A new report from Forrester Research Inc. (Nasdaq: FORR) introduces Organic Business, an emerging business strategy in which firms bring their business processes and services online where they can be embedded in their customers’ and suppliers’ operations. Companies like Amazon.com, Dell, General Motors, LendingTree, and Verizon are already using this approach to create new consumer offerings, automate supplier interactions, and gain more business control over business assets and IT investments. Organic Business will also cause firms to outsource more processes and services.
Although the Internet has dramatically changed the way firms interact with their customers, it has so far failed to give firms the tools to integrate and automate their back-office and B2B processes. But Web services standards agreed to by 170 software vendors change all that. For the first time, firms can pursue what Forrester calls “Organic Business.” It’s organic because firms will grow by reusing their existing assets to reach new customers in new markets. An Organic Business will be able to:
- Embed business services inside customers’ and suppliers’ operations. Example: Amazon’s merchant processes are available over the Internet as Web services, which allow customers like Target and Toys¿R¿Us to sell online using Amazon’s retail infrastructure.
- Outsource non-core business processes and services. Example: Merrill Lynch takes on the trade settlement process for new hedge fund customers, while eSpeed processes international bond trades for financial services firms.
- Gain transparency and control over IT investments. Example: Verizon builds business services to fuel its new consumer offerings and then puts the service outcome metrics and associated IT costs on an executive dashboard.
“Fast-forward five years. The Internet will link every firm with every customer, every business asset, and every other firm,” said Ted Schadler, vice president, Forrester Research. “The resulting network of firms, customers, and assets will be massively more controllable, visible, and agile than in today’s world. Harnessing the Internet as a business tool is the best way to operate efficiently and competitively.”
An Organic Business strategy is possible because of advances in technology, including Web services and an adaptive data center infrastructure that Forrester calls Organic IT. When firms use this technology to bring their business processes online, it will be easier than ever to link a back-office claims processor in Mumbai with a policy pricing group in Topeka. This means that more processes, and jobs, will go to the lowest cost providers, wherever they are, thus fueling the politically charged debate over offshore outsourcing.
New kinds of providers are building out the technical and business foundations of a mature online economy which Forrester calls the business services Internet. In this online economy, companies will focus on what they do best and assemble complete solutions with the help of:
- New infrastructure providers like Akamai Technologies and Grand Central Communications. These companies, as well as companies like IBM and Hewlett-Packard, are building the technical foundations of a robust Internet to help firms bring their business processes online and embed them in customers’ operations.
- New business providers like Amazon.com and eBay. These Internet-generation companies are joined by experienced suppliers like Merrill Lynch and FedEx to offer an ever-growing portfolio of business services that other companies can assemble to accelerate their own organic growth.