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Issue 8: VSAT in Corporate IT (InfoKom)

Strategic Alignment of VSAT System
in Corporate IT: INFOKOM's Case

Rafdian Rasyid

This paper is available in Bahasa Indonesia

Can VSATs play a significant strategic role in terms of supporting businesses? Can VSATs support corporate IT?

It is obvious that in Indonesia, VSAT is a must have infrastructure for business. Nobody can argue that Indonesia up to now does not have terrestrial infrastructures that can cover remote areas or even metropolitan areas. Only VSATs can reach them. However, what link can we make between the existence of VSATs and IT in the corporate environment? This article attempts to answer that. We will also discuss challenges faced by VSAT operators, and solutions that can be applied.

I. Introduction

PT. Infokom Elektrindo ("INFOKOM"), established in 1998, is one of the leading VSAT service providers in Indonesia. According to the Comsys Report 2003, INFOKOM is the second largest SCPC VSAT provider throughout the country, ranking third in the Asia Pacific region. Despite the recent establishment of the company, the VSAT services of INFOKOM actually began in the 1980s under its parent company. INFOKOM's VSAT services are well-known under the brand-name of "SmartCom."

In the past, VSAT players tended to look at a VSAT network as merely a telecommunication infrastructure. VSAT people usually thought of Information Technologies in the corporate environment as not having a direct connection to the VSAT. They consider that IT and corporate IT applications are outside of the VSAT world. However, the issue of "convergence" of telecommunications and IT has pushed telecommunication professionals to look more at the IT area. To better sense this issue, we need to observe the IT domain.

II. IT System Definition

Referring to a commonly used definition, IT (Information Technology) is a system or technology that can (i) Retrieve, (ii) Transfer, (iii) Analyze, (iv) Present, and (v) Store information. The term "information" is defined as any data that is useful for business. Traditionally, IT can be divided into two layers namely: (1) Infrastructure layer, and (2) Application layer. Table 1 summarizes the technology function of IT.

Function of
Key Technology
Retrieve (infra) Apps User Interface, Keyboard, Mouse, Web Browser, GUI, Scanner, Sensor, etc.
Transfer (infra) LAN, Ethernet, WAN, Leased Line, VSAT, VPN-IP, etc.
Analyze (apps) Business Apps, ERP, SAP, Oracle Apps, CRM, BI, Server, CPU, etc.
Present (apps) Monitor, Display Board, Power Point, Web Browser, Buzzer, GUI, etc.
Store (infra) Database, RDBMS, Oracle DB, Hard-Disk, Storage, Tape Backup, SAN, CD-RW, Diskette, etc.
Table 1. Key Technologies Involved in the IT Domain

III. The Strategic Role of IT for Business

One of the tools for understanding the strategic alignment between IT and business is depicted in Figure 1 (called "Mc Farlan Strategic Grid"). This tool is commonly used by companies in developing their strategic IT plan. The idea is to map the current condition and the expected future condition. The term "expected future condition" is driven by the business strategy. Some companies that fall into the Support quadrant might not be able to move to other quadrants due to their business process that do not rely too much on IT. For example, major industrial process companies or major chemical companies do not use IT as their strategic weapon to win the competition.

The interesting case is in the banking industry. Before 1990, major banks fell into the Factory quadrant, in which many day-to-day operations were actually very dependent to the existence of IT. After 1990, major banks moved to the Strategic quadrant since most of them were using IT as a strategic weapon to win the competition (for example: most of them use ATMs and online banking services to compete with others).

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Fig. 1: Strategic Impact of IT to Business
Source: [Applegate 1999], [Ward 1996], [INFOKOM 2001]

  • A. Major Banks (before '90)
  • A'. Major Banks (after '90)
  • B. Major Insurance Companies
  • C. Medium size grocery chains
  • D. Major Distributors
  • E. Major Airlines (before '90)
  • F. Major Chemical Companies
  • G. Major Industrial Process Companies
  • H. Insurance Brokers
  • ATM: Automated Teller Machine

One should bear in mind that neither companies or IT products can stay forever in the Strategic quadrant. After a certain amount of time, companies or IT products can move or be moved to other quadrants. The best example of this is the ATM (Automated Teller Machine). In the Indonesian case, before 2000 an increasing number of banks were using ATM as the key differentiator to win the competition. So, before 2000, ATM was in the Strategic quadrant. However, at this point in time the ATM is no longer considered as strategic, but merely as an operational item. Now, there emerge ATM "consortiums" (called ATM-networks) such as ALTO, ATM Bersama and ATM Link, or even global ones such as Cirrus or Maestro. A small size bank in Indonesia now can immediately have thousands of ATMs just by connecting to an ATM-network.

IV. Corporate IT Spending

The VSAT service procurement and its budget in companies is normally allocated as IT infrastructure budget. Figure 3 gives an idea of how corporate IT spending is tightly coupled with its business strategy.

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Fig. 2: Strategic Impact of IT to Business
Source: adapted from [Weil 1998], [INFOKOM 2001]

Figure 2 depicts the infrastructure and the application portfolio in companies. The foundation of the application is the infrastructure, whereby the application itself can be categorized into three kinds of applications, namely: strategic, informational, and operational. It is normal for a strategic application, as in the case of ATMs to become an operational application.

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Fig. 3: IT spending Pattern Compared to Business Strategy
Source: [Weil 1998]

As we have seen in Table 1, the VSAT is part of the IT infrastructure. If we agree with this idea, then looking at the spending pattern in Figure 3, we should get the sense of how the VSAT service procurement in companies is also affected by their business strategy and the IT spending pattern.

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