Years ago I worked as a sales rep for Taiwan Computers, a major motherboard manufacturer in Taiwan. My customers were mainly based in Australia, Hong Kong, New Zealand and the Philippines. The more tedious parts of my job included filing import/export documents at the trade department and going to different banks to chase customer payments, mostly sent via letters of credit (LC).
Government documentation was relatively easy since there was only one department and the forms and the filing were standard. These forms are important today; logistics companies like FedEx, BAX Global and DHL will ask for these before they begin processing your order.
Processing an LC is another matter. In an ideal world, a customer places an order with a manufacturer in a foreign country, goods are shipped and payment is made. However, as most traders would attest, the industry doesn't work on trust alone. Suppliers will not manufacture and ship goods to customers halfway around the world without some assurance of payment. Buyers will not pay for a product that he has not seen nor checked against his specifications.
The key to unlocking transactions between exporters and importers is the LC, issued by a financial institution as an irrevocable guarantee of payment. Once the beneficiary has presented to the issuing or negotiating bank documents complying with the LC terms, the bank is obliged to pay irrespective of any instructions of the applicant to the contrary.
Let's say my company banks with Commercial Trust Bank (CTB) in Taiwan, which has a branch in Hong Kong. My customer is Acme Computers in Sydney. They have an account at National Australia Bank (NAB). Acme sends an order for $100,000 worth of computer parts. I agree to sell the goods and give Acme 30 days to pay, provided they send me a 60-day LC for the full amount.
Acme goes to NAB and applies for a $100,000 LC, with Taiwan Computers as the beneficiary. NAB issues the LC against Acme's account at the bank. NAB sends a copy of the LC to CTB, which notifies my company that payment is ready and we can ship the goods Acme ordered with full assurance of payment. Acme sends a letter confirming receipt of the goods. I go to CTB with all the documentations stipulated in the LC, NAB transfers the $100,000 to CTB, which then credits the account of Taiwan Computers by that amount.
"Now imagine if you have 100 customers scattered across 20 countries. Each have their own preferred bank and the payment conditions vary depending on the value of the order and the relationship with the customer," said Claire Buchanan, senior vice president of global operations at Bolero, which runs a global electronic trading platform.
Inefficiencies
There are documented cases of beneficiaries waiting as long as 30 days before getting paid even after the customer has confirmed receipt of the goods. In many cases the delays are the result of back-and-forth processing between the banks. Naturally, the banks are making money from interest, but the customer gains nothing and is meanwhile feeling the pressure on its cashflow. On top of this are the processing fees and bank commissions that will be charged.
The inefficiencies in the existing financial supply chain have been tolerated for many years simply because it was the only one that existed.
Many of the improvements on the supply chain have involve the physical elements, ranging from containerization to fulfillment management, and not the financial side.
According to management consultant Killen Associates, "a typical billion-dollar company spends approximately $27 million annually on unnecessary working capital and inefficient processing functions because they lack visibility into the financial supply chain and receivables." The total value locked up in inefficiencies associated with the global supply chain is estimated at between $500 billion to over $1 trillion.
That is because of 'performance gaps' in the financial supply chain, such as the time taken over documentation and the manual errors that arise from manual input and reconciliation.
Now companies from outside the financial sector are moving to plug those gaps. It's an opportunity keenly eyed by logistics giants such as TNT and pure play financial service providers.
"Traders on both sides of the chain are under constant pressure to identify areas where they could cut cost and improve efficiency," said Ambrose Lin, Managing Director of TNT Express Worldwide Hong Kong, an express logistics provider. "They are passing this pressure on to their logistics providers expecting value-added services that are not their core focus."
Imagine if you have a system where the information about your business is stored electronically and when you need to issue an LC, you simply connect to a service provider, identify the bank you want to deal with and provide the details of the track. The system extracts the appropriate information and electronically fills in the form. This becomes one task that allows your finance controller to see from one dashboard your financial position as it relates to the different transactions you have ongoing, including credit standing and default payment schedules. Such a system would allow you to see receivables as and when they are due via a single console.
These days, traders have options beyond traditional banks. A number of financial services organizations such as JP Morgan and Sumitomo have vastly improved their financial supply chain systems to allow complete end-to-end processing of trade transactions. Because security is of primary importance, these proprietary systems are not accessible to non-partners. What's more, these facilities are only available to large enterprises, leaving small and medium enterprises with an antiquated system that is costing them time and money.
Logistics providers are already extending their value-added services and can potentially offer transaction processing through tie-ups with multiple banks, financial service providers, such as Morgan Stanley.
"As an internationally recognized and trustworthy express service provider, TNT does not currently engage in expediting payment processing requirements of our customers. In the not too distant future, an innovative e-invoicing services will be launched and made available to all customers with account relationship with us", Lin said.
Another option for traders is a neutral, secure platform enabling paperless trading between buyers, sellers, and their logistics service and bank partners.
This is the opportunity Bolero targets, sitting between banks and international traders offering a single dashboard from which to complete a transaction for any country or bank. Bolero is a neutral secure platform enabling paperless trading between buyers, sellers, and their logistics service and bank partners.
"Our solutions integrate the physical and financial supply chains, providing visibility, predictability, accuracy and security. This delivers significant improvements in operational efficiencies and reductions in working capital," notes Buchanan.
Buchanan admits that larger banks offer similar services using proprietary systems. In the open market, she claims only Bolero has a platform built for international trade. "There are several things you have to have in place to make this work, not the least of which is security. When you have transactions that cross international borders you need a system that is not only secure but has a framework that is legally enforceable across the different countries," she adds.
However this plays out, it is clear competition is finally coming to the international financial supply chain.
Sunday, March 16, 2008
10 Simple Rules for Successful ERP Projects
META GROUP said that much as 75 percent of all CRM projects fail to meet their objectives and that 70 percent of ERP and SCM projects are just as appalling if not outrageous. This is because of price tags that each of these engagements can cost an enterprise.
ERP carries with it the burden of integrating the business process with IT and thus requires considerable amount of planning, customization and fine-tuning.
Below we highlight TEN rules that will help guide you through the intricacies of implementing an ERP system and hopefully see you through a successful engagement process.
Geoff Squires, Solutions Director for Asia Pacific at Intentia provides field insight into each rule.
RULE ONE: Develop a strategic vision
An ERP implementation is a business transformation process. It is therefore important to have a strategic vision for the future and develop a high-level roadmap to achieve it. The vision should have achievable targets and that the team must comprise of process and technology experts.
Geoff Squires: The key to the success of any project -- particular the highly complex, multi-site, multi-function deployments, is to continually focus on 'why' this is being done -- whether to mitigate future risk to the business, whether it is to engender improvements based on increase in revenue. All these factors need to be understood and supported from the top board level management down through the organization to ensure all buy into, and keep focused on those goals.
RULE TWO: Align project goals with organizational goals
Project goals must be aligned with the overall goals of the business. Clear project goals must be developed, articulated and used to drive the project decision-making and ultimately measure project success.
GS: The first point to note is that such projects are seldom just technology implementations. Most projects form a significant initiative that impacts the business at a management level, and also and the organization's future operational processes. As such, it's vital that the project is strictly aligned with the company's business and is properly prioritized.
RULE THREE: Establish realistic timelines
A successful, integrated ERP implementation relies on a realistic project timeline. Gathering requirements, designing and configuring the applications, testing, training, and acceptance are standard activities of a technology implementation.
GS: Although people tend to want to get things completed as fast as possible, shortcuts often create significant tensions and issues. It is critical that from the outset, realistic expectations are set -- and managed throughout -- to ensure that the business sees the project running on schedule and succeeding from beginning to end.
RULE FOUR: Staff your project with the right resources
A successful ERP project is manned by a team that represents the various business units that will be impacted by the solution. They work closely with the application specialists who will then customize the application to match the business process.
GS: This is a fundamental issue for many implementation projects. Many project teams have two tasks: to represent the real needs of the business so that the project is built around the right processes for that business; and to build 'respect' for allocated resources, by the business. If process owners are not respected, then it is hard to build respect for the project itself and the outcomes will potentially become tainted by those personal resource attributes.
RULE FIVE: Organize resources as a joint project team
An ERP project is a transformational exercise designed to improve how a company creates, builds and delivers value to its customers. As such, each member of the project team will need to work very closely with each other. To ensure the group stays focused on its goals, members should report to the project manager for the duration of the project.
GS: Once again, this is all about focusing on the ultimate goal(s). That the project is aligned towards that goal, and that people involved are prepared to unite and understand the necessary compromises that may be required across cross-functional areas -- because they are all working to that ultimate end game.
RULE SIX: Utilize cross-functional teams
Business process often cuts across functional departments within the organization. Solutions to process problems are not completely isolated to a specific department. Having a cross functional team approach to problem solving brings together people with specific knowledge, skills, objectivity and fresh perspective necessary to achieve desired improvements.
Gs: This is critical! The danger of working in 'silos' without any crossovers or integration across the team is that the business will likely find itself having to resolve functional issues down the track because the team hasn't worked together properly at the front end of a project. Ensuring project teams understand the entire configuration of a system based on cross-interaction at the start, can be pivotal in mitigating such risks.
RULE SEVEN: Let process drive system design
Successful ERP implementations are projects that are driven by the business process, and not the technology that the company purchased. Conversely, ERP projects fail because technology is allowed to rule the implementation thereby forcing organizations to completely change the way they design, manufacture or deliver products to meet the strengths and weaknesses of the ERP system being introduced into the organization.
GS: This is all about focusing on the ultimate goal(s). That the project is aligned towards that goal, and that people involved are prepared to unite and understand the necessary compromises that may be required across cross-functional areas - because they are all working to that ultimate end game."
RULE EIGHT: Eliminate substitute processes
As the name implies, a substitute process is created to cover up a weakness in the primary process. Substitutes are, by nature, temporary and meant as stop-gap measures to allow for correcting a faulty primary process. Because these are often inadequate by design, their root cause should be identified and fixed to bring back normal processes in line.
GS: Over time, businesses develop numerous processes that essentially are doing very similar or identical things. This is generally the result of organizations working within the constraints of old systems and or old cultures resistant to changes in working practices. It often occurs due to lack of understanding of what is possible at a strategic level, because the process owners are working at an operational level. In these instances, collapsing these multiple systems into one process -- but one that incorporates different variants to cope with any site-specific or unique requirements -- simplifies operations and ultimately the business.
RULE NINE: Use metrics to measure success
A successful ERP implementation will yield measurable results. These can then be used to further improve upon the processes creating a continuous improvement model. The goal of measurement is therefore to improve performance. A successful metric process needs to measure one of three different aspects of a process: cycle time, cost and first pass yield (the percent of acceptable products produced during one cycle).
GS: Quite often, a basic failure of a project can come down to a team's inability to measure the outcomes of the implementation. The most common cause of this is a failure to set benchmarks at the beginning of a project -- a baseline from which to work and compare end results to. Critical to measuring a project's value is to set high and lower KPI's at the beginning and on completion, refer back to these in order to assess realization of those expected benefits.
RULE TEN: Manage the change
The most overlooked and undervalued aspect of a technology initiative is managing the impact of organizational change. Successful ERP projects include a change management program that educate, prepare and motivate those impacted by the change so they can adapt to and succeed in the new environment. Change is always difficult but a committed leadership that is able to effectively communicate and motivate the workforce is primed to achieve the goals it has set at the onset of the ERP project.
GS: Significant changes can touch every part of an organization as the result of such projects. The response will generally fall into categories of those that will embrace change, and those that will resist it. If expectations, concerns or and difficult user acceptance are not managed adequately, it can affect the entire outcome of a project, irrespective of how successful the deployment is.
Conclusion
Organizations increasingly recognize that ERP technology provides the necessary support for efficient business processes. Only when these processes are designed to accommodate the software's functionality can the capabilities of the technology be realized.
ERP carries with it the burden of integrating the business process with IT and thus requires considerable amount of planning, customization and fine-tuning.
Below we highlight TEN rules that will help guide you through the intricacies of implementing an ERP system and hopefully see you through a successful engagement process.
Geoff Squires, Solutions Director for Asia Pacific at Intentia provides field insight into each rule.
RULE ONE: Develop a strategic vision
An ERP implementation is a business transformation process. It is therefore important to have a strategic vision for the future and develop a high-level roadmap to achieve it. The vision should have achievable targets and that the team must comprise of process and technology experts.
Geoff Squires: The key to the success of any project -- particular the highly complex, multi-site, multi-function deployments, is to continually focus on 'why' this is being done -- whether to mitigate future risk to the business, whether it is to engender improvements based on increase in revenue. All these factors need to be understood and supported from the top board level management down through the organization to ensure all buy into, and keep focused on those goals.
RULE TWO: Align project goals with organizational goals
Project goals must be aligned with the overall goals of the business. Clear project goals must be developed, articulated and used to drive the project decision-making and ultimately measure project success.
GS: The first point to note is that such projects are seldom just technology implementations. Most projects form a significant initiative that impacts the business at a management level, and also and the organization's future operational processes. As such, it's vital that the project is strictly aligned with the company's business and is properly prioritized.
RULE THREE: Establish realistic timelines
A successful, integrated ERP implementation relies on a realistic project timeline. Gathering requirements, designing and configuring the applications, testing, training, and acceptance are standard activities of a technology implementation.
GS: Although people tend to want to get things completed as fast as possible, shortcuts often create significant tensions and issues. It is critical that from the outset, realistic expectations are set -- and managed throughout -- to ensure that the business sees the project running on schedule and succeeding from beginning to end.
RULE FOUR: Staff your project with the right resources
A successful ERP project is manned by a team that represents the various business units that will be impacted by the solution. They work closely with the application specialists who will then customize the application to match the business process.
GS: This is a fundamental issue for many implementation projects. Many project teams have two tasks: to represent the real needs of the business so that the project is built around the right processes for that business; and to build 'respect' for allocated resources, by the business. If process owners are not respected, then it is hard to build respect for the project itself and the outcomes will potentially become tainted by those personal resource attributes.
RULE FIVE: Organize resources as a joint project team
An ERP project is a transformational exercise designed to improve how a company creates, builds and delivers value to its customers. As such, each member of the project team will need to work very closely with each other. To ensure the group stays focused on its goals, members should report to the project manager for the duration of the project.
GS: Once again, this is all about focusing on the ultimate goal(s). That the project is aligned towards that goal, and that people involved are prepared to unite and understand the necessary compromises that may be required across cross-functional areas -- because they are all working to that ultimate end game.
RULE SIX: Utilize cross-functional teams
Business process often cuts across functional departments within the organization. Solutions to process problems are not completely isolated to a specific department. Having a cross functional team approach to problem solving brings together people with specific knowledge, skills, objectivity and fresh perspective necessary to achieve desired improvements.
Gs: This is critical! The danger of working in 'silos' without any crossovers or integration across the team is that the business will likely find itself having to resolve functional issues down the track because the team hasn't worked together properly at the front end of a project. Ensuring project teams understand the entire configuration of a system based on cross-interaction at the start, can be pivotal in mitigating such risks.
RULE SEVEN: Let process drive system design
Successful ERP implementations are projects that are driven by the business process, and not the technology that the company purchased. Conversely, ERP projects fail because technology is allowed to rule the implementation thereby forcing organizations to completely change the way they design, manufacture or deliver products to meet the strengths and weaknesses of the ERP system being introduced into the organization.
GS: This is all about focusing on the ultimate goal(s). That the project is aligned towards that goal, and that people involved are prepared to unite and understand the necessary compromises that may be required across cross-functional areas - because they are all working to that ultimate end game."
RULE EIGHT: Eliminate substitute processes
As the name implies, a substitute process is created to cover up a weakness in the primary process. Substitutes are, by nature, temporary and meant as stop-gap measures to allow for correcting a faulty primary process. Because these are often inadequate by design, their root cause should be identified and fixed to bring back normal processes in line.
GS: Over time, businesses develop numerous processes that essentially are doing very similar or identical things. This is generally the result of organizations working within the constraints of old systems and or old cultures resistant to changes in working practices. It often occurs due to lack of understanding of what is possible at a strategic level, because the process owners are working at an operational level. In these instances, collapsing these multiple systems into one process -- but one that incorporates different variants to cope with any site-specific or unique requirements -- simplifies operations and ultimately the business.
RULE NINE: Use metrics to measure success
A successful ERP implementation will yield measurable results. These can then be used to further improve upon the processes creating a continuous improvement model. The goal of measurement is therefore to improve performance. A successful metric process needs to measure one of three different aspects of a process: cycle time, cost and first pass yield (the percent of acceptable products produced during one cycle).
GS: Quite often, a basic failure of a project can come down to a team's inability to measure the outcomes of the implementation. The most common cause of this is a failure to set benchmarks at the beginning of a project -- a baseline from which to work and compare end results to. Critical to measuring a project's value is to set high and lower KPI's at the beginning and on completion, refer back to these in order to assess realization of those expected benefits.
RULE TEN: Manage the change
The most overlooked and undervalued aspect of a technology initiative is managing the impact of organizational change. Successful ERP projects include a change management program that educate, prepare and motivate those impacted by the change so they can adapt to and succeed in the new environment. Change is always difficult but a committed leadership that is able to effectively communicate and motivate the workforce is primed to achieve the goals it has set at the onset of the ERP project.
GS: Significant changes can touch every part of an organization as the result of such projects. The response will generally fall into categories of those that will embrace change, and those that will resist it. If expectations, concerns or and difficult user acceptance are not managed adequately, it can affect the entire outcome of a project, irrespective of how successful the deployment is.
Conclusion
Organizations increasingly recognize that ERP technology provides the necessary support for efficient business processes. Only when these processes are designed to accommodate the software's functionality can the capabilities of the technology be realized.
Shared IT Keeps Airlines Aloft
Intensely competitive" best describes the airline industry where shakeouts are an ever-present threat. Airport capacity, route structures, technology and costs of leasing or buying aircraft significantly impact carriers of all sizes. Adding to the torment of airline executives are the weather, labor relations and the spiraling cost of fuel. This is an industry that has gotten used to an average 5% margin.
On average, fuel accounts for 14%-16% of an airline's total cost, with short haul flights costing more than long-haul ones because take-offs and landings consume high amounts of jet fuel. The cost of labor, including pilots, flight attendants, baggage handlers, dispatchers and customer service staff accounts for up to 40% of an airline's expense.
These forces converge to create an industry in turmoil, constantly looking for ways to cut cost, improve efficiency and maintain customer satisfaction. The arrival of competition from low-cost carriers has added further to this complexity.
Historically, an airline's operation is largely controlled by its government. The US market is viewed as one big homogeneous region and its IT infrastructure is equally homogeneous by design. European carriers are set up around traditional borders with flag carriers dominating their local turf. Because the airline business is capital intensive, governments have traditionally been owners of these national carriers.
Deregulation has helped change this approach to ownership and allowed for introduction of new players. Privately-owned regional carriers have successfully ended the dominance of national carriers. While very large carriers such as British Airways and Alitalia can afford to build and sustain their own IT infrastructure, smaller carriers have banded together and introduced the concept of shared resources - a community that shares common infrastructure.
Unlike Europe, Asia has no single dominant carrier. And because of fragmentation that is complicated by deregulation, many smaller carriers that dominate their local market suffer in other places. Like their European counterparts, large airlines like Cathay Pacific and Singapore Airlines can afford to build their own infrastructure. Everyone else has to learn to share.
"Smaller carriers depend on third parties to meet their infrastructure needs. The result is a proliferation of different technologies and environments, some sharing among themselves while others signing up outsourcing contracts with providers such as Amadeus, Sabre and SITA," said Damian Hickey, vice president of the Airline Business Group at Amadeus.
Pressures of business
Many of Asia's national carriers are state-owned, with little competition. However, this has begun to change with deregulation.
"China's upcoming 22 million middle class travelers are putting pressure on the government to modernize its fleet and enhance airport facilities. The challenge now becomes one of managing the expected growth even as operators are saddled with high operating costs, brought about by inadequate infrastructure and lack of experience in building and managing a modern airline business," notes Mark Abe, vice president of Global Transportation Group at EDS.
The rising cost of fuel and growing competition are forcing most airlines to look at ways to cut cost with information technology expected to contribute significantly to cost reduction. About 80% of the IT infrastructure is common to all carriers.
Younger airlines have the benefit of having fewer legacy systems and processes to manage. That said, they share the same problem as their larger counterparts trying to enhance their IT operational capability in the face of growth prospects - access to technology and skilled resources.
This brings to the fore the concept of a community platform where resources are shared among members of the community. The airline network industry pioneered this concept with the successful launch of SITA, a dedicated network. It was acquired by French telco Equant (now Orange Business Services) and is still used by 640 airlines today.
Outsourcing
While airlines are used to the idea of outsourcing, some still display concerns about which parts make sense to outsource and which elements should best be kept in-house.
"If you look at outsourcing, you need to understand the different types available out there. Traditional outsourcing engagements defer the operation of airline-owned assets to a third party.
A new model is slowly gaining acceptance whereby airlines lease the required IT operations from a third party who owns, operates and manages the physical asset," notes Hickey. Participating airlines are encouraged to take ownership in the community business.
With the exception of the very large carriers, few airlines can afford to build, operate and maintain their own IT infrastructure. The community model allows smaller airlines to have available at their beck and call the requisite infrastructure and services needed, and still allows them to focus on their reason for being - the business of transportation.
"We believe that the future of the airline industry is the leveraging of a common infrastructure. Between 60%-70% of the technology used in airlines is non-strategic. When you look at the economics and business issues, outsourcing starts to make economic sense," concludes Abe.
Significant variations
According to Matthew Davis, director of Consulting at American Express, "Corporate clients are traveling more, and increased globalization is leading to strong demand for long-haul air travel and hotel space at their traveler's destination. Whilst global fares are rising across the board, there are significant variations by region and event the countries within these regions."
The airline industry pioneered the concept of sharing to survive and grow. Despite being competitors, airlines have set aside their competitive egos to pool together resources to build a common platform from which everyone benefits.
The concept of community sharing lends itself beautifully to other industries like financial services, transportation, governments, and education among others. But to achieve the same success as that in the airline industry requires the creation of common standards, the agreement on a unified set of processes, and the willingness to move with the times.
The Flight Biz
There are currently 1.6 billion business and leisure travelers today, estimated to reach 2.3 billion by 2010.
Business travelers are important to airlines because they are more likely to travel several times in a year. These also tend to purchase the upgraded services that have higher margins for airlines.
Leisure travelers, on the other hand, are very price-sensitive and during periods of uncertainty will forgo their travel plans.
Although there are more travelers today than at the beginning of 2000, bottom-line growth has remained relatively modest if not flat.
The cost differential between low-cost carriers and network carriers is as high as 2 to 1, even after adjustments for pay scales, fuel prices and seat density.
Keeping Costs On The Ground
Cost control measures are now extending to outside the internal operations of an organization. Airlines are working with partners to streamline operations and reduce the cost of doing business. Among the process changes and technologies being considered are:
The full migration to electronic ticketing, mandated by the International Air Transport Association (IATA) by end of 2007.
Introduction of self-service check-in kiosks, currently hindered by lack of standards among solution vendors.
RFID technology to process baggage handling at airports.
Simplifying the creation, processing, handling and management of customer information.
All of the above changes require not just simple introduction of new technology but a change in the way partner organizations operate. But to most carriers, these are easier said than done.
On average, fuel accounts for 14%-16% of an airline's total cost, with short haul flights costing more than long-haul ones because take-offs and landings consume high amounts of jet fuel. The cost of labor, including pilots, flight attendants, baggage handlers, dispatchers and customer service staff accounts for up to 40% of an airline's expense.
These forces converge to create an industry in turmoil, constantly looking for ways to cut cost, improve efficiency and maintain customer satisfaction. The arrival of competition from low-cost carriers has added further to this complexity.
Historically, an airline's operation is largely controlled by its government. The US market is viewed as one big homogeneous region and its IT infrastructure is equally homogeneous by design. European carriers are set up around traditional borders with flag carriers dominating their local turf. Because the airline business is capital intensive, governments have traditionally been owners of these national carriers.
Deregulation has helped change this approach to ownership and allowed for introduction of new players. Privately-owned regional carriers have successfully ended the dominance of national carriers. While very large carriers such as British Airways and Alitalia can afford to build and sustain their own IT infrastructure, smaller carriers have banded together and introduced the concept of shared resources - a community that shares common infrastructure.
Unlike Europe, Asia has no single dominant carrier. And because of fragmentation that is complicated by deregulation, many smaller carriers that dominate their local market suffer in other places. Like their European counterparts, large airlines like Cathay Pacific and Singapore Airlines can afford to build their own infrastructure. Everyone else has to learn to share.
"Smaller carriers depend on third parties to meet their infrastructure needs. The result is a proliferation of different technologies and environments, some sharing among themselves while others signing up outsourcing contracts with providers such as Amadeus, Sabre and SITA," said Damian Hickey, vice president of the Airline Business Group at Amadeus.
Pressures of business
Many of Asia's national carriers are state-owned, with little competition. However, this has begun to change with deregulation.
"China's upcoming 22 million middle class travelers are putting pressure on the government to modernize its fleet and enhance airport facilities. The challenge now becomes one of managing the expected growth even as operators are saddled with high operating costs, brought about by inadequate infrastructure and lack of experience in building and managing a modern airline business," notes Mark Abe, vice president of Global Transportation Group at EDS.
The rising cost of fuel and growing competition are forcing most airlines to look at ways to cut cost with information technology expected to contribute significantly to cost reduction. About 80% of the IT infrastructure is common to all carriers.
Younger airlines have the benefit of having fewer legacy systems and processes to manage. That said, they share the same problem as their larger counterparts trying to enhance their IT operational capability in the face of growth prospects - access to technology and skilled resources.
This brings to the fore the concept of a community platform where resources are shared among members of the community. The airline network industry pioneered this concept with the successful launch of SITA, a dedicated network. It was acquired by French telco Equant (now Orange Business Services) and is still used by 640 airlines today.
Outsourcing
While airlines are used to the idea of outsourcing, some still display concerns about which parts make sense to outsource and which elements should best be kept in-house.
"If you look at outsourcing, you need to understand the different types available out there. Traditional outsourcing engagements defer the operation of airline-owned assets to a third party.
A new model is slowly gaining acceptance whereby airlines lease the required IT operations from a third party who owns, operates and manages the physical asset," notes Hickey. Participating airlines are encouraged to take ownership in the community business.
With the exception of the very large carriers, few airlines can afford to build, operate and maintain their own IT infrastructure. The community model allows smaller airlines to have available at their beck and call the requisite infrastructure and services needed, and still allows them to focus on their reason for being - the business of transportation.
"We believe that the future of the airline industry is the leveraging of a common infrastructure. Between 60%-70% of the technology used in airlines is non-strategic. When you look at the economics and business issues, outsourcing starts to make economic sense," concludes Abe.
Significant variations
According to Matthew Davis, director of Consulting at American Express, "Corporate clients are traveling more, and increased globalization is leading to strong demand for long-haul air travel and hotel space at their traveler's destination. Whilst global fares are rising across the board, there are significant variations by region and event the countries within these regions."
The airline industry pioneered the concept of sharing to survive and grow. Despite being competitors, airlines have set aside their competitive egos to pool together resources to build a common platform from which everyone benefits.
The concept of community sharing lends itself beautifully to other industries like financial services, transportation, governments, and education among others. But to achieve the same success as that in the airline industry requires the creation of common standards, the agreement on a unified set of processes, and the willingness to move with the times.
The Flight Biz
There are currently 1.6 billion business and leisure travelers today, estimated to reach 2.3 billion by 2010.
Business travelers are important to airlines because they are more likely to travel several times in a year. These also tend to purchase the upgraded services that have higher margins for airlines.
Leisure travelers, on the other hand, are very price-sensitive and during periods of uncertainty will forgo their travel plans.
Although there are more travelers today than at the beginning of 2000, bottom-line growth has remained relatively modest if not flat.
The cost differential between low-cost carriers and network carriers is as high as 2 to 1, even after adjustments for pay scales, fuel prices and seat density.
Keeping Costs On The Ground
Cost control measures are now extending to outside the internal operations of an organization. Airlines are working with partners to streamline operations and reduce the cost of doing business. Among the process changes and technologies being considered are:
The full migration to electronic ticketing, mandated by the International Air Transport Association (IATA) by end of 2007.
Introduction of self-service check-in kiosks, currently hindered by lack of standards among solution vendors.
RFID technology to process baggage handling at airports.
Simplifying the creation, processing, handling and management of customer information.
All of the above changes require not just simple introduction of new technology but a change in the way partner organizations operate. But to most carriers, these are easier said than done.
Understanding the Shift Toward Network-based Video Surveillance in Asia
Understanding the Shift Toward Network-based Video Surveillance in Asia
Threats of security continue to pervade the global market since September 11. Bombings and threats promising mayhem and destruction had led to a surge in investments around security and surveillance systems. This is fueling the change in how we capture, store, and monitor video.
According to Shivanu Shukla, an industry analyst at Frost & Sullivan "There has been strong interest in being able to remotely monitor surveillance cameras, run video analytics, and integrate surveillance with other physical security systems."
Shukla notes that network-based video surveillance systems are becoming popular. Frost estimates the video surveillance market to grow from $992.1 million in 2006 to $3956.7 million in 2013.
Analog vs. digital
Analog video surveillance systems consists of analog cameras connected via cables to multiplexers and in-turn connected to monitors and key boards. But what happens when the area that needs to be monitored is a significant distance away and there is a need to record 7x24?
Network surveillance solutions allow existing analog cameras to be connected to a video server, which is connected to the network, and monitored by any computer that is on the network, or the existing control room.
"Storage of the video can be done by network video recorders (NVRs), which can be anywhere on the network, as opposed to digital video recorders (DVRs), which need to be placed close to the cameras or the switcher/multiplexer. In a complete network surveillance solution, network cameras are used to connect directly to the IP network, without the need for an external encoder," says Shukla.
Video surveillance deployments in Asia are mostly analog based due in part to the market's price sensitivity. But this is changing as the security threats continue to remain high on radar of both commercial and the public.
Kiran Kumar, a Frost Research Associate, notes that government and transportation sectors are spearheading video surveillance deployments, with large projects for airports, city surveillance, and other critical infrastructure surveillance.
"Fast developing physical infrastructure such as airports, seaports, highways, and rail networks is a key driving force for the strong adoption for video surveillance systems," says Kumar.
There are three main factors limiting the continuing growth of analog video surveillance systems:
Cost: Set-ups and installation costs of traditional coaxial or fiber-based cabling for analog video systems over large areas is very high. Large-scale projects for city surveillance and monitoring of harbors and ports take a significant role in effecting change to network surveillance.
Scalability: Despite DVRs having improved the recording quality of analog cameras, there is still the physical restriction of its installation near the analog matrix.
Flexibility: Integration of analog video surveillance systems with other systems can be cumbersome. Analog surveillance systems are limited to centralized video analytics, which requires additional hardware, cabling and is difficult to scale.
Benefits of network surveillance
Digital technology is helping extend the capability of surveillance beyond what can be achieved with traditional systems.
Technology now allows us to monitor an area from any location in the world in real-time without any significant investment.
Storage of video can be done on NVRs that can be anywhere on the network. How much video we can store digitally is limited only by the amount of hard disk space. And because the video traverses through the network, backups can be done remotely.
Scalability of network surveillance systems is easy and inexpensive. Network cameras can be connected to the network without rewiring.
With network surveillance systems, intelligence can be distributed either directly at the camera or encoder, or centralized on the NVR or a separate server.
Network surveillance systems are cheaper to build and maintain with reusability of existing IP network infrastructure, highly scalable with little incremental costs, low maintenance costs, and ability to reuse existing legacy surveillance cameras and other display and monitoring equipment as key factors for adoption of digital surveillance techniques.
Limitations of going digital
Not everything is bright and rosy. Due to its dependence on the network, security teams will need the support of the IT department.
"The key challenge to adoption is to get the security and IT teams to adopt network surveillance. Existing network infrastructure makes the proposition of network surveillance stronger. However, organizations where such infrastructure is less developed would be slow to move to network surveillance," says Shukla.
He concedes that network surveillance adoption is changing the dynamics between the security personnel and the IT teams within enterprises, hindering its adoption rate. The introduction of network surveillance implies the participation of the IT division in security matters.
"Security personnel are typically more conservative and not open to major changes in their environments. Network surveillance adoption would depend on the successful interactions and communication between the two teams within an enterprise," notes Shukla.
Although Frost & Sullivan expects the trend towards network surveillance to be strong, adoption of analog system will continue to grow as well, albeit slower than network surveillance deployments.
"While remote access, scalability, and distributed intelligence are the key drivers for network video surveillance, price, perceived reliability, and conservative nature of security teams to change and adopt new technologies will hinder adoption," says Kumar.
Traditionally, cameras have been the point of entry for vendors into the market; subsequently their offerings include DVRs, NVRs, encoders, and software, together with switchers and multiplexers.
Increasingly, due to the emergence of network surveillance solutions, there is an effort from vendors to approach the surveillance solution from the NVR or DVR front, by offering better management software, virtual matrix systems and video content analytics as a solution package.
As traction for network video surveillance picks up in Asia Pacific, providing complete end-to-end surveillance solutions is expected to become a key to succeed in the market.
Threats of security continue to pervade the global market since September 11. Bombings and threats promising mayhem and destruction had led to a surge in investments around security and surveillance systems. This is fueling the change in how we capture, store, and monitor video.
According to Shivanu Shukla, an industry analyst at Frost & Sullivan "There has been strong interest in being able to remotely monitor surveillance cameras, run video analytics, and integrate surveillance with other physical security systems."
Shukla notes that network-based video surveillance systems are becoming popular. Frost estimates the video surveillance market to grow from $992.1 million in 2006 to $3956.7 million in 2013.
Analog vs. digital
Analog video surveillance systems consists of analog cameras connected via cables to multiplexers and in-turn connected to monitors and key boards. But what happens when the area that needs to be monitored is a significant distance away and there is a need to record 7x24?
Network surveillance solutions allow existing analog cameras to be connected to a video server, which is connected to the network, and monitored by any computer that is on the network, or the existing control room.
"Storage of the video can be done by network video recorders (NVRs), which can be anywhere on the network, as opposed to digital video recorders (DVRs), which need to be placed close to the cameras or the switcher/multiplexer. In a complete network surveillance solution, network cameras are used to connect directly to the IP network, without the need for an external encoder," says Shukla.
Video surveillance deployments in Asia are mostly analog based due in part to the market's price sensitivity. But this is changing as the security threats continue to remain high on radar of both commercial and the public.
Kiran Kumar, a Frost Research Associate, notes that government and transportation sectors are spearheading video surveillance deployments, with large projects for airports, city surveillance, and other critical infrastructure surveillance.
"Fast developing physical infrastructure such as airports, seaports, highways, and rail networks is a key driving force for the strong adoption for video surveillance systems," says Kumar.
There are three main factors limiting the continuing growth of analog video surveillance systems:
Cost: Set-ups and installation costs of traditional coaxial or fiber-based cabling for analog video systems over large areas is very high. Large-scale projects for city surveillance and monitoring of harbors and ports take a significant role in effecting change to network surveillance.
Scalability: Despite DVRs having improved the recording quality of analog cameras, there is still the physical restriction of its installation near the analog matrix.
Flexibility: Integration of analog video surveillance systems with other systems can be cumbersome. Analog surveillance systems are limited to centralized video analytics, which requires additional hardware, cabling and is difficult to scale.
Benefits of network surveillance
Digital technology is helping extend the capability of surveillance beyond what can be achieved with traditional systems.
Technology now allows us to monitor an area from any location in the world in real-time without any significant investment.
Storage of video can be done on NVRs that can be anywhere on the network. How much video we can store digitally is limited only by the amount of hard disk space. And because the video traverses through the network, backups can be done remotely.
Scalability of network surveillance systems is easy and inexpensive. Network cameras can be connected to the network without rewiring.
With network surveillance systems, intelligence can be distributed either directly at the camera or encoder, or centralized on the NVR or a separate server.
Network surveillance systems are cheaper to build and maintain with reusability of existing IP network infrastructure, highly scalable with little incremental costs, low maintenance costs, and ability to reuse existing legacy surveillance cameras and other display and monitoring equipment as key factors for adoption of digital surveillance techniques.
Limitations of going digital
Not everything is bright and rosy. Due to its dependence on the network, security teams will need the support of the IT department.
"The key challenge to adoption is to get the security and IT teams to adopt network surveillance. Existing network infrastructure makes the proposition of network surveillance stronger. However, organizations where such infrastructure is less developed would be slow to move to network surveillance," says Shukla.
He concedes that network surveillance adoption is changing the dynamics between the security personnel and the IT teams within enterprises, hindering its adoption rate. The introduction of network surveillance implies the participation of the IT division in security matters.
"Security personnel are typically more conservative and not open to major changes in their environments. Network surveillance adoption would depend on the successful interactions and communication between the two teams within an enterprise," notes Shukla.
Although Frost & Sullivan expects the trend towards network surveillance to be strong, adoption of analog system will continue to grow as well, albeit slower than network surveillance deployments.
"While remote access, scalability, and distributed intelligence are the key drivers for network video surveillance, price, perceived reliability, and conservative nature of security teams to change and adopt new technologies will hinder adoption," says Kumar.
Traditionally, cameras have been the point of entry for vendors into the market; subsequently their offerings include DVRs, NVRs, encoders, and software, together with switchers and multiplexers.
Increasingly, due to the emergence of network surveillance solutions, there is an effort from vendors to approach the surveillance solution from the NVR or DVR front, by offering better management software, virtual matrix systems and video content analytics as a solution package.
As traction for network video surveillance picks up in Asia Pacific, providing complete end-to-end surveillance solutions is expected to become a key to succeed in the market.
Hi-Tech Checks in
The information-intensive hotel industry has discovered IT is critical at all points of the business chain
Back then, making travel plans involves many processes. You call up your travel agent and she supplies you with a list of possible hotels, room availability, rates and special offers. You pick the date for the trip and confirm your hotel preference. She then makes the booking through the computer system and off you go. Behind the scenes, she sends a confirmation fax to the hotel with your details. At the receiving end, the hotel will enter your details into their computer system. When you arrive at your destination and you check-in at the front desk, the hotel staff verifies your reservations, assigns you the room and hands you the keys.
Fast forward to today. Technology has caught up with the industry. As the travel agent issues a confirmation to your hotel about your reservation, the global travel distribution system (Amadeus, Galileo, Sabre or Worldspan) will connect to the hotel's back office and make the appropriate entry, minimizing error and ensuring accuracy of customer's details.
Hotels have also adopted a more sophisticated system for tracking customer information. Hotels now use data warehouses and data mining tools to better understand their customers' individual preferences.
The Internet is used to communicate to their business partners -- travel agencies, airlines, government tourism boards, cruise liners, car rentals and global distribution channels -- and provide updates on room availability, rates and special offers.
Competition for a growing class of travel- and tech-savvy customers has forced hotels to adopt the latest technologies to ensure that partners are updated on the current hotel developments. The Internet has spawned a new segment of customers who use the Web to scout for hotel rooms and seek weekend bargains.
Key component
Chris Hartmann of global hospitality consulting firm, HVS International, said the technology used in the hotel industry has evolved. "To look at the state of technology in hotels and resorts today, it's important to understand that 'technology' today is not simply a network infrastructure, computers and the IT department. Technology is a key component of every aspect of hotel ownership. Management of, and a comfort with, today and tomorrow's technology is necessary in every department," said Hartmann, who leads technology strategies for HVS.
Technology investments require well-defined objectives aligned with overall business strategy. Whether it is a hotel redevelopment, acquiring or repositioning hotel assets, scores of decisions require technology insight and operational understanding. Failure to take into account the importance of technology at the onset will result in substantial costs associated with retro-fitting, last-minute implementations, and ongoing operational challenges resulting from poorly selected systems.
CIOs believe that the business of running an IT organization has changed significantly from what it was ten or 15 years ago. Shane Izaks, general manager, information technology at the Hong Kong and Shanghai Hotels Limited (best known as Peninsula Hotels) said to be an effective CIO today, you need to understand the business you are in to get business units to buy into your ideas.
High expectations
"You not only need to understand hardware and software from a systems point of view but from also from a business point of view. This is how IT is able to drive the business. Technology and processes have matured in complexity to the point that understanding the business is paramount to ensuring the successful integration of IT into the business. The CEO, CFO and COO have high expectations of the role that technology plays in the business of running a hotel," Izaks said.
Today's business unit manager, CEO, and his management team - CFO and COO - understand the importance of IT and expect the CIO to understand the business so that there is a tighter integration of technology into the business. The technologies today are much more complex and the resulting integration makes for a more successful alignment of technology to business.
Izaks says the question is not whether technology is sophisticated enough to match the business process "The real challenge lies in the IT team's ability to understand the interdependence of IT and business, and to build processes that would allow for the symbiotic co-existing of two different but interdependent systems," he adds.
Years ago, hotels had isolated islands of systems that didn't talk to each other. No one had a single view of the business; financial systems, CRM and bookings were on different systems that didn't talk to each other, and data was often rekeyed in to spreadsheets to make sense of it. This was the only way for hotel chains with properties located in many parts of the world to have some picture of what the overall business was like.
At that time, no-one was able to know in real-time precisely what was happening in properties within the hotel chain, how the business performed during particular periods, or was able to view and share customers' profile and service preferences.
Today, technology advances give us the ability to connect the different islands of information and enable us to understand what works, what doesn't, who customers are and what their buying patterns are. The Internet has become an accelerator for the adoption of sophisticated technology that will enable the delivery of greater customer service and higher productivity.
The Internet and VPN have allowed the connection of different systems, bringing the data back into a central repository and be able to understand what it all means, in real-time.
Lifecycles and priorities
"Those hoteliers who view technology as a cost center and afterthought to the successful operation of any property risk becoming out of touch with their customers. More dangerous, however, is that those who don't recognize and exploit today and tomorrow's technologies for their competitive advantage will quickly be overtaken by those who do," added Hartmann.
But just as Hartmann is right in his assessment of how business managers look at technology, CIOs like Izaks must continue to grapple with the issue of technology lifecycles and priorities. In good times and bad, budgets remain a constant in the life of a CIO.
Identifying the business priorities, evaluating and recommending one standard for the organization, and sticking to what's been given budget approval are part of the challenge. Advances in technology offer numerous temptations to throw out what's been approved. But most hoteliers will agree that changing the strategy mid-stream is not easily undertaken.
Technology is changing very rapidly. Things get replaced faster with each refresh and the rate of will even be faster in the future. Just as technology is an enabler of new business, it is also becoming an inhibitor. Izaks laments that the inhibitor then becomes getting the right technology into the business, even as that technology cycles through faster than our ability to integrate it in.
"This presents a challenge for the CIO: being able to identify the technology we need, as opposed to what we'd like to have, and allocating budget for it. We have a five-year budget cycle where we look at the technology we purchased last year and track its depreciation on our books. At the same time, we look at our business needs today and start preparing for technologies we might need three or four years into the future. To keep this picture top-of-mind as we work our annual budgets makes for challenging budget planning cycles."
The hotel industry, like others in the hospitality business, is in a constant state of battle readiness. The two gulf wars, SARS, avian flu, and the Asian financial crisis have forever changed the way the industry looks at its future.
The industry is accelerating the adoption of technology to reap the benefits it has to offer in the shortest possible time. The challenge for managers like Izaks is to stay abreast of the changes, keep an open mind to the future, and be prepared to lead every day, 7x24.
Convergence in a hotel suite
Thanks to the mobile phone, guests today avoid using the hotel's phone system to place international calls, causing a fall in hotel communication revenues. Because of this hoteliers have come to regard their voice communication infrastructure as a cost center rather than a profit center. In addition, with more business travelers demanding for Internet connection in the room, hotels have invested in data networking. But for how long will hotels keep spending on two different networks?
Shane Izaks believes that convergence is inevitable. "The Internet presents opportunities to introduce new ways to enhance customer experience and thus differentiate ourselves from the rest of the industry."
Communication technologies allow a certain yet needed differentiation, by offering more and more personalized services to this new wave of guests coming from China, Korea or Russia. Therefore, hoteliers are looking at building up their competitiveness by improving guest services, increase staff efficiency and maximize their return on investment.
Marc-Alexis Remond, director of marketing and business development at Alcatel, points to three beneficiaries of a converging network.
"Hotel guests want personalized services, fast answers, first call resolution and access to advanced communications and entertainment applications. Hotel staff and executives need mobility and collaborative solutions that keep them connected and available, with access to information, in real time and easy interactions with guests and colleagues.
"Everyone wants a highly reliable data and telephony solution that provides consistent user services across the enterprise while benefiting from the maximum operational cost savings for the minimum investment."
The trick is to identify the right technologies and applications and find vendor-suppliers with a strategy for deploying enterprise IP telephony solutions over any data network (LAN switches, routers, etc), whether provided by themselves or a third party. Staying with standards-based solutions will mitigate the risks of vendor lock-in.
Back then, making travel plans involves many processes. You call up your travel agent and she supplies you with a list of possible hotels, room availability, rates and special offers. You pick the date for the trip and confirm your hotel preference. She then makes the booking through the computer system and off you go. Behind the scenes, she sends a confirmation fax to the hotel with your details. At the receiving end, the hotel will enter your details into their computer system. When you arrive at your destination and you check-in at the front desk, the hotel staff verifies your reservations, assigns you the room and hands you the keys.
Fast forward to today. Technology has caught up with the industry. As the travel agent issues a confirmation to your hotel about your reservation, the global travel distribution system (Amadeus, Galileo, Sabre or Worldspan) will connect to the hotel's back office and make the appropriate entry, minimizing error and ensuring accuracy of customer's details.
Hotels have also adopted a more sophisticated system for tracking customer information. Hotels now use data warehouses and data mining tools to better understand their customers' individual preferences.
The Internet is used to communicate to their business partners -- travel agencies, airlines, government tourism boards, cruise liners, car rentals and global distribution channels -- and provide updates on room availability, rates and special offers.
Competition for a growing class of travel- and tech-savvy customers has forced hotels to adopt the latest technologies to ensure that partners are updated on the current hotel developments. The Internet has spawned a new segment of customers who use the Web to scout for hotel rooms and seek weekend bargains.
Key component
Chris Hartmann of global hospitality consulting firm, HVS International, said the technology used in the hotel industry has evolved. "To look at the state of technology in hotels and resorts today, it's important to understand that 'technology' today is not simply a network infrastructure, computers and the IT department. Technology is a key component of every aspect of hotel ownership. Management of, and a comfort with, today and tomorrow's technology is necessary in every department," said Hartmann, who leads technology strategies for HVS.
Technology investments require well-defined objectives aligned with overall business strategy. Whether it is a hotel redevelopment, acquiring or repositioning hotel assets, scores of decisions require technology insight and operational understanding. Failure to take into account the importance of technology at the onset will result in substantial costs associated with retro-fitting, last-minute implementations, and ongoing operational challenges resulting from poorly selected systems.
CIOs believe that the business of running an IT organization has changed significantly from what it was ten or 15 years ago. Shane Izaks, general manager, information technology at the Hong Kong and Shanghai Hotels Limited (best known as Peninsula Hotels) said to be an effective CIO today, you need to understand the business you are in to get business units to buy into your ideas.
High expectations
"You not only need to understand hardware and software from a systems point of view but from also from a business point of view. This is how IT is able to drive the business. Technology and processes have matured in complexity to the point that understanding the business is paramount to ensuring the successful integration of IT into the business. The CEO, CFO and COO have high expectations of the role that technology plays in the business of running a hotel," Izaks said.
Today's business unit manager, CEO, and his management team - CFO and COO - understand the importance of IT and expect the CIO to understand the business so that there is a tighter integration of technology into the business. The technologies today are much more complex and the resulting integration makes for a more successful alignment of technology to business.
Izaks says the question is not whether technology is sophisticated enough to match the business process "The real challenge lies in the IT team's ability to understand the interdependence of IT and business, and to build processes that would allow for the symbiotic co-existing of two different but interdependent systems," he adds.
Years ago, hotels had isolated islands of systems that didn't talk to each other. No one had a single view of the business; financial systems, CRM and bookings were on different systems that didn't talk to each other, and data was often rekeyed in to spreadsheets to make sense of it. This was the only way for hotel chains with properties located in many parts of the world to have some picture of what the overall business was like.
At that time, no-one was able to know in real-time precisely what was happening in properties within the hotel chain, how the business performed during particular periods, or was able to view and share customers' profile and service preferences.
Today, technology advances give us the ability to connect the different islands of information and enable us to understand what works, what doesn't, who customers are and what their buying patterns are. The Internet has become an accelerator for the adoption of sophisticated technology that will enable the delivery of greater customer service and higher productivity.
The Internet and VPN have allowed the connection of different systems, bringing the data back into a central repository and be able to understand what it all means, in real-time.
Lifecycles and priorities
"Those hoteliers who view technology as a cost center and afterthought to the successful operation of any property risk becoming out of touch with their customers. More dangerous, however, is that those who don't recognize and exploit today and tomorrow's technologies for their competitive advantage will quickly be overtaken by those who do," added Hartmann.
But just as Hartmann is right in his assessment of how business managers look at technology, CIOs like Izaks must continue to grapple with the issue of technology lifecycles and priorities. In good times and bad, budgets remain a constant in the life of a CIO.
Identifying the business priorities, evaluating and recommending one standard for the organization, and sticking to what's been given budget approval are part of the challenge. Advances in technology offer numerous temptations to throw out what's been approved. But most hoteliers will agree that changing the strategy mid-stream is not easily undertaken.
Technology is changing very rapidly. Things get replaced faster with each refresh and the rate of will even be faster in the future. Just as technology is an enabler of new business, it is also becoming an inhibitor. Izaks laments that the inhibitor then becomes getting the right technology into the business, even as that technology cycles through faster than our ability to integrate it in.
"This presents a challenge for the CIO: being able to identify the technology we need, as opposed to what we'd like to have, and allocating budget for it. We have a five-year budget cycle where we look at the technology we purchased last year and track its depreciation on our books. At the same time, we look at our business needs today and start preparing for technologies we might need three or four years into the future. To keep this picture top-of-mind as we work our annual budgets makes for challenging budget planning cycles."
The hotel industry, like others in the hospitality business, is in a constant state of battle readiness. The two gulf wars, SARS, avian flu, and the Asian financial crisis have forever changed the way the industry looks at its future.
The industry is accelerating the adoption of technology to reap the benefits it has to offer in the shortest possible time. The challenge for managers like Izaks is to stay abreast of the changes, keep an open mind to the future, and be prepared to lead every day, 7x24.
Convergence in a hotel suite
Thanks to the mobile phone, guests today avoid using the hotel's phone system to place international calls, causing a fall in hotel communication revenues. Because of this hoteliers have come to regard their voice communication infrastructure as a cost center rather than a profit center. In addition, with more business travelers demanding for Internet connection in the room, hotels have invested in data networking. But for how long will hotels keep spending on two different networks?
Shane Izaks believes that convergence is inevitable. "The Internet presents opportunities to introduce new ways to enhance customer experience and thus differentiate ourselves from the rest of the industry."
Communication technologies allow a certain yet needed differentiation, by offering more and more personalized services to this new wave of guests coming from China, Korea or Russia. Therefore, hoteliers are looking at building up their competitiveness by improving guest services, increase staff efficiency and maximize their return on investment.
Marc-Alexis Remond, director of marketing and business development at Alcatel, points to three beneficiaries of a converging network.
"Hotel guests want personalized services, fast answers, first call resolution and access to advanced communications and entertainment applications. Hotel staff and executives need mobility and collaborative solutions that keep them connected and available, with access to information, in real time and easy interactions with guests and colleagues.
"Everyone wants a highly reliable data and telephony solution that provides consistent user services across the enterprise while benefiting from the maximum operational cost savings for the minimum investment."
The trick is to identify the right technologies and applications and find vendor-suppliers with a strategy for deploying enterprise IP telephony solutions over any data network (LAN switches, routers, etc), whether provided by themselves or a third party. Staying with standards-based solutions will mitigate the risks of vendor lock-in.
Successful Financial Supply Chain Strategy: the CFO Connection
In a truly global environment, an enterprise operation extends beyond the confines of its business premises to encompass the operations of its suppliers, partners and customers. But while most organizations have learned to fine-tune their enterprise resource planning (ERP) systems, few have yet to experience the promise of their supply chain management (SCM) systems.
SCM systems have the potential to improve the three key drivers of financial performance -- growth, profitability and capital utilization. Many of today's enterprises fail to achieve these benefits because many C-level executives view SCM as a tactical back-room cost-center activity. Most SCM professionals fail to link SCM to key financial metrics because they do not speak the language of finance and are therefore unable to articulate how SCM drives financial performance. For SCM to drive performance throughout the organization, strategic and tactical decisions must be made with an enterprise-wide perspective.
"In an age of intense competition, supply chain efficiency and adaptability are not just requirements for success. They are necessities for survival," said Patricia Cheong, Regional Director, Asia at Sterling Commerce. "A recent study conducted by Accenture, Stanford, and INSEAD found that senior executives at leading companies view supply chains as critical or very important to their company and industry, and most also agreed that investments in supply chain capabilities have increased in the last three years."
Central to achieving such a transformation is the Chief Financial Officer (CFO). The CFO must take a leadership position in educating key personnel on the financial connection as he is well equipped with the financial acumen to link business processes, activities and tasks to key financial metrics achieving an enterprise-wide view.
Cheong concurs, "Driven by cost-cutting needs and general dissatisfaction with supply chain performance, CFOs are adding supply-chain management to the financial levers they already control. In the past, they have had a feeling that they have spent too much -- with too little to show for it. New technologies and architectures have emerged to make the CFO's quest for visibility and control over complex supply chain processes both possible and practical. Today, applications are available for managing the flow of orders, inventory and shipments both inside and outside an organization. These applications provide end-to-end visibility into critical supply chain events and exceptions, together with the tools to proactively balance supply and demand in real time."
Buck Devashish, SVP of Strategic Initiatives and Business Development at Sterling Commerce, looks at it differently. "In the late 80s/early 90s the CFO became all-powerful because he/she became the voice of the shareholder driving corporate returns through improved efficiency of operations and better control of the entire cash flow cycle. This was enabled in part by the entire ERP wave that came up then and helped the CFO track every item of expense incurred, and also track every asset actually owned by the corporation."
The supply chain management wave of the late 90s continuing through today is focused on maximizing value in the extended enterprise space, or multi-enterprise processes. Here, the challenge for the CFO is that several of the expenses are incurred by third parties and that inventory is often not on the books of the organization and thus out of the direct "control" of the finance executive.
The added complexity of an extended enterprise has not changed the demands on the company to deliver shareholder return. Devashish concludes that it is considered best practice for CFO to be involved in supply chain management. Best practice companies including Wal-mart and Dell have realized that the supply chain is their true sustainable differentiator today.
Dr. Stephen G. Timme, president of Finlistics Solutions and an adjunct professor at the Georgia Institute of Technology, suggests that CFOs take a top-down approach to making the financial-SCM connection. This comprises three elements:
Step 1: Calculate the Value of Gaps in Key Financial Metrics
Gaps exist between revenue, costs of goods sold and days in inventory (DII). The value of the gaps can be based on historical data, industry aggregates, benchmarks from competitors and aspirations derived from business intelligence tools. Whatever metric is used, these should be a correlation to shareholder value, should be used to reward senior managers, and are easily understood throughout the organization.
Step 2: Link Gaps in Financial Metrics to SCM Business Processes and Strategies
Each process within an organization bears a direct impact on a company's financial operation. Resulting gaps in financial metrics should be identified in specific areas of the operation to provide a better understanding of the cause-and-effect relationships between SCM activities and financial performance. For example, a gap in profitability related to percentage cost of goods sold can be mapped to an SCM-related process such as distribution and logistics. This in turn is linked to a key activity such as warehouse management, which itself is related to tasks such as receiving, putting away, pick-pack-ship operations, and to key performance indictors such as labor costs, average time per pick, and pick accuracy. A misalignment within any element of the process creates opportunities for gaps to proliferate and impact the organization's overall performance and profitability.
Step 3: Map SCM Initiatives to Financial Performance Gaps
The information obtained in the first two steps becomes the foundation for exploring SCM solutions that improve the SCM-related business processes and strategies underlying the gaps in the key financial metrics. A logical methodology for identifying specific areas of opportunities can thus be created, and a disciplined approach for estimating monetary benefits can be built.
SCM has the potential to help improve higher returns to shareholders. Improvements in SCM business processes and strategies cannot completely close financial performance gaps. But for many organizations, the improvements have a significant impact on the bottom line.
SCM systems have the potential to improve the three key drivers of financial performance -- growth, profitability and capital utilization. Many of today's enterprises fail to achieve these benefits because many C-level executives view SCM as a tactical back-room cost-center activity. Most SCM professionals fail to link SCM to key financial metrics because they do not speak the language of finance and are therefore unable to articulate how SCM drives financial performance. For SCM to drive performance throughout the organization, strategic and tactical decisions must be made with an enterprise-wide perspective.
"In an age of intense competition, supply chain efficiency and adaptability are not just requirements for success. They are necessities for survival," said Patricia Cheong, Regional Director, Asia at Sterling Commerce. "A recent study conducted by Accenture, Stanford, and INSEAD found that senior executives at leading companies view supply chains as critical or very important to their company and industry, and most also agreed that investments in supply chain capabilities have increased in the last three years."
Central to achieving such a transformation is the Chief Financial Officer (CFO). The CFO must take a leadership position in educating key personnel on the financial connection as he is well equipped with the financial acumen to link business processes, activities and tasks to key financial metrics achieving an enterprise-wide view.
Cheong concurs, "Driven by cost-cutting needs and general dissatisfaction with supply chain performance, CFOs are adding supply-chain management to the financial levers they already control. In the past, they have had a feeling that they have spent too much -- with too little to show for it. New technologies and architectures have emerged to make the CFO's quest for visibility and control over complex supply chain processes both possible and practical. Today, applications are available for managing the flow of orders, inventory and shipments both inside and outside an organization. These applications provide end-to-end visibility into critical supply chain events and exceptions, together with the tools to proactively balance supply and demand in real time."
Buck Devashish, SVP of Strategic Initiatives and Business Development at Sterling Commerce, looks at it differently. "In the late 80s/early 90s the CFO became all-powerful because he/she became the voice of the shareholder driving corporate returns through improved efficiency of operations and better control of the entire cash flow cycle. This was enabled in part by the entire ERP wave that came up then and helped the CFO track every item of expense incurred, and also track every asset actually owned by the corporation."
The supply chain management wave of the late 90s continuing through today is focused on maximizing value in the extended enterprise space, or multi-enterprise processes. Here, the challenge for the CFO is that several of the expenses are incurred by third parties and that inventory is often not on the books of the organization and thus out of the direct "control" of the finance executive.
The added complexity of an extended enterprise has not changed the demands on the company to deliver shareholder return. Devashish concludes that it is considered best practice for CFO to be involved in supply chain management. Best practice companies including Wal-mart and Dell have realized that the supply chain is their true sustainable differentiator today.
Dr. Stephen G. Timme, president of Finlistics Solutions and an adjunct professor at the Georgia Institute of Technology, suggests that CFOs take a top-down approach to making the financial-SCM connection. This comprises three elements:
Step 1: Calculate the Value of Gaps in Key Financial Metrics
Gaps exist between revenue, costs of goods sold and days in inventory (DII). The value of the gaps can be based on historical data, industry aggregates, benchmarks from competitors and aspirations derived from business intelligence tools. Whatever metric is used, these should be a correlation to shareholder value, should be used to reward senior managers, and are easily understood throughout the organization.
Step 2: Link Gaps in Financial Metrics to SCM Business Processes and Strategies
Each process within an organization bears a direct impact on a company's financial operation. Resulting gaps in financial metrics should be identified in specific areas of the operation to provide a better understanding of the cause-and-effect relationships between SCM activities and financial performance. For example, a gap in profitability related to percentage cost of goods sold can be mapped to an SCM-related process such as distribution and logistics. This in turn is linked to a key activity such as warehouse management, which itself is related to tasks such as receiving, putting away, pick-pack-ship operations, and to key performance indictors such as labor costs, average time per pick, and pick accuracy. A misalignment within any element of the process creates opportunities for gaps to proliferate and impact the organization's overall performance and profitability.
Step 3: Map SCM Initiatives to Financial Performance Gaps
The information obtained in the first two steps becomes the foundation for exploring SCM solutions that improve the SCM-related business processes and strategies underlying the gaps in the key financial metrics. A logical methodology for identifying specific areas of opportunities can thus be created, and a disciplined approach for estimating monetary benefits can be built.
SCM has the potential to help improve higher returns to shareholders. Improvements in SCM business processes and strategies cannot completely close financial performance gaps. But for many organizations, the improvements have a significant impact on the bottom line.
China's Data Center Challenges
The good news is that China has a competent labor pool from which to draw the necessary skills to build and support data center operation. The bad news is that China's data center managers face the same problems as their counterparts in developed countries like the US and Europe.
While salaries, which comprise a significant portion of IT budgets, remain low relative to those in the US, Europe, Japan or Australia, other costs are not too far off.
"Mature industries like banking are heavily dependent on technology to thrive. In these markets, data centers are built based on similar standards as those in more market markets like the US and Europe," said Jerry Yi, Senior Solutions Consultant, China Hewlett-Packard.
One significant advantage that China has over markets like Singapore and Hong Kong is the limited amount of legacy infrastructure in place. Chinese businesses that are expanding to meet domestic and international business opportunities can take advantage of new technology and not be held down by legacy applications and business processes.
China's economic boom is significantly impacting the way data centers are designed, built and operated. BUt many of these centers are still located in major business cities like Beijing, Shanghai and Guangzhou. In these locations, real estate costs are rapidly rising and data center managers need to carefully plan for space if they are to ensure effective use of prime resources.
Richard Y. Mei, Technical Manager, Systems Engineering at Commscope, notes that China's data center designers and managers can leverage best practices learned in structured cabling, cooling/heating/ventilation and lighting to enhance operational efficiency.
"The inhibitor towards successful data center design is not price but growth. Companies need to carefully plan for growth. Otherwise they will discover that the data center facility they built today will not able to meet business demands in a year's time," he said.
Raju Chellam, Asia-Pacific Vice President for AMI Partners, an international research firm, agrees. "The biggest and most common mistake among data center designers in Asia is poor planning. Lack of proper foresight and failure to pay attention to the potential of business growth is resulting in some data centers reaching capacity within a matter of 18 months. This is a waste of company resource and will definitely result in lost business opportunities as companies struggle to build new data centers or extend existing ones."
Although virtualization is reducing the number of new servers being purchased, the compact design of blade servers means that cooling and ventilation will become significant factors in data center design and operation.
"Companies need to look at advances in dynamic smart cooling technologies to cooling-over-provisioning and higher operational cost issues," adds Yi.
Mei recommends sticking to standards when selecting the core components of a data center. "It is a mistake to assume that buying cheaper cables and connectors will save you money. On the contrary, such a practice often leads to higher costs as companies eventually realize that they sacrifice reliability and scalability to save a few dollars. There are hard dollars lost when a data center goes down because of faulty cabling," argues Mei.
Another challenge facing IT managers is the issue of budgets. China's economy is booming and businesses are expanding. But IT budgets are not keeping up with the growth beyond the technology. To add pressure to the kettle, focus has remained on the cost of acquisition rather than the total cost of ownership. Unfortunately, initial purchase price is clearly visible to finance and senior management.
Two other costs often ignored in the planning stages are operational costs and implementation costs. The former includes system management, power and cooling, and the impact of system failure. These costs are difficult to quantify in detail. The latter carries a variability clause meaning additional costs will be incurred subject to delays that are cannot be accurately predicted.
Troy Syn, Managing principal APJ TSG Presales SWAT, Technology Solutions Group at HP notes that given today’s constrained IT budgets, there is a reluctance to invest capital on IT. "This has lead to a "Band Aid" approach to IT investment. However this approach has also lead to a (slowly) increasing run rate of IT costs. Given that IT is now a critical component of a company's operations, perhaps the biggest misconception that needs to be changed is that investments in IT need to be made for long term transformations," adds Syn.
Indeed, good planning, attention to detail and foresight are attributes that come with some of the best built data centers in the world. Listening to the experience of others will pay dividends very quickly.
While salaries, which comprise a significant portion of IT budgets, remain low relative to those in the US, Europe, Japan or Australia, other costs are not too far off.
"Mature industries like banking are heavily dependent on technology to thrive. In these markets, data centers are built based on similar standards as those in more market markets like the US and Europe," said Jerry Yi, Senior Solutions Consultant, China Hewlett-Packard.
One significant advantage that China has over markets like Singapore and Hong Kong is the limited amount of legacy infrastructure in place. Chinese businesses that are expanding to meet domestic and international business opportunities can take advantage of new technology and not be held down by legacy applications and business processes.
China's economic boom is significantly impacting the way data centers are designed, built and operated. BUt many of these centers are still located in major business cities like Beijing, Shanghai and Guangzhou. In these locations, real estate costs are rapidly rising and data center managers need to carefully plan for space if they are to ensure effective use of prime resources.
Richard Y. Mei, Technical Manager, Systems Engineering at Commscope, notes that China's data center designers and managers can leverage best practices learned in structured cabling, cooling/heating/ventilation and lighting to enhance operational efficiency.
"The inhibitor towards successful data center design is not price but growth. Companies need to carefully plan for growth. Otherwise they will discover that the data center facility they built today will not able to meet business demands in a year's time," he said.
Raju Chellam, Asia-Pacific Vice President for AMI Partners, an international research firm, agrees. "The biggest and most common mistake among data center designers in Asia is poor planning. Lack of proper foresight and failure to pay attention to the potential of business growth is resulting in some data centers reaching capacity within a matter of 18 months. This is a waste of company resource and will definitely result in lost business opportunities as companies struggle to build new data centers or extend existing ones."
Although virtualization is reducing the number of new servers being purchased, the compact design of blade servers means that cooling and ventilation will become significant factors in data center design and operation.
"Companies need to look at advances in dynamic smart cooling technologies to cooling-over-provisioning and higher operational cost issues," adds Yi.
Mei recommends sticking to standards when selecting the core components of a data center. "It is a mistake to assume that buying cheaper cables and connectors will save you money. On the contrary, such a practice often leads to higher costs as companies eventually realize that they sacrifice reliability and scalability to save a few dollars. There are hard dollars lost when a data center goes down because of faulty cabling," argues Mei.
Another challenge facing IT managers is the issue of budgets. China's economy is booming and businesses are expanding. But IT budgets are not keeping up with the growth beyond the technology. To add pressure to the kettle, focus has remained on the cost of acquisition rather than the total cost of ownership. Unfortunately, initial purchase price is clearly visible to finance and senior management.
Two other costs often ignored in the planning stages are operational costs and implementation costs. The former includes system management, power and cooling, and the impact of system failure. These costs are difficult to quantify in detail. The latter carries a variability clause meaning additional costs will be incurred subject to delays that are cannot be accurately predicted.
Troy Syn, Managing principal APJ TSG Presales SWAT, Technology Solutions Group at HP notes that given today’s constrained IT budgets, there is a reluctance to invest capital on IT. "This has lead to a "Band Aid" approach to IT investment. However this approach has also lead to a (slowly) increasing run rate of IT costs. Given that IT is now a critical component of a company's operations, perhaps the biggest misconception that needs to be changed is that investments in IT need to be made for long term transformations," adds Syn.
Indeed, good planning, attention to detail and foresight are attributes that come with some of the best built data centers in the world. Listening to the experience of others will pay dividends very quickly.
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