electric with its evolution into a real-time digital corporation (see the GE case study in Section Error! Reference source not found.).Other examples of NGEs, with varying degrees of compliance, are Intel, Dell computing, nextgeneration virtual telephone companies, virtual software companies, and numerous electronicbusinesses like online clearing houses and trading hubs. NGEs employ innovative business modelsand rely on the emerging next generation technologies" (e.g., Next Generation Networks, NextGeneration Web, Next Generation Databases, Next Generation Software Infrastructure).NGEs raise


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several issues that span business and technical domains. For example,the four stages mentionedpreviously introduce costs and delays displayed in Table 1-1. Additional examples of the issuesraised are: Strategic and applications issues such as the business risks and pitfalls that need to be avoided

Architecture and integration issues that address how NGEs can be architected, developed, andintegrated

IT infrastructure issues that are concerned with enabling technologies such as networks andmiddleware for NGEs

Management and support issues that address the planning, organizing, staffing, and securityissues concerned with NGEs

We will develop a more extensive list of these issues in the next section and will attempt to answerthem in the balance of this book.

Table 1-1: Costs and Efforts Associated with Stages of Evolution

Stage of Evolution Cost To Implement Effort To Implement

Stage 1: Simple Web sites $1K to $100K 1 to 3 staff months

Stage 2: Simple e-commerce sites

$10K to $500K to 1 staff years

Stage 3: Intermediaries andVirtual Enterprises

Around $1M 1 to 2 staff years

Stage 4: Next GenerationEnterprises

$1 to $5M 2+ staff years

(can be significantly higher forlarge scale NGEs)

Use of the Internet in Business -- A Quick Summary

Use of the Internet for entertainment, online-purchases, and conducting business grew dramatically in1999 but slowed down considerably in 2001. Despite the slowdown in 2001, e-business continues togrow and the volume as well as the value of Internet transactions is increasing. This growth has broughtabout fundamental shifts in how business is carried out by enterprises: how enterprises do business witheach other, how they interact with their customers, and the mix and distribution channels of newproducts and services. Adoption of the Internet within the enterprise is being driven by an intensedemand for economic, seamless interoperability of business processes within and among enterprises.Business models and processes can be expected to undergo large shifts as the implications of thesechanges take hold. In today's marketplace, across all industry segments, businesses are realizing thattransformation to e-business is required to remain competitive. As enterprises around the world

undergo transformations, they are increasingly leveraging Internet technologies to: Broaden their markets by extending their reach globally at minimal additional expense and enticing

new prospects to become customers Enter new business areas through collaborations or expanded services made possible with Web-

based interactions Increase employee productivity by providing easier access to corporate information and services

Reduce costs through improved operations that integrate Web access and traditional IT systems Achieve operating efficiencies by reducing the number of people making routine decisions, by

decreasing turnaround time, by managing reduced inventories, etc.


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Combine faster response times, continuous availability, and an ability to deal with complexitythrough the use of e-business applications to enable business opportunities that couldn't be madeprofitable in a manual implementation

Not only has the e-business transformation changed the competitive landscape, it has also changed theway companies must identify and deal with new threats and vulnerabilities to their business assets.

Business procedures and IT policies need to be updated to account for these new business risks.

Obviously, Internet has had positive as well as negative impacts. A landmark paper by Mike Porter[Porter 2001] discusses in detail the negative as well as positive impacts of the Internet on a) theindustry structure, which determines the profitability of the average competitor and b) sustainablecompetitive advantage, which allows a company to outperform the average competitor. For example,the Internet has opened new markets for potential profits but it is difficult to maintain a competitiveedge because everyone can enter the new marketplace.

1.3.2 The Mega Trends -- A Multidimensional View

A few messages are clear from the quick literature surveys: a) NGEs provide a network of specializedservices that are offered over a global connectivity platform and b) the global connectivity platforms(i.e., the IT infrastructure) are the backbones of NGEs that need to be properly planned, integrated,secured and administered. Within this broad picture, several types of configurations can beidentified, depending on the usage scenarios, the parties involved (e.g. retailers and end customers asopposed to wholesalers), and a number of other attributes.

After experimenting with several conceptual models to capture the essence of NGEs in a simple butelegant manner, we have selected four basic attributes that define our reference multidimensional spacshown in Figure 1-5.This analysis then proceeds by mapping various configurations of enterprises toregions in this space. With each attribute, we associate a set of discrete values, {Low, Medium, High,Very High}, based on an informal, qualitative estimation shown inTable 1-2.In this model, NGEsconduct business by fully exploiting four 'mega trends" (seeFigure 1-5).

a) Web (W) relianceof internal as well as external business activities through ebusiness, ecommerceand other e-initiatives,

b)Mobility(M) support for the mobile customers, workforce and operations

c)Dispersion(D) of operations to widely dispersed sites due to outsourcing and rentals, and

d) Agility (A) (on-demand services) to quickly respond to changing business conditions.

These four dimensions (WMDA) provide a simple yet powerful mechanism to represent a very widerange of enterprise models, including the ones discussed previously. Different enterprises cover aregion in this diagram and are represented as circles/ellipses. For example, the regions shown in thefigure indicate traditional enterprises with low reliance on any of these four capabilities while othersshow extended enterprises. For each dimension, the {Low,Medium,High} ordering is defined bylocating the easy case at the center, in such a way that outer regions naturally come to representmore challenging areas.


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The main idea is that NGEs lie at the outer edges of this model. As the NGEs push simultaneouslytowards these four dimensions, they dramatically increase their reliance on a complex array of IT(information technology) services that include new technologies such as Web Services, SemanticWeb, wireless middleware services, wireless networks, application servers for ecommerce and B2Btrade, and systems management platforms. [Umar 2005]. Basically, NGEs are not one dimensional

entities that can be characterized as e-corporations, mobile corporations or on demandenterprises but are multidimensional entities that are simultaneously using mobility, on-demandservices and other capabilities to conduct business (seeFigure 1-5). As the enterprises push towardsthese four dimensions, they not only dramatically increase their reliance on IT services but alsochange the situation where the IT infrastructure starts driving the business strategies. In addition, newissues in IT planning, integration, security and administration arise the focus of this book. Inparticular, NGEs need to plan and integrate their IT services quickly and correctly to compete andsurvive.

Figure 1-5: Multidimensional View of Digital Enterprises

Table 1-2: The Key Dimension Parameters (WMDA)

Web Reliance

(W)

Mobility Reliance

(M)

Dispersion (M) Agility

Reliance (A)

None No use of Web No use of MobileServices

No dispersion, singlesite

No Agility

Low Information only SMS Local sites C2B Agility

Medium Simpletransactions(eCommerce)

Mobile eBusinessApplications(MEBAs)

Statewide sites B2B Agility

High B2B andecollaboration

Location-basedServices (LBS)

National sites B2E Agility

Very

High

Enterprise 2.0 Sensor networks International sites All of the above


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Although the simple model presented inFigure 1-5: can be used to characterize an overall profile ofan NGE or a business unit/service of an enterprise, additional attributes (dimensions) are needed tofurther refine this model.

1.3.3 Web Dimensions -- the Electronic Enterprises

None (No use of Web): This represents a really low-tech firm that may use email services,but nothing else.

Low (Basic Websites): This represents the use of websites to display/advertise companyproducts. All other company operations are largely unaffected. For example, the customershave to separately order the products that they select by browsing through companywebsites.

Medium (Basic e-Commerce). This allows the consumers select the products through theInternet and then also buy them over the Internet from a seller. This option mainlyconcentrates on C2B (consumer-to-business) operations where the service is not onlyadvertised but can also be purchased over the Internet by the consumers. In addition, theWeb is used as an interface to corporate applications (i.e., new applications are developed by

using the Web and existing applications are given face lifts by using the Web). This stagebecame popular in the late 1990s.

High (e-Business). This option goes beyond the basic e-commerce sites by running theentire business through Internet technologies. In this option, Internet and Web technologiestake a central role in gluing services across multiple business units spanning differentorganizations. It adds B2B (business-to-business) interactions to C2B as encountered in theprevious two stages. The B2B interactions, although hidden from the users, take placedirectly between business partners. This stage, popular at the turn of the 21st century, is atthe core of contemporary e-business activities like online shopping, trading betweenbusiness partners, and integration of business processes across organizational boundaries(e.g., workflows across organizations through IT). An example is Amazon.com when youorder a book from Amazon.com, many other suppliers may be involved in this transaction.

Very High (Digital Enterprises, Enterprise 2.0): This option goes beyond ebusiness to acompletely digital enterprise where almost all business activities are conducted over theWeb. In these enterprises, the interactions between business activities within an enterpriseare conducted, monitored, and controlled electronically and through the latest Webtechnologies (e.g., Semantic Web, Web 2.0+). The Internet-based IT infrastructure and thenext generation web becomes the primary enabler of company business in this model. Thefollowing examples characterize different aspects of modern digital enterprises. An exampleis Enterprise 2.0, proposed by [McAfee 2006], exploit a new wave of businesscommunication tools including blogs, wikis and group messaging software that allow formore spontaneous, knowledge-based collaboration within organizations. These new tools,commonly known as Web 2.0, may supplant other communication and knowledgemanagement systems and superior ability to capture tacit knowledge, best practices andrelevant experiences throughout a company and then make this knowledge readily available

to more users. The result is highly productive and highly collaborative work environmentsby making both the practices of knowledge work and its outputs more visible.

1.3.4 Mobility DimensionThe Mobile Enterprises

None (No use of mobile computing). This represents a corp that may use cellular phonesfor talking but there is no other use of mobile computing applications


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Low (Wireless Messaging and Wireless Web). This option uses wireless messagingservices (SMS, MMS , Blackberry) and Wireless Web (doing web surfing from mobiledevices)

Medium (Mobile eBusiness Applications -- MEBAs).This means that the company goesbeyond stage 1 and supports access to EB applications through mobile devices. Specificapplications are mobile portals, mobile commerce, mobile customer relationship

management systems (m- CRM ) , mobile supply chain management systems (m- SCM ), etc High (Location Based -- Positional and Voice-- Services). This means that the company is

going beyond stage 2 and exploiting positional applications (Location Based Services - LBS)and voice applications (typically based on VoiceXML). LBSs support geographic position(location) for some applications. For example, positional commerce gives you informationabout deals in the Boston area when you are in Boston . An example is positional-commercethat provides support to customers based on their geographic position (e.g., to give youinformation about deals in the Chicago area when you are in Chicago). The systems use aGPS (Geographical Positioning System) to locate the position of the customers. In manycases, a positional attribute (P) is added to mobility. For example, M-commerce becomesMP-commerce or MPV (mobile-positional-voice) commerce.

Very High (Mobile Enterprises). This means that the company is going beyond stage 3 andadopting additional sophisticated mobile apps [Umar 2013, Kalakota2002]. These may

include specialized applications involving mobile agents and sensor networks. Mobile agentsare programs capable of being transferred to remote hosts in order to carry out different taskson behalf of their users. Wireless sensor networks (WSNs) are formed by extremely smallsensors, or nano computers. For example, many sensors are installed or sprayed in an area todetect vehicle movements, collect temperature fluctuations, and gather a variety of usefulinformation.

1.3.5 Dispersion Dimension - The Global Enterprises

None (No dispersion, single site): This represents an enterprise with a single site. Low (Local sites):The enterprise may have multiple sites but they are all within one city or

neighborhood. Medium (Statewide sites):The enterprise has multiple sites but they are all within one state

or region. High (National sites):The enterprise has multiple sites that are all within one country (one

government). Very High (International sites):The enterprise has multiple sites that are dispersed across

multiple countries and continents. In this case, several national and international lawsapply.

1.3.6 Agility Dimension - The Agile Enterprises

None (No Agility): This represents an enterprise that does not use agility at all. Low (C2B Agility): The enterprise may use agility that is primarily focused on C2B

operations, i.e., customer facing operations. Medium (B2B Agility):The enterprise may use agility that is primarily focused on B2B

operations, i.e., business partner/supplier facing operations. High (B2E Agility):The enterprise may also use agility at B2E level, i.e., employee facing

operations. Very High (All of the Above):The enterprise may use agility at all levels. The main idea of

on-demand services is that these services can be used whenever a user wants to. Examples ofon-demand services are the popular video on-demand and print-on-demand.In softwareand business applications, the idea of on-demand services is that a company can offer new


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services to its users when they need it. For example, a telecom company may offer DSL orwireless service when and if a user needs it. An extension of this idea is On-demandEnterprises, also known as Agile Enterprises that assemble and offer services on the fly.In reality, on-demand services are being offered through application service providers(ASPs) or quick outsourcing agreements. For example, IBM has acquired Corio corp(www.corio.com), a large application hosting company, to support IBMs on-demand

enterprise model. In addition, service-oriented architecture (SOA) based on Web Services isbeing positioned by several companies as the main mechanism for supporting on-demandservices. A research area of On-Demand Computing is being pursued to support on-demandservices.

1.3.7 Few Sample Representations

Table 1-3 shows how the main enterprise models presented previously can be represented in terms ofthe four parameters (WMDA) shown in Figure 1. The four basic enterprises are presented primarilyin terms of one dimension (others are dont cares). For example, web enterprises are primarilypresented by the web dimension, mobile corps are characterized by mobility, etc. However, other

enterprises are represented as a more complex multidimensional entities. For example, on-demandenterprises require high to very high agility reliance for on-demand services to become availablequickly, medium to high mobility reliance to provide on-demand services to mobile users and veryhigh web reliance for the ASP model to work. Specialized enterprises require high to very high webreliance, very high dispersion, and very high agility reliance. Realtime enterprises require high to veryhigh web reliance, high to very high mobility reliance to capture information from mobile users, andvery high agility reliance to adapt to realtime demands.

Table 1-3: Sample Enterprise Models Represented in Terms of Core Parameters

Note: X entries indicate dont care

Web

Reliance

Mobility

Reliance

Dispersion

Reliance

Agility Reliance

Web Enterprise Very high X X X

Mobile Corps X Very high X X

Extended Corps X X Very High X

Agule Corps X X X Very High

On-Demand

Enterprise

High to VeryHigh

Medium to High X Very High

Specialized

Enterprise

High to VeryHigh

X Very High Very High

Realtime

Enterprise

High to VeryHigh

High to VeryHigh

X Very High

Next Generation

Enterprise

High to VeryHigh

High to VeryHigh

Very High Very High

1.3.8 Highlights of Different Views on NGEs

NGEs, as stated previously, represent the outermost circle inFigure 1-5 and thus push the envelope inusing the next generation of digital technologies and business models to conduct business. Different
http://www.corio.com/http://www.corio.com/http://www.corio.com/http://www.corio.com/


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views of such enterprises have been presented in the literature. A common view is to describe NGEsas the final stage of evolutions starting from an ebusiness point of view [Umar 1999, Kalakotta 2002,Umar 2004]. These evolutions start from simple Web sites that only advertise business services tosimple ecommerce (EC) sites where the users can buy items online to B2B trade over the web andbeyond. Some vertical market segments have explicitly used the notion of Next Generation toindicate forward thinking. For example, telecom sector has aggressively used the notion of next

generation telcos to compete in the marketplace. NGTs are supposed to provide on-demand telecomservices, support next generation operation support systems [TMForum] and Next GenerationNetworks (NGNs).

Another view, presented by consultants such as [Kidd 2000], emphasizes that Next GenerationEnterprises (NGEs) are concerned with looking beyond current best practice in manufacturing andservices businesses and exploring tomorrow's industrial needs and problems. According to [Kidd2000], NGE, is also concerned with discontinuities in the change process - both in terms ofresponding to these discontinuities and exploiting them for competitive advantage. Discontinuities aredefined as non-linearities in the change process that either render aspects of current best practicesinappropriate or which provide new opportunities or open up entirely new ways of working.Corporate architecture of NGEs is viewed as a network capable of reconfiguring itself and self

adapting as the business environment changes and the core competencies are spread acrosscorporations.

Peter Drucker, a well known management scholar, has discussed NGEs within the context of NextGeneration Society [Drucker 2001]. According to [Drucker 2001], enterprises of the future will beorganised globally along product or service lines and will be held together and controlled by strategywith alliances, joint ventures, minority stakes, know-how agreements and contracts as the buildingblocks of a confederation. This kind of organization will need a new kind of top management that willneed to balance the conflicting demands on business being made by the need for both short-term andlong-term results, and by the corporation's various constituencies: customers, shareholders (especiallyinstitutional investors and pension funds), knowledge employees and communities.

A technology based view of NGEs is presented by [Pohle et al 2005] in an IBM Consulting Serviceswhite paper based on a survey of 450 CEOs. Entitled Specialized Enterprises, this paper citesdifferentiation (unique product and/or services), responsiveness (agility) and efficiency (mostly costcompetitiveness) as the most critical attributes of successful business models in today's and futuremarketplace. Although the importance of these business attributes is not new, the paper emphasizesthat all three must be achieved simultaneously. This can be achieved with the global connectivityplatform (components that can be created, deployed and accessed over the Internet) that automatesprocesses and reduces collaboration and transaction costs. These platforms allow companies toassemble a business model from groups of "specialized" capabilities offered by service providersaround the globe. This allows enterprises to specialize in the few activities that offer advantage in themarketplace while relying on external specialists to provide the capabilities that the firms do not have.The paper discusses how the global connectivity platforms lead to internal as well as external

specialization through business components that can be assembled in one location, installed in anotherlocation and accessed globally.

The notion of agility is common throughout discussion of NGEs, albeit with different emphasis. Ingeneral, agility combines three major building blocks (people, technology, processes) to support agileoperations where each building block (BB) is designed for flexibility and quick response and themanagement serves as the glue between the BBs to provide added value (i.e., 1+ 1 + 1 > 3). Severalbooks (e.g., [Goranson 1999]) and articles on agile enterprises, lean organizations, and on-demandbusinesses, (See [Boehm & Turner, 2004]) discuss myriad of issues and challenges in making an


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organization nimble. Digital enterprises [Carr 2001] are also discussed widely. In addition, the notionof extended and virtual enterprises is commonly mentioned for future enterprises. These corporationsrepresent networks of autonomous firms cooperating with each other to achieve common businessgoals [Davis 2003]. In this type of enterprise, a firms supply, production, logistics and distributionnetworks are used to conduct business by utilizing the innovative new business models and emergingtechnologies.

Besides the broad models of future enterprises, several models have been proposed that concentrateon different aspects of enterprises. Increased use of mobility, especially location based services thatcan allow detection and analysis of items as they move around the corporations, has given rise to thenotion of mobile corporations [Kalakotta 2002b, Umar 2004b]. The increased use of Web 2.0 andsocial networking has led to the discussion of Enterprise 2.0 [McAfee 2006]. In addition, advent ofreal-time business activity monitoring (RBAM) by using management dashboards has led to thenotion of Real-time Enterprises (Gartner Group). Real-time enterprises use management consoles tomonitor and control the business activities critical to the company's day-to-day operations. Theseenterprises are building digital nervous systems that connect everything involved in the company'sbusinessIT systems, factories, employees, suppliers, customers and products. An example of a real-

time enterprise is General Electric [;;;2]. The CIO of General Electric uses a large keyboard and ahuge screen display panel that shows the real-time status of software applications critical to GE's day-to-day operations. The screen displays an array of green (indicates good), yellow (not as good as itcould be) and red (trouble) icons that represent the status of GE's operations around the globe. Themain idea is to respond to changes and manage risks continuously instead of waiting for end-of-the-month or end-of-the-quarter reports.

c01 digital enterprises short draft

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