Impact of Internet Computing on Systems Integration George Feuerlicht, School of Computing Sciences, University of Technology, Sydney, Australia
[email protected] Abstract: Rapid technology changes accompanying the shift towards Internet computing are forcing organizations to review their approach to developing and acquiring enterprise information systems. In this paper, we examine the impact of Internet computing on enterprise information systems and discuss the role of system integrators in this new computing environment. Key Words: Systems Integration, Enterprise Information Systems, Internet/Intranet, Network Computing, Application Service
1. Introduction The advantages of the Network computing1 over earlier computing models are well documented in the literature [1,2]. One of the most important benefits of Network computing is that it bridges the gap between internal systems and external applications running on the Internet, allowing companies to expose their applications to vast audiences of clients with little additional cost. Many companies gained significant competitive advantages by being early adopters of Internet-based solutions. Well-known and often quoted examples of Internet success stories include Wells Fargo Bank, 1 800 FLOWERS, UPS (United Parcel Service), Amazon.com, CDnow, and E*Trade. Recent reports indicate that the acceptance of E-commerce (Electronic Commerce) is reaching a stage where some companies are conducting a significant proportion of their business over the Internet [3]. For example, IBM sells $1 billion of products and services monthly over the Internet and reports savings of $340 million annually. The communications equipment manufacturer Cisco manages 72 percent of revenues (approximately $20 million per day) via the Internet and estimates savings of $250 million annually through its Webbased sales automation system. Dell Computer estimates sales of $14 million every day through its Web ordering site. In certain industry sectors, for example Financial Services, the move towards E-commerce is inevitable. According to Booz, Allen & Hamilton [4] the cost of a Web transaction ($0.01) is more than 100x lower then an equivalent transaction in a fullservice bank branch ($1.07), and almost 30x lower than a transaction performed through an ATM. Savings of this magnitude together with other advantages such as continuous availability and global customer reach are compelling arguments for moving applications to the Internet computing platform.
1.1 Challenges of Internet Computing The above well-publicized examples clearly demonstrate the opportunities presented by Internet computing, and illustrate how some organizations have been able to exploit this new computing platform. However, for many other technology user organizations, Internet computing represents yet another, unwelcome paradigm shift necessitating costly and risky 1
We use the term Network Computing and Internet Computing interchangeably in this paper to denote systems that use Internet technologies based on standards such as Java, HTML, HTTP, CGI, IIOP, and XML.
migration projects. Each new technology shift is associated with infrastructure costs and requires integration with existing (soon to be legacy) systems. The growing range of legacy solutions now includes recently implemented client/server applications. While most Internet applications in use today are highly innovative and cost-effective, the technology used to construct these applications is rather primitive when compared to more traditional applications (e.g. client/server systems). First generation Internet applications typically consist of HTML pages and CGI scripts, and use the HTTP protocol for communication. As a result, such systems have limited scalability, are difficult to maintain and enhance, and have poor reliability. New technologies based on more advanced architectures designed to overcome the limitations of first generation Internet computing are emerging and will eventually replace the early Web-based applications [5]. This rapid evolution of Internet computing produces an ongoing need to maintain and develop new inhouse technical skills and expertise and causes a significant drain on resources [6,7]. There is almost constant need to redevelop applications as new and improved product versions become available. Not surprisingly, many organizations look towards outsourcing to escape this vicious circle of escalating costs, others see the acquisition of ERP (Enterprise Resource Management) systems as the means to avoid costly inhouse development. Notwithstanding the challenges noted above, the impact of Internet computing on enterprise information systems will be profound, altering the role of key participants in the process of systems implementation and integration. In this paper, we examine the impact Internet computing has on enterprise information systems and discuss the role of system integrators in this new computing environment.
2. Enterprise Information Systems and Internet Computing During the previous decade most organizations implemented information systems based on inhouse developed applications to cover their key information processing needs. With escalating costs of projects and a significant number falling altogether the limitations of inhouse development have soon become apparent. Banks, airlines, and government departments set up large IT departments with large budgets to fund the increasing demands of users for applications. The large-scale adoption of ERP (Enterprise Resource Planning) systems during the 90s was to a large extent driven by the need avoid the high cost of inhouse development. However, the ERP approach has not been entirely successful in controlling IT costs. While ERP systems undoubtedly play an important role in most large enterprises today, they are costly and their return on investment has been rather slow and elusive. After spending millions of dollars and in some cases years implementing ERP solutions many of the anticipated ERP benefits have not been attained [8].
2.1 Impact of Internet Computing The impact of Internet computing is more pervasive than is often assumed; it goes to the core of how are applications developed and deployed, and who develops, deploys and maintains enterprise information systems. The interconnection of almost all social and economic institutions via computer networks – the phenomenon of superconnectivity [9] creates an entirely new business environment – the networked economy. Enterprise computing based on the traditional model of internally developed, vertically integrated computer systems that support all key business functions does not suit this new business environment. To be effective enterprise information systems need to mirror the new business environment, and consequently are becoming more fragmented and heterogeneous. In a typical business-tobusiness E-commerce application core business transactions are no longer confined to the internal information systems, but span multiple enterprises along the lines of ownership of key business processes [10].
2.2 Re-architecting ERP Systems for the Internet Most ERP vendors (e.g. Oracle, PeopleSoft) were quick to realize the importance of Webenabling their applications. Initially these applications were Web-enabled without significantly changing the underlying client/server architecture. Such solutions did not allow large-scale deployment over the Internet and are being currently replaced by a new generation of ERP applications designed for Internet computing. Re-architecting ERP applications for the Internet is not a trivial task, but the advantages are numerous, including the ability to accommodate different types of clients, good database integration, support for reliable transactions, and scale-up to a very large user populations. In effect, ERP vendors are turning their solutions into E-commerce applications providing the infrastructure for business-tobusiness, and business-to-customer electronic commerce. Once this infrastructure is in place ERP applications can be readily deployed within organizations on Intranets or across the Internet to reach remote clients.
2.3 Application as a Service An important consequence of re-architecting applications for the Internet is that the application does not need to be installed and maintained in operation at the client site. The emerging application model is service-oriented. From this new perspective applications are no longer viewed as software packages that need to be purchased and implemented within organizations, but as application service delivered over the network. Providing application service over the Internet is the ultimate form of outsourcing that frees the organization from the need to own hardware and software, and from having to participate in further enhancement and maintenance of applications. The most widely used example of delivering application service over the Internet is E-mail. E-mail service is offered (usually free) by a large number of Web sites. Other application services are likely to follow in the near future; likely candidates are human resources management, procurement, sales force automation, payroll, and order processing applications. These application services will be rented to organizations that seek to reduce IT costs [11, 12]. More specialized, industry specific application services (e.g. banking and financial, shipping, manufacturing, etc) will follow as this approach evolves further.
3. Conclusions It can be argued that both existing models for constructing enterprise information systems (i.e. inhouse development and ERP implementation) fail to deliver cost-effective solutions because of excessive reliance on the client organization to provide implementation resources and skills. Most organizations are ill equipped to fulfill this role, and simply cannot keep up with the fast changing technological base. Outsourcing implementation and maintenance of ERP systems to third-party system integrators goes some way towards alleviating this problem, however given the rapid pace of evolution of technologies today, even systems integrators find it difficult to deliver cost-effective and timely solutions. There is no guarantee that the system, once implemented will remain state of the art. Major re-implementation costs are likely to arise resulting in high cost of ownership of the ERP system. Internet computing enables the application service model by removing the constraints of hardware and software location, opening up new outsourcing opportunities. At present it is not clear who will benefit most from this development, however it is quite likely that it will be the ERP vendors themselves who will be able to deliver the lowest per user cost of ownership of ERP applications. Clearly there are security implications of this level of outsourcing, and many organization will still choose to run systems internally, albeit at a higher cost. As the availability of secure and cost-effective online application services improves many small and medium-sized companies will opt out of the high-cost/low-return ERP implementation race.
Internet computing will re-define the balance between IT suppliers, user organizations and systems integrators. The large-scale implementation projects, which have been traditionally the main activity of system integrators, will diminish, as outsourcing of application services becomes more widespread.
4. Literature 1. Feuerlicht G. Architectures and Technologies for Network Computing, Proceedings of the 6th International Conference, Systems Integration ’98, Prague Czech Republic, June 1998, page 395-399, ISBN 80-7079-801-7 2. Network Computing Using Web Technologies for Competitive Advantage, Gartner Group report, 1998. 3. Riley, J. Cooking up E-business, The Australian, March 16, 1999, page 53. 4. Larry Martinez, Financial Services Strategy for Electronic Commerce, Oracle OpenWorld Conference, San Francisco, Nov 1998. 5. Kelli Wiseth, Next-Generation Web, Oracle Magazine, November/December 1998 6. Zeke Duge, Future Perfect – Strategies for I.S. Delivery, Oracle OpenWorld Conference, San Francisco, Nov 1998. 7. Satish Nambisan, Yu-Ming Wang, Roadblocks to Web Technology Adoption, Communications of the ACM, January 1999/Vol 42, No 1 8. Power, K. Beyond ERP, Information Week, March 29, 1999. 9. Turoff, M, Hiltz, S.R. Superconnectivity, Communications of the ACM, July 1998, Vol 41, No 7, page 116. 10. Steven Bell, (Forrester Research), CIO Magazine, Oct. 15, 1998 11. Finklestein, R. Why I love the Internet, Oracle Magazine, November/December 1998. 12. Ellison, L. Keynote address, Oracle OpenWorld Conference, San Francisco, Nov 1998.
