The Business Process Paradox

The Business Process Paradox

There's little point in developing and implementing a utility computing model if the move can't help reduce complexity. Just about every corporation is saddled with layer upon layer of needless, redundant IT systems that don't communicate with each other. And those layers of technology are inevitably mirrored in costly layers of needlessly complex business processes. Utility computing holds the promise of doing away with all those old, separated systems, replacing them with a streamlined infrastructure that every business unit can access for its computing needs.

The paradox, however, lies in the potential for utility computing to set off another round of wrenching business process re-engineering. The drive to consolidate servers and standardize platforms and applications will become a powerful force for simplicity and savings. But that simplicity doesn't come easy. Will the standardization required on the IT level force business units to rethink all their business processes to conform?

Forcing separate business units, with their own cultures, agendas, and ingrained business and IT process habits, to standardize on, say, a financial system or a new server platform is never easy, say many experts—no matter how attractive the benefits. Dev Mukherjee, vice president of e-business on demand strategy at IBM, concedes that reaping the full benefits of utility computing is a symbiotic process: "You can't do the process transformation unless you do the IT transformation," he notes. "And you don't really get the full value out of the IT transformation unless you transform your business processes alongside them."

Corporations beginning to head down the road toward a utility computing infrastructure already have had to come to terms with the need to revamp their business processes. Steve Karl, senior vice president of technology operations at American Express, which last year signed a contract with IBM Global Services worth more than $4 billion over seven years, champions the virtues of standardization. But, he concedes that standardization can have a negative effect on business process innovation. "Innovation is important to us, and we're aware that standardization can kill innovation," Karl says. "We need to support innovation, yet even if it takes more time, it's an absolute requirement to be really clear what we're trying to achieve on a business objective level."

Getting the full value of utility computing will always depend on whether CIOs can get cooperation from the business units. Will they be willing to develop business processes that can share corporate IT resources, and then actually share them? "A big impediment to this whole concept is the idea of sharing among business units," says Gartner Inc. analyst Donna Scott. "Each business unit has spent more money than they need to on their infrastructure, but that doesn't mean they necessarily want to give it up. You've got to change that orientation, and that will take time."

The only way to do that, says AmEx's Karl, is to work from a highly centralized IT structure: "Some IT structures lend themselves to standardization and utility computing and some do not. In companies where IT is very decentralized, with a corporate CIO and line of business CIOs, frankly, I think achieving utility computing would be very difficult."

Even as they concede the pitfalls, many experts believe that a utility computing infrastructure provides an ideal environment for re-engineering processes—indeed, that it will encourage the process. "In consolidating your servers," says IBM's Mukherjee, "you standardize and you simplify. The result: You make your IT infrastructure more efficient, more flexible and more resilient. And that's an ideal environment for business transformation." Gartner's Scott agrees: "The idea is that as business processes are reengineered, the IT infrastructure can provide what they need." The more standardized your IT, the more agile your business processes. But you can't standardize everything, Scott concedes: "There will still be customized infrastructure within each business unit, and of course, every enterprise will have to decide where it makes sense to standardize and where it makes sense to customize."

And some contrarians believe there's no paradox at all. "The goal is to transform the corporation from the inside out," says Vernon Turner, an analyst at IDC. "You don't want to try to change the behavior of the business units. You want to change the behavior of the data center." Indeed, Turner warns, if another round of business reengineering is required, "then utility computing will never be implemented."

This article was originally published on 04-01-2003
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