هو إستراتيجية

Getting handcuffed to the current version of EA software is by far the major reason why customizing EA is not a great idea in the long run.

Writing an integrated internal software system:

Pros:

• Decoupled Solution: The core business processes are segregated from the EA. The system can be updated and enhanced several times independent of EA application. That way, the development cycle of internal software system will be decoupled with that of EA development cycle which is notoriously slow.
• Leverage existing capability of IT Department: Writing an internal application can take advantage of existing capability of the IT department. If the current IT department is good in developing .NET applications, then this customized application can be on that platform.

Cons:

• Integration Issues: EA applications do not have a good support for integrating external systems. Although, most of them are beginning to use SOA (Service Oriented Architecture) framework to support integration of external application.

As vendors recognize that they will not be able to force every firm to use plain vanilla business process they will begin to support seamless integration with external applications. The second option will become the only way the corporations can automate their core competencies.

Every organization has gotten to this cross road by trial and error implementing a sound EA Strategy.  I don’t think every vendor is speaking in unison as to how to tackle the issue of automating the core competency for that organization. The organizations that have tried both the above mentioned ways to automate their core competency have been frustrated by the complexity of the implementation. As integration technology changes, and as delivery model adapts we will see continued frustration in the implementation of EA Strategy.

Popularity: 10% [?]

When an organization starts as a small firm, there is usually no financial bandwidth to implement an elaborate Enterprise Application. The firm is usually functioning on a shoe string budget. The most important resource, capital is extremely scarce and is allocated very carefully to create a steady cash flow. Enterprise Application, though helps set a firm’s foundation on a sound footing for the organization to grow organically, does not initially enable cash flow. So the firm in its infancy builds and runs its business processes with applications that are barebones Excel based or some sort of shareware/open source software systems. Though, building an organization on a strong foundation of Enterprise Application is ideal, small organizations bucket the implementation of Enterprise Application as a ‘nice to have’ category and move on…

As the organization grows, the rudimentary applications grow with the firm and for a long time the firm can survive on these internally built and ‘enhanced’ software systems. These applications are usually written and rewritten by several people with no formal exposure to software development methodology. They do not understand the complexity of maintenance, deployment and testing. These systems do not usually scale easily. Hence large number of employees is needed to be hired to run the organization around these software systems. The human glue keeps this collection of hodge-podge systems in synchronization. When the organization begins to reach a point of disintegration due to ‘fragile’ and ‘rigid’ business processes based on these rudimentary systems, only then the executives feel the need to implement the Enterprise Application. The Executive directive is passed down to the middle management. After selecting a viable vendor for the Enterprise Application which will encompass some combination of ERP, SCM, CRM depending on the organization, the mammoth exercise of implementing the Enterprise Application begins. This implementation process is akin to changing the plumbing of a house after the house has been built.

So for so good, but what the implantation team does not understand is that there needs to be a delicate balance between customization of Enterprise Application to the organization’s business process and adaptation of firms business process to the ‘canned’ business process provided by the vendor for that Enterprise Application. The people in-charge of implantation of the Enterprise Application needs a solid understanding of the core competencies of their firm. All business processes that do not enable core competencies of the organization can and should be changed to map the pre-generated business processes that are part of the Enterprise Application. They could be configured but the temptation to customize these business processes should be avoided. Why? Because these non core or contextual business process simply play a supporting role for that organization. They do not enable differentiation strategy and hence it’s a waste of important resource to customize these business processes. In my opinion these contextual business process can even be outsourced to some degree without having a negative impact on the organization itself.

But, the business processes that enable or is a part of core competency of that organization should not be retrofitted to the existing ‘canned’ business process provided by the Enterprise Application. Why? Because if the firm’s core competency is mapped to plain vanilla business process provide by the third party vendor, it does not give the organization an ability to sustain its competitive advantage. How can ‘someone else’ understand your firm’s differentiation strategy and your competitive environment? There is no way the business process for the core competencies of the organization can be enabled by the Enterprise Application without loosing that competitive edge. Your competitive advantage is the ‘secret sauce’ and you should try to keep it that way by not ‘watering down’ those business processes to plain vanilla third party vendor developed business process. In my view automating the core competencies of the firms should be tackled by using one of the two ways

1. Customizing Enterprise Application
2. Writing an internal software system that can interface with the Enterprise Application.

Each has its own pros and cons which I will write in my future blog.

Popularity: 34% [?]

The biggest advantage of SaaS CRM is that, very little in house resources are utilized in deploying, maintaining and integrating the CRM application. The vendor does most of the work and thus SaaS delivery model looks tempting from a financial perspective. As it turns out it is not advantageous to have SaaS delivery model for the CRM application in every scenario.  Depending on the type of firm’s competitive strategy, it will be disadvantageous to implement SaaS CRM.  

According to Porter’s Generic Competitive Strategies, there are 2 types of Competitive Advantages a firm can possess: Cost Leadership or Differentiation. When the organization uses Cost Leadership Strategies, the sole objective is to become the low cost producer in the industry. This is the model where the organization goes after only the ‘price sensitive’ customers. The CRM in this case can be ‘plain vanilla’ application. Hence under this circumstance SaaS CRM can be used successfully. In fact if the number of customers is very large, the organization can focus on streamlining SCM and other internal business process to maximize throughput. CRM in this case can even be outsourced/offshored because now it can be a non-core activity. Firm can get away by having very rudimentary CRM process.

But if the competitive advantage of the firm is based on Differentiation Strategy, then the firm seeks to be unique in its industry along the facet that it thinks its widely valued by the customers. So in this case ability to understand the customers is very vital. Customer Segmentation and Relationship Management is a critical factor in differentiating the product or the service. It is extremely important that the CRM needs to integrate not only with other systems (SCM and ERP) but also with people and processes. SaaS CRMs have very weak integration ability (in most cases additional connector software needs to be purchased or customized connector needs to be created via Web Services). SaaS CRM also cannot be customized for the unique business processes. Now, SaaS CRM begins to loose its advantage for the organization that has unique Customer Relation business processes.

SaaS CRM always works for the organization with Cost Leadership Competitive Strategy but rarely works for the organizations with Differentiation Competitive Strategy.

Popularity: 46% [?]

SaaS or On-Demand application delivery as a disruptive delivery model is challenging traditional

Enterprise applications. Adoption rate is the fastest in the SME (Small and Medium Enterprises) space. But, large multinational organizations are slow to embrace the on-demand delivery model.

SaaS has both pros and cons as explained in my previous blog. But, its not the cons of the On-Demand delivery model that is holding back the CIO’s of the large organization from joining the SaaS bandwagon. But, believe it or not, its one of the advantages of SaaS that is stirring up a political problem for the CIO. The main advantage of the SaaS delivery model is that it needs a smaller IT team. No need for large IT resource to integrate and sustain the traditional

Enterprise application. Smaller IT department is great for reducing IT costs, but it creates the illusion of loss of power for the CIO. Typically, larger the department the more perceived power the executive possesses.

CIOs pretend that they need complex application, so that they can justify bigger budget and larger IT resource. If the enterprise application is outsourced (SaaS is a unique way of outsourcing) then suddenly there is no justification of a large organization. This development, in the tribal world of executives, leads to diminished power for the CIO (because he now has a smaller army).

In my view CIO should not fear the reduction of size of IT department. If the software systems that support tactical and non core businesses is outsourced then it frees up the resource to focus on the strategic aspect of the business. Identifying and implementing software systems that enables core competency of the organization will make the role of CIO more relevant to corporation.

Making a major impact on the business strategy the CIO can thus showcase real power in the boardroom even with a small organization.

Popularity: 70% [?]

After 15 years being IT Organizations’ central focus, Enterprise applications are getting old and decrepit and desperately needs a facelift. Like it or not these applications can now be classified as Legacy system (Read Koch’s IT Strategy Blog Riding the ERP Bus Forever for more on ‘Legacy’ Enterprise systems). Implementation and Integration of Enterprise application has become more and more complex (instead of getting simpler) after several versions of upgrade. From a customer’s perspective Enterprise application calls for a large IT department to implement and sustain this behemoth (which adds to thier cost). Hence, companies are now looking for other ways to handle Enterprise applications.

It appears that On-Demand delivery model or SaaS (Software as a Service) model has emerged as a preferred choice that makes lot of economic sense to the companies. It’s being adopted at a rapid rate. This is a model where vendors own the enterprise system. The organization /customers pay for using the system but not for owning the system. This disruptive delivery model is bound to shake up the current leaders in ‘legacy’ enterprise applications. This unique delivery model will make Enterprise applications more agile and relevant to the company’s strategy.

Some of the advantages of SaaS

1. Smaller IT resources.

2. Quicker implementation and faster training for the employees and thus reducing TCO (total cost of ownership).

3. Faster ROI due to lower up-front cost.

4. Lower hardware/software cost due to reduced investment in installing, upgrading and sustaining of enterprise system.

SaaS has some challenges that vendors have been successfully trying to address –

1. Loss of control: Because of Reliability/Uptime

2. Data security: This is a tough pill to swallow for the corporate executives. Can they trust third party vendors with the data?

3. Privacy of data: Who owns the data now?

4. Different integration need: How will the SaaS application integrate with the existing systems?

In my view, advantages of SaaS delivery model far outweigh the shortcomings and it’s only matter of time SaaS will be the “preferred” delivery choice for Enterprise applications. Small and Medium Enterprises have already embraced the SaaS delivery model. Larger organizations are slowly opening up to this disruptive delivery model. When I was in Melbourne Australia last month I read an interesting article about SaaS in Australian Post related to explosive growth and adoption by large organizations of SaaS

There are some political implications for the CIO’s of large organizations to fully accept SaaS model, which I will address in my next blog.

Popularity: 54% [?]

CIO Insight article revisits Nicholas Carr controversial 2003 HBR article “IT Doesn’t Matter“. Well, the gist of the article is: Nicholas Carr sees no strategic value of IT for the business. He compares IT to Electricity. When electricity was discovered, some organizations that were able to understand the business value of electricity used it to create a sustainable competitive advantage. But soon all the competitors started using electricity and electricity was no longer an enabler of competitive advantage. Thus, commoditization of electricity transformed electricity from an enabler of business strategy to cost of doing business. Carr concludes that same future lies ahead for IT. At some point, all the organizations will use IT to enable their value chain.

Since his initial article he has written the book ‘IT Doesn’t Matter’ and continues to write about irrelevance of IT in business strategy. No doubt his analysis is half baked and several reputable people have rebuked his take. What’s surprising is that he still finds an audience that listens to his views. Nicholas Carr’s view on IT is as poignant as U.S. Commissioner of Patents Charles H. Duell’s view in 1899 declaring everything that could be invented has been invented and recommended that the Patent Office be closed down permanently (this is only a urban myth but this story comes closest to Carr’s perspective).

Granted, there is some truth to what Carr says though. Granted there are some aspects of IT that behaves like a commodity. IT infrastructure like storage, network etc are clearly commodity. Other infrastructure/support applications like email, excel etc act as commodity and we could see more organizations using SaaS (software as a service) model. Even some of the IT enabled applications in a supporting department, in organizations like HR etc can use ‘canned’ applications like SAP.

But, have you ever wondered why implementation of ERP applications fails most of the time? It’s because organization try to apply ERP to every value chain in the organization. There are some business processes that create a differentiation competitive advantage for the organization. These business processes create ‘Economic Moat’ that competitors cannot replicate. This is where IT cannot be used as a commodity. For these business processes, IT can be used to ‘widen’ the ‘economic moat’ and extend the competitive advantage vis-à-vis the competition.

My belief is that it’s the job of IT department to understand the business strategy, organizational behavior and competitive strategy for their company. One of the job functions of an IT executive must be to identify the ‘core competency’ of their organization. Customized IT solution must be applied to those business processes and hence build a ‘sustainable’ competitive advantage. For business processes that are not part of company’s core competency, automation can either be outsourced or SaaS can be enabled or ERP applications can be used.

Popularity: 52% [?]