by: Sigurd Rinde

2009 looks bleak, people are nervous, businesses have found the handbrake and sounds of changing gears without using the clutch can be heard.
But a crisis has a side effect; it spurs changes and new ideas that moves society forward. Even stronger, it cries out for changes and new ideas, just cost-cutting your way forward does not cut it.

As I said to my EI friend Dennis the other day - you have two choices:

  1. Try to understand what's happening and get a grip on the future so you can prepare a defence (futile on all counts I would say), or 
  2. put on your best running shoes, a headlamp and a big smile as you venture out into the dark in search for opportunities.
I'm more inclined to the latter approach.
So let's put on the headlamp and do some nocturnal orienteering:

The credit crunch is scary, the loss of share and house values is devastating for pension plans and of course the loss of jobs is heart wrenching. But they're all inevitable results of the mechanism in how society works; either by the downs in the natural up-and-down imbalanced nature of things, or by the bigger shifts in "ways".

Imbalances and natural ups-and-downs are only surface effects, the core issue is how fast and efficient "real" wealth is created in the society as a whole. An increase in "real" wealth creation will affect us long term and should balance imbalances in short term, so that's where we should focus.

We've done the big leaps from hunter-gatherer to agriculture, and agriculture to industry moves - so not much to find there, and ICT has done it's job over the last 30 years in organisations/enterprises (the hubs of wealth creation), or so it "seems".

I use the term "seems" as I'm not so sure it's potential has been exhausted.

Academic studies are a bit vague as to specific figures, but while digging around I found at least irrevocable signs that IT in the industrial enterprise did have a serious impact on wealth creation, and maybe more interesting, it was an accelerator for the impact of other capital investments and labour. This should not come as a surprise as we have seen the IT enhanced efficiency of industrial production, logistics and other near-linear processes.

A surprise was the indication that IT did not have a similar impact on the services sector, there's even talk about an initial negative impact moving towards a neutral impact over time.  

Why this? IT applied to linear and physical processes is what has been deployed, it's the kind of software that can run most of the industrial core and thus their main value creation processes. It's the software that some vendors have grown big by, SAP and Oracle being two good examples. In broad terms this enterprise software market is about 228 Bn $ per year.

On the other hand the services sector (and in parts of the industry sector), where the processes are much less linear, where people are involved, processes changes paths all the time. Such processes are called practices, exceptions, ad-hoc, knowledge worker or manual processes - and the software delivered is almost without exception non-process based. These are mostly ad-hoc application (linked or not) to aid ad-hoc writing, analysis, communication, keeping and sorting knowledge and recording of the ongoing. 

More or less the only process based software that is trying to add some structure here would be BPM systems, still a fledgling and small market at 1.5 Bn $ per year. Beyond that, the processes are mostly run by "technologies" like organisational hierarchies, budgets, deadlines, email and meetings (methods that are accepted as a "given" and subsequently modelled by BPM, thus effectively limiting that IT solution long term in my view).

These types of processes are what I call, as you would expect if you've been here before, ERP (Easily Repeatable Process) and BRP (Barely Repeatable Process).

Now to something interesting: If you take world wide GDP (for the lack of better) as a reasonable measure of wealth creation for different sectors, then adjust it with some rough estimates as to where ERP and BRP type of activities happen you could deduce that ERPs stands for about 32% of world's wealth creation while BRPs stand for roughly 64%. [Note below] 

So now we have this situation while we enter 2009 looking for the "yet to be used" wealth creation acceleration methods:

ERP, IT and wealth creation:

- 32% of world wide wealth creation.
- 228 Bn $ of software delivered per year.
- Mature technologies, widespread use.

BRP, IT and wealth creation.

- 64% of world wide wealth creation.
- 1.5 Bn $ of software delivered per year.
- Early or inexistent technologies, very early adoption.

If IT could do wonders for past world wide wealth creation by handling ERP better, why should it not have at least the same impact on future wealth creation if it could handle BRP better? In fact why should it not have twice the impact? Of course it could, it just have to be done and should thus be a worthwhile activity to focus on in 2009 and beyond.

As you would/might know, supplying an overall BRP solution is my particular area of interest and activity so I am definitely biased, but quite happy to do my bit to prove if I'm right or wrong.

[Note: GDP per sector: Agriculture: 4%, Industry: 32 %, Services: 64 %.

Estimated percentage of a sector's people processes being BRP: Using GM in 2007 as a measuring stick with 7.5% in Admin costs -> let's assume that 2/3rd of that is non-linear or BRP -> 5% BRP and 2.5% ERP on top of 92.5% core ERP or BRP.
Thus W-W ERP GDP share would be: 32% x 0.95 + 64% x 0.025 ≈ 32 %

And W-W BRP GDP could be: 32% x 0.05 + 64% x 0.975 ≈ 64 %]

Original Post: http://thingamy.typepad.com/sigs_blog/2009/01/beyond-the-crisis-the-importance-of-wealth-creation-and-enterprise-software.html

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