for IT -- Sept -27

for IT -- Sept -27

;JP;
ANPAc..r..
IT-infrastructure-needs
JP/ /

Infrastructure: Trend, need, cost or investment?

By Paulus Bambang WS

JAKARTA (JP): In the face of AFTA, just 16 months away, every
company in this region, like it or not and ready or not, despite
internal problems such as debt restructuring and capital
expenditure limitation, will have to compete with global players.

Forms of competition will change rapidly and will often be
unprecedented. Many previous theories will have to be reviewed
due to the huge differences in speed, velocity and complexity
compared with those of the decade before.

There will be at least three conditions during the
implementation of AFTA in 2003 and APEC in 2010 that will have to
be carefully anticipated by businesspeople, as follows:

The first is that customers will be totally in control. With
Internet technology, they will have more choices than ever
before. While their behavior, wants and needs will be carefully
tracked and observed by companies, likewise they will also track
and scrutinize every movement of each product, including its
innovations and substitutions in the entire industry.

Customers will become smarter and possess more complete
information prior to decisions of purchase. Interconnectedness
between customers will become more prevalent, so that success in
serving one customer will be of paramount importance and failure
to serve one customer could bring fatal results. Zero defect or
at least "6 sigma quality" will be a must if you want to become a
real global customer-centered organization.

Second, speed and velocity of information and transaction is
just one click away. This means the entire business process will
radically change to become "real time at the speed of thought".
Inventory management, cash management and manufacturing
facilities will be more open and transparent to customers. Each
requirement must get an immediate response, otherwise consumers
will quickly move to another source. This will be made faster by
the Internet technology, which is currently at its initial stage.

The third very important trend is that innovation and product
development cycle will become shorter and shorter. Unlike before
new products and services will be introduced to the market in
months rather than years or decades. Hence, the capability to
blend the strength of knowledge management with Research and
Development capacity will become very vital.

From the above three conditions, it is obvious that IT will
play a crucial role for the survival of businesses in the coming
new era. It is irrefutable that, despite the Dot Com and Nasdaq
crashes, IT will no longer be a luxury item, but a major artery
for the lifeblood of businesses in the competitive era in the
near future.

IT readiness

Although AFTA (ASEAN Free Trade Agreement) is getting close,
many Indonesian companies are not able to do much. They have not
been able to make final and full settlements of debts incurred in
the precrisis period, let alone think about IT development. Other
ongoing problems that increase their burden are the unstable
exchange rate and political situation; so many doubt our
readiness to compete in AFTA. Businesspeople, economy observers
and the government should be fully aware of this condition.
Otherwise Indonesia, the biggest market in Southeast Asia, might
experience a second colonization -- an economic colonization --
without being able to rise as a reliable manufacturing nation.

Executives should be bold enough to end this vicious circle by
selecting the correct priorities to achieve superiority in the
coming competition, namely by a fundamental straightening-up.

Phase One. Looking outward and realizing that the competition
is real and severe. The three conditions mentioned above will
have a major influence on the ways businesses are conducted in
the future. We must start to think in the wider scope of ASEAN
rather than the narrow borders of Greater Jakarta. We should not
think about protection but competition and we must be honest with
the realities: whether our company will survive when AFTA is
implemented.

Phase Two. Looking forward. Carly Fiona, both the former and
current chief executive officer of Hewlett Packard, is a
monumental example in finalizing the mega merger between Hewlett
Packard and Compaq some time ago.

Carly wrote: "Looking forward is about how we can extend our
core assets and apply them in new adjacent markets. We can fuel
and capitalize on change by providing access to information and
communication technologies where it currently doesn't exist to
create growth opportunities in the global ecosystem. As
entrepreneurs, we are always asking: 'Where will the next fast-
growing market come from? Where will new ideas come from? Where
will our customers come from?' We can begin to think about the
answers to these questions by thinking about imbalance in the
global ecosystem."

To prepare a correct strategy based on input from "Looking
outward" and "Looking forward", an internal straightening-up
becomes inevitable. This takes us to the next phase.

Phase Three. Looking inward. This activity is similar to
looking at oneself in the mirror, seeing the truth and acting on
the truth. Courage is required to change old styles with new
styles, with new technologies, with new competence and if
necessary, even with new blood.

Gary Hamel said: "In order to survive, companies need to
mirror the internet itself. They need to be open, democratic,
tightly networked, experimental, endlessly adaptable and utterly
restless."

This becomes easier when our IT infrastructure is well
organized. For example, hardware that includes multiuser systems,
servers, single-user system, PC and workstation as well as data
communications equipment like local area network, internet design
and intranet access.

These are "must-have" items which must be continuously adapted
to business requirements. The software should include software
infrastructure system, application tools and application
solutions that fit the new business processes and match the new
rules of the business game.

A consultant is needed so that the hardware and software
function to the optimum requirement. The consultant should cover
the following areas: consulting, implementation, operational
services, and training and education as well as support services.

If budgeting is the problem, then leasing should be an
attractive alternative. For the past few weeks quite a number of
companies have been offering financing facilities for both
hardware and software. Cost wise it becomes higher due to the
interest, but it is a big help to cash flow and it changes
capital expenditure investment into operating expenses.

Another alternative, which is also today's trend, is
outsourcing, meaning a company pays only costs according to a
certain scheme, such as pay per usage, monthly payment, time and
material costs, joining fee plus per user cost. This alternative
will help a great deal though not giving the most sophisticated
solution due to limited funds and human resources. The weakness
is, of course, in its high dependability on the supplier of
outsourcing services.

There are several factors to be taken into consideration in
choosing the budgeting alternatives and implementation of IT
infrastructure:

Factor number 1. Speed and complexity of program. The faster
its requirement and the more complex its infrastructure, in
today's financial and economic condition, companies are well
advised to be more cautious. Here, risk sharing becomes
preferable, therefore, leasing, subcontracting and outsourcing
are correct choices. Risk sharing will also make the vendor more
careful in designing a whole concept and in choosing the hardware
and software. Unarguably the total expenses will be greater than
a direct purchase but when deducted by the risks of
malfunctioning programs as well as obsolete technology, the
difference in the cost can then be considered as "insurance to
get the best".

Factor number 2. Limited capability of human resources and an
urgent requirement for a competitive edge ("a must-have
investment"). In this situation a reliable Application Service
Provider is recommended, such as the use of BCA's ATM and
internet network to speed up distribution and communication with
customers. This type of payment per usage will reduce total cost
of ownership in the long run considering the high costs involved
in hardware, software and brainware.

Factor number 3. Branding to strengthen company position. In
this case it is better to use strategic alliances with a profit
sharing scheme or Application Service Provider (ASP). Normally
this is done with a renowned vendor, so that such synergy will
indirectly enhance the company's image for example an airline
using Singapore Airlines' Krisflyer as its ASP or an automotive
company in conjunction with Astra Group as the ASP famous for its
cost effectiveness. Comparably the costs in this scheme are
higher, but the difference should again be considered as
marketing and promotion costs.

Factor number 4. Need for total integration. Here, an
experienced implementor and an entire software package are
required. A single direct purchase is advised and should anyone
offer a joint financing and operation venture, such can be given
consideration if the total cost of ownership is lower in the long
run.

The question that remains is whether there is another way to
anticipate the future competition based on "outward looking" and
"forward looking" concepts, aside from the maximum usage of IT.

The answer is a "yes". The manual system will still exist.

But for how long?

IT is the accelerator to succeed in the fast lanes of the
global competition era. Your investment today will decide the
survival of your company in the future.

(The writer is the managing director of Astra Graphia IT
Solution).