Hans Wortmann, APMS, StavangerSept 27th, 2011

The effect of SaaS on our society and community

Setting the scene

› Who are the top innovative companies (Fortune 500)?

› What is the branch of industry in which Google operates?› Advertisement – not ICT !

› What is the branch of industry in which Apple operates?› Music – not ICT !

› Which markets changed dramatically due to ICT?› Travel, books, finance, entertainment, education,…› Research? Consultancy? Manufacturing? Supply Chain?

Three messages

› Services industries will change dramatically• Examples to show impact on society• Technological background

› Manufacturing industries are servitized• Therefore ….

› Enterprise software supply is also servitized• Therefore….

› Impact on our community

SERVICES

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Example: Amazon Mechanical Turk

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Amazon Mechanical Turk

› Used as a software service› People all over the world› Tasks that are hard for computers

(but easy for humans)› Examples:•List a shorter word in a word ($ 0.05)•Label images of animals ($ 0.05)•Label images of structures ($ 0.05)•Find contact e-mail on websites ($ 0.03)•Write a 2-3 paragraph blog entry ($0.50)

› Is it really a human? You don’t know!

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Misdaadkaart.nl

Example: Crimemap.nl

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Example: MARINETRAFFIC.COM

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GELUIDSNET.NL

Example: Noisemap.nl

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ECOMAP

Example: Pollutionmap.nl

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Common denominator:

This leads to a new supply of componentized services

› For which a business may emerge› E.g. Google maps or the apps on smart

phones

› We will see more examples shortlyServices re-engineering is possible and happening everywhere

It is easy to assemble new services from existing ones

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Examples of new software servicese.g. in the financial sectorin het health care sectorin vehicle repair

› Not merely new services, but also› Disruptive opportunities

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iDeal

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iDeal

› Easy, Safe, real-time and Secure payment• Within a commercial transaction:

payment as a service› Hybrid Mixture of flexible front-end and

mature back-end› Clearly positioned in the market› Easy access for small web shops› Genuine Software-as-a-Service example

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Example Health Care: check medication compatibility

New service:Medication check

Example: innovative car assurance

› What drives the risks of a car insurer?› Acceleration: pushing the gasoline and the brakes

› If acceleration can be measured, a superior contract can be offered:• Low basic premium - more costs for each

acceleration

› Who can measure acceleration?› The Telco provider! (Vodafone)

› Example of disruptive market innovation (new entrant)› Like Apple in music, Google in advertisement, Amazon

…

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Carglass

Example: car repair (windscreen)

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› Market leader in car windscreen repair › What is their competitive advantage? › Strong ICT integration with Insurance company

(insurance company only has to pay..)› Premium price, more efficient process› Issues:•Dependency (channel to customer)•Cost accounting (compound services)

Example: car repair (windscreen)

Intermediate conclusion

› Services industries will change dramatically• Impact on many branches – not predictable• Boundaries between branches affected

› However, the risks are substantial• Hacking a service is a real risk

› Company telephone server is hacked in the weekend and for ten thousands of Euro’s costs are made by hackers

Risks – one more example

› In The Netherlands, the government provides an authentication service for citizens, DigiD

› It ensures for the government that an authenticated citizen is interacting with a government agency

› And the citizen may assume to deal with a genuine government agency

› This service is dependent on a dozen other services ….. One of which is the service providing security certificates

› This one was hacked last week

Message 1: services industries are going to change

Consequences for the society:

› Services comprise about 70% of the economy

› Productivity improvement in services has traditionally been low

› Software-as-a-Service will • substantially improve productivity in services • but also create new challenges

Technological background (1)

› The costs of computer and telecommunications hardware decrease rapidly – but customers do not always benefit• Most 0n-premise hardware is standing idle

› Storage and processing services by IT vendors are cheap• New virtualization software allows to share hardware

› Competitive vendors sell offerings “from the cloud”• Infrastructure (hardware) as a service – IaaS • Platform (systems software) as a service – PaaS

Technological background (2) Software-as-a-Service

› Traditional application software (ERP, CRM, …) requires considerable effort for application management• Back-up, security, user management, helpdesk,

licensing, integration, customization, upgrading, …› Many tasks become much cheaper if only one version

of the software is installed – serving many customers

› This single code base is behind Software-as-a-Service, the third level of cloud computing

PRODUCTS

Servitization of manufacturing (1)› Manufactured products are extended with many

services• Maintenance• Pay per use• Information center

› Cars are e.g. leased, not owned. They are financed by subscription. They are insured. • In case of an accident, they are replaced• They can be a center of services for the driver

Example: cars

Servitization of manufacturing(2)

› Manufactured products are traditionally sold without much information

› Servitization implies more information exchange on products

› For example, tracking and tracing information

› Traditionally, tracking and tracing goes with the product

› Each stakeholder gets a copy from the previous party› Laborious and not effective

Servitization of manufacturing (2)› What to do? Eliminate manual printing and typing

› Therefore, most current solutions try to implement EDI

› Copying information for each stakeholder› Copying of information makes updating very

difficult› Better idea: store once, retrieve when needed

Servitization of manufacturing (3)

› Current enterprise systems are designed to get all information into the system, stored as a copy

› Better architecture:• Get links to information to retrieve it when needed• SaaS architecture

Message 2: manufacturing industries are servitized

Consequences for manufacturing industries:

› Their services business can be improved and provide new business opportunities

› These improvements will attract new competitors

› Beware of risks!

ENTERPRISE SOFTWARE

Enterprise Software Supply Chain

› What is the Enterprise Software Supply Chain?› The business of SAP, Oracle, Infor and Systems

Integrators› What do customers want?• Pay per usage• Seamless upgrading, integration, application

management• Use ICT for competitive advantage

› Is Software-as-a-Service going to be the answer?› Via an apps store for enterprise apps?

Servitization of the Enterprise Software Supply Chain

› All major vendors announced initiatives for SaaS• Some have remarkable success (Salesforce)

› Enterprise software is different from apps on a smartphone• Integration of various enteprise apps means

• Data integration• Process integration• UI harmonization

• E.G. testing becomes increasingly difficult!

› Many very interesting problems occur for academics -• The future is no longer what it used to be• Rethink the future!

Three messages

› Services industries will change dramatically• Impact on society via examples• Technological background

› Manufacturing industries are servitized• Therefore, manufacturing theory has to be re-

investigated• Supply chain management is certainly affected

› Enterprise software supply is also servitized• Therefore, academics enter into a real challenge• The knowledge on enterprise software in

manufacturing and SCM has to be re-invented

Impact on our community

› These times are fascinating

› IFIP WG 5.7 is the community that should study the effects of SaaS and Cloud Computing on Manufacturing and Supply Chain Management

› We should grasp the opportunity with themes at APMS, EU projects initiated from our community, SIGs, etc.

Thanks for your attention

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