InformationWeek
Defining The Business Value Of Technology
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December 18/25, 2000 |
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More Work Ahead
Yes, companies have embraced E-business. No, they haven't finished the job, says Gerstner.
By Paul McDougall With Martin J. Garvey
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ot your E-business infrastructure and processes in place? Good, because now it's time for the hard work. The systems and organizational changes many companies have made probably aren't adequate to support the demands customers, suppliers, partners, and business requirements are going to place on them.That was the message IBM chairman and CEO Lou Gerstner delivered last week in a keynote speech at the eBusiness Conference & Expo in New York (you can read his keynote here). Gerstner says companies are entering a "next generation" of E-business, one that requires new attention to business integration and IT infrastructure.
"Inside IBM, we talk about 10 times more connected people, 100 times more network speed, 1,000 times more devices, and a million times more data," Gerstner says. "The infrastructure technology that exists today isn't ready--it can't handle what's coming."
IBM is trying to resolve that problem with a host of new products and initiatives, including a new mainframe, a revamped enterprise storage system, and multibillion-dollar investments in hosting centers and Linux.
Gerstner says true E-business requires a level of system-to-system--and business-to-business--integration that hasn't happened yet at most companies. For businesses that have decentralized their departments and business units that may involve a move toward more centralized IT systems, as well as deep organizational changes. "This model represents a full-frontal assault on the prevailing mantra of organizational theory--decentralization is good, centralization is evil," he says.
The IBM chief knows he's asking a lot of company executives. "The hard part for business leaders is making the commitment to reconceptualize their management systems and organization models," he says. "I can assure you that is hard, hard work."
Gerstner isn't going to get an argument about that from John Dye, president and CEO of Nasco Inc., which processes more than 70 million health-insurance claims a year for Blue Cross/Blue Shield. The Atlanta company, which directly links its claims-processing system to customers' systems, also could benefit from tighter integration with the vendor that prints its forms, Dye says. "But the system we have now, where we send tapes back and forth, seems to work. So why mess with it?" he says.
IBM will have to answer such questions if it's to become the premier provider of what Gerstner calls "second-generation" E-business products and services--those meant to facilitate integration of key business processes through and across supply chains. Of course, he's been singing that tune for years, and IBM stands to benefit from the performance.
IBM wants to deliver a full range of integrated information services that companies can tap into the same way they get power and water. It will spend $4 billion during the next three years to open 50 data centers, many of which will be designed from the ground up to facilitate a broad range of IT services, from merely providing space for a customer's servers to application hosting and management. IBM's partnerships with AT&T and Qwest Communications International Inc. should ensure that the new centers will have access to virtually unlimited bandwidth.
IBM's new hosting center in Boulder, Colo., offers insight into the scale of some of the other centers the company plans to build. The Boulder hosting facility covers 245,000 square feet and contains 145 mainframes with 145 terabytes of storage. From the facility, IBM manages 13,000 midrange servers and 245,000 desktops that are hosted on site or in 130 remote locations.
Observers say IBM's fixation on hosting--what it calls E-sourcing--is hardly surprising, given that it's one of the fastest-growing units in the growth-challenged company. IBM "has an E-services business that's growing at 70% a year. You just don't notice it that much because it's a $95 billion company," says John Jones, a Salomon Smith Barney analyst. IBM pegs the overall hosting market at $6 billion and predicts it will grow to $55 billion by 2003.
Rivals say E-sourcing is just another name for outsourcing, and they suggest that there's little to distinguish IBM's plans from offerings already in place from a number of vendors. "I agree with the overall strategy, but it appears that Lou hasn't read a newspaper in the last year," says Pat Adamiak, line-of-business manager for Internet operations and utility computing at Hewlett-Packard. "We've been talking about this stuff for a year."
IBM's E-sourcing plans could also meet customer resistance. The company will have a lot of data centers to fill, but many potential customers say they're reluctant to outsource their entire computing infrastructure. "Our IT employees are very closely linked to our business processes," says Roger Mowan, CIO of Eastman Chemical Co.
Whether companies buy their IT systems or outsource, IBM wants to be the system supplier. Last week, it unveiled a number of products that are designed to automate the heavy lifting involved with process integration.
Take the z900 mainframe system, the latest addition to IBM's new eServer line and a follow-on to the venerable System/390 mainframe. Despite its big-iron heritage, the z900 is designed from the ground up to mimic the flexibility and scalability of dozens of smaller servers, an approach that lets users dedicate various nodes to discrete functions and integrate the results in real time with data from other apps.
IBM's pitch: Consolidating systems on a mainframe is a much more effective approach than that used by other E-business systems, which try to integrate data from applications spread across numerous disparate devices.
The proposition intrigues some IT managers. "As you get into the supply chain and look at the number of items you have and the level of forecasting that's required for real integration, tying everything into a single, smoothly running architecture would be a huge advantage," says Jack Cooper, CIO at pharmaceutical company Bristol-Myers Squibb Co. in New York. Cooper ultimately wants to link his company's manufacturing system to his customer supply chain. He says he's taking a close look at the z900.
In the coming months, IBM plans to migrate some of the more advanced features of the z900 into the rest of its server line. For instance, it's working closely with Cisco Systems to integrate that company's multinode load balancer, which works with the Intelligent Resource Director on the z900 to prioritize network traffic, into IBM's Windows NT and Unix servers.
IBM also introduced its revamped Shark Enterprise Storage Server; it now features Peer-to-Peer Remote Copy (PPRC) technology, a disaster-recovery architecture that copies data in real time to a backup system that can be as far as 60 miles away. Shark's FlashCopy capability, which copies data to applications at speeds up to 190 Mbytes per second, has been extended beyond mainframe environments to work with Unix and Windows host systems.
PPRC could boost the disaster-recovery process at Spartan Stores, a grocery chain in Grand Rapids, Mich. IT staffers there manually truck tapes off site and sort through them to decide which ones are obsolete. With PPRC, Spartan hopes to have live copies of data stored at a remote site, which will let it keep the company running even if a data center is wiped out. "We've been an EMC customer for six years, but after the first of the year, we're migrating to Shark with PPRC," says Paul Zimmer, director of data center and technical services at Spartan.
IBM intends to further bolster Shark early next year with so-called virtualization technology, code-named Storage Tank, that will give Shark policy-based management capabilities that let users prioritize information.
Another central component of IBM's plan to facilitate the swift creation of fully integrated, automated E-business environments is Linux. The move to standards-based, open computing is so inexorable that companies such as EMC, Microsoft, and Sun Microsystems represent "the last big proprietary plays the industry will see," Gerstner says.
To emphasize the point, Gerstner says IBM will invest $1 billion in Linux marketing and development next year. He also revealed what IBM is calling the largest Linux implementation in the world: a supercomputer-class installation by Shell Oil in Amsterdam, the Netherlands, that will be used to drive seismic exploration efforts.
Linux is facilitating new types of computing architectures that align closely with E-business requirements, mostly because of its ability to scale horizontally and vertically, says IBM VP Irving Wladawsky-Berger. "We can use it to aggregate very large numbers of Pentium processors--1,024 in the case of Shell--and apply them to very important applications," he says.
But IBM's rivals dismiss its focus on Linux as just another chapter in a confused operating-system story. "At various times, IBM has told the market it's totally focused on AS/400, then AIX, then OS/2, then Windows 98 and Windows 2000, and now Linux. How are customers supposed to have confidence in a company that always has an operating system du jour?" asks John Loiacono, senior VP and chief marketing officer at Sun, which uses one Unix flavor--Solaris--for its full server line.
IBM's biggest roadblock to realizing Gerstner's vision may be customers who don't want to have to transform their business processes to the degree he espouses. "E-business often has more to do with implementing effec-tive change-management strategies and less to do with specific technologies. And the degree of change that's often required can be a tough nut to crack," Bristol-Myers Squibb's Cooper says. Good thing his company makes Excedrin.
Photo of Cooper by Dan Brinzac
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