Trust me: Building strategic partnerships in a global marketplace

Trust has always been the cornerstone of a successful business relationship. But in a global marketplace, your business partners may include a myriad of companies spread across the globe, linked by information gateways. Issues of trust, privacy, security and validation — integral components to maintaining an effective information supply chain — were the subject of a panel discussion at the recent "Cultivating and Securing the Information Supply Chain" symposium sponsored by the W. P. Carey School's Center for Advancing Business through Information Technology (CABIT).

Trust has always been the cornerstone of a successful business relationship. In bygone days a man's word was his bond, and a handshake was good enough to seal the most complex of deals. But in a global marketplace, your business partners may include a myriad of companies spread across the globe, linked by information gateways. Trust is still important, but how do companies build it?

Globalization "creates some unique problems for organizations," said Robert St. Louis, chairman of the W. P. Carey School's information systems department and moderator of a panel entitled "Facilitating Globalization through Strategic Partnerships" at the recent "Cultivating and Securing the Information Supply Chain" symposium. The event, which brought together industry leaders, academics and policy makers, was sponsored by the W. P. Carey School's Center for Advancing Business through Information Technology (CABIT).

But trust alone is not enough for a business reliant on the information supply chain, according to Professor Ajay Vinze, director of the center. The information supply chain, he explained, is a network of secured, integrated information and communication technologies that provides an environment for business partners to work collectively to sense and respond to the opportunities and challenges of the global marketplace. "What we're doing is delving further into it by looking into privacy and security issues, in very specific instances," Vinze said.

Plugging the dike

Security is a sensitive issue for panelist Genaro Matute. In October 2001 Matute was tapped by Alejandro Toledo, the President of the Republic of Peru, to serve a seven-year term as Contraloría General (Comptroller General) for the Sistema Nacional de Control (the National Control System), the South American country's equivalent of the General Accounting Office in the United States.

At the time he was recruited, Matute, who holds a doctorate in information systems from UCLA's Anderson School of Management, was director of the MBA program at Universidad ESAN in Lima, Peru. His daunting task was to unravel the mess left behind a year earlier by disgraced ex-President Alberto Fujimori and his intelligence chief, Vladimiro Montesinos. According to Matute, corruption had been rampant in Peruvian government and private enterprise during the Fujimori administration.

The tab was staggering — losses were pegged at more than $2 billion in equivalent U.S. funds, with $15 million alone disappearing in a suitcase hand-carried out of the country by Montesinos. Mutate's investigation has recovered $300 million to date, mostly from accounts held in the United States and Switzerland. The effort continues. Matute oversees a task force that supervises the use of financial resources at all levels of Peruvian government, monitoring expenditures by leveraging information technology in partnership with global contributors and advisors.

Debt operations, military purchases, funding of construction projects and other expenditure channels are now closely scrutinized with a checks-and-balances system designed to thwart corruption. "We are doing preventative control … to avoid any type of problem," Matute said. Matute studied a workflow-based process that was being developed by the government of India for ideas on how to handle the paperwork generated by workflows. "We receive 10,000 documents per month," Matute said, describing the resulting environment as "a madhouse."

Because new laws govern the response times for processing these documents, acquiring IT applications designed to handle large volumes of data was a critical component of the program. Matute's team acquired a financial auditing program developed by PriceWaterhouseCoopers — Team Mate — to handle what he calls 'compliance/legality auditing.' The workflow management strategy allows Matute's operation to harness the information supply chain with stringent risk analysis and planning practices. His staff now employs external data mining and business intelligence-gathering practices previously unavailable but now possible using SPSS Inc.'s Clementine, a predictive analytics application.

What's your trust ranking?

Arguing the case for federated security between partner networks was W. P. Carey information systems Professor Haluk Demirkan. Before his academic career, Demirkan spent over a decade in the private sector developing business intelligence solutions and data warehousing practices integral to the information supply chain model. Equally important in Demirkan's ongoing research is the injection of federation into the information supply chain network.

This combination of research and real-world experience has provided Demirkan with a ringside seat to the debate that has raged over network security and standardization practices. According to security architect Lakshmi Hanspal, writing in Web Services Journal "federation means trusting sources to come across your borders and opening up your services to them. Federation works on the principle of a business trust model."

This trust model, according to Demirkan, requires each partner to incorporate security features at the system's central architecture layer, sandwiched between a company's top-level business access portal and the applications infrastructure. This way, organizations can operate independently according to their business model, safely sharing the information necessary to participate in the value chain.

This approach develops trust, allowing organizations to profit collectively from their service-oriented architecture. This security coding generates what Demirkan calls 'trust rankings.' Each company interacting with the information supply chain must earn and maintain an acceptable ranking, based on a 0-9 scale. If a company's ranking falls below the minimum set by a partner, access to key functionality in the supply chain can be denied.

This model also provides for increased flexibility, as federation partners are free to bring in new providers. Being assigned a low ranking by a disgruntled partner would be devastating, Demirkan predicts. The negative consequences, like getting the dreaded negative feedback from an eBay transaction, would motivate companies to take ownership of the trust requirements. "If I say 'I can't trust this partner anymore because of security,' that's it," Dermirkan said. "That company could go bankrupt because it would be so hard to get that reputation back."

Getting lean and going global

Stephen Slade, director of applications marketing for Oracle, the Redwood Shores, California database and applications behemoth, said companies must embrace the notion of globalization, he said, and accept the challenge to transform into lean, world-class competitors.

Slade said that the combined gross domestic product of China and India is on track to overtake that of the United States by 2010. He urged panel attendees to evolve their companies' supply chains into value networks, to become organizations that leverage technology to enhance total customer experience (TCE). TCE is what the next dimension of manufacturing and service should be all about, he said.

"The value chain is very long, and the procurement section … is becoming less and less a significant factor," he said, "because of the long-term contracts and suppliers that are available to take over … when you can't meet that price supply." "Where is our competitive edge?" Slade asked. "Our competitive edge sits in innovation. It sits in information. It sits in technology."

Talking Points

• Globalization is no longer a 'like to have' but a 'have to have' feature for any company, according to Robert D. St. Louis. Trust, privacy, security and validation are integral components to maintaining an effective information supply chain.
• Technology has made the world very small, says Stephen Slade. New technologies such as Service Oriented Architecture, Business Activity Monitors and nanotechnology will contract operations significantly in the near future.
• A working definition of the information supply chain, according to Ajay Vinze: a collection of information and communication technologies to provide a secure integrated decisional environment that enables business partners to collectively sense and respond to opportunities and challenges in a networked eco-system.