Enterprise Application and Firm’s Core Competency

21Nov

Enterprise Application and Firm’s Core Competency

No comments

When an organization evaluates several Enterprise Application (EA) Vendors and zeros in on a suite, they will begin to notice that all the elements of their firm’s ‘value chain’ cannot be mapped to the business process modules provided by that EA. What it mean is that the EA Suite cannot be used ‘as is’ for every module like CRM, ERP, SCM or SRM etc. to support the firm’s business structure. That is a good sign, because if the EA is used without customization (but only with some configuration) to support every functional organizations then it clearly indicates that the firm does not have a competitive advantage compared to its competitors. It is impossible for an EA vendor to build every possible variations of business organization’s value chain even though the vendors sell it with that promise. Think of it this way, if you can use a generic EA with some configuration to map to your business processes then any organization with the right resources will be able to duplicate your effort and thus eroding your firm’s ‘economic moat’. Granted that some of the modules like SCM, ERP or HR can be your non core activities and these modules can be used with no customization. But for your core activities, EA should not be used ‘out of the box’. As mentioned in my blog Enterprise Application Implementation Strategy there are 2 ways to tackle automating core competency using EA

Customizing Enterprise Application

Pros:

Consolidated Solution: Both non core and core business processes will be on a same platform simplifying the portfolio of software applications.

Homogenized Development team: Since all the application is on a single EA platform, the IT department can have a homogenized development team. No need to get different resource with differing skill sets.

Cons:

Expensive: Need to hire and train highly specialized resources. It is also very slow to build, test and deploy a customized solution thus making the solution expensive.

Spotty Vendor Support: Usually the vendors do not encourage firms to customize their EA application. But at the same time they do recognize that the customers will walk away if no customization is provided. So EA vendors have a bad reputation of providing good support.

Handcuffing to a version: Once the software is customized, upgrading to a newer version becomes near impossible because all the customization will be lost. Sooner or later the vendor will start pressurizing to upgrade because of their cost of supporting old version become very high

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.