Jones Lang LaSalle
Future Office
The very near future, that is, for six areas where technology is transforming business in dramatic fashion. CFO Asia examines what finance executives can do to manage the change.
Cesar Bacani, CFO Asia
March 27, 2006
Inside Hewlett Packard's CoolTown IT-prototypes showcase in Singapore, Des Yee is in full steam. "This has a biometrically sealed chip," he says, holding up an ordinary looking ID card. "During the personalization process, we scan your thumbprint, capture your signature, take a three-point biometric picture of your face, put in a PIN number or even do a DNA swab for encoding on this chip. Then, depending on the level of security required by your company, this machine will read your thumbprint and compare it with what is embedded on the chip, or your signature, or your face or your DNA swab. Pretty scary, huh?"
Yee, who is director technologist for Asia Pacific and Japan of Hewlett-Packard (HP), the U.S. IT-solutions company, moves on to a new radio frequency ID (RFID) application. "You can now tag brochures, medical records, or whatever paper-based applications you have and put an RFID tag on a tag on a tag on a tag," he says, pointing to a document tray filled with a pile of brochures. "Previous to this, you could not do that, for the reason that if you put an RFID tag on top of itself, it will conflict. This in-tray, developed by Magellan Technology in Australia, can read all the tags inside it. A middleware allows your computer to communicate with the tray and tell you which documents are in there."
Is this Asia's future office? Better believe it. Perhaps DNA-capable ID systems are not for everyone, but RFID-tagged top-secret contracts and several years' worth of tax documents are certainly useful in any firm. And what about an executive PDA that is not only e-mail-capable, but also shows the latest financial statements, sales, inventory levels, and other real-time data while you are on the move? "Our MC50 enterprise digital assistant has a faster processor and more memory than a PDA and can go 10 to 12 hours without a recharge," says Mike Muller, president of Symbol Technologies Asia. The gadget connects to ERP, CRM, and other business applications via a wireless local-area network that allows high-speed access to data within a few hundred feet from the base station.
More important than the James Bond gadgetry are ever more sophisticated software suites that predict future trends, allowing companies to try and forestall profit-sapping developments. "We have a Fortune 100 customer called Ingram Micro, which markets computer systems to interim sellers," says Richard Hale, analytics leader of IBM's worldwide team for business intelligence. "When salespeople turn on their computer in the morning, a dashboard comes up. If there's a red light, the system is predicting that a customer is showing characteristics that it is starting to buy computers from another company. So the salesman is alerted into paying special attention to that customer."
The Future Is Now
Ingram's sales dashboard is an example of a technology that's becoming widely available, developed by global vendors such as Cognos, Hyperion, IBM, and SAS. Indeed, some of the gadgets on show at HP CoolTown are already in limited adoption. The Hong Kong government, for example, is replacing citizen ID cards with embedded-chip ones containing thumbprints and photographs, though not DNA swabs. RFID is now in airports (that strip of plastic on your luggage has an RFID transmitter telling conveyor belts which carousel it should go to) and in Asian factories serving America's Wal-Mart, which requires its suppliers to use RFID tags.
What this tells Asia's CFOs is that the future is just around the corner, and they should start preparing for it now. Some might think that their current systems are adequate, thank you very much. But it would be difficult to maintain that kind of thinking when competitors start making strategic decisions faster, come up with new products sooner, treat their clients better, and, most disturbingly, raid your own customer base more efficiently and effectively. Once one company crosses over, the playing field becomes uneven, and everyone else has to follow or perish.
It's not just an issue of operational edge. "I don't think young people today, when they start looking for work, would want to join a company that is less adequate (in terms of technology) than what they are used to at home and in school," says Singapore-based Michel Gambier, general manager of Microsoft's information worker business in Asia Pacific. The technologically challenged Asian office may end up with a second-rate workforce — and a third-rate bottom line.
So what is the CFO to do? The first thing, of course, is to know what's coming up the pike and see which ones are likely to be what their enterprise will need. CFO Asia spoke with analysts, developers, vendors, CIOs, and CFOs for clues on what may become standard technology in the enterprise environment over the next 5 to 10 years. We think the following areas of business operations are most likely to see technological changes, and therefore should be looked at seriously by CFOs.
1: Smart Cards
At Sun Microsystems in Hong Kong, employees use chip-embedded ID badges to open office doors. "I can visit a Sun office anywhere in the world and enter the premises with this card," says Audrey Lam, a marketing specialist at Sun in Hong Kong. What's more, she can use the same badge to access her own files wherever she is in the Sun world. The company uses a thin-client computer system whose processing power and storage lie with central servers, not the usual desktop PCs with their own central processing unit and hard disks. So a staffer can slip his ID card into a slot in any Sun office computer and access his desktop, enabling him to work in whichever city he happens to be.
That same smart card is on track for many more uses. "We are introducing cards that have 500 megabits of memory on them," says Martin McCourt, president for Asia of Luxembourg-based smart card technology provider Gemplus International. "So essentially you've got a hard drive in the card, and one that is secure. You can put a thumbprint in there, photographs, your entire phone book." And even DNA information. The HP system that Des Yee was putting through its paces, which Bulgaria is adopting for its national ID system, has the option of a DNA reader. You swab saliva from inside a person's cheek, put the cotton tip in the reader along with the smart card, and the system will tell you in minutes whether the person is who he says he is.
Only the most security-conscious company will go the DNA route. Of more general interest is the use of the smart card to access employee desktops at home or wherever else they are (not just in any office location, as is the case with Sun Microsystems). Currently, some companies allow employees to access company resources outside the office through the internet and the use of a password system. A smart card, slipped into a reader connected to the PC, makes for added security, since the user will need to physically possess the card and use his password. A third safeguard is a thumbprint reader, making sure the person accessing the company portal is indeed the employee.
You can load the smart card badge with other features, such as an RFID tag. (This tag is a tiny radio transmitter that comes in a variety of forms, including one that can withstand 275 degrees centigrade heat in an oven, used in automotive parts, and another that utilizes conductive ink instead of copper for the antenna.) It will then be possible for the office system to know where an employee is at any given moment, assuming he is wearing his ID badge. This was put in practice in Singapore during the SARS scare in 2003. Through RFID tags, suspected victims of the disease were continuously tracked during their hospital stay, allowing doctors to quarantine everyone who had contact with patients later confirmed to be SARS-positive.
Privacy concerns and cost will probably limit the use of RFID on ID badges to hospitals and high-security environments, but the capacious smart cards may be used widely as laptops, tablets, PDAs, and other mobile devices are allowed access to business applications and confidential company data outside the office. "One of the things I see going forward is that people are going to be more and more mobile," says McCourt. "The challenge for the company is to make certain that whoever is trying to access company resources through the mobile-phone networks, say, is really authorized to do so. So there you can use smart cards to authenticate the user."
2: Enterprise Portals
The move to mobility is supported by the migration of company applications and data to the internet. "We're seeing a lot of companies in Asia investing in an enterprise portal," says Lai Kim Fatt, chief knowledge officer at NCS, the IT services subsidiary of Singapore Telecom. (It was Lai, then CIO of the Singapore government's Defense Science & Technology Agency, who developed the RFID-based monitoring of SARS cases.) A portal typically interfaces with customers, suppliers, and the public, but also stakes out a private intranet area for company executives and employees to access from inside and outside the office.
One building block is broadband, which allows speedy uploading by the company's enterprise portal server of applications and data and equally fast downloading and processing by staff. An indication of how ready Asian businesses are to embrace broadband — and thus migrate to the web — comes from a study by Dutch research firm Telecompaper. As of third quarter 2005, Hong Kong led the rest of Asia in broadband subscribers with 73 percent of all households, followed by South Korea with 67 percent. Penetration rates in Taiwan, Singapore, Japan, and Australia were in the 31 percent to 55 percent range. Chinese broadband subscriptions (6.6 percent of households) grew 90 percent from third quarter 2004.
Another driver of enterprise portal adoption is the rise of VPN — virtual private network — technologies. Banks and other high-security organizations use dedicated lines for their portals, but many other companies now have the cheaper option of utilizing the public internet. Security is provided by a VPN that either encrypts or encapsulates information before passing it on to the non-secure web, and does other things such as authenticate passwords.
More options are opening up as telecom companies join the fray. BT Group, the U.K. telecom giant, is introducing in Asia a menu of IT services that bypass the public internet altogether for mission-critical applications such as CRM software and data beamed wirelessly to a laptop. Instead, clients use BT's internet protocol (IP) global backbone and those of its partners, minimizing the danger, says the company, of the business getting hit by congestion or disruption on the public internet. And because BT and its partners have fixed-line, mobile, and wireless broadband infrastructure, clients can tap its services using any computing and phone device anywhere and anytime.
BT's solution anticipates the convergence of fixed-line broadband, wireless local area networks, and mobile roaming in the enterprise space, a trend that is gaining strength in cell phone-savvy Asia as current voice-and-text-only networks are replaced by 3G, which can handle streaming videos and high-volume data. "You talk to companies here about mobile wireless, and nine of ten, no, ten of ten, would be keenly interested," says Horace Chow, vice president for Asia Pacific of U.S. software giant Sybase. He expects worldwide spending on wireless infrastructure and application services to reach nearly US$60 billion in 2009, twice the total in 2004. This includes spending on WiMAX, which connects wireless local area networks with each other to allow high-speed access to data across an entire country.
3: Death of the PC?
If office devices can access the enterprise portal anywhere via wireless broadband, does this mean the demise of the office workstation as we know it? After all, why should the company provide staff with both a desktop PC in a cubicle and a portable PC for mobile computing? One mobile PC for use inside and outside the office should be enough. Moving forward, what about a portable device combining computing, telephony, and ID authentication? A mobile phone activated by an authorized thumbprint is slipped into a "notebook PC" that is virtually just a screen, keyboard, and battery. Like the current thin-client system at Sun, processing and storage are done by the company's servers, accessed by the phone through a wide-area wireless connection such as WiMAX. The phone is slid out if the user wishes to make or answer a call.
Martin Gilliland, research director, client platforms, at Gartner in Singapore, sees cost savings driving the development of such a thin-client mobile device (though not necessarily one with a telephony component). "It's not a notebook because it doesn't have the motherboard CPU, a hard drive, and heat sink," he says. "You take a lot of cost out by reducing all that hardware expense. I'm guessing about 50 percent." But Gilliland doesn't expect thin clients to kill thick clients, that is, the present-day PCs with their own CPU and storage, at least in the next ten years. "The cost of the PC is coming down rapidly, while security and manageability are going up equally rapidly," he explains. "Developments from both hardware and software vendors are making its features and functions considerably more useful to the enterprise, such as 64-bit hardware and virtualization software."
Microsoft is leading the charge here. Gambier, the Asia Pacific general manager, says the software giant will launch this year a vastly improved Microsoft Office suite boasting new features such as business intelligence, and the new operating system Vista. "For the foreseeable future, we see the majority of organizations still using the thick client model," Gilliland concludes. "However, we expect the thin client model to grow faster."
But in the thick-client space, desktop PCs are expected to be eventually replaced by notebooks, laptops, and tablet PCs. "Enterprises will be going more and more mobile as the cost gap between desktops and laptops continue to narrow, and their capabilities converge," says Francis Kam, marketing director for Dell China. "The faster the costs go down, the faster will be the acceleration from desktop to notebook replacement." The total cost of ownership of a notebook versus a desktop is currently 30 percent to 40 percent higher, he adds, because of expensive mobility chipsets, batteries, cooling systems, extra-strong monitors, and robust chassis. Even so, says Kam, "we're seeing more and more of our customers replacing desktops with notebooks."
Enterprise digital assistants (EDAs), such as those made by Symbol, are complements to notebooks, not replacements, chiefly because of screen size.
The cramped buttons are another inconvenience, but wireless full-size keyboards can help. At HP CoolTown, Yee demonstrated yet another alternative, a prototype attachment that beams a holographic keyboard onto any flat surface. Symbol's EDAs currently download enterprise applications and data only within the office, using the wireless local area network, but it is developing a model that links with mobile-phone networks. Users of this EDA will be able to access company applications anywhere and anytime, with the speed accelerated if downloading via a 3G network.
4: Internet Telephony
After putting in a broadband infrastructure, a company will have the option of voice-over-internet protocol (VoIP). This involves carving out a portion of the bandwidth for telephone calls. "You don't need to set aside too much, actually, because voice is only 3 to 4 KB," says David Tantana, business development consultant at software company Corebridge (Hong Kong). The firm, whose headquarters are in the U.K. and R&D center in France, reaps substantial savings because VoIP routes IDD calls through the internet, bypassing the networks — and fees — of traditional telcos.
Corebridge has also brought down its mobile roaming expenses, a by-product of the proprietary Corebridge Application Suite integrating telephony with data that it sells to other companies. "I spent virtually the whole day in Jakarta on my mobile phone calling overseas, and the bill came to just HK$45," says Neil Orvay, Corebridge's managing director and CFO. Through his phone's instant-messaging client, he accessed the company's Application Suite server in Hong Kong and instructed it to call his mobile phone and then patch him on to an overseas number. As a result, the phone company treated Orvay's call as originating from Hong Kong, not as pricey mobile roaming.
The Application Suite's main function is to put together the PBX phone system of a company and its databases, including CRM and email systems. The result is that whenever an office phone rings, the application server automatically brings up on the phone's associated computer all the information the company has about the caller, thus improving customer service and productivity. The system also captures information about all outgoing calls, email, SMS, and instant messaging, data that managers can mine to assess employee productivity. If a particular salesperson devotes 60 percent of his calls to customers that account for only 10 percent of revenues, for example, managers are alerted about the mismatch.
5: Business Intelligence
Business applications like Corebridge's are expected to become mainstream in the near future as Asian companies lay down basic broadband and wireless infrastructure, build enterprise portals, and implement ERP, CRM, and other enterprise software applications. All these transactional processes throw up huge volumes of information that can tell the company valuable things about future trends, deepen its understanding of itself, and generally sharpen its competitive edge — if the data can be mined, cleaned up, and analyzed. This is the business of business intelligence, or BI.
"Usage of BI in Asia Pacific is growing significantly," reports Matthew Mok, senior manager in Hong Kong, financial intelligence practice, for leading U.S. business analytics provider SAS. "In 2004, total revenue for the BI industry in Asia Pacific was US$230 million. By 2010, we will see spending on BI total US$600 million." Says John Kiesel, business unit executive, Worldwide Business Intelligence, at IBM: "You will see BI inside every application that's delivered to the desktop in five years' time in Asia. Business intelligence is available only to a company's business analysts today; tomorrow it would be available to everyone in the office."
Users will no longer need to frame queries and set parameters in order to get answers to specific questions, as business analysts do now. Instead, the BI software will analyze historical and real-time data continuously and alert staffers to potential problems through their laptop, EDA, and even mobile phone. "And not all BI is decision support," adds Hale, the IBM analytics leader. "Some really advanced BI will change the operation of the company automatically." One such system is already in place at some stores in the U.S. When there are bargain sales on beer, for example, the BI system will automatically increase replenishment orders for chips and pretzels.
The BI software can also track employee performance, grade, and rank it, and publicly display the results. "Bank One in the U.S. was losing something like US$500 million a year because it was driven by revenue growth, not profits," Kiesel recounts. "When Jamie Dimon became its CEO [in 2000], he gave finance officers 90 days to put together a portal containing all the tools that would help branch managers improve their unit's profitability. The portal also had a BI application that ranked every manager based on his or her unit's financial results. The top performers got big bonuses. The bottom ones got canned." It was stressful but effective. "In two years," says Kiesel, "Bank One made US$3 billion in profit."
6: Virtual Collaboration
How people work will obviously change as a result of developments in office infrastructure, IT tools, and business processes. "They will free up the organization and enable it to have a worldwide labor pool, so you can use people from everywhere," says Kathy Harris, group vice president at Gartner. "The hottest workplace application will be collaboration." With high-speed access to enterprise portals, mobile devices, and a constant stream of company data, staffers can easily form and reform various working groups across the global organization, and even tap suppliers, customers, and other outsiders, as they go about their daily tasks.
Harris estimates that up to 80 percent of all knowledge sharing today is done through email, but she sees new collaboration drivers in instant messaging, blogs, wiki (a server software that allows anyone to create and edit web pages) and web conferencing. "Organizations can also engineer communities, such as those that build customer communities out on the web," she adds. "These customers talk and give each other advice about the company's products, pulling a lot of the work out from call centers and company agents."
Last year Microsoft issued an upgraded Live Meeting web conferencing service, which runs on any PC with an internet connection. "You can use Live Meeting with a camera, you can use voice, you can use document sharing, or everything at once," says C.K. Taneja, general manager in India of U.S. market researcher Greenfield Online. The system allows staffers from different parts of the world to collaborate on the same Excel spreadsheet, Word document, Powerpoint presentation, and other Microsoft applications, as well as PDF files. Every participant sees and can make changes to the document on his PC screen in real time.
The faces are tiny on a computer screen, but a Live Meeting session can be projected to a full screen in the office conference room. Taneja says he detects no time lag or synchronization problems if the session is hosted in the U.S. or Singapore, where Live Meeting has servers. "But there would be some time lag if you host in India, because Live Meeting does not yet have a server here," he adds. Live Meeting's competitors include WebEx, eCollaborate, and Cisco's MeetingPlace.
Coming up: virtual-reality conferencing. Working with Hollywood studio DreamWorks, HP is developing Halo, which requires special rooms with very high bandwidth connectivity and wall-to-wall projection screens. "You can have a user sitting here in Singapore and one in California and one in New York and essentially it looks like you are sitting in a single room talking to a group of people across the desk," says Steve Huhn, HP's worldwide vice president of IT outsourcing/managed services. "Halo is engineered to make people feel intimate, to have the ability for eye contact, and see facial expressions and body language."
These collaborative technologies work just as well with third-party providers, helping boost the trend of global multi-sourcing, in which companies hire a multitude of specialists from anywhere around the world to handle various business processes so they can focus on their core competency. By 2009, predicts Gartner, Asia Pacific companies will be spending US$7.8 billion on business process outsourcing, 79 percent more than in 2004, and US$15 billion on outsourced IT services, up 63 percent in five years.
Among the new service providers will be pay-as-you-go public grid computing centers. In March, Sun will open in the U.S. a "retail grid" with thousands of Sun Fire x64 servers. It will charge clients US$1 per CPU per hour to run complex calculations such as Monte Carlo simulations of risks and analysis of geological surveys.
Multi-sourcing should be helped along by virtualization technologies that make various databases running on multiple servers work as one. Virtualization will be extended to the hardware level this year when Intel ships VT chips that allow multiple applications to run in the same space. Users will see a single, unified interface that masks the complex of resources fueling the company's operations, from multi-location data centers to supplier and customer networks to global outsourcing providers. And because a company's servers and PCs are, in effect, one virtual machine, workloads can be parceled dynamically depending on which parts of the network are underutilized.
Your Move, CFO
How long do companies in Asia have before this tsunami of IT changes descends on them? Not that much, it appears. "In the old days, you spent millions on an IT project with a three- to four-year life cycle," says Sybase's Chow. "No one wants that today. Now, the treasury department wants this, credit cards wants that. They cannot wait for the entire organization to move. They need business intelligence, RFID, whatever, now, this minute." This poses a challenge to the CFO and the CIO, who have to make sure that the various systems can eventually be knitted together.
More and more, it is the business side, rather than the IT department, that drives technology adoption across Asia. Says Chow: "Some IT people tell me, 'If I know one more thing, I'm going to explode.' But the business people always show interest. They would say, 'That guy down the road is doing this, so I have to do it too.'" Often, IT simply executes what the business units decide to do, all the more reason for the CFO and CIO to keep lines open.
The good news is that companies that are reasonably up to date with their IT systems will need only incremental upgrades, not a total overhaul. "It's not like you have to change everything," says Lai of NCS. "You must be very clear about what is serving you well and which you don't have to change so much." The question of best-of-breed solutions versus one vendor responsible for everything will resurface with new urgency, as will the issue of open source versus proprietary software. Dion Wiggins, vice president and research director at Gartner, expects open-source software solutions to directly compete with closed-source products in all software infrastructure markets by 2008.
"Open source is already mature in key areas such as development tools, operating systems, and security," he says. "Directory services, management, and application services are a little bit behind, with relational databases further down." Wiggins notes the rise of Asianux, a consortium between Hansoft in Korea, Miracle Linux in Japan, and Red Flag Linux in China. The three-country coverage (with the prospect of more joining) may encourage global vendors to certify their applications on this open-source platform.
As they move forward, however, CFOs must not forget that machines do not determine success. As vice president for finance, Asia, at U.S. software company Computer Associates, Jeff Hunt has business-intelligence applications at his fingertips. "BI is very, very powerful because it gives you a view across your business with a dashboard, rather than having to go to 20 or 30 places and ask the same questions," he says. But has the system ever told him something that his gut instinct says is plain wrong? "Absolutely," says Hunt. As it was in the past and as it is today, the human software will remain the most important technology in the office of the future.
© CFO Publishing Corporation 2006. All rights reserved.
Future Office
The very near future, that is, for six areas where technology is transforming business in dramatic fashion. CFO Asia examines what finance executives can do to manage the change.
Cesar Bacani, CFO Asia
March 27, 2006
Inside Hewlett Packard's CoolTown IT-prototypes showcase in Singapore, Des Yee is in full steam. "This has a biometrically sealed chip," he says, holding up an ordinary looking ID card. "During the personalization process, we scan your thumbprint, capture your signature, take a three-point biometric picture of your face, put in a PIN number or even do a DNA swab for encoding on this chip. Then, depending on the level of security required by your company, this machine will read your thumbprint and compare it with what is embedded on the chip, or your signature, or your face or your DNA swab. Pretty scary, huh?"
Yee, who is director technologist for Asia Pacific and Japan of Hewlett-Packard (HP), the U.S. IT-solutions company, moves on to a new radio frequency ID (RFID) application. "You can now tag brochures, medical records, or whatever paper-based applications you have and put an RFID tag on a tag on a tag on a tag," he says, pointing to a document tray filled with a pile of brochures. "Previous to this, you could not do that, for the reason that if you put an RFID tag on top of itself, it will conflict. This in-tray, developed by Magellan Technology in Australia, can read all the tags inside it. A middleware allows your computer to communicate with the tray and tell you which documents are in there."
Is this Asia's future office? Better believe it. Perhaps DNA-capable ID systems are not for everyone, but RFID-tagged top-secret contracts and several years' worth of tax documents are certainly useful in any firm. And what about an executive PDA that is not only e-mail-capable, but also shows the latest financial statements, sales, inventory levels, and other real-time data while you are on the move? "Our MC50 enterprise digital assistant has a faster processor and more memory than a PDA and can go 10 to 12 hours without a recharge," says Mike Muller, president of Symbol Technologies Asia. The gadget connects to ERP, CRM, and other business applications via a wireless local-area network that allows high-speed access to data within a few hundred feet from the base station.
More important than the James Bond gadgetry are ever more sophisticated software suites that predict future trends, allowing companies to try and forestall profit-sapping developments. "We have a Fortune 100 customer called Ingram Micro, which markets computer systems to interim sellers," says Richard Hale, analytics leader of IBM's worldwide team for business intelligence. "When salespeople turn on their computer in the morning, a dashboard comes up. If there's a red light, the system is predicting that a customer is showing characteristics that it is starting to buy computers from another company. So the salesman is alerted into paying special attention to that customer."
The Future Is Now
Ingram's sales dashboard is an example of a technology that's becoming widely available, developed by global vendors such as Cognos, Hyperion, IBM, and SAS. Indeed, some of the gadgets on show at HP CoolTown are already in limited adoption. The Hong Kong government, for example, is replacing citizen ID cards with embedded-chip ones containing thumbprints and photographs, though not DNA swabs. RFID is now in airports (that strip of plastic on your luggage has an RFID transmitter telling conveyor belts which carousel it should go to) and in Asian factories serving America's Wal-Mart, which requires its suppliers to use RFID tags.
What this tells Asia's CFOs is that the future is just around the corner, and they should start preparing for it now. Some might think that their current systems are adequate, thank you very much. But it would be difficult to maintain that kind of thinking when competitors start making strategic decisions faster, come up with new products sooner, treat their clients better, and, most disturbingly, raid your own customer base more efficiently and effectively. Once one company crosses over, the playing field becomes uneven, and everyone else has to follow or perish.
It's not just an issue of operational edge. "I don't think young people today, when they start looking for work, would want to join a company that is less adequate (in terms of technology) than what they are used to at home and in school," says Singapore-based Michel Gambier, general manager of Microsoft's information worker business in Asia Pacific. The technologically challenged Asian office may end up with a second-rate workforce — and a third-rate bottom line.
So what is the CFO to do? The first thing, of course, is to know what's coming up the pike and see which ones are likely to be what their enterprise will need. CFO Asia spoke with analysts, developers, vendors, CIOs, and CFOs for clues on what may become standard technology in the enterprise environment over the next 5 to 10 years. We think the following areas of business operations are most likely to see technological changes, and therefore should be looked at seriously by CFOs.
1: Smart Cards
At Sun Microsystems in Hong Kong, employees use chip-embedded ID badges to open office doors. "I can visit a Sun office anywhere in the world and enter the premises with this card," says Audrey Lam, a marketing specialist at Sun in Hong Kong. What's more, she can use the same badge to access her own files wherever she is in the Sun world. The company uses a thin-client computer system whose processing power and storage lie with central servers, not the usual desktop PCs with their own central processing unit and hard disks. So a staffer can slip his ID card into a slot in any Sun office computer and access his desktop, enabling him to work in whichever city he happens to be.
That same smart card is on track for many more uses. "We are introducing cards that have 500 megabits of memory on them," says Martin McCourt, president for Asia of Luxembourg-based smart card technology provider Gemplus International. "So essentially you've got a hard drive in the card, and one that is secure. You can put a thumbprint in there, photographs, your entire phone book." And even DNA information. The HP system that Des Yee was putting through its paces, which Bulgaria is adopting for its national ID system, has the option of a DNA reader. You swab saliva from inside a person's cheek, put the cotton tip in the reader along with the smart card, and the system will tell you in minutes whether the person is who he says he is.
Only the most security-conscious company will go the DNA route. Of more general interest is the use of the smart card to access employee desktops at home or wherever else they are (not just in any office location, as is the case with Sun Microsystems). Currently, some companies allow employees to access company resources outside the office through the internet and the use of a password system. A smart card, slipped into a reader connected to the PC, makes for added security, since the user will need to physically possess the card and use his password. A third safeguard is a thumbprint reader, making sure the person accessing the company portal is indeed the employee.
You can load the smart card badge with other features, such as an RFID tag. (This tag is a tiny radio transmitter that comes in a variety of forms, including one that can withstand 275 degrees centigrade heat in an oven, used in automotive parts, and another that utilizes conductive ink instead of copper for the antenna.) It will then be possible for the office system to know where an employee is at any given moment, assuming he is wearing his ID badge. This was put in practice in Singapore during the SARS scare in 2003. Through RFID tags, suspected victims of the disease were continuously tracked during their hospital stay, allowing doctors to quarantine everyone who had contact with patients later confirmed to be SARS-positive.
Privacy concerns and cost will probably limit the use of RFID on ID badges to hospitals and high-security environments, but the capacious smart cards may be used widely as laptops, tablets, PDAs, and other mobile devices are allowed access to business applications and confidential company data outside the office. "One of the things I see going forward is that people are going to be more and more mobile," says McCourt. "The challenge for the company is to make certain that whoever is trying to access company resources through the mobile-phone networks, say, is really authorized to do so. So there you can use smart cards to authenticate the user."
2: Enterprise Portals
The move to mobility is supported by the migration of company applications and data to the internet. "We're seeing a lot of companies in Asia investing in an enterprise portal," says Lai Kim Fatt, chief knowledge officer at NCS, the IT services subsidiary of Singapore Telecom. (It was Lai, then CIO of the Singapore government's Defense Science & Technology Agency, who developed the RFID-based monitoring of SARS cases.) A portal typically interfaces with customers, suppliers, and the public, but also stakes out a private intranet area for company executives and employees to access from inside and outside the office.
One building block is broadband, which allows speedy uploading by the company's enterprise portal server of applications and data and equally fast downloading and processing by staff. An indication of how ready Asian businesses are to embrace broadband — and thus migrate to the web — comes from a study by Dutch research firm Telecompaper. As of third quarter 2005, Hong Kong led the rest of Asia in broadband subscribers with 73 percent of all households, followed by South Korea with 67 percent. Penetration rates in Taiwan, Singapore, Japan, and Australia were in the 31 percent to 55 percent range. Chinese broadband subscriptions (6.6 percent of households) grew 90 percent from third quarter 2004.
Another driver of enterprise portal adoption is the rise of VPN — virtual private network — technologies. Banks and other high-security organizations use dedicated lines for their portals, but many other companies now have the cheaper option of utilizing the public internet. Security is provided by a VPN that either encrypts or encapsulates information before passing it on to the non-secure web, and does other things such as authenticate passwords.
More options are opening up as telecom companies join the fray. BT Group, the U.K. telecom giant, is introducing in Asia a menu of IT services that bypass the public internet altogether for mission-critical applications such as CRM software and data beamed wirelessly to a laptop. Instead, clients use BT's internet protocol (IP) global backbone and those of its partners, minimizing the danger, says the company, of the business getting hit by congestion or disruption on the public internet. And because BT and its partners have fixed-line, mobile, and wireless broadband infrastructure, clients can tap its services using any computing and phone device anywhere and anytime.
BT's solution anticipates the convergence of fixed-line broadband, wireless local area networks, and mobile roaming in the enterprise space, a trend that is gaining strength in cell phone-savvy Asia as current voice-and-text-only networks are replaced by 3G, which can handle streaming videos and high-volume data. "You talk to companies here about mobile wireless, and nine of ten, no, ten of ten, would be keenly interested," says Horace Chow, vice president for Asia Pacific of U.S. software giant Sybase. He expects worldwide spending on wireless infrastructure and application services to reach nearly US$60 billion in 2009, twice the total in 2004. This includes spending on WiMAX, which connects wireless local area networks with each other to allow high-speed access to data across an entire country.
3: Death of the PC?
If office devices can access the enterprise portal anywhere via wireless broadband, does this mean the demise of the office workstation as we know it? After all, why should the company provide staff with both a desktop PC in a cubicle and a portable PC for mobile computing? One mobile PC for use inside and outside the office should be enough. Moving forward, what about a portable device combining computing, telephony, and ID authentication? A mobile phone activated by an authorized thumbprint is slipped into a "notebook PC" that is virtually just a screen, keyboard, and battery. Like the current thin-client system at Sun, processing and storage are done by the company's servers, accessed by the phone through a wide-area wireless connection such as WiMAX. The phone is slid out if the user wishes to make or answer a call.
Martin Gilliland, research director, client platforms, at Gartner in Singapore, sees cost savings driving the development of such a thin-client mobile device (though not necessarily one with a telephony component). "It's not a notebook because it doesn't have the motherboard CPU, a hard drive, and heat sink," he says. "You take a lot of cost out by reducing all that hardware expense. I'm guessing about 50 percent." But Gilliland doesn't expect thin clients to kill thick clients, that is, the present-day PCs with their own CPU and storage, at least in the next ten years. "The cost of the PC is coming down rapidly, while security and manageability are going up equally rapidly," he explains. "Developments from both hardware and software vendors are making its features and functions considerably more useful to the enterprise, such as 64-bit hardware and virtualization software."
Microsoft is leading the charge here. Gambier, the Asia Pacific general manager, says the software giant will launch this year a vastly improved Microsoft Office suite boasting new features such as business intelligence, and the new operating system Vista. "For the foreseeable future, we see the majority of organizations still using the thick client model," Gilliland concludes. "However, we expect the thin client model to grow faster."
But in the thick-client space, desktop PCs are expected to be eventually replaced by notebooks, laptops, and tablet PCs. "Enterprises will be going more and more mobile as the cost gap between desktops and laptops continue to narrow, and their capabilities converge," says Francis Kam, marketing director for Dell China. "The faster the costs go down, the faster will be the acceleration from desktop to notebook replacement." The total cost of ownership of a notebook versus a desktop is currently 30 percent to 40 percent higher, he adds, because of expensive mobility chipsets, batteries, cooling systems, extra-strong monitors, and robust chassis. Even so, says Kam, "we're seeing more and more of our customers replacing desktops with notebooks."
Enterprise digital assistants (EDAs), such as those made by Symbol, are complements to notebooks, not replacements, chiefly because of screen size.
The cramped buttons are another inconvenience, but wireless full-size keyboards can help. At HP CoolTown, Yee demonstrated yet another alternative, a prototype attachment that beams a holographic keyboard onto any flat surface. Symbol's EDAs currently download enterprise applications and data only within the office, using the wireless local area network, but it is developing a model that links with mobile-phone networks. Users of this EDA will be able to access company applications anywhere and anytime, with the speed accelerated if downloading via a 3G network.
4: Internet Telephony
After putting in a broadband infrastructure, a company will have the option of voice-over-internet protocol (VoIP). This involves carving out a portion of the bandwidth for telephone calls. "You don't need to set aside too much, actually, because voice is only 3 to 4 KB," says David Tantana, business development consultant at software company Corebridge (Hong Kong). The firm, whose headquarters are in the U.K. and R&D center in France, reaps substantial savings because VoIP routes IDD calls through the internet, bypassing the networks — and fees — of traditional telcos.
Corebridge has also brought down its mobile roaming expenses, a by-product of the proprietary Corebridge Application Suite integrating telephony with data that it sells to other companies. "I spent virtually the whole day in Jakarta on my mobile phone calling overseas, and the bill came to just HK$45," says Neil Orvay, Corebridge's managing director and CFO. Through his phone's instant-messaging client, he accessed the company's Application Suite server in Hong Kong and instructed it to call his mobile phone and then patch him on to an overseas number. As a result, the phone company treated Orvay's call as originating from Hong Kong, not as pricey mobile roaming.
The Application Suite's main function is to put together the PBX phone system of a company and its databases, including CRM and email systems. The result is that whenever an office phone rings, the application server automatically brings up on the phone's associated computer all the information the company has about the caller, thus improving customer service and productivity. The system also captures information about all outgoing calls, email, SMS, and instant messaging, data that managers can mine to assess employee productivity. If a particular salesperson devotes 60 percent of his calls to customers that account for only 10 percent of revenues, for example, managers are alerted about the mismatch.
5: Business Intelligence
Business applications like Corebridge's are expected to become mainstream in the near future as Asian companies lay down basic broadband and wireless infrastructure, build enterprise portals, and implement ERP, CRM, and other enterprise software applications. All these transactional processes throw up huge volumes of information that can tell the company valuable things about future trends, deepen its understanding of itself, and generally sharpen its competitive edge — if the data can be mined, cleaned up, and analyzed. This is the business of business intelligence, or BI.
"Usage of BI in Asia Pacific is growing significantly," reports Matthew Mok, senior manager in Hong Kong, financial intelligence practice, for leading U.S. business analytics provider SAS. "In 2004, total revenue for the BI industry in Asia Pacific was US$230 million. By 2010, we will see spending on BI total US$600 million." Says John Kiesel, business unit executive, Worldwide Business Intelligence, at IBM: "You will see BI inside every application that's delivered to the desktop in five years' time in Asia. Business intelligence is available only to a company's business analysts today; tomorrow it would be available to everyone in the office."
Users will no longer need to frame queries and set parameters in order to get answers to specific questions, as business analysts do now. Instead, the BI software will analyze historical and real-time data continuously and alert staffers to potential problems through their laptop, EDA, and even mobile phone. "And not all BI is decision support," adds Hale, the IBM analytics leader. "Some really advanced BI will change the operation of the company automatically." One such system is already in place at some stores in the U.S. When there are bargain sales on beer, for example, the BI system will automatically increase replenishment orders for chips and pretzels.
The BI software can also track employee performance, grade, and rank it, and publicly display the results. "Bank One in the U.S. was losing something like US$500 million a year because it was driven by revenue growth, not profits," Kiesel recounts. "When Jamie Dimon became its CEO [in 2000], he gave finance officers 90 days to put together a portal containing all the tools that would help branch managers improve their unit's profitability. The portal also had a BI application that ranked every manager based on his or her unit's financial results. The top performers got big bonuses. The bottom ones got canned." It was stressful but effective. "In two years," says Kiesel, "Bank One made US$3 billion in profit."
6: Virtual Collaboration
How people work will obviously change as a result of developments in office infrastructure, IT tools, and business processes. "They will free up the organization and enable it to have a worldwide labor pool, so you can use people from everywhere," says Kathy Harris, group vice president at Gartner. "The hottest workplace application will be collaboration." With high-speed access to enterprise portals, mobile devices, and a constant stream of company data, staffers can easily form and reform various working groups across the global organization, and even tap suppliers, customers, and other outsiders, as they go about their daily tasks.
Harris estimates that up to 80 percent of all knowledge sharing today is done through email, but she sees new collaboration drivers in instant messaging, blogs, wiki (a server software that allows anyone to create and edit web pages) and web conferencing. "Organizations can also engineer communities, such as those that build customer communities out on the web," she adds. "These customers talk and give each other advice about the company's products, pulling a lot of the work out from call centers and company agents."
Last year Microsoft issued an upgraded Live Meeting web conferencing service, which runs on any PC with an internet connection. "You can use Live Meeting with a camera, you can use voice, you can use document sharing, or everything at once," says C.K. Taneja, general manager in India of U.S. market researcher Greenfield Online. The system allows staffers from different parts of the world to collaborate on the same Excel spreadsheet, Word document, Powerpoint presentation, and other Microsoft applications, as well as PDF files. Every participant sees and can make changes to the document on his PC screen in real time.
The faces are tiny on a computer screen, but a Live Meeting session can be projected to a full screen in the office conference room. Taneja says he detects no time lag or synchronization problems if the session is hosted in the U.S. or Singapore, where Live Meeting has servers. "But there would be some time lag if you host in India, because Live Meeting does not yet have a server here," he adds. Live Meeting's competitors include WebEx, eCollaborate, and Cisco's MeetingPlace.
Coming up: virtual-reality conferencing. Working with Hollywood studio DreamWorks, HP is developing Halo, which requires special rooms with very high bandwidth connectivity and wall-to-wall projection screens. "You can have a user sitting here in Singapore and one in California and one in New York and essentially it looks like you are sitting in a single room talking to a group of people across the desk," says Steve Huhn, HP's worldwide vice president of IT outsourcing/managed services. "Halo is engineered to make people feel intimate, to have the ability for eye contact, and see facial expressions and body language."
These collaborative technologies work just as well with third-party providers, helping boost the trend of global multi-sourcing, in which companies hire a multitude of specialists from anywhere around the world to handle various business processes so they can focus on their core competency. By 2009, predicts Gartner, Asia Pacific companies will be spending US$7.8 billion on business process outsourcing, 79 percent more than in 2004, and US$15 billion on outsourced IT services, up 63 percent in five years.
Among the new service providers will be pay-as-you-go public grid computing centers. In March, Sun will open in the U.S. a "retail grid" with thousands of Sun Fire x64 servers. It will charge clients US$1 per CPU per hour to run complex calculations such as Monte Carlo simulations of risks and analysis of geological surveys.
Multi-sourcing should be helped along by virtualization technologies that make various databases running on multiple servers work as one. Virtualization will be extended to the hardware level this year when Intel ships VT chips that allow multiple applications to run in the same space. Users will see a single, unified interface that masks the complex of resources fueling the company's operations, from multi-location data centers to supplier and customer networks to global outsourcing providers. And because a company's servers and PCs are, in effect, one virtual machine, workloads can be parceled dynamically depending on which parts of the network are underutilized.
Your Move, CFO
How long do companies in Asia have before this tsunami of IT changes descends on them? Not that much, it appears. "In the old days, you spent millions on an IT project with a three- to four-year life cycle," says Sybase's Chow. "No one wants that today. Now, the treasury department wants this, credit cards wants that. They cannot wait for the entire organization to move. They need business intelligence, RFID, whatever, now, this minute." This poses a challenge to the CFO and the CIO, who have to make sure that the various systems can eventually be knitted together.
More and more, it is the business side, rather than the IT department, that drives technology adoption across Asia. Says Chow: "Some IT people tell me, 'If I know one more thing, I'm going to explode.' But the business people always show interest. They would say, 'That guy down the road is doing this, so I have to do it too.'" Often, IT simply executes what the business units decide to do, all the more reason for the CFO and CIO to keep lines open.
The good news is that companies that are reasonably up to date with their IT systems will need only incremental upgrades, not a total overhaul. "It's not like you have to change everything," says Lai of NCS. "You must be very clear about what is serving you well and which you don't have to change so much." The question of best-of-breed solutions versus one vendor responsible for everything will resurface with new urgency, as will the issue of open source versus proprietary software. Dion Wiggins, vice president and research director at Gartner, expects open-source software solutions to directly compete with closed-source products in all software infrastructure markets by 2008.
"Open source is already mature in key areas such as development tools, operating systems, and security," he says. "Directory services, management, and application services are a little bit behind, with relational databases further down." Wiggins notes the rise of Asianux, a consortium between Hansoft in Korea, Miracle Linux in Japan, and Red Flag Linux in China. The three-country coverage (with the prospect of more joining) may encourage global vendors to certify their applications on this open-source platform.
As they move forward, however, CFOs must not forget that machines do not determine success. As vice president for finance, Asia, at U.S. software company Computer Associates, Jeff Hunt has business-intelligence applications at his fingertips. "BI is very, very powerful because it gives you a view across your business with a dashboard, rather than having to go to 20 or 30 places and ask the same questions," he says. But has the system ever told him something that his gut instinct says is plain wrong? "Absolutely," says Hunt. As it was in the past and as it is today, the human software will remain the most important technology in the office of the future.
© CFO Publishing Corporation 2006. All rights reserved.
posted by Jones Lang LaSalle NJ News Blog at 10:11 AM
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