By poplar demand I’ve now rearranged the interviews alphabetically instead of by the dates taken. I also added two pictures two clarify some details in the “Evolution of Cloud” section.
Unbundling of Business Processes
Interaction costs are money and time that are expended whenever people and companies exchange goods, services, or ideas. The exchanges can occur within companies, among companies, or between companies and customers. They can take many everyday forms, including management meetings, conferences, handset conversations, sales calls, reports, and memos. In 1999 John Hagel and Marc Singer published an article in the Harvard Business Review called Unbundling the Corporation . The article is focusing on the economic transformation of verticals across the sectors of the global economy, something telecoms should be familiar with by now. In a nutshell, Hagel and Singer found that all business processes of any enterprise fall into three core categories – they call them processes – and that reduced interaction costs leads to an unbundling of these three core categories:
three core business processes of any corporation
However, the business mechanics for these three core business processes are competing, and their divergent economic, cultural, and competition-related imperatives inevitably conflict and lead to compromises and trade-offs. A specialized competitor who does not have to make these compromises can offer specific elements of a core business much more effectively than a fully integrated company. Telecoms know this all too well: other companies seem to innovate quicker, Facebook seems to be able to build a deeper emotional customer relationship on a larger scale, and so on. That wasn’t an issue as long as interaction costs were quite high, as interaction costs could be used as market entrance barriers.
Service Oriented Architecture
Web 2.0 accelerates business unbundling by reducing interaction costs. Its customer-centric approach, .harnessing collective intelligence and creating an environment or platform of intellectual exchange., lead to app stores and open development initiatives. In a way, Web 2.0 opened the doors to cost effective out-sourcing. In order to prevail in the acceleration of business unbundling and market fragmentation even lower interaction costs are required, fueling the operational model of Web 2.0. Constant change of suppliers, services, vendors, and technologies is not something telecoms were very fond of so far, as a natural result of their focus on long- term strategic network investments. What they needed was a design framework. And not just any framework, but one that is
- Service and customer oriented;
- Allows the reuse of services, applications, and functional behavior;
- Permits agile change in business processes on top of existing services and information flows;
- Supports real-time monitoring of services and information flows;
- Allows the exposure of enterprise processes, services, and functions to third parties within and outside the enterprise.
Like so often such a framework already existed since the early nineties. This design framework was called the Service Oriented Architecture (SOA).
Cloud Business Model
You need to align your IT with a very specific Service Oriented Architecture to be compatible with the operational model of Web 2.0, while being able to source specific flexible and agile services from specialized external companies – 3rd parties – and to unbundle and re-bundle your business as needed. However, ASPs moved the complexity from your basement to their basement – you are now running the servers somewhere else, but they are still run on specific servers. You also usually only pay for the hosting, not the software itself, and ASPs also usually host one customer per instance of the software. The complexity remains. What is missing is the business design of the operational aspects as well as architectural design: you probably need to do something different or new in order to engage and disengage quicker with 3rd parties and cater to the Web 2.0 operational model. These challenges along with some changed economics of datacenter and network operations created six characteristics for the Cloud-way to consume or offer services: virtualized resources, elastic resource utilization, automation, utility pricing, self-service provisioning, and managed operations.
Web 2.0 operational model, SOA, and the Cloud business model
For telecoms, Cloud is a business model (again: in a broad sense) of providing services that caters to a Web 2.0 operational model and is manufactured within a Service Oriented Architecture (the free eBook describes the evolution of Cloud in more in detail).
