|Issue:||Asia-Pacific I 2005|
|Topic:||Asian tigers in a global market–Technology implications for smaller organisations|
|Title:||Executive Vice President|
|Organisation:||Oracle Corporation, Asia Pacific Division|
Derek Williams is Executive Vice-President of Oracle Corporation, Asia Pacific and Japan. He is a member of Oracle’s Executive Management Committee and a director for Oracle Japan. Mr Williams formerly was Senior Vice President of Oracle Asia Pacific Division and served as regional director for strategic accounts before moving to head the newly created Asia Pacific Division. In recognition of his contribution to the development of the Chinese software industry, Mr Williams was awarded an Honorary Professorship from Shanghai Textile University in 1995.
Most large enterprises and governments across Asia Pacific have embraced Internet-based business processes and application. Today, as the first wave of e-business, large organisations are starting to reap the benefits. Behind these large organisations, though, is a network of small and mid-size enterprises, SMEs, which dominates the Asia Pacific business landscape and is the backbone of the value chain for global commerce. Now, Asia Pacific’s smaller organisations can become competitive in the global value chain through strategic adoption of IT.
The global marketplace we operate in today is becoming smaller as a result of greater visibility and real-time connectivity via the Internet and advanced mobile communications. This new, more transparent world has increased competitive pressure on organisations and it is the small and mid-sized businesses, which often feel the greatest brunt. Supported by improved logistics, the connected marketplace makes smaller enterprises more vulnerable to replacement in their value chain. Increasing global competition in the world’s economy means companies are searching for ways to both differentiate themselves through new products and exemplary customer service whilst, at the same time, improving margins through cost cutting to meet investor commitments. Furthermore, as customers and suppliers adopt more advanced technologies, they force these standards on their smaller business partners. Unfortunately, the ability of smaller enterprises to address these challenges is constrained by the fact that they generally are not masters of their own destinies. They play the role of cog within value chains defined by the larger organisations. It is the larger enterprises that traditionally set the rules for business practices, performance standards and communication. For example, trading partners are beginning to demand that more business processes be conducted electronically. This trend affects smaller enterprises more so than larger companies, because their survival and success may depend on establishing links to partners, customers and suppliers. Smaller enterprises, therefore, must keep up or face replacement by a more capable player. Asia Pacific’s smaller companies also face many other challenges. The amount of information exchanged with other players across the supply chain is increasing dramatically. Collaboration between companies will also increase as they outsource both functions and work to multiple companies across extended supply chains to optimise operations. Data broadcasting is also on the rise. New technologies like RFID (Radio Frequency Identification) – miniature devices that can be implanted into any product to broadcast information anytime, anywhere–will double or triple the data circulating in the worldwide economy. This data must be managed, synthesised and ultimately converted into useful, actionable information by companies of all sizes. Companies’ information systems must be able to handle such data volumes. Smaller organisations also face many of the same challenges that large enterprises deal with. A key area is Corporate Governance. Across the globe, new regulations demand more transparency and process certification, as well as greater information storage for longer periods. In parallel, the new modus operandi of companies as virtual corporations demand more users to generate, process and transmit information through firewalls, creating new and unexpected volumes of information. Companies need to be well prepared to deal with this dynamic data mountain. Pressure has never been greater on companies to lower operating costs, whilst improving governance and productivity to reduce time to market. Economic uncertainty, increased competition, compliance requirements standards have placed heavy burdens on the administrative and information technology systems of smaller businesses. Many of Asia Pacific’s larger enterprises, the early adopters of Internet-based applications, have weathered the economic storm by operating efficiently as e-businesses. To survive alongside this first wave of e-business adoption, smaller organisations must similarly transform their operations and processes. Desperate to keep up So what is stopping these smaller firms from adopting e-business? Factors such as fear of cost and of disruption to daily business are uppermost. Many companies find some business applications difficult to use, forcing up implementation costs. The cost of keeping up with technology and new business processes is high but the cost of non-compliance can be even higher, often resulting in higher costs, lower productivity, squeezed margins, weak corporate governance and ultimately imperilled viability. In addition, failure to ensure connectivity with trading partners and meet customer service-level commitments leads trading partners to label one’s company as being ‘difficult to do business with’. It is imperative that smaller companies be able to compete with their peers and larger organisations. In the Internet age, it is too easy for dissatisfied customers to switch suppliers, or for business partners to drop lower value resellers. Exasperated employees slump to lower productivity and may leave, resulting in a talent drain, a vicious cycle that is difficult to break. Positioning for growth Keeping up is a survival strategy. Just reacting is doomed to fail. The focus must therefore be on going on the offensive – playing to win. Increasing competitiveness will increase shareholder value and attract trading partners. Companies need to achieve more with less and do so rapidly. In the effort to create value, smaller enterprises face several obstacles to improvement. The organisations themselves typically operate in functional or operational silos. They are not organised in theory, or practice, for seamless business process management. Communication is manual rather than automated among departments and with trading partners. Management reporting is typically periodic and fragmented. Inquiries from stakeholders, customers or suppliers cannot be confidently or accurately answered in a timely fashion. Disparate and disconnected business systems create complexity and make it challenging to manage by fact. For example, when making an order fulfilment promise, is it based on the manufacturing inventory status or the inventory position in the order management system? Which one is continuously updated? Has the information in these two systems any relation to what is actually available to promise in the warehouse? The dispersion of management and information leads to a lack of control and visibility. The result is an error prone, inefficient business with a penchant for making decisions based on complex and untimely information. This is not a characteristic that proclaims, ‘We’re easy to do business with’. Smaller enterprises need access to information, in real time to ensure a handle on the business. To remain viable—and more desirably competitive, with a focus on growth—smaller companies must bring knowledge and people together to better manage their business. They must automate and connect business processes within the company and work to enhance relationships with trading partners. While a tried and tested strategy for large businesses, strategic adoption of IT is now finally the focus for smaller enterprises. The reason for the lag of the small and mid-market segment has been the perception that enterprise software is too complex, too costly to implement and maintain and suited only for large companies. Smaller organisations make their move There are two dynamics, which are motivating smaller enterprises to take action. First, many of the large companies are now forcing their smaller trading partners to comply with more advanced requirements. To comply with this edict, smaller enterprises question the need to change. ‘We’ve been in business and have managed just fine so far, haven’t we? Our existing systems are good enough—aren’t they?’ But in reality, is organisational data available in real-time and accurately enough to provide information that management can be confident in? Looking back at the challenges presented previously, the answer is, by and large, ‘no’. Smaller enterprises have one powerful advantage over large organisations– their size enables much greater business agility. This unique advantage can enable them to adapt and execute new strategies quickly to become more competitive. Secondly, enterprise class software packages are now available for smaller businesses. The barriers have come down significantly for total cost of ownership (TCO), including the price of the software, implementation, hardware and ongoing support. Best practices and lessons learned have significantly matured these products and services ensuring greater project success and return on investment (ROI) to the traditionally risk adverse small enterprise. Typically, smaller companies do not have large in-house IT teams or budgets. In the past, this meant that they could not afford to buy, implement or manage the latest e-business systems—putting all of the associated benefits of these systems out of their reach. The combination of mature software solutions, solution packages priced for smaller businesses and the global best practices incorporated into today’s solutions, now make it possible for smaller businesses to invest strategically in IT. As small businesses have many of the same requirements as larger companies, they need similar e-business information architecture and software capabilities as those enjoyed by large enterprises. They do not need downsized, non-scalable versions, which do not accommodate growth or offer key functionalities. To match their agility, smaller companies need an e-business system that can be put in place fast, in a matter of weeks, not months. Today, there are entire pre-packaged applications and ‘best practice’ business flows available that can be quickly deployed to improve business efficiencies and reduce time-to-market significantly. In addition, smaller companies are making open standards an essential criterion of their IT system selection process. This ensures that their business does not become tied into a single technology platform, but can integrate seamlessly with various types of technology. For example, many Asian companies have complex supply chains that may involve partnering and trading with other businesses; be it purchasing parts from Taiwan and Hong Kong for local assembly before being marketed to Eastern Bloc countries. Having a single open technology architecture means it is easy to do ‘e-business’ with different technology infrastructures. This is especially important if a company is looking to merge or expand in the longer term. Bear in mind, successful smaller companies do not stay small, they aspire to grow. Another consideration is the use of products based upon the Linux operating system. Linux can dramatically reduce computing costs–both capital and maintenance cost–for smaller companies, whilst ensuring the highest levels of performance, reliability and security. A complete and integrated information architecture– simplifying the complex Large and small organisations alike have tended to build IT systems in reaction to specific demands for business functionality. The result is that these organisations are left to manage fragmented data and systems that are complex, poorly integrated and costly to maintain. In contrast, companies benefit from having a roadmap to strategically build company-wide information architecture. This will eliminate complexity and enhance connectivity by consolidating the infrastructure across three layers: applications, data and technology. Briefly, the three layers or ‘sub-architectures’ are: 1. Application Architecture–a consolidated core business and commodity applications footprint that share integrated processes, components and resources; 2. Data Architecture–a unified data model that underpins an enterprise’s business processes and application; 3. Technology Architecture–a consolidated, secure, accessible, scalable, reliable and secure technology infrastructure that supports the consolidated data and applications architectures of the enterprise. This strategic approach is particularly important for smaller businesses as they need to eliminate the cost and risk of traditional managed integration, improve data timeliness and quality and enable the deployment of global standard processes. In turn, they will benefit from more accurate and timely access to enterprise data, as well as achieve faster return on investment and improved governance as a result of an integrated architecture and solutions that are quick to implement, easy to use and inexpensive to maintain. Embarking on the transformation today The first wave of e-business is well established amongst the larger enterprise market. Now is the time for smaller enterprises to embark on transforming their businesses. Many companies in Asia Pacific already realise that affordable, reliable, secure and scalable e-business software can improve processes, reduce costs, boost overall profitability and provide a competitive edge. With the right approach and architecture in place, smaller companies across the region can be in the forefront of the second wave of e-business and profit from that leadership. Challenging economics and competitive forces favour companies that invest for the future. Companies choosing to hold back on IT investments will face stronger competitors that are investing now to create a competitive advantage and implement best practices for growth.