This section provides an overview of current developments in a number
of important business sectors.
For each sector we describe current changes and the consequences they
have for the business operations
and information systems
of these companies. We mainly concentrate
on the developments in The Netherlands, but we place these developments
in the context of European and global developments.
2.3.1 Government
Important changes are going on at all the levels of the Dutch Government,
at a national level, a provincial level and a municipal level. An important
characteristic of all of these changes is the fact that the government
is becoming more businesslike. At the heart of this is the
fact that politicians and government are realising that monopolistic
organisations, public as well
as private, usually operate in a less efficient and effective way than
commercial organisations. They lack the healthy discipline of
the market. This new awareness is not unique for The Netherlands.
In other Western countries we can also notice this shift to more businesslike
and especially smaller governments.
Confinement to core responsibilities
By way of a first step, the government confines itself to a number of
core responsibilities. This concerns tasks that politicians and the
government have earmarked as unalienable government tasks.
Only the government may perform these tasks. These tasks include defence,
public order and safety, management of government funds, justice and
environmental planning. Moreover, tasks are concerned that are highly
cost intensive and require a high degree of consultation, such as the
construction of a national infrastructure
and especially in The Netherlands the construction of
dikes.
Almost all government tasks from which civilians and companies benefit
can also be performed by independent organisations with or without a
commercial objective. These organisations can work in a more businesslike
and customer-oriented way. The Dutch Government places housing, public
health, education and culture in this category.
Separation of policy making and policy implementation
A current topic in the discussion with respect to government tasks is
the need for a clear separation between the definition of a long-term
policy and the short-term implementation
of policy. In this vision, the definition of policy, including the formulation
of the corresponding legislation, and the monitoring and implementation
of the policy is the responsibility of small departments. The present,
large ministries could therefore disappear. The implementation of the
national government policy would be the responsibility of more or less
autonomous regional administrative bodies. This is based on the assumption
that from that position, the small departments will be better able to
monitor the expenses and the consequences of the policy implementation.
Another advantage is the fact that the policy implementation is brought
closer to the public. The administrative bodies can offer services
of a higher quality level and are better able to cater to the public.
In this context the central government also moves the definition of
the regional and local policies towards
the provinces and municipal councils. These can also supervise the implementation
of the policy.
Independence and privatisation
One could think of various solutions that would lead to a more efficient
way of working for the administrative bodies. These solutions vary from
independence (in the form of internal self-management, agencies or independent
administrative bodies) to complete privatisation. There are advantages
and disadvantages to each model. Politicians assume that the advantages
of independence and the more businesslike way of working of the administrative
bodies will outweigh the extra costs involved with centralised policy
making and policy monitoring by small departments. There is currently
a preference for full privatisation. The small departments can enhance
the internal efficiency of the administrative bodies by means of result-based
management in combination with so-called contract management.
We can also see the trend that administrative bodies contract out tasks
to companies in the private sector. For the people in charge of the
administrative bodies this involves tighter procedures with respect
to purchasing, product delivery and
service providing, as well as a more
strict budget monitoring.
The question how the political supervision of autonomous administrative
bodies and the contracting out of work should be organised, remains
to be answered. The parliament and the ministers remain responsible,
also for the delegated implementation of government tasks. This requires
an improved monitoring of the implementation and the effects of the
policy. This monitoring should take place independent of the administrative
bodies who implement the policy.
Towards a new form of business operation
The developments described above have far-reaching consequences for
the government business processes.
In the execution of its tasks, the government devotes more attention
to a customer-oriented approach to civilians and companies. Administrative
bodies will act as front-offices for the various government
tasks. Civilians and companies will be able to settle an increasing
number of matters at one desk. This allows the administrative body to
supply services that are better tailored to the customers personal
situation. Another advantage is the fact that the government is better
able to monitor the way a civilian or company
uses government services. This will not only improve the quality of
new policies, but it will also help to fight fraud and improper use
of government funds.
The government aims for effective integral management. The small departments
develop the long-term policy and see to it that the administrative bodies
implement this policy. The administrative bodies perform their tasks
as effectively as possible at the lowest possible costs.
New requirements for information systems
Changes in the business processes result in new requirements for the
government information systems. The government more and more resembles
an interorganisation of
policy making departments and lower authorities on the one hand and
of public and private organisations that implement the government tasks
on the other hand. Moreover, national governments have to deal with
supranational organisations such as the EU, NATO and the United Nations.
These organisations affect the national policies. Evidently, IT and
telecommunications are
important resources in this matter.
The proper organisation of information
systems first of all requires that the participating organisations make
proper agreements concerning the division of tasks and concerning the
information that is required. Subsequently, they can agree on the interchange
of data and on the way they interconnect
their business processes. These agreements form a basis for the organisation
of the information systems and for the communication
between these systems.
The new information systems of the government will be of a completely
different nature than the present information systems. The latter usually
support the execution of a single government task. This leads to a great
diversity of isolated applications.
Moreover, the present systems are rather inflexible with respect to
changes in the administrative organisation. They are not equipped for
policy monitoring and for communication with other systems. The government,
which will more and more become an interorganisation of flexible organisations,
therefore also needs an interorganisation of flexible information systems.
New information systems and their mutual communication should not interfere
with the necessary changes in the government, but they should in fact
support them.
2.3.2 The Financial Sector
Important changes are currently taking place in the financial sector.
The companies in this sector, such as banks, investment companies, insurance
companies and pension funds, are in the process of revising their customer
approach, their services and their organisations.
Over the past fifteen years, governments have lifted numerous rules
and restrictions for financial transactions. This liberalisation and
deregulation have lead to the integration of both the national and the
international financial markets. In The Netherlands, a result of this
was that the separation between banks, investment companies, insurance
companies and pension funds has become less strict. Partly influenced
by the European unification and the opening up of the European markets,
this has resulted in many mergers and new partnerships between financial
companies. Expansion was a decisive means to retain a satisfactory level
of operating in the financial world. The mergers or new partnerships
between financial companies are also intended to offer combinations
of banking services and insurance policies to customers, in which the
partners use each others sales channels.
These developments also create room for new and innovative financial
services and instruments. At the present time, we can even speak of
a true innovation race. The fast development and introduction of new
services and instruments a short time-to-market has therefore
become a strategic factor.
The developments
From this angle we provide an overview of the main developments in the
financial sector:
Internationalisation
The ongoing internationalisation of the financial markets results in
an increasing importance of the international activities of the companies
in this sector. This mainly concerns international services to internationally
operating customers.
Cost reduction
Fierce competition and pressure on the margins force financial companies
to reduce the general level of costs. This results amongst other things
in a current interest in business
process redesign projects, mergers and concentrations, and efficiency
programmes.
Integral solutions
To distinguish themselves in a highly competitive market, financial
companies add more and more service elements to their basic portfolios
of financial services. The emphasis is shifting from providing single
services to offering integral solutions for the financial needs of customers
or customer organisations. Since there is no longer a clear separation
between the various types of financial companies, tailor-made combinations
of financial services can be offered to both private customers and business
relations.
Risk management and performance management
The increased uncertainty in the financial markets has strongly increased
the business risks of suppliers of financial services. The simultaneous
narrowing of the margins as a result of the fierce competition more
than ever requires a good risk and performance management. This is therefore
a central issue in the long-term policies of many financial companies.
Distribution channels
The distribution channels to a large extent determine which customers
a company reaches. The number of outlet channels has therefore increased
over the past few years. The personal customer approach currently takes
place via a companys own branch offices, through agents or by
means of account managers. Companies can also opt for direct writing,
in which they communicate with their customers in writing or by telephone
as much as possible. Telecommunications and IT open up new channels,
such as money changing machines, cash dispensers, cash deposit machines,
electronic payment systems in shops
and telebanking systems for companies and private individuals.
A well-balanced distribution mix through various channels is becoming
an increasingly critical success factor for the positioning of financial
services on specific market sections. This is a highly influential factor
in the choice for a (merger) partner and for an IT infrastructure.
Further growth extended office
The development from front-office to extended office will not pass unnoticed
by the financial companies, where administrative tasks form the major
part of the work. In this process, after all, business processes are
moving from the financial companies to their customers. This offers
new marketing opportunities for the financial companies: introducing
new IT applications, new
(varieties of) financial services and new channels. The customer purchases
or gets the necessary software. He uses this software for all kinds
of financial activities and administrative tasks and for communication
with various financial companies.
More service to customers
Quick service to customers (time-to-deliver) is becoming increasingly
important. The same applies to the speed of reacting to market developments
(time-to-market). Swiftness of service is of course not synonymous to
quality of service. Nevertheless, speed will be an important distinguishing
factor. For example, bringing out a credit offer immediately after application
ready while the customer waits could be decisive for the
commercial success. The increased customer demands with respect to the
up-to-dateness of required financial data also illustrate the necessity
of speed. The success of the balance information phone and of home banking
demonstrate the importance.
Tariff structures
By means of a refined tariff structure, financial companies will convince
their customers to use the cheapest distribution channels. This principle
has already been introduced in payments and it seems to be the start
of a trend.
Alternative payment circuits and contracting out financial business
processes
As a result of some developments, banks are in danger of losing their
influence on the payments circuit. Companies that co-operate a great
deal, more and more often decide to cancel out their mutual financial
obligations against each other. This will lead to a structural decrease
of the commissions on payment services provided. The large banks are
still trying to regain a share of this market. They are now offering
services in the field of in-house banking to companies, for matters
such as the so-called treasury management. However, customer organisations
by now have recruited their own experts for these tasks. There still
lies an opportunity in the increasing complexity of the financial processes
in question, so that customers may after all have the need to contract
these processes out to banks. A number of banks now offers such services.
Consequences for the business operation
The existing organisation of the financial companies must be adapted
to the described developments. An important step is the transition of
a service-oriented company to a market-oriented and customer-oriented
organisation. This tilting of the organisation results in
a separation between the front-office the part of
the company that is aimed at the customers and the back-office
the parts of the company that handle the processing and administration
of the various services.
As a result, financial companies are increasingly decentralising their
business processes in order to meet the present-day customer demands.
Consequently, the influence of the business units within the company
increases. Decisions about investments, including automation, are increasingly
made decentrally.
Consequences for the information systems
All the developments described above also have consequences for the
information systems of financial companies. The tilting
of the organisation necessitates the adaptation of the IT infrastructure
(hardware, software and networks).
This adaptation is so drastic that a complete renewal of the existing
applications will sooner or later be inevitable for a number of financial
companies.
The desired architecture of the information systems can be realised
with new IT and new system development methods, for example:
- fast, flexible systems for back-office, front-office and extended
office, including the data
communication between them;
- modern, integrated systems for back-office and front-office;
- new methods for evolutionary or iterative system development;
- re-use of knowledge and software components in the construction
of new applications.
Financial companies are usually reluctant to shift to new technologies
on a company-wide basis. They want to reduce the risk by demanding standards
and making requirements concerning performance, controllability and
durability. The large number of pilot projects involving new technology
is typical of this attitude.
The necessity to apply new technology is increasingly felt, partly
because of the intensifying competition. A great problem, however, is
the question how companies can control
the transition to a new architecture of information systems.
Perspective
Financial companies are more and more becoming automated data factories.
Manual execution of processes for processing, obtaining and supplying
data will be restricted to a minimum. Input, retrieval and output of
data will be more and more decentralised by means of data communication.
The emphasis with financial services will shift increasingly towards
the front-office and the extended office (the interface
with the customer) and to product innovation. These are the things companies
will concentrate their efforts on in the coming years. First, they will
organise and streamline the resources of the back-office in such a way
that the back-office will be able to fully support the shift of emphasis.
This will result in the idea of a virtual organisation of financial
services, in which the relationship between the production
in the data factory and the actual services to the customer will become
less and less clear.
2.3.3 Social Security
The level of collective social security benefits in The Netherlands
is high, compared to other countries. Over the past few years, there
is a growing political and social awareness of the fact that the present
system as a whole will no longer do. Problems are presented by the high
costs of social security and the insufficient percentage of working
population. The government has made a choice in this matter: work is
more important than income and income-from-work is to be preferred above
a social security benefit. As a result of the high costs involved, the
government is trying to reduce the current collective insurances to
a minimum benefit. Additional insurance is the responsibility of employers
and private individuals.
The enhancement of peoples personal responsibility by the government
matches the trend of individualisation. The government tailors the benefit
to the individually accumulated rights and the personal situation of
people. For the administrative bodies in charge of the implementation
of the social security, this will lead to drastic changes in their way
of operating. They will have to operate in a customer-oriented way and
become competitive or co-operate with private insurance companies and
service providing companies. In view of flexibilisation and individualisation,
they will develop and market new forms of insurance and new services.
At the same time, the costs will have to be kept down to a minimum.
Employee insurance
The government is reorganising employee insurances with respect to,
for instance, sickness and incapacity for work to reduce the flow of
new applications for social benefits. The government is applying the
so-called volume policy to this end, which involves measures such as:
- increasing the barriers for being granted benefits, building in
own-risks and checking whether people who receive benefits are in
fact entitled to them;
- prevention, active reduction of occupational hazards, placing the
responsibility for those risks with the business
sector, introducing own-risks for companies, introducing premium
differentiation and no-claims bonus systems;
- performing an intermediate role in getting people who are on social
benefits back among the working population as soon as possible.
We expect that the implementation of the these collective insurances
will be privatised, resulting in a competitive situation between the
current administrative bodies and private insurance companies.
There are more and more independent organisations who advise on the
work circumstances, preventive measures and counselling in case of sickness
and incapacity for work. A strong preventive policy and a proper coaching
of employees can help employers to keep the insurance risks down, thus
positively influencing their own premiums.
Job centres
Regional job centres, municipal welfare departments and industrial insurance
boards will co-operate intensively to help people find jobs in the most
effective way. They will adapt their mutual work methods and service
portfolios to be aimed at a one-desk approach. This means that they
will organise the business processes at the local offices in such as
way (by means of IT) that one employee will be able to help the customer
with all his questions concerning incapacity for work, social benefits,
finding work and receiving follow-up training.
Health care insurance
The health care insurance shows the same trends as the other social
insurances. The current collective insurances are being privatised and
the height of the benefits is reducing. The National Health Insurance
for people with lower incomes is starting to operate in a way similar
to that of the private insurance companies for people with higher incomes.
People can take out additional insurance with the National Health Insurance
or with private insurance companies. Health care insurance will operate
in a more market-oriented and efficient way. Important developments
in this matter are:
- the growing freedom of people to choose for an insurance company
(National Health or private);
- many mergers between National Health departments and private insurance
companies;
- increasing market influence because of competition between the insurers
with respect to quality and price;
- more freedom for insurance companies to choose the care providers
they will work with;
- better control of costs of health care and resources used.
For the health insurers, too, customer orientation, marketing and
development of services will become important issues. Moreover, it will
be of strategic importance to acquire more exact information on the
structure of the costs of health care. All health care insurers are
now in the process of collecting and analysing the payments and claims.
These data are compared with similar data within a region and on a national
and international level.
Collective pension plans
An increasing personal responsibility will be expected of each citizen
to see to a proper old age pension. Because of the ageing of the population
it is hardly to be expected that the government will be able to maintain
the present level of the collective pensions on the basis of the (Dutch)
Old Age Pensions Law, since the necessary funds are collected directly
from the working population (which is getting relatively smaller) and
paid directly to the people who are entitled to this benefit.
Company pension funds and insurance companies will be ready for this
and offer their customers additional insurance and savings programmes.
Critical customers employees and employers will assess
the investment results of the pension fund and the insurance company
on the basis of common investment indexes and benchmarks. They will
compare the results with those of other pension funds and insurers.
This is the reason why the pension funds turn to more active and less
risk-avoiding investment strategies, which, to their expectation, will
lead to higher results .
European developments
Free traffic of people and goods, services and capital form important
pillars of the European Union. The national administrative bodies in
the field of social security and employment will be dealing with an
increasing amount of migrant workers from different European countries.
More and more people will be looking for jobs and will find them outside
their own country. Many retired people from the northern countries already
prefer to live or spend the winter in Southern European countries. This
means that governments have to adapt the legislation with respect to
social security to this situation. In doing so, they have to take the
European guidelines into account. The adaptations will lead to a further
harmonisation of the standards of living and the conditions of employment
between the member states. National organisations in the field of social
security will have to intensify the co-operation with the partner organisations
in the other EU countries.
2.3.4 Industry
The environment in which industrial
companies are offering their products
and services has been in strong motion over the past few years. Below,
a brief overview is given of the most important trends and their consequences
for the business operations and the information systems in this sector.
Internationalisation
The market of many industrial organisations consists of the entire world.
More and more often, they have organised their own business activities
internationally. The main reasons for this are spreading of risks, expansion
through acquisitions and the separation of development and production.
Development preferably takes place in countries with a high technological
and scientific development level. Production can either take place in
countries with low wages, countries that stimulate investment or countries
close to the outlet, which will reduce the logistics costs.
The geographical spread of the business activities leads to companies
becoming world-wide interorganisations
of independent business units, that co-operate on an international basis
with suppliers and customers. This development makes high demands of
the internal and external communication, of data interchange and of
the control and monitoring of goods flows.
Shorter product life cycle
Product life cycles have become shorter and shorter over the past years,
and this development does not seem to have come to an end yet. Examples
in this area are PCs and audio-visual equipment, but also baby nappies
and detergents. There are two important reasons for this. On the one
hand the rapid development of technology constantly creates new possibilities.
On the other hand, customers become increasingly demanding and constantly
require innovated products, stimulated by the way by the joint marketing
and advertising efforts of the manufacturers.
For manufacturers it is therefore of vital importance that they reduce
the time-to-market of new and improved products. As a consequence of
this shorter time-to-market, the time-to-profit must also be shorter.
A product must pay for itself quickly, since its replacement will be
marketed in a short time. This makes heavy demands of the effectiveness,
the efficiency and the control of both the development of products and
production processes and of the production itself.
Integration
Industrial companies and their activities are links in the logistics
chain from raw material to end user. The increasing co-operation between
links in the logistics chain requires different methods of control.
There is a shift from order-based delivery to agreement-based stock
management for the customers.
Cost reduction
In many industrialised countries the competition is fierce. There is
a high level of concentration, expansion and co-operation on the purchasing
side, giving it a stronger negotiating position towards the suppliers.
If a manufacturer wants to retain his own margin, this places a pressure
on the cost price. The manufacturer partly shifts this burden to his
own suppliers by demanding from them that they lower their prices. This
was recently illustrated by the great price reductions that car manufacturers
forced on their suppliers.
This reduction of cost price by force requires drastic changes in the
procedures and resources of the production process, which can only be
realised through proper organisation and control of the process.
Improvement of customer services
The quality of the physical product is not the only thing to determine
the customers satisfaction, nor has it been for a long time. Customers
expect an increasingly short time-to-delivery. In the fresh-daily and
perishables sectors and in some sectors of the supplying industries
people think in terms of several hours. Customers also require an increasingly
high level of reliability of delivery, in which the exact moment of
delivery is becoming an important issue. At the same time, the market
demands an extensive product range as well as the choice between product
varieties or the possibility to compose individual products by means
of different options. These developments, too, require adaptation of
the production process and of the control of this process.
Consequences for the information systems
Besides a proper organisation of the business operations, information
systems have an important role in the realisation of the changes described
above. First of all, the companies and business units that participate
in a common production process will interconnect their computer
systems to create one network
of computers. Data communication stimulates the integration of the applications
of the participants. This results in a common information
system that controls and monitors the common process. Important
developments in the field of IT are SCADA systems, that handle automated
process control, and Computer Aided Design (CAD), that speeds up the
design of products and production processes. An important initiative
with respect to co-operation is that of PDI/CALS, which aims for standardisation
on behalf of the exchange of data on products and production processes
between different companies. These IT developments will be discussed
in detail in section 3.3.
2.3.5 Retail, Distribution And Transport
For this sector, we will mainly concentrate on the services in the
logistics chain: retail, distribution and transport. The services in
this sector are in particularly dynamic. The core process in this chain
is that of making products available at a different time and place and
in a different quantity and packaging. We first discuss the developments
in this area. In conclusion, we will discuss the changes in the field
of passenger transport.
Internationalisation
The internationalisation of industry causes the logistics chains to
cross international borders. For companies in the international logistics
chain, it is of vital importance that they have enough knowledge of
and experience with international retail and transport. Especially the
knowledge of local legislation and of the legislation with respect to
import and export covers a large and complex domain. On the one hand,
we see international negotiations with the objective to remove the barriers
for international trade, reduce legislation and promote international
standardisation. On the other hand, it is still common practice for
national and local authorities to intensify the legislation. The local
economic interests, the national competitive position and environmental
care are at the basis of this.
Added value
Adding value in the logistics chain is an important issue for the organisation
and control of this chain. By means of value-added logistics,
manufacturers try to deliver products with the highest possible added
value at minimum costs. This implies a constant solving of dilemmas.
Manufacturers try to keep the time-to-deliver as short as possible,
even when complex products are concerned. To this end, the order is
executed at the latest possible stage in the logistics chain by means
of assembly of standard components. For simple products, the final step
of the assembly product takes place at the distribution stage. Delivery
from stock, like in supermarkets, places shop owners for the dilemma
that they have to offer the customer the widest possible choice of products
while keeping the stocks down to a minimum. We see this phenomenon throughout
the entire logistics chain. All the suppliers and manufacturers want
small stocks and short delivery times. In addition, suppliers also supply
their products to different manufacturers.
The solution to the described dilemmas lies in the integral organisation
of the entire logistics chain. By means of telecommunications, the participating
companies connect their information systems and thus create a network
system. This network system can adequately support the control of
the entire logistics process.
Integration and expansion
Suppliers of services in the logistics chain respond to the developments
as described, by integrating functions in the chain. By co-operating,
the suppliers of logistics services offer integral logistics solutions
to manufacturers. This is a great change for an industry consisting
of relatively many small companies that compete fiercely. Integration
of the logistics chain leads to a further integration of the business
operations of service suppliers and manufacturers. The separation between
industrial activities and the logistics chains vanishes. Long-term co-operation
between manufacturers and suppliers of services replaces short-lived
commercial relationships. Long-term contracts will take the place of
the current single orders.
The integration results in expansion of the companies through mergers
and long-term partnerships. By combining the knowledge and skills of
the companies involved, a higher level of service can be offered to
the customer.
Manufacturers are concentrating more and more on their core
activities, so that more work is contracted out. Manufacturers also
spread their activities geographically over independent offices. This
results in large logistics chains, especially for large manufacturers.
The logistics chain for the production of a certain product no longer
consists of one company, but of a number of companies or business units.
Manufacturers contract out more and more activities with suppliers of
logistics services. This not only concerns logistics tasks, but also
tasks such as the assembly of simple products and product repair and
maintenance.
Consequences for IT and telecommunications
The market of retail, distribution and transport is characterised by
strong changes in the patterns of co-operation. The logistics chain
gets the nature of an interorganisation of manufacturers and suppliers
of logistics services. Since many companies participate in different
chains, there is in fact one big interorganisation of manufacturers,
retailers, distributors and transporters. Within the interorganisation,
the participating companies enter into brief or long-term co-operation,
aimed at the production and delivery of certain products to customers.
By making proper use of IT and telecommunications, incorporated in a
common network system, the companies in the interorganisation can have
their co-operation run efficiently and effectively, without losing their
own independence and competitiveness.
The optimal use of IT enables clusters of companies in an interorganisation
to set up new enterprises that offer new products and services in the
marketplace.
New ways of approaching customers
The development of home systems and the Digital
Highway will greatly affect the final link in the logistics chain:
the consumer. Currently, shops are functioning as front-markets
for products or services, usually by different manufacturers. The consumer
comes to the shop for advice and to buy products or services.
The Digital Highway enables companies to offer their products and services
on the home systems of the consumers, for example in the form of digital
catalogues. Employees of the companies advise the consumers via videophone.
The customer can order items from his home, and the company will see
to the delivery of the goods. The customer can also close an insurance
policy at home, or book a trip. This form of extended office,
or better still, teleshopping already works for mail order
companies, although they still use paper catalogues and telephones.
Shop chains face the choice of remaining traditional shops or becoming
home order companies, partly or completely. The choice will
also depend on the product they sell. The consumer experiences certain
forms of shopping as a chore and will, if the alternative
presents itself, prefer to order electronically and have the purchases
delivered by the shop owner. For other products, for example fun-shopping,
the consumer will prefer to go to the shops. In case of supermarkets,
the consumer will probably prefer electronic ordering for the weekly
purchasing of non-perishables. At the same time, he will retain the
need for small neighbourhood shops for the fresh items, delicatessen
and forgotten items on the list.
Book shops and record shops will be facing a totally different situation.
They now sell novels in the form of books, or music on CDs. In future,
companies will supply existing and new kinds of immaterial
products directly to the consumer via the Digital Highway. Here,
too, the choice of the consumer is decisive. The consumer will decide
which type of immaterial product
he buys and how he uses it.
Transport of passengers
Great changes are going on in the field of passenger transport. This
mainly applies to public transport: train, underground, tram and bus.
Until recently, in The Netherlands, and in many other European countries
mainly state-operated companies or state-subsidised companies were responsible
for public transport. Governments are, however, in the process of privatising
these companies and permanently reducing the subsidies to these companies.
A EU guideline stipulates that railway companies are divided into companies
that respectively deal with the infrastructure (the road), and the operation
(transporting passengers and goods). The government will in the near
future only subsidise the companies in charge of the infrastructure.
The public transport companies are becoming responsible for their own
operations, revenues and cost-effectiveness and for finding customers
and actively searching for new market opportunities.
They therefore look for an answer in a more efficient business operation
and especially in more co-operation. It is essential to respond to the
demand of the customers. Customers prefer door-to-door transport. This
is an important reason for people to use their own car, a rental car
or a taxi. When travelling by public transport, people often have to
combine the use of buses, trains or aeroplanes within a single journey.
This results in a loss of time for the traveller, sometimes a great
loss because of bad connections. Moreover, he often still depends on
additional transportation he may have to take his own bicycle
to the railway station, his own car to the airport or a taxi from the
airport to the railway station. There is a need for more co-operation
between the various public and private transport companies to be able
to provide door-to-door transport. By means of a common IT infrastructure,
companies are able to provide the customer with information for his
itinerary and to advise him on how to organise his journey and which
means of transport to take. The customer can book and pay for his trip
by means of the system, with or without the interference of travel agents.
Transport companies are thus better able to match demand and supply.
Many public transport companies now work with fixed time-tables and
a limited variation of prices. In future, more passenger transport will
be on-demand and means of transport will be used depending on the current
demand. Besides this, variable pricing can be applied, for example higher
rates in peak hours and reductions in the off-peak hours. This will
result in an improved result management.
2.3.6 Telecommunications
European governments have stimulated mergers and take-overs that have
resulted in the present national telecommunications companies. For decades,
these state-operated companies have dealt with a stable market for telephone
and telegraph services. For years, national governments have given their
telephone companies a legally protected monopoly.
This situation is now changing rapidly. This has a number of consequences,
including: the trend towards privatisation and deregulation with governments,
the introduction of new services and new networks as a result of technological
developments, the internationalisation of the services and more customer-oriented
services.
Privatisation and deregulation
The large, national telecommunications companies with their strong monopolistic
nature are disappearing. Many of these companies have already been privatised.
The national governments are also giving concessions to new suppliers
of telecommunications services. The national companies are therefore
really losing their monopolies. For many new networks and services,
such as the GSM network for mobile telephone, this is already the case.
Further deregulation will follow. American telecommunications companies
are therefore now entering the European market. In response to these
developments, telecommunications companies are starting to co-operate
on a national and international level. Other companies also participate
in these co-operations, for example banks and railway companies. We
can also see the development of international conglomerates as a result
of mergers of large telecommunications companies. Companies are thus
trying to hold on to their market shares, and to expand also
in different sectors. This expansion is necessary as well, to obtain
sufficient economy of scale and to be able to invest in new developments
and keep the costs down.
Technological developments
With modern IT people are able to store and transmit all types of information
in digital form. This development has major consequences for telecommunications.
Telecommunications companies will in the future offer one world-wide
network for the communication between people, mobile systems, information
systems and home systems of private individuals: the Digital Highway.
Via this network all communication takes place in digital format. The
network supports matters such as videophone (conferencing between people),
the exchange of multimedia documents
and the transmission of multimedia by media suppliers.
The telecommunications companies will strongly expand their services
in the field of data transmission. Traditionally, there is a relationship
between the form of data transmission and the type of company that executes
the transmission:
- telephone companies for telephone conversations, sending
faxes and (on a small scale as yet) data communication between computers
of different companies;
- broadcasting and cable television companies for broadcasting
and transmitting video and sound;
- transport and distribution companies for the transport and
distribution of material data carriers such as paper (books and documents),
CD (sound, computer documents) and videotape (video and sound)).
In the future, the telecommunications companies will be transmitting
all these types of data in digital format.
The telecommunications companies have to equip their networks and
their services for these new technological possibilities. The international
nature of the Digital Highway necessitates international co-operation
between these companies, that have always been independent. This is
another reason for governments to privatise the telecommunications companies
and to deregulate in order to create room for international co-operation.
Internationalisation
The internationalisation concerns all sectors of trade and industry,
which influences the need for telecommunications. Large multinational
companies demand world-wide, tailor-made services at low prices. They
are considering a private network for speech and data communication
for their international organisations that covers various continents.
This is typically a market in which nationally operating telecommunications
companies have to co-operate internationally. They will offer these
services together in the form of a virtual network. They
offer the customer a private network that uses existing networks and
services, while it is completely transparent to the customer that a
number of telecommunications companies are working together in the background.
This is a market in which the telecommunications companies compete with
service offering companies that use their networks. The Internet is
a good example of this. Users of multimedia PCs can have digital telephone
conversations via the Internet. They just pay the local telephone rates
for their connection with the Internet.
Customer Care and Billing
The developments mentioned above have consequences for customer care
and billing. The customer must be able to choose which services he will
purchase. The customer companies and private individuals
must be able to purchase a unique combination of local and international
services, tailored to his own situation. In doing so, the customer requires
an individual and modular billing system, issued by the company where
he purchased the services in the first place. As a result of the deregulation,
a fierce competition will arise between existing and new telecommunications
companies. These companies must distinguish themselves both with respect
to the services offered and with respect to prices. To this end, a telecommunications
company must have flexible, customer-oriented service organisations
that focus on certain groups of customers, but that also have a flexible
and powerful billing system. An automated system with an extensive database
for rates, contracts with customers and registration of the use customers
make of the services is indispensable in this matter.
Consequences for business operations
The developments described above have far-reaching consequences for
the business operations. We divide the activities of telecommunications
companies into two categories:
- The traditional network company, that focuses on setting
up and making available transmission facilities in the form of networks;
- the service organisation, that focuses on providing telecommunications
services that make use of existing network facilities
It seems that two different types of telecommunications companies
will develop. First of all there will be network companies with the
core activity of setting up
connections and making them available. These network companies provide
local connections and trunk connections between local networks.
There will also be service organisations that mainly focus on developing
a wide range of telecommunications services and making them available.
In doing so, they use the transmission capacity of the various network
companies. The service companies pay the network companies for the transmission
capacity they use. The service companies offer their services locally
to private individuals and local companies, and internationally, for
example to offer a virtual private network to multinational companies.
The services include all forms of communication and transmission and
broadcasting of data. The customers pay the service companies for the
services provided.
Thus, eventually a world-wide interorganisation of network companies
that offer transmission capacity will emerge, as well as an interorganisation
of service organisations that use the transmission capacity to offer
tailor-made communication services to companies and private individuals.