At the height of the dotcom spending frenzy, IT companies profited from selling technology they said would "scale to meet the demands of the business".
But businesses found that buying scaleable technology was expensive. Meanwhile e-business failed to gather speed as fast as predicted and its support needs fell far short of the IT capabilities procured. In the new wave of e-business, scaleability is down to managing growth of your e-business systems.
The bit in the middle
There has been a lot of talk about the merits of middleware, but industry experts have singled it out as the most significant technology for building future-proof business IT systems.
Middleware is one of the fundamental building blocks for any e-business project, but IT leaders need to tread carefully as the cost of the technology can run into millions. One of the reasons for the interest is that businesses tends to run mixed IT environments, comprising ERP packages, legacy mainframe, Unix and Windows servers. ERP systems were not designed with e-business in mind, so companies have had to retrofit their IT requirements for e-business on to existing ERP systems.
This is where middleware has played an important role: linking disparate IT systems together through a procedure known as Enterpise Application Integration (EAI). Without a single view of the whole business - a goal promised by EAI - organisations have little chance of delivering genuine benefits from an e-business implementation. Relying heavily on middleware and expensive consultancy, EAI projects are often difficult to justify.
One of the problems is trying to position middleware infrastructure projects to the board in isolation. "The chance of the board understanding middleware is close to zero," says Guy Hains, chief executive officer for the UK operations of IT services company CSC.
"You cannot have a five-year [infrastructure] project," says John Tangaa, IT director at Allders. "You have to cut it down to reasonable steps that can deliver measurable return on investment."
The upfront cost of software integration is not the only factor deterring users from building full-blown e-business systems. Hardware cost is another. E-business requires a lot of computing resources, and one of the biggest slices of the budget goes towards storage. According to George Teixeira, chief executive officer and president of storage software specialist DataCore, storage costs quickly add up. "Dedicated storage is very expensive," he says.
Businesses need to buy large amounts of storage upfront. US department store JC Penney, a customer of DataCore, bought 20Tbytes of EMC storage, costing about $1m (£0.7m) - assuming storage costs of five cents per Mbyte - but only used 30% of the capacity. In other words, $700,000 of the $1m storage investment went unused.
Enterprise storage systems provide data only for a single operating system environment. Data for Unix, NT and mainframe systems must be stored separately, giving rise to massive under-utilisation
This is one of the areas Teixeira's company addresses: DataCore offers technology designed to serve data from enterprise storage to multiple operating systems.
Capacity on demand
It is not just storage that drives e-business. In last year's dotcom economy boom, Sun Microsystems enjoyed large profits from selling high-end Unix servers.
But user companies could never be sure how successful their Web site or e-business venture would be. Were it to be an outright success, there would be huge demands on servers. But without enough capacity, the server could end up running more slowly as more users logged on to the Web site. Eventually, server response time would be so slow that customers would turn away. The answer was to buy the more powerful servers and run them with a very light workload.
But this computing model is not cost-effective: users end up buying expensive boxes that are under-used. One of the alternative approaches the industry is taking is to ship a fully configured multi-processor server and allow the user to specify how many processors they initially need. As and when business demands on the server increases, the user can "buy" more capacity, resulting in additional processors being switched on. But the upgrade is permanent, and the user consequently ends up paying for the extra processors even if demand on the server is subsequently reduced.
Hewlett-Packard has begun offering another approach: pricing the server as a utility. Users are charged according to the capacity they use. Management software on the server monitors usage in order to provide the billing.
But holding back this model of computing is the problem of charging for software. Licences are generally charged per processor, per server or per user. The software industry is not yet offering true usage-based licensing to reflect the new pricing model on hardware based on usage.
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