Dr. Han T. M van der Zee doesn’t own a crystal ball. Yet the director of the Nolan Norton Institute in De Meern, the Netherlands conducts research to predict the future. Companies look to the Institute to help them determine what they have to do now to get ready for tomorrow.
Van der Zee, who also is a professor of information management at Tilburg University in the Netherlands, predicts that information and communication technologies (ICT) will play a key role in how organizations create value. These technologies are already causing the formation of new strategic alliances, the shaping of virtual enterprises and the emergence of networked organizations. Previous research at the Institute, the research facility of KPMG Peat Marwick, has suggested outsourcing suppliers and buyers are working together more closely to compete in the changing business world. But what will happen next?
To determine how the future might evolve, van der Zee asked 20 international† companies to share their visions of a plausible future. Then he used scenario planning to make some realistic predictions about outsourcing relationships in 2005.
The professor created a matrix using the real changes that are providing uncertainties in the current market. The horizontal axis described the degree of globalization in the business world. At the far left was a regional world. At the far right was a totally open global marketplace.
Factoring In The Importance Of Technology
The vertical axis factored in the importance of technology in providing a competitive advantage. At the bottom of the matrix, ICT provided no advantage; it was just a commodity. At the top, technology was a decisive player.
Finally, the professor divided each box into two categories. One category assumed there was an ample supply of qualified high tech workers. The second category described the situation if talent were in short supply.
Van der Zee labels the first box – a regional world where technology is a commodity – “history.” Donna Reed, the icon of the 1950’s, would have felt at home in this box. However, the Internet has relegated this box to the same fate as ancient Rome.
The second box is a regional world where ICT provides a strategic advantage. This is a place were different cultures express themselves through technology. Here, geographic boundaries make a difference. Local companies might focus on one region they are familiar with, like North America, northern Europe or Asia.
The professor says companies living in this high tech regional world keep in touch with their customers through technology. “In this scenario ICT helps organizations create customer intimacy,” explains van der Zee.
The professor believes there will always be a demand for local companies that champion local values and deliver products and services with a local flavor. Furniture is one area that he predicts will remain local. So will banking because of the regulation involved. “Consumers are different and have different buying preferences,” he points out.
The upper right corner is the world of cyber competition. Here the world is open to all players and technology plays a leading role. Players in Australia and Anchorage compete for the same customers. The big global players like IBM and EDS will thrive in this world, in the professor’s guess.
With no trade barriers, the professor predicts there will be “a lot of pressure on prices.” Van der Zee says in Holland few people go to a retail store to purchase a CD or a book. Instead, they prefer to shop online, searching for the best price.
The final square is the global competition box. This is where the world is global but ICT is not a competitive driver. Examples are franchises like McDonald’s on the Champs Elysee in Paris or the Gap in Tokyo. These companies tend to ignore cultural differences. (Blue jeans are the same in America as they are in Asia.) They aren’t technology companies but they will use ICT for order fulfillment.
Each Scenario Will Have Its Day
Like a good economist hedging his bets on predicting the course of interest rates, van der Zee says the participants felt every scenario will be reality in a certain period of time.
The problem for many ICT companies is going to be the ability to select a specific market. “They are used to being generalists, delivering everything to everybody,” van der Zee says. Now may be the time to consider focusing. “I think there will be a watershed,” he says.
Lessons from the Outsourcing Primer:
- An insular, regional world where technology is not important is history.
- Local ICT companies will do well if they focus on serving their local markets, respecting language and cultural preferences.
- Cyber competition for commodities will drive down prices.
- Big outsourcing providers with global scale will do well in a global marketplace.
- Franchises like McDonalds and the Gap will use information technology to assist with fulfillment.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].