General business dynamics and the impact on TP

Computer Industry Report, Dec 17, 1993

In at least two important ways, general business and IT market dynamics are becoming tied together. First, as IT technologies spread into every corner of organizations, business evolution and IT evolution become inextricably linked, and changes in one require or demand changes in the other. Second, as the computer industry matures, it will no longer grow two to three times faster than overall economies. As a result, competition in the IT industry will increase dramatically. Battles for market share will heighten. Prices will drop; product standardization will increase; suppliers will attempt to enhance embedded functionality; distribution systems will evolve to favor low-cost, high-volume sales; and quality will become a key feature of attempts to differentiate goods and services.

Changes in business strongly favor the transaction processing market. Specific TP market sectors -- such as the TP systems market, TP database market, or TP systems integration market -- will grow faster than either respective general IT markets or economies in general. Moreover, because of increased competition, TP suppliers will evolve to be more responsive to channel and customer needs.

Business thinking and strategy have evolved dramatically over the past half century, in part as a consequence of applying IT to business challenges. From 1950 to the mid-1970s, bureaucracy was the chief organizational form of business. The care and feeding of capital was the chief principle used for structuring organizations. Automation became the primary objective of IT. Subject to all of these forces, IT was organized to maximize the productivity of the capital-intensive mainframe computer.

From the 1970s to the late 1980s, the costs of capital dropped significantly. Strategic thinking shifted from issues like scale efficiencies in production to portfolio management. Strategic options were evaluated according to growth and share potential. Terms like "rising star" and "dog" were introduced to describe strategic options. Business searched for ways to maximize data access to support efficient report generation and to minimize entry, mobility, and exit barriers in industries. Personal computing and data integration became the dual -- and sometimes inconsistent -- objectives of IT. Data was the dominant asset in IT -- if not in practice then at least in theory.

Today, we are in the midst of another major shift in perspective. The current rethinking, however, probably is more fundamental and long lasting than previous shifts. The era of the conglomerate is giving way to a new focus on product and process quality. Companies are spending less time looking for "rising star" opportunities in mature markets and more time finding ways to increase productivity, profitability, and share through higher-quality processes and products. The thinking is that if more attention is paid to quality early in the production process, fewer resources have to be devoted to integration, testing, support, replacement, and rebuilding customer relationships.

Terms like "franchise" and "total quality" are being introduced into the lexicon of business to describe the techniques of maximizing customer relationships. The new emphasis is on making business easier to transact. This requires more appropriate information, easier selling engagements, lower-cost transactions, and more efficient support infrastructures.

Information access as the primary objective of database is giving way to information delivery. Store fronts are giving way to anywhere, anytime shopping outlets. Information delivery and anywhere, anytime shopping are impossible without transaction processing technologies that support, on the one hand, more complex transactions and on the other, more reliable, always-available transaction processing systems. Many organizations are beginning to place transaction processing applications at the center of their IS structures.

Increasingly, transaction processing technologies will be embedded in an expanding variety of applications. TP will be used not only to perform traditional types of work like check processing, but will be found in situations where delivery of information or an information service must be guaranteed to ensure customer satisfaction.

The emphasis on transaction processing will require exploitation of distributed processing power. Whereas previously desktop and LAN-server machines supported personal-productivity types of applications, they will evolve to become integral to mission-critical application processing. The emerging emphasis on customer relationships as the central asset will force many new requirements on TP technologies and transaction-oriented information systems. Of greater interest than whether TP technologies will grow will be how -- and how much faster than overall IT -- they will grow.