Megaprojects in IT and Communications

with emphasis on supplier dynamics

L-F Pau, Prof. CBS / RSM / GIBSlpau@nypost.dk

How come ITC is often worth more than bricks and mortar?

EXAMPLES TYPICAL PROJECT SIZE

EXTERNALFINANCING %

TOOLS: Platform for smartphonedesign and pre-production

3-6 BEuros 0 %

COMMUNICATIONS : 3 G/4G Network infrastructure across a country

6-70 BEuros 90 %

IT: Outlook mail deployment across a 100 000 people distributed company

500 MEuros 0 %

ELECTRONICS: 0,15 micron semiconductor plant

4-8 BEuros 40 %

OUTSOURCED IT SERVICES: US Social security outsourcing contracts for 10 years ; « outsourcing megadeals »(*)

3 BEuros Federal budget

*: TPI Global outsourcing index by ISG: 2011 volume of 95 BUSD

CASE: IT outsourcing Q1-2012Source: KPMG Global IT-BPO Outsourcing Deals Analysis Quarterly Analysis January –March 2012

• ICT Services command the highest share of the market, both in number of deals and contract value, with 31.2% of all deals signed or deals worth USD 5.39 billion

• IT Bundled services and IT Infrastructure deals were the next biggest service areas in the market• The Government and Defense sectors remain the largest consumer of IT outsourcing services

contributing around 26% and 17% to the total number of IT outsourcing deals in Q1-2012. Telecom was the third largest contributor to outsourcing deals by number, with 13% of all clients in that sector.

• Q1-2012 saw an almost equal contribution by the Americas and EMA regions, with around 45% of deal value contributed by the Americas, and 40% for EMA regions

• 96% share by value was contributed by deals having either Hybrid or Fixed price model, compared to 83% in Q1-2011

• TOP DEALS Q1-2012 : 1) Texas Department of Affiliated Computer IT Infrastructure [Data Center Outsourcing, Network Information Resources, Government Services]; acquired for 8 years & USD 1.1 billion by Xerox Corp2) Sabre Holdings Corp, Travel & Logistics; acquired for 6 years & USD 800 million by HP3) Directorate for Emergency Communications [Network management]; acquired for 14 years & 750 MUSD by

Motorola Solutions4) Blue Cross and Blue Shield [Health Solutions BPO Bundled Services -Claims Processing]; acquired for 3

years & 1,2 BUSD by SXC Health Solutions Corp5) UK Ministry of dedense [HRO Human resources]; acquired for 10 years & 695 MUSD by Capita PLC

How is the time-line in ITC Megaprojects ?

EXAMPLES PROJECT DURATION

R&D INTENSIVE

PENALTIES FOR DELAYS

Mobile 3G standards

13 years ++++ No

Microsoft Windows 7 OS

7 years ++ Share price

London Olympicsnetworks

2 years 0 Very high (AV rights)

SWIFT payment clearing

18 months 0 50 % of contract

ST Crolles semiconductorfab

8 years +++ 30 % of production

PLAN

• ICT Industry structure• Project planning tools and methods• Supplier related risks• ICT Megaprojects as Smart Business networks• Conclusion

ICT INDUSTRY STRUCTURE

MAIN VERTICAL SEGMENTS

Technology suppliers

Product suppliers & integrators

Service operators

Users

Mostly project driven

Mostly capability and volume driven

MAIN HORIZONTAL SEGMENTS

TECHNOLOGIES• Semiconductor• Passive & other

components• Displays• Power storage & circuits• Microwave • Optics• Software tools• ASIC’s• Cryptography• Storage technologies

PRODUCTS• Hardware systems• Software products• Applications• Digital content• Embedded products• Appliances

SERVICES• Communications• Computing services• Content services• Domain /

application specific services

• Design and manufacturingservices

• Customer support services

FUNDAMENTAL TECHNOLOGICAL CHANGE FACTORS

Bandwidth growth :• fiber capacity doubling every 12 months• packet switching capacity doubling every 12 months in backbone and

enterprise• Internet backbone core bits/s doubling every 4 months

Processor performance :• Processor performance doubling every 18 months (“Moore’s law”)

Software programming effort and error rates• Grow exponentially with functionality

Electronic identification• Has reached its limit with IPv4

Insufficient pools of design, installation and maintenance engineer• Global issue, except China / India

CONVERGENCE

Who has largest R&D ?

Who has largest margins?

Who holds most patents?

ICT Industry

TECHNOLOGY

• Computing• Communications• Media• Industrial

applications• Business

applications• Outsourcing

services

Examples of convergence : Appliances and bundled content

PC and mobile communications

Access nodes, gateways/servers

Backbone and software

COMPUTER INDUSTRY TRANSFORMATION

IBM HewlettPackard

Apple Oracle

Chips

Computer

Operating Systems

Managed services

Sales & Distribution

INTERNAL BUSINESS STRUCTURE

• Heavy R&D and skills dependency• Very long technology development,

standardization and regulatory cycles• First-copy costs are dominant and sunk• Variable costs are small • No capacity constraints• Significant economies of scale • Market cannot be perfectly competitive• Two sustainable structures:

– Dominant firm/monopoly– Monopolistic Competition

EXTERNAL BUSINESS STRUCTURE

• High competitive performance requirements• Formal requirement specifications• Standards and architectural compliance for

integration• Resilience and no down-times• Very short RFP/ Bidding cycles• Evaluations primarily on OPEX , and less on

CAPEX• Very competitive pricing

STRATEGIES TO SEGMENT THE MARKET

• Finance people are not the “drivers”, but competence and innovation (also in market units)

• Look for similar usage patterns from customers with common characteristics

• Partner and collaborate by adequate tools (roadmaps, specifications, standards)

• Value based pricing– Offer a product line or service bundle, and watch choices– Price differently different versions for different market segments

• Promotional pricing to identify price sensitive groups

PROJECT DELIVERY STRATEGIES

• For technologies & products, the project delivery accuracy is LESS important than the knowledge and value exchange, and LESS important than performance advantages

• For services, the project delivery accuracy is MORE important than the knowledge and value exchange, but LESS important than service resilience

• Be the Most Attractive customer to your key suppliers , as suppliers need to make choices, and buyers cannot partner with all suppliers and need to make choices as well

CHANGE PROCESSES and WARS

• Custom contract fabrication vs. Standard componentsEg: IBM vs Texas Instruments , .....

• Proprietary vs. ProprietaryE.g.: Microsoft vs Google , ARM vs Intel

• Proprietary systems vs. Open public standardsE.g.: HP vs Linux , ATM vs IP , IPv4 vs. IPv6

• Materials/Component/Sub-system suppliers vs. System suppliers higher in value-added chainE.g.: Cisco vs Telecoms equipment, Toshiba vs Philips ,

• Bundling appliances with contentE.g.: Best Buy or Sony vs Radio Shack or Thomson Multimedia , Apple vs, Nokia

PROJECT PLANNING TOOLS AND METHODS

TECHNOLOGY ROADMAPS

Product technology roadmaps

“align decisions with trends”

Product roadmaps

“schedule product introductions”

Science/technology roadmaps

“set industry targets”

Industry roadmaps

“set industry expectations”

PROJECT ROADMAPSInternal or disclosed between companies

Business market drivers (milestones in market)

Product service capabilities (sequence diagram)

Technology/knowledge ressources (sequence diagram)

ICT MEGAPROJECT ROADMAP COLLABORATIONSas tools to elicit ,derive and express business visionsand describe the linkages /actions for delivery through time

Set objectives

Informa-tiongathering

Select scenarios

Create roadmap fundamentals

Formulate and orga-nize follow-up

Information sharing

Building common view

Building blocks for roadmap

Generate roadmap by

- information sharing

- drafting map

- assessment

WORKSHOP

PROJECT TEAM ACTIVITIES

FORMAL SPECIFICATIONS and FAST PROTOTYPING

• Almost all products, systems , services and applications rely on dynamic formal specifications, with libraries focussed on reuse and R&D additions

• Specifications are usually shared between suppliers and buyers

• Several of these techniques span across domains

• Most allow for fast prototyping in hardware, software and networks, allowing customers to provide feedback very early in projects

• Examples of specification languages: UML, EDA , VERILOG , CATIA , PML, …

• Architectures , tools and standards exist allowing to integrate, update, evolve across domains and to include past designs

• Examples of integration techniques: MDA (OMG) , OASIS, BPM

PROJECT PLANNING TOOLS

• Extensive applications exist allowing for design specifications linkedproject planning (coupling e.g. PDM or UML directly to project scheduleand task allocations)

• End-to-end resource planning environments : SAP, BPM , etc .. ; PERT/ Gantt/etc.. only used in very small projects

• Such tools are heavily shared with/ used by contract manufacturers(Taiwan Semiconductor, Solectron, Flextronics, Foxcon, Sanmina, etc…)

• Component manufacturing delays, test fixture delays, network availabilityare the biggest risk factors in technology and products

• Bad specifications, bad organization / management , insufficient expertise and sometimes manpower, are the biggest risk factors in services

PURCHASING / SOURCING

• Most manufacturing companies purchase more than 1 currency unit of materials for every 2 they sell, and ratio is falling as firms increase their level of outsourcing

• Innovation, time to market (TTM), price performance and quality depend at least as much on the efforts of your suppliers as on internal competences

• Joint business process re-engineering and real joint work with suppliers is commonplace, but put limits on IPR and on independence/switching

• Joint efforts require significant investments in time and brainpower from the suppliers, and these are in limited supply

MAKE vs BUY DECISION: the semiconductor case

• Differentiate from competition• Value added solutions with customization, with more

services• Managing change and evolution via FPGA (make), then

opt for ASIC’s (design, outsource production) , or eventually ASSP’s, Network processors (buy) if cost of SW development too high and standards stable

• ASIC’s give superior performance , but costs in time-to-market and total system costs

• Commodity chips, ASSP’s, NP’s give time-to-market adavantage, but limit value-added and life-time to life-time of standards

• Issue of interface standards (the “bazaar” )

ICT MEGAPROJECT DELIVERY ACCURACY

SECTOR DELIVERY TIME PRECISION

DELIVERY COST PRECISION

DELIVERY QUALITY

Technology Excellent, unlessmanufacturingis outsourced

Excellent Excellent

Products Very good Very good ExcellentServices Excellent , or

lousyAverage Variable

ICT PROJECT PLANNING RISKS

• Project execution is in ICT less a risk than stakeholder / technology resilience

• Risks grow exponentially with custom software weight

• High levels of expertise and R&D, colocatedwith project teams, reduce risks even in ICT services

• The biggest risks are bad HR management, and sometimes bad general management

SUPPLIER related RISKS

MAJOR WARS between STAKEHOLDERS & SUPPLIERS

• The old law “don’t compete with your client” is gone in ICT; now: steal from your client (“know how” and customers)

• Component / technology suppliers try to move to added-value subsystems/systems

• Component suppliers are decimated by spin-offs/new ventures with more advanced designs

• Service creators decimated by creative talent moving to new hunting grounds and styles

• Outsourcing of production, test ,facilities /offices, and sometimes of industrialization services is a growing risk factor

……. Resulting in creative destruction cycles

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CASE: The communications industrysuppliers being exposed to supplychain dependencies (I)

With the deregulation of handsets, emerged for the first time the question whether the systems’ suppliers should manufacture and design these access terminals .In most cases , the decisions were to spin-off or outsource such manufacturing and very quickly also their design .

Ever since, the trend has accelerated to affect the:• outsourcing of almost all manufacturing of system’s nodes , • the co-design of key semiconductor or optical devices , shared between the communications industry and the

semiconductor industry or the design houses • the commoditization of large parts of the operating systems and middleware• sometimes immoderate uses of consultants not just as buffer work capacity , but for key specification , design

,testing or other tasks

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Asset bases (non-financial) for communications industry suppliers (II)

• a)The Intellectual capital and know-how capital , represented legally by inventions, patents , trademarks , process know-how and similar , and for which legal filing, protection and review mechanisms exists backed up by trade agreements and treaties

• b)The Competence capital ,which is the subjective set of skills, experience and contacts which staff brings to a company , and which the learning-by-doing process enhance as well as some occasional company initiated competence development activities .In this competence capital should be featured key staff ,and experts , who have a combination of higher creative skills, implementation skills and communication skills to their co-workers ,and sometimes to the community at large ..

• c)The Customer trust capital base , which is not to be confused with the bilateral trade between a supplier and one of its customers , but with the depth , duration , credibility and trust of such a customer towards its suppliers . In one word it could be called the “depth of the relationship” .

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Strategic intents of predators (III)

a) For component suppliers (hardware, semiconductor, software, packaging ...) to move up the value chain to grasp sub-systems or systems in growing communication offerings

b) For IT or computer industry suppliers to capitalize on high, but falling, computer sub-systems volumes, to enhance them for the communications service needs, and, in that process, to improve the quality and dependability of computer equipments. In some cases, such IT or computer industry suppliers attempt to achieve a monopoly in selected network architecture nodes (application servers, authentification servers, base station controllers , ....)

c) For consultants to occupy the place left open by the communications operators /enterprises in the field of service creation and service management ,as the diversity of these has been growing very fast with new technologies and open standards

d)For contract manufacturers to absorb the plants and production staff of communications industry suppliers ,although they had not realized that they would have a hard time going beyond bill-of-materials skills to reach architectural know-how and IPR without long lasting investments

e)For software products industry to enlarge its product portofolio to include major high-value packages sold by the communications industry suppliers (such as network management, billing systems, customer-care systems , messaging, security software ) or used by these for their internal processes (ERP, documentation , CAD , test systems)

f) For all the above to make the communications industry supplier bear the cost of risk research , of pre-standardization work, of standardization/lobbying ,of integration into very complex networks and systems , and of high cost initial engineering , productisation and debugging

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Attack mechanisms of the predators(IV)

• 1-merger and acquisitions , typically of communications industry supplier’s plants , but also of non-core product lines or divisions ; in most cases , these deals have been carried out with financial valuation methods (or palettes thereof) which by and large have neglected totally the intellectual capital , the competence capital ,and the customer trust capital

• 2- “strangling approach “ using technical dependencies as trigger events ,and business models thereafter ,and finally “strategic agreements” aiming at competence/IPR/customer trust transfer from the communications industry supplier to a predator ;the core of this approach is precisely to take over the intellectual capital, the competence capital and/or the trust capital

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Three Cases of stranglingapproaches (V)

• Software industry supplier (middleware)• Contract manufactuer (limited volume manufacturing)• Semiconductor supplier (interconnect )

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Cumulative relative impact table from predatory processes aiming at communications industry suppliers (VI) in % , mid-2002 to end 2004 , with base mid 2002

PROCESS Relative impact on IPR capital

Relative impact on competence capital

Relative impact on client trust capital

Case A: software 2 -5 % 0- 7 % 0-4 %Case B : contract manufacturing

4 -16 % 2-18 % 6-14 %

Case C: semiconductor

8 -25 % 5-20 % 10 -25 %

Min imum (maximum) cumulated relative impact in % , 2002 -2004

14 % (46 %) 7 % (45 %) 16 % (43 %)

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The communications industry suppliers’ defence and offensive strategies (VII)

• Mandate open public standards (ISO process:3GPP,IETF,OMG,OMA) compliance in all sourced products or technologies :

• Cooperative funding , or “pool companies” to develop generic components to communications industry specifications , and with test and integration by the communications industry (Symbian, semiconductor foundries,etc)

• Collaboration of communications industry suppliers in joint specifications beyond standards (or prior to standards are published)

• Involving operators and other communications industry clients in management and technology roadmap alignment processes

• Timely and effective patent and IPR swap agreements with royalty payments or compensation payments• Branding policy by communications industry suppliers (individually or collectively) of communications

software applications or packages ,instead of letting the software , IT or semiconductor industry do it (e.g SAF , BREW,..)

• Aggressive personnel policies offering technical career tracks and prestige ; competence networks and architects programs

• Innovative business process ,tariff/charging/rating/ payment schemes benefiting the operators and supported by innovative business processes embedded inside the technical systems and products

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Case lessons (VIII)

• The communications industry supplier’s face far deeper challenges than the financial situation and demand evolution . They also face the consequences in some cases of failed investments , failed R&D projects , or goodwill accounting practices .The consolidation processes in this industry cannot ignore the predatory ambitions by other industries . Quite often the telecommunications industry suppliers have to rebuild customer trust ,besides just profitability . Each supplier represents a specific situation ,but possible fragmentation and recomposition will be analysed in terms of the same three types of assets studied here .The identification of mismatch between the telecommunications suppliers themselves , and with others , in terms of intellectual capital , competence and customer trust , are necessary to enable success over time and continued innovation in the best interest of end users .

• The above analysis does not address one challenging issue , which is who and how will the requirements be initiated and analysed in that industry : by the operator as traditionally (but they don’t do that much any more) , by the suppliers (but there is a substantial risk of overshooting/undershooting market acceptance ) ,or by the predators (if they can seduce the operators, which some try to )

ICT MEGAPROJECTS as “SMART BUSINESS NETWORKS”

INTRODUCTION

• A typical ICT megaproject involves technology, product, service, and other suppliers subject to high dynamics in the project dynamics, and high stakeholder dynamics

• Therefore ICT megaprojects allow to study in particularstakeholder dynamics and paradygms in collaboration

PEER GROUPS & SIMPLE COLLABORATION HIERARCHIES

•Peer groups•Economies of scale

–Joint ownership–Information gathering

•Risk bearing advantages•Associational gains

•Simple hierarchies•Team production•Economies of communications •Economies of Decision-Making•Monitoring

MULTILAYER HIERARCHIES

• U-form enterprises:– functional managers & a general manager– multi-layers of managers– cumulative control loss– long run strategic decisions

• M-form enterprises:– Quasi autonomous operating divisions

(quasi-firms)– General office: advisory & audit functions,

strategic decisions (e.g. resources allocation) & long term strategy

HYBRIDS

1. Long term relations between buyer and supplier

2. Joint ventures3. Business groups 4. Informal networks5. Franchising

DIFFERENT VERTICAL RELATIONSHIPS

Spot sales/ purchases

Long-term contracts

Agency agreements

Franchises

Vertical integration

Joint ventures

Informal supplier/ customer

relationships Supplier/ customer

partnerships

Low Degree of Commitment High

Low

High

Form

aliz

atio

n

• Smart Business Networks• Group of participating businesses that form the nodes• Linked together via communication networks forming links

between the nodes• With compatible goals• Interacting in novel ways resulting in spontaneous processes• Perceived by each participant as increasing its own value• Sustainable over time as a network with dynamics

• We apply the word “smart” to an action resulting in novel and different process , hence thought of as innovative.• Smart actions create remarkable, “better than usual” results.• What is smart today will be considered common tomorrow.• To be smart in business is to be smarter than the competitors;

this requires to be smart in process definition and updates.

WHAT ARE SMART BUSINESS NETWORKS ?

• Establishment of common understandings (meanings, ontologies, commitments, SLA’s, contracts)

• Membership selection

• Linking: search, select, authentication, hand shake, trust

• Goal setting

• Interaction

• Risk and reward management

• Continual improvement

WHAT SHOULD SMART BUSINESS NETWORKS BE ABLE TO DO ?

• Quick Connect, and Disconnect

• Pick (including based on process serach) , Plug, and Play

• Own Business Logic

WHAT IS (POSSIBLY) MAKING SUCH NETWORKS “SMART” ?

SMART BUSINESS NETWORK FUNCTIONALITIES

The following capabilities are seen in smart business networks:

• Membership selection: the capabilities to decide which business entities can act as nodes of the network; it includes a search-and-select behaviour by the actors. Once the appropriate actor, or node, is found, and the connection has been established, the process of performing a business transaction can begin.

• Membership ending rules and procedures over time; the capability to quickly disconnect, is a process greatly influenced by risk and reward division . This will be a vital element of a smart business network, because unless it is agreed ahead of time how risk and reward will be allocated, serious problems of mistrust can develop ;

• Linking: the positioning and connecting of nodes to the other parts of the network. The linking processes can include the directories (search and select) and routing (path finding) through the network as well as communications infrastructure elements such as authentication, trust establishment , firewalls , and network management;

• Goal selection and dynamic conflict resolution : the coordination mechanisms that determine the limited shared goals in the business network and the tasks and responsibilities assigned to each member node;

• Interaction and sharing : the shared expertise, management and capabilities that make the network generate novel results, preferably those that no single member could achieve on its own;

• Evaluation : Risk and reward management: the division of material results (profit and loss in a monetary but also know-how, intellectual property rights , customer data ,etc .. ) and the perceived value by each of the participating business entities of its share;

• Resilience, fault tolerance/recovery and risk management: risk measuring and distribution rules, and conflict resolution processes; clearly connections in a smart business network are much more complicated to achieve and require higher levels of mutual trust.

Network of nodes Structures such as smart business networks

Properties

Variation and network dynamics

from asynchronous needs and fulfillment

Emergence (attraction, repulsion)

Stabilisation

Retroaction/changes in membership

Business / « Energy » / Social forces

Entropy

SBN DYNAMICS

• Upload once for multiple indexing sites.

• Change inventory pricing for different services.

• Create subsets of books for various sites.

• Add information or web site links to each record.

• Check your data for completeness.

• Save hours per week/month.

CASE: Simplify upload process:Bookrouter.com (Golden et al., 2005)

THE FUTURE : GENETICS AND SMART MEGAPROJECT BUSINESS NETWORK DESIGN

• ESTABLISHMENT : There is a similarity with genetic processes where the networking effect results from mutual perceived forces of attraction (or repulsion) and evolutionary birth-life-death processes. The implication of this argument is that the design of a smart business network must not only reflect the needs of individual members, but more importantly the social triadic relationships in the emerging networks and how they evolve over time .

• DYNAMICS : Once people are engaged in selected mutual commitments a subtle shift takes place from diverse to common ends .Diverse ends remain but they become subordinated to an emerging set of shared ends. One can study dynamic smart business network consistence graph , comparable with the dynamic genetic signature fit between living cells (in biology and genetic engineering).

• BUSINESS GENETICS : This leads directly to proposing a representation of smart business networks, and a design method, relying on the connectiveness in genetically evolving networks, with topologies found both in the business relations space as well as in their communications network topologies.

A

B

C

Blue: Forces of repulsionYellow: Forces of attractionIntensity: Business relationsDynamics: Project deadlines

A HIGH TECH INDUSTRY CASE (I)

SHORT DESCRIPTION : direct implementation of this research on business genetics by one of the world’s top management consultancies, to assist author and his team in their industry to cater to a strategic goal, i.e. turn “A”, a high tech systems supplier to the service sector, into a systems and service integrator benefiting from the outsourcing trend amongst its service provider customers.

CASE SPECIFICATION

• The number of partners in the total smart business network is about 500, with on a country or regional basis a minimum of three and maximum of about 15. Business volume : 2,8 B USD/year

• The case is about designing a smart business network around the field support, installation and consulting Division of the company “A”, to allow “A” to achieve a significant worldwide market share in network operations amongst its worldwide service provider customers, at a time where these customers change their core business of running networking services into the new core business of interconnecting networks they do not want to operate themselves anymore.

• This can only succeed if on a global scale, “A” can identify, select, use and sever links to a wide diversity of smaller technology or skills suppliers, many of them only operating in localized markets, or having de facto only one key customer. As the outsourcing opportunities are time-critical, and as “A” wants to leverage its systems know-how (on its own products and selected other one’s), financial terms are in effect of secondary importance compared to a rather large number of intangible properties searched for or to be avoided .Very often the track record of the smaller high tech companies may have been with competitors to “A” or with “A”’s own customers without any direct connection to “A”.

A HIGH TECH INDUSTRY CASE (II) DISCUSSION

Advantages : First because of the shear automated exhaustive handling of all possible configurations, with their evolutions over time (from known tack records into fulfillment horizons on the outsourcing contracts ) .Next , the possibility for “A”, with help of the consulting company, to tailor the forces of attraction and repulsion (usually via simple look-up tables expressing real preferences) around mostly intangibles , was a unique advantage . Intangibles considered fell into the broad categories of : skills sets , available staff on short or medium term notice , prior systems/product/tools experience , incentives and penalty conditions, geographical distance of pockets of skills sets to the customer sites , etc …Third, was considered very valuable the ability with simple cellular automata and computational geometry tools to project the evolution of the smart business network under risk situations (as discussed in (Pau ,2005 a) ) and ,even more valuable, under negotiation sessions ; quick decisions could be made to stop early or to entrust a partner with a wider role ,etc … . Last, was judged very favourably by decision makers the use of smart business maps for executive decision visualization,Drawbacks were the learning time it took for traditional management consultants to adapt to this

novel way of thinking; but actually this time was far less than the time a merchant bank would have taken to tackle the same volume of analysis .The other drawback was the reluctance by some of the 500 possible parties to disclose some intangible characteristics ;but actually this was never a show-stopper as information was readily available by indirect channels such as the references these same companies were citing .Metrics : The outcome parameters were KPI’s in supplying outsourcing contracts as business

networks, and so far the over 10 instances have not lead to any questioning on the methodology, but rather on the changing goals and structure of the service suppliers.

CONCLUSION

KEY CHALLENGE (I): operational efficiency AND improvisation

Vintage Network DisciplinedEnterpriseNetwork

Improvisational Network

FirmA

FirmB

FirmC

Functions

Entity boundary Business unit or function

KEY CHALLENGE (II) : network architecture and governance structure that characterize improvisational networks

Loose couplingKnowledge partitioningInterdependencevisibilityHeterogeneityretentionSelf-organization

Architecture

Relational governanceDecision rights apportionment

Governance

Fit