IBM Sees Vertical Expertise Driving IT Investments

NEW YORK — Web services are ripe for growth, now that the information technology industry is emerging from recession-inspired cost cutting and moving into revenue-generation mode, according to IBM .

That’s the message of a worldwide survey of nearly 500 chief executive officers, just unveiled by IBM’s Business Consulting Services operation. The CEOs, who were debriefed in detailed in-person interviews but who are quoted anonymously in the results presented by IBM, expect to transform their enterprises over the next five years with a goal of rearchitecting their businesses in order to respond to customer demands in real time.

From IBM’s perspective, this will be accomplished via a component-based business model: vertical-industry expertise that’s “captured” and converted into modularized software components, which form a Web-services backbone.

“Business and technology are informing each other,” said Virginia Rometty, managing partner for IBM’s Business Consulting Services group. “We are working on our component-based business model to link business and technology together.”

Component-based business services are the latest buzzwords to emerge from IBM, which has latched on to “on-demand” as the catchphrase for its Web services and e-business architecture.

Competitor Hewlett-Packard calls its approach the “adaptive enterprise”, while Microsoft favors the term “service-oriented architecture.”

“Eighteen months ago, when we launched ‘on-demand,’ the technology was advancing at a prodigious pace, [though] things looked gloomy economically,” said Irving Wladawsky-Berger, IBM’s vice president for technology and strategy. With businesses back on their feet, “on-demand” technology is now poised to move into the marketplace.

“Web services are the heart of the emerging computing model,” he said. One surprising enabler is the increasing deployment of RFID devices and related telematics technologies, which can track goods.

Wladawsky-Berger said he believes servers can use RFID to suck in more granular consumer data and thus get a basis for better-informed businesses analyses, “allowing us to describe the problems in a far more modular, organic way than before.”

But Wladawsky-Berger warned that customers don’t care about Web services in technology terms. “We saw that ‘on-demand’ requires the fusion of technology with deeper industry expertise,” he said. “CEOs want to leverage this computing model to be[come] more responsive to customer needs. We see a very big opportunity to put this technology to work.”

Indeed, despite the IT-industry hype, Web services aren’t yet universally deployed. “Web services are still not something we have embraced in a concrete way,” said Bill Pence, chief technology officer at online music vendor Napster.

Pence spoke on a panel convened by IBM in New York Monday where it discussed its survey findings. “We have no standardized way of communicating with customers. It’s [Web services] something we would love to embrace.”

“We’re seeing more mid-market firms deploying Web services as part of their technology enablement [efforts],” said Donald Doane, chief executive officer of OpenDemand Systems.

Beyond the jargon, Wladawsky-Berger sees the emergence of a very specific type of software at the heart of Web services: the component business model or software that decomposes business processes into small pieces; these components are then mapped into Web services.

“We are moving into a world where we expect to ‘program’ business solutions,” he said, via detailed descriptions of how businesses function. Moreover, Wladawsky-Berger said he sees the people who generate such descriptions as forming a new professional discipline.

They won’t be programmers who write in Java. Nor will they be writers, who craft documents in English. Rather, a new language will emerge which can be used to precisely “capture” business operations and serve as an intermediate formulation to facilitate the conversion of those operations into software.

“This is all very new stuff,” Wladawsky-Berger said. “The discussions we’re having are about getting IT deeper into business.”

“I think business reengineering will happen systematically,” he added. “I don’t see it as one big bang.”

Many of the results in IBM’s survey were cast in a non-IT centric light. However, the findings indicated that business may be back on its feet enough to support spending for Web services and IT infrastructure.

“Revenue growth is back,” said Eric Pelander, a partner in IBM’s Business Consulting Services, which led the survey effort. “It has clearly eclipsed cost containment.”

Pelander said that CEOs see this growth coming from “new and differentiated products and services.”

Some of the CEOs surveyed by IBM took up the outsourcing banner. About 60 percent of the CEOs feel a major barrier to change is limited internal skills, IBM said. Moreover, what IBM characterized as “change fatigue” has taken over some organizations.

But there is a potential upside for IT spending. The survey noted that 60 percent of CEOs questioned see the need for improved IT performance. Nearly 15 percent believe they need to update obsolete technology.

“There have been many profound changes and there will be more,” said Wladawsky-Berger.

Updates prior version to correct reference to Donald Doane

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