VIEWPOINT
The Move to On-Demand Business Performance Services
—A Drive toward a $1.6 Trillion Global Market

The spread of computer networks built on the Internet’s open standards has far-reaching effects on the way companies must organize economic activity. Externally, businesses are integrating themselves more tightly with partners and customers. Internally, meanwhile, Internet technology has the opposite effect. Discreet business units and functions of production become more loosely coupled, as firms replace the sticky, proprietary technologies that connect their component pieces with standard, Internet-based interfaces.

These internal changes encourage radical innovation in business design. Looser internal coupling lets businesses dismantle and reassemble their component pieces in ways that make better use of available economics. with superior capability and economics. This outsourcing is combining with the spread of globalization to create networked chains of production that span the world. This reorganization into configurable and responsive systems of production supported by an equally responsive IT infrastructure is what is termed an “On Demand” mode of operation.

The On Demand opportunity is a market that lies outside the traditional IT industry. It is taking shape as companies tap specialized expertise for help optimizing, transforming and managing business-support functions such as human resources, finance and accounting, supply chain, risk management and new product development. This market in business expertise is Business Performance Transformation Services (BPTS).

BUSINESS PERFORMANCE TRANSFORMATION SERVICES
Because BPTS work falls outside the traditional IT market, its emergence is expanding the services delivery opportunity. Conventionally measured, the 2005 enterprise IT market is worth $1.3 trillion and is growing at about 6% a year. We calculate that the 2005 BPTS market is worth $1.6 trillion and is growing at more than 9% a year.

Until recently, traditional IT providers have not played a big part in the BPTS marketplace. For most IT companies, this is unlikely to change. The skills needed to succeed in this market - either within the inner workings of industries, or inside specific domains such as customer relationship management or human resources - fall outside their core expertise.

Business automation has blurred the customary demarcation between business and IT, put IT at the heart of corporate strategy and elevated the understanding of the possibilities. As a result, companies increasingly look for partners who can skillfully combine business insight with technology expertise.

The $1.6 trillion BPTS marketplace spans many different market segments. These industry and domain segments have different economics and diverse profit opportunities. Approximately $500 billion-worth of BPTS spending covers a limited range of market segments, and the opportunity exists to apply highvalue work and create new and innovative market solutions.

BPTS CAPABILITIES
The capabilities required to address this $500 billion BPTS opportunity draw on the ability to combine business insight with applied IT. Successful transformation begins with intelligent business design. Strategy & change consultants can apply the engineering disciplines of component business model to business design, breaking the firm into its component pieces for optimal reassembly. Properly isolated, each business component is more readily improved. Engineering and technology services’ (E&TS) technologists and engineers apply technology skills and IP assets to transform business processes and the underlying IT that supports them.

Continuous business-process improvement requires accurate and timely information from across the enterprise. BPO provides advanced data-integration software that lets clients see and understand how infrastructure, assets, people and processes combine to affect business performance.

BPTS revenue grew by 45% year over year in 2004 and by more than 30% year over year in the first half of 2005. As the market evolves, new BPTS practices will emerge. As the business-process revolution spreads, many more companies are likely to follow.

To contact author, e-mail him at icolley@ibm.com.

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