Volume 3, Edition 1

Comment

The Impact of the Internet and Intranet on Business
By John S. Leggate, CIO & Group Vice President, Digital Business, BP p.l.c

The ensuing collapse in stock values undermined shareholder confidence and contributed to a growing scepticism about the Internet’s contribution to national productivity and competitiveness.

Nonetheless, studies in the US have shown the growth rate of labour productivity to increase from an annual rate of 1.77% in 1973-94 to 2.64% in 1995-99 while adopting IT. Even after the recent crash, productivity is projected at a trend rate of 2.24% per year with a range of 1.33% to 2.98%.

Although no direct link has been established between technology spending and productivity per employee, the studies have concluded that the U.S. productivity revival remains largely intact and that IT has played a central role.

A longer-term perspective tells us there have been other ‘booms and busts’ in the history of revolutionary technologies, especially ‘connector technologies’ like railways, canals and telephones. They go through several stages of development, including the sort of shake-out that overtook the Internet, before reaching maturity. After the shake-out comes the build-out, as the new technology becomes an engine of growth and moves the economy to a higher level of productivity.

It’s in this context that, despite damage to the technology sector and millions of shareholders, big business users – the real customers for this technology – have had a rather different experience. For them, the build-out is under way as the Internet and digital technology provide new tools for the deep, long-term transformation of their businesses and the nature of work.

BP’s digital experience has paralleled a dramatic expansion of our global interests and operations and a major shift in the composition of our energy portfolio. In the process, BP’s business has changed significantly – in shape, size and structure.

BP had to be capable of performing at this new global scale and deliver the added value promised to shareholders.

This demands full transparency of business performance in order constantly to improve and produce sustainable value to shareholders.

It has meant inter-connecting the company so that it can interact with the entirety of its people and physical assets, finances and costs, and evaluate its risks. High performance has been the BP culture for almost a decade. Now we have to do it in fast time.

BP committed to make the company ‘deeply digital’, capable of ‘living on the Web’; a company that was ‘always on’. There would be nothing we could not know, learn or transact that was not available through a Web browser, at any time, wherever we were.

We are driving digital technology into almost every corner of the company, using it to unlock new oil and gas reserves, cut production costs and make our employees one of the world’s most mobile, yet most connected workforces.

We are in the early stages of this journey – we have made mistakes and we wrestle ceaselessly with limitations of our technological legacy and business process which we built for a different era. We have also had to be hard-headed about controlling costs, capturing benefits and ensuring that our digital innovation is focused on achieving business delivery.

And when I think about the deep dependency of modern companies on digital technology and digital infrastructure, it occurs to me that this may also be true for government as well.

In which case, three things come into focus.

1. The Web is no longer merely a tool for improved performance; it is a vital piece of business process infrastructure, central to the business architecture, efficacy and security for modern businesses and countries.
    

2. Business and government in the industrialised world are becoming more and more dependent on the public infrastructures supporting the Internet.
    

3. Many public infrastructures beyond telecoms are equally dependent on digital capability.

At the same time, it is one of the Internet’s extraordinary features that, although so much now depends on it, no single authority either owns or is accountable for it. It is a web without a spider. And it has developed a life of its own -- it is already no longer possible to draw a complete map of the Internet; its rate of expansion daily outstrips our capacity to map it.

We also know more about the properties of the Internet as a complex network – designed to be resilient yet we are learning from experience that in reality there are critical hubs and concentration points. Disable key hubs and a network can fragment and even collapse.

In sum, we see how dependent we have become on the Internet for our economic advancement and the welfare and security of our societies. And we see the ‘dark side’ of our dependency -- how exposed we could be now to the risk of digital failure, be it from technology failure, supplier failure or the geopolitical tensions that can lead to outbreaks of targeted cyber terrorism.

Which begs the question - should we be conducting a more fundamental review of the robustness of our digital infrastructure – both nationally and internationally?

This brings me to a fourth point –

“Are we doing enough to ensure that the UK will be a world leader in e-business?”

Last week’s Booz Allen Report on International E-economy Benchmarking places the UK second behind the US as ‘an environment for e-business’. The benchmark, essentially, is the G7.

By any measure this looks like considerable progress towards the Prime Minister’s pledge in 2000 to make the UK the best place in the world to do e-business by 2005. The report is a comprehensive and very well assembled health check and we are studying it carefully.

But it misses, I think, an important question: What race are we in – and with whom? Is the G7 a sufficient benchmark in defining future success? Because it obviously excludes some of the world’s real pace setters – South Korea, India, China – countries that increasingly offer serious competition in the global market place.

The report also acknowledges what is well known -- that in business broadband connections alone, Britain lags well behind Germany, France, Italy; and that the rate of take-up and use by individuals and government is still too slow.

In other words, despite the Government’s present initiatives and good intentions and the urgency expressed by the Prime Minister in calling for our national effort to roll out broadband to be speeded up, the UK is still at risk of falling further behind other nations in terms of underlying productivity and global competitiveness.

The need for urgency comes home to me on my visits to India. Here, government and the private sector have been working together to leverage India’s competitive advantages and establish a world class IT sector. This is attracting a tide of investment from the US and Europe. Today India is the world’s top IT outsourcing haven; 30% of the world’s software engineers today are Indians; and 200,000 have found jobs in Silicon Valley.

Similar models are at work for Ireland, Canada and Eastern Europe and China is catching up.

So, are we really doing enough?

All told, after reviewing the Government’s action plans, I think there is still a good debate to be had as to whether we are diverting enough strategic resource to our objective of global e-business leadership.

In this regard, the broadband roll-out is fundamental. Why? Because –

1. Each technological revolution has its own infrastructure. For the steam engine, it was rail. For cars, the highway. For the digital economy, it’s broadband connection to the Internet backbone.
    

2. Broadband is about more than mere speed. It’s about being ‘always on’ and our ability to access existing systems and business processes – and have them working and talking together: seamlessly.

World leadership in e-business also needs appropriate incentives, tax regimes, regulatory frameworks and a key point not raised in the report – the crucial importance of recognised international accreditation for our people and processes in the global market place.

Ultimately it is about our national digital capability – our people – both in number and quality – compared with the competition.

In summing up, I want to suggest four areas for action and understanding:

1. To ensure that the Internet and digital technology are accorded the same priority, security and resources as other key elements of our public infrastructure.
    

2. In terms of national risk management, we need to map our dependency on digital technology, know its full extent, identify its critical nodes and understand the critical national risks associated with those nodes, so that we can better defend and harden the network – and develop contingency plans.

3.      Take note of the shift of corporate traffic from private intranets towards the public Internet. Until now, private companies here and abroad have financed large chunks of proprietary intranets for their own needs. I believe we are rapidly approaching the demise of the corporate intranet as these companies can’t and won’t continue doing this from their individual resources for much longer. In future, business wants its digital endeavours supported by existing public infrastructure – and this will become a key factor in decisions of global companies when locating their business operations.

4. We need to get the message over that there are benefits for all businesses, and help SMEs that are still on the outside of this phenomenon, to engage with it. Earlier this year BT held a series of broadband summits, involving 400 small-business leaders from across the UK. Most said that they wanted to invest, but felt they lacked the knowledge and skills to capitalise on the Internet as a business channel. Only a small percentage cited money as the reason. As many as 45 percent said they simply didn’t know enough about it.

And finally, I want to go back to the vision expressed by the Prime Minister in 2000 – “to make the UK the best place in the world to do e-Business.” – and pose the question – if we are really serious about this agenda, what further acts of leadership will be demanded of business, government and academia, working together, to ensure that Britain keeps up with the world’s most competitive countries - to ensure that the UK sets the Trend and becomes the Next Wave?

JOHN S LEGGATE
 

CIO and GROUP VICE PRESIDENT, DIGITAL BUSINESS, BP
 

AS CIO of BP, John Leggate is responsible for the development of BP’s

digital capability – its related systems, technology, business processes

and opportunities – across the 150 business units that comprise the

company’s global operations, upstream and downstream.
 

Leggate, a chartered engineer, a graduate of Glasgow University and a

Fellow of the IEE, began his career in marine consultancy and nuclear

energy before joining BP Exploration in 1979. During the 1980-90s he

held posts of increasing responsibility in the management and operating

of BP’s North Sea oil and gas assets.
 

In 1998, he was appointed President of BP’s Azerbaijan International

Operating Company, in which capacity he was tasked to manage BP’s

interests in the unfolding geopolitical and economic debate that centres

on crude oil export routes from the Caspian Sea.
 

Leggate has a particular interest in executive leadership, the

management of high-performance teams, organisational change, and

knowledge management. He is a member of the BP Group Senior

Leadership Team, and is closely involved in the development of corporate

policy on technology foresight, global environmental performance, and

sustainability.
 

He is married with four children, lives in London and travels widely on

behalf of the company.