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					                           IT’s Changing Destiny
               Evolving IT Investment Drivers and Technology Cycles


               The Rules
                                                        Era IV: IT Reshaping
                                                        Business Models
                                                         Ubiquitous Computing
                                             Era III: Value Creation and
                                             Business Effectiveness
Structure                                       Internet/Network Computing

                                    Era II: Productivity and End-User
                                      Client/Server Computing

                           Era I: Automation, Cost Control
                           and Efficiency
     Low                       Mainframe/Midrange Computing

            1950   1960      1970   1980     1990     2000      2010         2020
              The Emerging EC Business Model
                         From Infrastructure to Extrastructure

                  Demand                              A New Business
       Customers Are Demanding ...                   Model Is Emerging
            More Convenience
             New Channels
             Hybrid Products
               Lower Cost

   The             The Internet Is Accelerating...              The
                            Communication                     Virtual
                             Collaboration                   Enterprise

               Business Is Driving ...
             Core Competence Centricity        The Internet is Breaking
                     Innovation               All Commerce Paradigms!
The “Plug and Play” Virtual Organization
Competitive Differentiators                                         Critical Business Challenges
• Market Agility                                                    • Emerging Business Models
• Organizational Flexibility                                        • External Interdependencies
• Speed/Time to Market                                              • Redefining Roles/Functions
• Customer Intimacy            External Inputs                      • Inventing New Business
                             Business          Suppliers               Processes
                 Enterprise                             Networks
               “Mother-Board”                  Internal Inputs/
                                                                           Critical IT Challenges
                                                      Sales & Marketing    • Application Integration
                                                   Customer Service        • Application Sourcing
                                               Product Creation              - Build vs. Buy vs. Outsource

                   Market                  Finance and Operations          • Market Intelligence &
                   Place                                                     Knowledge Transfer
                  Dynamics              Process Outsourcing                • Efficient Infrastructure
                                                 Product                      Management
                                                Fulfillment                • Bulletproof Security
                                                                              and Privacy

       Customer Group A          Customer Group B
  E-Commerce Across Industry Segments

by Leaders                                                                                               Banking


                                                               Telecom     Healthcare
                       Consumer Prod.
                        Manufacturing       Home Services
     Logistics                                                                                        Advertising

                                               Retail       Selling    Office Supplies
                                              Grocery                                     Electric
                            Manufacturing                     X-Mart
    Services                                                  Retail  Recreation
                                            Cards and                                                       Stock
                                                            Dry Goods and Leisure        Gaming
        EC will impact                        Gifts                                                        Trading
       marketing, selling                        EC will impact structure of               EC will restructure
     and customer service                       offerings and how delivered                the entire industry
                                    Information as a Percent of the Total Offering
      Worldwide Year 2000 Predictions
       Potential “Failure” Rates by Industry and by Country
                By Industry                                           By Country
        Aerospace, Banking, Computer                      Australia, Belgium, Bermuda, Canada,
1       Manufacturing, Insurance, Investment
        Services, Pharmaceuticals               15%       Denmark, Holland, Ireland, Israel,
                                                          Switzerland, Sweden, U.K., U.S.A.

        Biotechnology, Chemical Processing,               Brazil, Chile, Finland, France, Hungary,
2       Consulting, Discrete Manufacturing,
        Heavy Equipment, Medical Equipment,
        Publishing, Semiconductor, Software,
                                                33%       Italy, Mexico, New Zealand, Norway,
                                                          Peru, Portugal, Singapore, South Korea,
                                                          Spain, Taiwan
        Telecom, Power, Water

3       Broadcast News, Hospitality, Food                 Argentina, Armenia, Austria, Bulgaria,
        Processing, Law Enforcement, Law
        Practices, Medical Practices, Natural
        Gas, Ocean Shipping, Pulp & Paper,
                                                50%       Columbia, Czech Republic, Egypt,
                                                          Germany, Guatemala, India, Japan, Jordan,
                                                          Kuwait, Malaysia, Poland, Puerto Rico,
        Television, Transportation                        Saudi Arabia, South Africa, Sri Lanka,
                                                          Thailand, Turkey, U.A.E., Venezuela, Yugoslavia

        City & Town Municipal Services,                   Afghanistan, Bahrain, Bangladesh, Cambodia,
4       Construction, Education, Farming,
        Government Agencies, Healthcare, Oil    66%       Chad, China, Costa Rica, Ecuador, El Salvador,
                                                          Ethiopia, Fiji, Indonesia, Kenya, Laos, Lithuania,
                                                          Morocco, Mozambique, Nepal, Nigeria, Pakistan,
                                                          Philippines, Romania, Russia, Somalia, Sudan,
                                                          Uruguay, Vietnam, Zaire, Zimbabwe

Note: A “failure” is defined as an interruption of a mission-critical business process,
with unknown severity or duration, occurring between 1Q99 and the end of 2Q00.
CIO Priorities: Top 10 Technology Issues
        Europe                                  North America                                     Asia/Pacific
1999                                         1999                                          1999
Build “Net” Capabilities                     Build “Net” Capabilities                      Build “Net” Capabilities
Test Year 2000 Problem                       Exploiting Data (Mining/Wareh)                E-Commerce Applications
Improved Service Levels                      Test Year 2000 Problem                        Installing Enterpr. Packages
Exploring E-Commerce                         Build IT Infrastructure                       Effective Network Mgmt.
Refurbishing Legacy Apps.                    Install Packaged Bus. Apps.                   Y2K Testing/Remediation (tie)
                                                                                             E-Commerce Infrastr. (tie)
 2000-2004                                     2000-2004                                      2000-2004
 Packaged Apps. Transitions                    E-Commerce and ”Net”                           Extranet, Intranet, Internet
 Workplace Transformation                       Infrastructure                                E-Commerce Infrastructure
 Mobile/Remote Access                          Packaged Apps. Transitions                     Packaged Apps. Transitions
 Multiplatform Integration                     NT Deployment/Integration                      Multiplatform Integration
 E-Commerce Exploitation                       Mobile/Remote Access/PDA                       NT Deployment Strategies
 Security & Privacy                            Security & Privacy                             Security & Privacy
 Exploiting Data (Mining/Wareh.)               Network (reliable/low-cost infra.)             Network (reliable/low-cost infra.)
 Distrib. Process Mgmt.                        Consumer Prod. Integration                     Middleware/Messaging
 Workflow                                      Middleware/Messaging                           Collaborative Computing
 Network (reliable/low-cost infra.)            Exploiting Data (Mining/Wareh.)                Data Mining/Warehousing
                                               User Interface Evolution
Note: 1996-1999 lists of top CIO issues based on survey work with European, North American, Asia/Pacific and Latin American commercial
clients of GartnerGroup’s IT Executive Program (ITEP) -- which at year-end 1998 totaled more than 900 members worldwide. 2000-2004 top
CIO issues based on GartnerGroup forecast.
                 Business Impact of
             Technology Discontinuities
              Networked                 Contextual               Spontaneous
              1997–2002                 2003–2006                   2007–>
Technology   Network Computing       Flat-Screen Displays      Wireless LAN/WAN
Discontin-   Architectures
                                     “Always-On” Devices       Speech/Natural
  uities     Location Transparency                             Language Dialogues
                                     Automatic Platform
             Speech Recognition      Adjustment                Agent Intermediaries
             for Telephony
                                     “Follow-Me” Profiles      Wearables
                                     Synchronization           Any Time Access

  Impact     Interrupt-Driven        Microtasking              Multitasking

             Just-in-Time            Mobile Information Access Mobile Decision Support
             Information Delivery
                                     Broad Consumer            Point-of-Need
             Consumer Web            Interactive Access        Access
             Network Access          Device Management         Untethered Culture
             and Speed
    Technology Directions: Platform Infrastructure

           2004 Forecast (P=0.7)                Implications                       Surprises (P=0.3)
Client     - One primary device for bus.    - Continued shift                  - MSFT broken up (P=0.2);
           prof. (Wintel 90% + share)       from cost of purchase              - Non-MSFT and/or browser-
           - Explosion in mobile and        to cost of support                 based clients grab 30%+
           mass access devices              - TCO continues to rise share
           - NC’s gains 20% share (but
           mostly as terminal replacemts)

Server     - 70% of new apps target NT,   - ISV support of non-NT              - IA64 and/or MSFT
           with 15% Solaris, HP/UX or MVS platforms withers                    schedules slip over a
           - NT remains behind Unix/MVS   - Management of heterogeneous        year causing severe impact
             for large, complex, mission-   platforms remain huge concern      on new apps deployment
            critical environments

Network    - 20% of enterprise WAN          - Multi-vendor networking          - Wireless grows from less
           traffic bought in converged      declines; 6-7 major telco          than 5% of traffic in ‘99 to
           (voice, video, data) format      carriers W/W; 4 major              to 15% in ‘04
           - Policy-based management        equipment “camps”                   - Telecommuting backlash
           - 10X LAN; 3X WAN Growth         (Lucent, Cisco, Siemens, Nortel)

Storage    - Storage uses 65% of apps.      - SAN technology becomes           - SAN interoperability issues
             server deployment capital       critical component of              are not resolved, resulting
            (driven by storage growth)       application and server              in permanent loss of vendor
            - Storage mgmt. moves           management /scalability              leverage, higher acquisition
            from server to intelligent                                           costs and higher storage
            storage-area networks (SANs)                                         TCO
  Technology Directions: Application Infrastructure
               2004 Forecast (P=0.7)                Implications                             Surprises (P=0.3)
Electronic     - Platform adjustment and “follow    - TCO linkages critical                  - 50% of med/large enterp.
Workplace      me” profiles emerge for nomads       - Infrastructure, Infrastructure!        recentralize personal apps;
               - Enterprise portals provide role-   - Human impact (info glut,               “3270” rules (p=0.2)!
               based access to bus. apps.           queue mgmt.)                             - Bleaching the blue collar
                - Intuitive design supercedes       -Integration with enterprise             - Internet implodes under
                content richness for New Media      apps an imperative                       its own weight (p=0.1),
Application     - 60% of AD performed by ESPs       - No AD silver bullet                    - Backlash against “vanilla”
Development    - Internal AD skills: 3GLs 40%;      - “Mass or focus” defines                packages/templates; return
                4GLs 30%; OO/Java/Web 30%           enterprise AD strategy                   to “build” strategy (60%
               - Integration is the new AD          - Procurement/contract mgmt.             share of AD)
               - Regulation and new acct. rules     key AD competency
               drastically change AD economics
Middleware/    - DBMS and OTM converge              - 3-4 dominant middleware                - Internet as the final
Database        - Messaging embedded in OS          stacks and message brokers               middleware (p=0.2)
                and/or via packaged apps            driven by ESPs and Packaged               - 40% of IMS DBMS
                - Return to NSM point-solutions     Apps Vendors                              apps replaced (p=0.2)
Enterprise     - 70% of strat. biz app decisions    - Big get bigger (top 5 ERP rev.         - SAP Implodes
Business       are front-office/value chain/CRM     share grows to 80% market);              - MSFT aggressively enters
Applications   - New players emerge to address      but can’t be all things to all clients   low-end enterprise apps
               emerging trading partner systems      - ERP market leadership defined         market (HR, Financial Acct),
                - Web-based consumer demand         by vertical expertise                    gaining 15% share
                forces 20% of large enterp. to      - ERP vendors stumble, but               - Siebel becomes ERP/CRM
                implement a front-office suite to   eventually dominate CRM                  powerhouse (via acquisition)
               to enable a CRM strategy
               Application Integration
          Zero Latency in the Financial Services Industry
                                       Foreign          Integrated
             Trading                   exchange         back office

               Unix                   VMS             OS/390
                  Worldwide Information Messaging Pipeline
                                                  Risk operational data store
                       Trading risk
                                                               Online risk analysis

Internal Application Integration Issues:      External Application Integration Issues:
• Batch window goes away                      • How best to provide access to
  (Zero Latency); stale info                    external clients and customers,
  no longer possible                            and between customers/suppliers
• Data consistency issues                     • Shared applications between
• Operational data stores                         and among a trading community
• TCO                                         • Licensing and TCO issues
Application Sourcing: Build vs Buy vs Outsource
           The New Software Capitalization Guidelines
Infrastructure Applications      Frontier Applications
              Type C - IT Supported                      Type C - IT Supported
          Type B - IT Enabled                        Type B - IT Enabled
   Type A - IT Centric                        Type A - IT Centric
 Months                  36     48    60    Months                  12     24   36
   - Improve Cost Structure -                - Market Changing Applications -
   • Indirect cost reduction                 • Revenue; business creation
     - NSM & IT asset mgmt. tools              - E-commerce

Utility Applications                       Enhancement Applications
              Type C - IT Supported                      Type C - IT Supported
          Type B - IT Enabled                        Type B - IT Enabled
   Type A - IT Centric                        Type A - IT Centric
 Months                  36     60    84    Months                  24     36    48
   - Automate Manual Processes-              - Improve Enterprise Returns -
   • Reduce direct costs                     • Higher margins
    - General ledger                           - Logistics; Data warehousing
          Effective Market Intelligence
            Knowledge Management Value Framework

KM Business Drivers             Strategy Choice
                                 % of Assets in Intellectual Capital
• Infoglut
• ROI on Intellectual Capital      High                       Low
• Competitive Environment        Knowledge-                Knowledge-
• Response Time Compression       Focused                   Enabled
• Resource Crisis                 Business                  Business
• Chaos and Complexity            Strategy                  Strategy


Business Outcomes
                                          • Best Practice Sharing
 • Measurable Results                     • Problem Resolution
 • Attack KM Business                     • Customer Retention
   Drivers                                • Revenue Generation
 • Culture of Collaboration               • Productivity
                                          • Others
 • Culture of Innovation
                     The Four Stages of
               Infrastructure Resource Mgmt.
    IRM                            Enterprise
                                       View        TCO         IT Asset       Operations
                     Stage         of IT Value
(% of G2000)                                      Impact     Management       Management

        15% 1. Infrastructure      Automation     Raise       Acquisition      Deployment
 ‘99    ‘04

 50% 50%                                                                       Monitoring
               2. Infrastructure    Reactive
                                    Efficiency    Control      Inventory       & Problem
  ‘99   ‘04

    30% 3. Infrastructure           Proactive                  Technology    Configuration &
 4%                                Productivity   Lower
           Optimization                                     Life Cycle Mgmt. Change Mgmt.
  ‘99   ‘04

 <1% 5% 4. Infrastructure     Facilitate     Not       Technology                Service
  ‘99 ‘04  Synchronization Value Creation Applicable Resource Mgmt.              Mgmt.
Information Security Stakeholders
      Media                    Regulators


          Legal                Call center

        Executive                     DBMS


            HR           Networking

      Auditors                 Customers
    Insurers                    Shareholders
CIO Priorities: Top 10 Management Issues
         Europe                                  North America                                     Asia/Pacific
1999                                          1999                                          1999
Solve Year 2000 Problems                      Lead the IT/Business                          Solve Year 2000 Problems
Reducing IT Costs                               Planning Process                            IT/Business Strat. Planning
Measuring IT (Value/Efficiency)               Solve Year 2000 Problems                      Align IT & Business Goals
IT Organization (Cross Border)                Align IT & Business Goals                     Reducing IT Costs
Project Management (tie)                      Recruit & Retain IT Staff                     Measuring IT (Value/Efficiency)
Alignmt./CIO Reports to...(tie)               Manage IT Efficiency
  2000-2004                                     2000-2004                                     2000-2004
  M&A (in)Digestion (infra, staff)              Business/IT Fusion                            Business/IT Fusion
  Evolving IT’s Role (How used,                 Demonstrating Bus. Value                      IT Skills (Recruit, Retain, Reskill)
    how involved?)                              “Sourcing” Mgmt. (IT services)                Business Continuity
  Revitalizing Existing IS Staff                Reducing IT Costs (infra, staff)              Extracting Business Value
  “Sourcing” Management                         Business Event and/or                         IT Governance/Organization
  Adapting to EuroLand                           Process Outsourcing                          “Sourcing” Management
  Long-term Funding                             IT Skills (Recruit, Retain, Reskill)          Reducing IT Infrastr. Costs
  Better Metrics (effect, contrib)              IT Governance/Organization                    M&A (in)Digestion (infra, staff)
  Process & Project Mgmt.                       Process/Project Mgmt.                         Data to Info. Mgmt.
  Using Information Effectively                 M&A (in)Digestion (infra, staff)              Knowledge Exploitation
  IT Skills (Recruit, Retain, Reskill)          Knowledge Exploitation
 Note: 1996-1999 lists of top CIO issues based on survey work with European, North American, Asia/Pacific and Latin American commercial
 clients of GartnerGroup’s IT Executive Program (ITEP) -- which at year-end 1998 totaled more than 900 members worldwide. 2000-2004 top
 CIO issues based on GartnerGroup forecast.
                          IT Management Trends
                                                                      • IT Planning/Risk Management
Business Value                                                        • Architecture and Standards
 Business Process
                                           Total Cost                 • Resource and Skills Management
    Improvement                        Technology                     • Program and Project Management
   Organizational Alignment
   Customer Service
                                                            User      • Customer/Relationship Management
   Competitive Position             Services        IT
                                                                      • Information/Data Management
   Employee Productivity
   User Interface, Usability
                                                    Labor             • Vendor (and ESP) Management
   Access to Corporate Data                                          • Asset/Financial Management
                                                                      • Contract Management

     Business Value vs Total Cost                                          IS Core Competencies
• Broker of Services
                                                                    Applications      Technology        Contracts
• Selective Outsourcing                                                               Infrastructure    • Terms &
                                            Role-based              Portfolio
• Modular Organizations                                             • Functionality   • Type              Conditions
                                                                    • Technology      • Cost            • Scalability
                                    Shared Services                 • Interfaces      • Age             • Termination
                                                                    • Valuation       • Support
                          Hybrids (Central/Decentral)               • Age                               Staff
                                                                    • Support            M&A Plan       • Skills
                                                                                         • People       • Compensation
    Centralized Organizational Structure                                                 • Technology   • Geography
                                                                                         • Financials   • Contracts
                                                                                         • Schedules

     ‘60s      ‘70s       ‘80s       ‘90s           ‘00s               M&A Planning, Due Diligence
    IS Organizational Evolution                                              and Integration
                   IT Skills and Sourcing Trends
                 Non-IT Staff                                                   “Strategic Alignment” Time Line
 90%                                        - Business users             Service/
                                                                         Solution              “We shop at the PWC mall”
 80%                                         - Business process                         2000
 70%            External IT Staff
                                                  outsourcers           Application             “We’re an SAP shop”
 60%                                         - Systems integrators,                     1990
 50%                                              consultants            Middleware
 40%                                          - Infrastructure                          1980 “We’re an Oracle shop”
 30%                                              outsourcers
 20%                                        - Contract employees                        1970
                                             - Decentralized IS staff    Platform               “We’re an IBM shop”
 10%            Internal IT Staff
  0%                                        - Central IS staff                          1960
        1998         2001            2003

       Sources of IT Skills                                                 ESPs as “Channel Masters”
                                                                        • Establish clear goals with strong consensus
                                                Shareholder             • Create “supporting” terms and conditions
                                                   Value                • Define “relative” service level agreements
 Business                                       ROT                     • Develop effective measurements and metrics
                                                                        • Conduct periodic performance audits
                            TCO                                         • Demand continuous improvement!
                     Cost                                               • Aggressively monitor and manage
              Product                                 Utility
                        Technology Integration
                                                                                       A “Step-by-Step” Approach
       Shifting ESP Landscape
Creating and Sustaining Market Differentiation                            Effectively Leveraging ESPs

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