The mystery-is-margin business model

The mystery-is-margin business model

While I'm feeding mosquitoes this summer during my inglorious attempts to outwit brown trout with fly tackle, I'll also be pondering Ron Ward's proposed Law of Simplification; maximise the pain, I always say.

Ron is the vice president and general manager of Compaq Computer's Enterprise Solutions division in the US, and he figures his name will soon rank right up there with Intel's Gordon Moore.

Here's Ward's idea: "Every 18 months, industry-standard solutions (including the hardware, the software, and the effort required to implement them) simplify by an order of magnitude."

In clearer terms, your mystery-is-margin business model may soon work as well as my dry flies. Or, to use another example: "Pay no attention to that man behind the curtain."

Compaq is betting big on the notion of simplifying deployment of complex ERP (enterprise resource planning) solutions and has worked closely with SAP AG to optimise Compaq platforms for SAP software.

Compaq is launching a Web-site-based tool, activeAnswers, to guide its partners (that's you) and some of its customers to much-faster deployment of "packaged" enterprise solutions. To hear Ronnie tell it, deploying ERP solutions in the middle market will be almost as easy as painting by numbers.

Likewise, SAP is aggressively ramping up its Ready-To-Run program designed to get small and midsize users started fast by bundling R/3 with hardware, a database, and basic configuration. Last year Ready-To-Run only included Compaq and Microsoft's SQL Server. Now the program is being extended to include hardware from Hewlett-Packard, Sun Microsystems, Groupe Bull, NCR, Siemens Nixdorf Informationssysteme AG and IBM. It also now supports databases from Oracle, Informix and IBM.

Don't get giddy with fear. The sky is not falling - even if Ward's notion becomes law. But something important is happening here. We are entering the age of packaged enterprise applications - a phrase that would have been considered an oxymoron not long ago. This move has important implications for your business.

Standards-based computing does inevitably produce commodity status. That's despite the fact that we are still creating complexity at the other end of the technology spigot (and with it, creating new mystery-is-margin opportunities). The current line in silicon is represented roughly by four-way Wintel servers, beyond which NT and ERP-lite applications don't scale well - yet. But for the three- to four-server, 200-user installation, Ward's law may soon stand!

One important question is how fast the gap between the Fords and Ferraris of the computing world is closing. My guess is that your investment in high-priced Unix mechanics is still a good bet for a couple of years. Beyond that, the ERP market may change fairly dramatically. You should be testing these new rapid-deployment schemes now and preparing to adopt a volume approach to that business if necessary.

As I said, the sky is not falling, but big changes are occurring in the channel. Efficiency and standardisation are the drivers. Direct selling is on the rise again. Most hardware is already a commodity. Packaged enterprise applications seem to be headed in the same direction.

This summer, while your business model is still hot, begin the process of figuring out where to go next. Today's nuisance mosquito is tomorrow's case of malaria. Be ready to deal with it.

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