In August there was a post by Michael Fauscette, IDC’s group vice president for software business solutions, that touched on some interesting concepts I think directly relate to what we are doing here at Aras. Mike’s post was called Maybe it should be "Networked Business"? He talks about the ‘network effect’ and how global businesses are transforming business processes to achieve new advantages and deliver new value. Here’s the part that caught my attention:
From what I've started to observe I think that there could be a related concept to the network effect in a networked enterprise. In the networked enterprise there is an effect that I call network synergy, or value to the business is increased as a result of the increased interconnectivity of it's people. The addition of the term synergy implies that the interconnection of people produces a result that could not be obtained if the people were not connected (in simple form it's the idea that 1 + 1 = 3).
While Mike is focused on enterprise social concepts, I think his points also relate to what we are referring to as the “Connected Cloud”. In a recent post by Aras founder & CEO, Peter Schroer, called THE REAL PROMISE OF THE CLOUD he explains his views on why all the hype around Cloud enablement is simply the precursor to what businesses are really working toward: seamless integration of aggregated data sets ‘of record’ and business process outsourcing services.
There are actually several different ‘network effect’ benefits in this scenario. The first is the concept of having the right data / the latest accurate information from a reliable source of authority available in the context of the workflow. This is a powerful capability because we’re talking about continuously updated, massively aggregated data sets that are then transparently and securely integrated into your employees day-to-day decision making processes about new products, supply chain, customer requirements and more. People have authoritative information instantly available in the context of their work. The more companies that are connected, the more economic incentive the data provider has to continually expand and update the data source.
The second ‘network effect’ concept associated with this type of connectivity is that of statistical sample size and predictive accuracy of the data set. For this one, let’s use an example. Take a specific microcontroller. Even at a company of Cisco’s scale the data set for Mean Time Between Failure (MTBF) is relatively small on any given chip. However, as the MTBF data are aggregated across many different high tech companies and numerous product lines the sample size becomes statistically significant and one has greater confidence about reliability, quality, field failures, etc. This in turn drives better business decisions about expected warranty costs, return policies and other important considerations that will effect overall profitability.
What we see is that we’re very quickly heading toward better more secure Connectivity between systems and data - wherever they exist: in the cloud, behind the firewall - to help people work in new ways. The type of connectivity that is transparent to end users. The type of connectivity that compresses business processes, that collapses the need for whole departments, that gets rid of ‘non-value add’ activities (in Lean-speak) and enables people to draw on information and resources that were previously out of reach. The type of connectivity that creates ‘network effect’ and is truly transformational to your business.
When you start to see this Connected / Networked future, you begin to ask different questions. Why should your company even try to maintain a comprehensive database of standard electronic components? Why should you take on the associated headcount, cost, effort, time? What competitive advantage does it provide? Why aren’t your company’s systems securely connected to an aggregated data source of components in the cloud? Why don’t your systems wrap corporate metadata around it transparently? How come this data isn’t available to your engineers in the context of their new product designs? Specs, reliability, prices, availability, lead times? Why don’t your engineers have immediate visibility into the next generation chips being developed as well?
If you answer the questions in this example and then begin to expand the concept to other areas of the business like compliance data, simulation services, supplier performance and on into the full range of BPO services like product engineering and more, you quickly see the network effect expand exponentially.
What would it mean if your people had this type of information integrated into their workflow? Greater efficiencies, productivity? What about innovation, speed, agility? What about your ability to compete?
We believe that this is the type of seamless connectivity is game changing. That the network effect is real from the Connected Cloud and that the concept of the “networked business” is where we’re headed as we all talk about the Cloud. That 1 + 1 = 3.
What’s your take? Will we remain forever tethered to yesterday’s ideas about what enterprise systems can and should do for us? Or are we destined to connect to the cloud?