by Dennis Gaughan | February 3, 2012 | 3 Comments
Over the last 10 years (both with AMR Research and now Gartner), I have spoken to many application leaders about how to better manage their application portfolio. While some of their circumstances are different, there is always a lot in common across companies. They are dealing with a diverse portfolio of applications which span from 30 year old legacy to large packaged application suites to leading edge SaaS. The cost of maintaining the existing portfolio keeps rising, which limits their ability to fund new investments to support new ideas. And they are under enormous pressure from their business peers who don’t understand why the applications can’t evolve as fast as business needs dictate.
Working with a number of peers across Gartner, we set out to identify the underlying issues behind these common problems and develop an alternative approach that could break this cycle for clients. We recognized that one of the underlying issues for clients is that they have taken a “one size fits all” approach to managing their applications. It didn’t matter whether the app was your core ERP system or a trade funds management application – they were applying the same investment strategy and governance approaches. They were also looking at consolidating more and more functionality into integrated suites –without really understanding what that meant from an agility standpoint.
We developed our Pace Layered Application Strategy framework to help clients think a little differently about their application portfolios. The premise is relatively simple – that a one size fits all approach does not work and that you need to look at applications in the context of the business value they provide for the organization and how their rate of change differs as a result. Do the applications support standard, foundational business processes (Systems of Record), non-standard differentiating processes (Systems of Differentiation) or new, experimental processes (Systems of Innovation). The applications in each of those categories have different requirements and rates of change, and the pace layer model prescribes unique governance approaches to each to allow for maximum flexibility.
The response to this research has been extremely positive, and we have been working over the last 12 months to develop a deep body of knowledge on the concept, how to get started, and how to evolve the strategy over time. I am really excited about the launch of a special report on Pace Layered Application Strategy http://www.gartner.com/technology/research/pace-layered-application-strategy/. This landing page is an excellent resource for those looking for more details on how to adopt pace layers. Please feel free to reach out and ask questions or to suggest additional research on pace layers.
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by Dennis Gaughan | January 10, 2011 | 2 Comments
Like just about everyone else I know, I have a number of New Year’s resolutions. Exercising more, eating better and staying in touch with family and friends are just a few on the list. And like many of you, I hope this year will be the year I can actually say I managed to keep them for 12 months straight. At least I have Facebook to help me with the last one. I also have some work-specific resolutions: doing more peer review for colleagues on their research notes and coming into the Boston office more frequently to help foster in-person collaboration and discussion/debate of new ideas. Although most of my colleagues are remote, there’s still a group of local analysts, and I enjoy talking with them face to face.
One new idea that’s been thrown around quite a bit lately (both in person and virtually) is applying the “app-store” concept, familiar to people with smartphones, to the world of enterprise applications. Consumers love this concept because it allows them to find, purchase, deploy, use and maintain applications in an amazingly easy way. And because the consumers are searching and buying, they’re likely to frequently use and buy more applications. The concept has been wildly successful for Apple, and now it’s being extended to people with other brands of smartphones. This success has raised an obvious question from consumers who are also users of enterprise software: Why can’t it be this easy at work?
There’s an App for That
A number of IT shops have had that question posed to them or are raising it themselves. Most organizations have more applications than they know what to do with. Wouldn’t this conceptual model help us organize, deploy and maintain apps more easily? And wouldn’t being able to track downloads and usage help us plan better for the apps in which we should invest more, perhaps even the ones we should be sunsetting? It’s a very compelling idea, one that software vendors and service providers are thinking about to help sell more software and/or services.
However, while I agree that the idea has merit and is worth exploring, I can immediately see at least three hurdles that must be overcome to make this idea work (I’m sure there are more). They stem from the differences between how the consumer app-store model works and the reality of enterprise apps for most organizations:
- Homogeneous model versus heterogeneous reality — Of course, my own consumer experiences of the app-store concept is based on owning an iPhone, and I must say it provides a great app experience. The app I need is easy to find, easy to buy, inexpensive (so I don’t need budget approval from my wife) and I get regular updates with new features. Much of this is possible because one company controls just about every aspect, except for the actual code development. Unfortunately, enterprise software doesn’t work that way — companies have a wide variety of platforms and technologies underpinning their app portfolios. The first hurdle is to try to replicate the app-store usability in a heterogeneous environment without breaking the bank on development and integration costs. It would also require a level of cooperation between vendors that, to say the least, has been difficult to achieve.
- Independent versus integrated apps — I have more apps on my iPhone than I care to count. Each one helps me do something very specific, whether it’s checking the weather or playing a game. But all the apps on my iPhone act independently of one another. I don’t have any reason to integrate Angry Birds with Cut the Rope — unless those birds can help me feed candy to Om Nom (sorry, non-iPhone users). I will, however, want to integrate my order management app with my logistics app, so the app store must accommodate the need for information sharing across discrete applications and maintain it seamlessly for end users. Maintaining integrations between enterprise apps is hard enough when IT controls the release cycles. What happens when end users want to upgrade their apps at their own pace?
- Deployment variety — This is somewhat related to the first hurdle, but it has more to do with how to aggregate and deploy the content in an enterprise app store. The mobile app-store model has a very controlled deployment model, where the provisioning, billing and maintenance are handled by one vendor. Poll most organizations today, and they’re likely to have a mix of apps that are on premises and in the cloud. Those wanting to pursue an enterprise app store must develop a standardized approach for provisioning these apps to end users when the apps may reside in distributed locations and have very different license agreements. Keeping track and ensuring license compliance will be critical to make sure your app vendor doesn’t come knocking at the end of the year with a huge bill (like when kids download stuff within games that cost real money).
The Idea Has Legs
The goals and intentions behind an enterprise app store are good ones: Make software easier to deploy and consume for end users. The reality of making this work is another matter entirely. Many software vendors are using platform as a service (PaaS) as a way to deliver their and their partners’ apps in a consistent and structured way. Service providers are exploring what some call “service marketplaces” to deliver more choices and easier consumption for customers. I expect the vendor and service provider community to drive some interesting innovations in the next 12 months to start clearing some of these hurdles. This is a topic Gartner will be digging into in much more detail this year, so stay tuned.
Is your organization pursuing an app-store strategy, or do you think an enterprise app store is a quixotic journey? What role do you see for the software vendors and service providers?
Category: Applications Enterprise Software Tags:
by Dennis Gaughan | December 13, 2010 | 1 Comment
In baseball, a player is considered worthy for induction to the Hall of Fame if they manage to hit .300 or better for his career. Think about that: Fail 70% of the time, and you’re immortalized in the Baseball Hall of Fame! Now, anyone who has tried to hit a 90 m.p.h. fastball can appreciate how good this average really is. In my view, it’s one of the hardest things to do in sports.
I was thinking about baseball because, as a Red Sox fan, I’m very excited about some of the new additions to the team for 2011. I was also thinking about my own success rate when it comes to picking topics for this column. It’s pretty easy to know when a topic hits the mark with readers, since you take the time to provide your own thoughts and opinions in response. Of course, I’m striving for a lot higher success rate than a hitter in baseball, and I think it’s been a successful year in that regard. Whether the feedback is positive or negative, I truly appreciate the interaction and always enjoy reading it.
I bring this up because our last column regarding ERP in the cloud generated a tremendous response, prompting a bunch of requests for more thoughts and opinions. Rather than trying to respond to everyone, I wanted to devote another column to expand on the topic. The feedback I received covered a wide range of topics, but four major themes emerged that warrant further discussion and analysis. Some I’ll cover here in this column, but they’ll also be the topics of in-depth research coming from Gartner in 2011.
Response No. 1: Flexibility of Deployment Models
A number of readers provided their perspectives on their interest level for adopting ERP in the cloud and what deployment model they’d be comfortable with, in particular. A small number of readers felt their organization’s CFO would never be comfortable moving their ERP system to the cloud, given the sensitive information that resides there. A larger number commented that they would be comfortable with a cloud-based deployment, but one where they had a dedicated instance of their ERP system and more control over it (I would describe this as “hosting in the cloud”). And there was a third group that was willing to take their application in a single instance, multitenant model.
This breakdown doesn’t surprise me. In fact, it’s consistent with the responses from the survey we did on cloud-based application deployments earlier this year, which was also split across these deployment models. Ultimately, this will become one of the key dimensions for how people select their applications going forward. Vendors will either need to provide multiple deployment options to create the broadest market opportunity or become more focused on identifying the segment their offering best addresses. The challenge for customers is identifying which deployment model the vendors actually offer, since vendor marketing for cloud computing often obscures the differences in deployment and/or architectural approaches.
Response No. 2: Pricing — Short-Term Benefits, Longer-Term Questions
Another key theme found in reader responses has to do with pricing for cloud-based ERP. Clearly, one of the most attractive parts of this new delivery model is the lower, upfront costs of a subscription-based pricing model. However, several readers raised concerns about how, in a subscription model, you’re paying for that license as long as you subscribe, instead of the one-time payment. I think this is a particularly relevant concern when talking ERP, where usage of the application is measured in decades. At this point, the challenge is we don’t have enough data to really look at the long-term total cost of ownership (TCO) of traditional perpetual license and maintenance costs versus subscription pricing.
There are a couple key considerations when evaluating your options. First, some vendors (whether they talk publicly about it or not) will offer a one-time conversion from subscription to perpetual license plus maintenance, or vice versa. So, if this is a big concern, you can talk to your vendor about its willingness to explore this. Second, I’ve spoken with many customers who are looking at running the numbers themselves to determine the cost differences between the two models, identifying the point in the future when ownership of the license is more cost effective. I think this can be a useful exercise, but make sure you factor in the costs of the people and infrastructure (including hardware refreshes) necessary to run that application yourself so that you’re truly doing an apples-to-apples comparison.
Response No. 3: Industry-Specific Nuances to Cloud Adoption
Some of the questions and feedback from readers pointed out how different industries have different paces of adoption for cloud-based applications. A reader who works for a vendor of cloud-based ERP pointed out that certain industries adopt faster because of the customers’ profiles, their margin pressures, and/or their dependence on technology. I do think these factor into the decision, and would also add that the pace of adoption varies by application category and company size.
Ultimately, this boils down to one of the most important take-aways: While the underpinning technology/deployment model is important, you should choose your application based on how it best meets the business requirements of your organization. If a cloud-based application is going to make it easier for you to connect to customers, this should be the driver for investment.
Response No. 4: New Capabilities of Products in the Cloud
The most interesting theme for me had less to do with where the application is deployed, but on how that application needs to change to support a new, more collaborative business model. Several readers shared that simply moving applications to the cloud to provide cost advantages isn’t enough. They would like to see applications that blended business processes from ERP with social networking technologies and the cloud to truly deliver a new way of collaborating with their trading partners. To quote one reader, “The power of a supply chain which identifies and allows various sourcing options based on product availability, right now, is compelling.”
This is the area where I think cloud computing has the greatest potential to impact your organization’s application strategy. Applications delivered in the cloud that provide these advanced capabilities can help extend business processes to trading partners or create new, collaborative processes that allow you to serve your customers better and be more responsive. This will place more demands on how you manage integration between applications and how you govern master data. It’s also one of the drivers behind our recommendation to implement a pace-layered application strategy.
As we come to the close of another year, the demand on everyone’s time increases. In addition to the constant flood of work-related activities, including year-end reviews to process, there are all those activities related to the holiday season that must be taken care of. Hopefully you’ll have a chance to take a step back and reflect on the things that are most important to you and enjoy some time off with family and friends. Kevin and I value your continued readership and would like to wish you all a healthy and happy holiday season and a fruitful and safe New Year.
I would love to hear your thoughts and feedback —firstname.lastname@example.org.
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by Dennis Gaughan | December 13, 2010 | 2 Comments
This week marks the one-year anniversary of Gartner’s acquisition of AMR Research. In many ways, I can’t believe an entire year has gone by; it’s gone very quickly. One of the striking differences between AMR past and Gartner present is just the “virtual-ness” of the workplace. Given that most AMR analysts were located in Boston, a lot of our discussion and debate happened in a conference room, which is just not possible in such a large organization. That is not to say those conversations never happen at Gartner, quite the opposite. They just occur on the phone 95% of the time. I bring this up because we had some interesting discussion on the phone the other day about the potential adoption of ERP in the cloud, and that combined with some other data, will help influence our research agenda going in to 2011.
During a team call, we discussed feedback from the many analysts who attended and presented at our Symposia events. Beyond discussion of the logistics and attendee feedback, we spent a fair amount of time talking about the key issues that customers were asking about in 1:1 sessions and which sessions had high attendance. The impact of social technologies on customer relationships seems to be a very hot topic, and one that we have a lot of plans to cover going forward. Another interesting line of questioning from attendees was around the potential for customers using cloud-based deployments for their ERP systems. Customers wanted to know who, if anyone, was using this model or trying to find out if others are thinking about it as well. The number of questions on this topic was higher from attendees at our U.S.-based symposium, but it came up in other geographies as well. So that begs a few questions: What is driving this increased interest, and will we see a significant uptick in adoption of cloud for core ERP?
Cloud Success Breeds Cloud Success
We conducted a survey earlier this year that looked at the adoption of applications in the cloud and the benefits expected and achieved from those investments. I have also done a number of inquiries with customers that are asking questions about cloud-based deployment for different applications. The activity and investment has increased in a number of categories, and we expect that to continue. In fact, from our recent survey, 99% of respondents expect to maintain or increase investment in cloud solutions for collaborative supply chain, finance or commerce management, and 72% expect to increase investment. Many companies have had early success with applications deployed in the cloud, and there has been an increasing comfort level for that over the last few years. This helps explain the increase in interest.
Some of the additional attention around cloud-based deployments for ERP comes from the vendors trying to sell that model to new and existing customers. This buzz is coming from all corners of the market, whether it’s vendors like NetSuite, Plex Systems or Workday, which have only existed in the cloud, vendors like Lawson, which are offering customers the ability to deploy its existing or newly-purchased ERP systems in the cloud or investments from SAP and Oracle to develop new ERP platforms that are designed for cloud deployment. The millions poured into marketing these offerings will help drive increased interest in deploying core ERP in the cloud.
It’s Not Time to Declare Victory Yet
While the interest is increasing, we are still far away from cloud deployments of ERP being commonplace. When looking at that same survey data, investments in cloud-based ERP still lag other application categories like customer relationship management (CRM), enterprise content management (ECM), and supply chain. Interestingly, when asked what are the main reasons for not adopting solutions in the cloud, the No. 2 reason is that people have invested too much in their on-premises ERP system. After investing so much money in their ERP strategy, many are reluctant to pull the plug and make a change.
In reality, I don’t think the decision will be so black and white for companies. I see a number of potential deployment scenarios where cloud-based deployment will make a lot of sense:
- Legacy Upgrade — We talk to many companies that are on old versions of ERP systems, running on outdated platforms. These old platforms are becoming very costly to maintain. However, the upfront investment in a new platform architecture is daunting. One possible alternative would be to migrate to a cloud-based deployment to avoid the cost of the new infrastructure.
- Two Tier ERP — While many customers we work with have a single global instance of their ERP system, many do not or are looking at implementing a two-tier ERP strategy to better support their business needs. A cloud-based deployment for that regional or business unit instance may be appropriate instead of deploying it on premise.
- Divestiture — One of the challenges of dealing with a divestiture is creating the new IT infrastructure to support the company being spun out. A cloud-based deployment for that new company may be the fastest way to bring the new entity online.
I expect we will see many more potential scenarios where a cloud-based deployment of an ERP system makes sense, but we are still at the investigation stage for most companies. We are planning to do much more research in 2011 regarding the potential for ERP in the cloud and would appreciate your input into the burning questions you would like us to answer. Are you considering a cloud-based deployment for your ERP system and have questions? Or have you already invested in cloud-based ERP and would like to share experiences and best practices?
I would love to hear your thoughts at email@example.com.
Category: Applications Cloud ERP Tags:
by Dennis Gaughan | July 12, 2010 | 2 Comments
As we reach the middle of the summer months, the East Coast of the United States has been engulfed in an oppressive heat wave. For a short while at least, the media has forgone stories about the wars in the Middle East and the oil crisis in the Gulf of Mexico to talk about the weather and the dangers associated with overexposure. Many friends are also sharing stories of nightmarish commutes on trains and buses without air conditioning. I know for many readers in different geographies, 100-degree temperatures and high humidity are more common occurrences. However, the scorching temperatures are rarer for us, especially this early in July (the temperature in Boston on July 5th was about 20 degrees higher than the average for that day).
So what does all this talk about weather have to do with enterprise software, you ask? Well, I’m glad you did. Pardon the pun, but acquisition activity in enterprise software is hot, and I believe it’s only getting hotter. Okay, maybe that’s a weak lead in for this week’s commentary, but perhaps the heat is affecting my brain.
One of the great benefits of writing for First Thing Monday is receiving instant feedback from readers who agree or disagree with my opinions. There are two topics that have driven a great amount of positive interest, which is fueling my opinion that we’re just on the cusp of a wave of acquisition activity in the enterprise software space. The first is cloud computing — in particular, the rise in interest and adoption of supply chain applications in the cloud. The second concerns my most recent post on rethinking your application portfolio strategy. Confirmed by many reader responses, these trends will continue to drive consolidation in the enterprise software space as the big vendors look to remain relevant with customers for both core IT capabilities and new innovations.
Why is This Happening?
There are a number of reasons why I expect a new wave of application consolidation. Some are issues that have existed for a long time, others are newer dynamics to the market:
- Pace of innovation — Business strategies are changing rapidly, and traditional IT systems can’t keep up. Single vendor, monolithic approaches to an enterprise applications strategy can’t support these more dynamic needs, and a new class of applications is emerging to support these differentiating and transformative processes as a result. Core IT systems of record are still important, but the value in the eyes of the business user is shifting to the edges of the enterprise.
- Collaborative value chains — The desire of companies to become more demand driven has broken down the artificial boundaries between trading partners, and now the whole value chain is looking for ways to create joint value for all participants. As we’ve written before, the cloud becomes an optimal delivery model for applications when the participants need to collaborate across company boundaries.
- Unbounded users — The expectations of users (that is, employees, customers, consumers and constituents) have changed dramatically with the introduction of new web technologies, social media and powerful mobile devices. Their expectations are evolving at a rate much faster than traditional enterprise applications have in the past.
These three changes, although not completely new, are some of the key root causes behind the recent wave of consolidation and will continue to fuel market activity. They’ll profoundly affect how enterprise software is developed and sold, requiring strategic shifts in thinking from the major enterprise application vendors if they want to maintain relevance with key customers.
Where Might It Happen?
Given the variety of challenges enterprise software vendors face, consolidation is likely to occur on a number of different fronts. I believe we’ll continue to see more deals for mobility, as vendors look to find innovative ways to serve those unbounded users. However, within my own sphere of research coverage, I see three related areas that seem ripe for consolidation:
- B2B integration — This one is actually well underway, but I don’t think we’re near completion yet. IBM’s pending acquisition of Sterling Commerce and the GXS-Inovis merger will force the hand of large enterprise software vendors to have a more credible story about how they can support customers’ B2B integration requirements. And I don’t think it’s just the big remaining vendors in play. There’s a lot of interest from our customers in trying to automate the last 20% to 30% of their trading-partner relationships to eliminate costly manual processes and there is a cottage industry of small vendors that help provide low cost B2B services. Those vendors have accumulated networks of companies that could be appealing to larger vendors looking to build B2B critical mass.
- Cloud application vendors — The list of potential targets for enterprise vendors within this category are almost limitless right now. We see not only a ton of activity and interest in traditional cloud application categories like CRM, but also business intelligence and supply chain. Within supply chain, there’s a lot of interest from customers on order fulfillment, inbound and outbound supply chain visibility, data synchronization and vendor-managed inventory (VMI).
- Trading exchanges and marketplaces — Regardless of what you called them when they rose to prominence in the late 1990s, these trading-exchange vendors have had a long road to differing levels of success. However, the convergence of these trends are bringing the surviving vendors back into the limelight. Their industry-specific trading networks can be a valuable asset for companies looking to increase their footprints in a new industry.
Is This Consolidation a Good Thing for Customers?
This is a tough question, and, unfortunately, the answer depends on the strategy the large software vendors take. If they continue with the status quo, with these innovative software companies getting absorbed into the existing processes and organizations designed to build traditional — that is, systems-of-record type — software, then it ultimately will be a bad thing for customers. The major software vendors, just like we advised to end users, must think about segmenting their product portfolios to match the pace of innovation their customers need. They should be able to bring in acquired companies and let them continue to thrive, as well as convince the investment community to embrace the portfolio segmentation.
The good news is that some are already headed in this direction, and the ones that successfully make the transition will become the dominant providers for the next generation of applications. Do you believe the big vendors can get there, or are they too set in their ways to make the necessary changes? I would love to hear your views at firstname.lastname@example.org.
Category: Applications Enterprise Software ERP Uncategorized Tags:
by Dennis Gaughan | June 29, 2010 | 4 Comments
I recently spent a few days in Chicago (well, in Rosemont, to be precise) with the Gartner/AMR Research SAP and Oracle Peer Forums at their semi-annual summit. It’s always great to participate in these events and network with some of the top SAP and Oracle customers. We used the opportunity to discuss key initiatives and identify best practices for how to extract the most value out of their application portfolios.
During the sessions, we talked about improving total cost of ownership and how to elevate the role of IT in the business. A lot of the informal conversation was centered on the best ways to extend and evolve application portfolios to meet the changing requirements of the business. Many of the Forum members continually struggle to keep up with these demands because of the inflexibility of the application architecture and the challenges of maintaining one complex application portfolio. A big part of the problem is that many of the systems have been architected to focus on improving internal processes and operations, while much of the business strategy has shifted to a network-based orientation.
Last week I spent two full days with Gartner colleagues Yvonne Genovese, Jim Shepherd and Val Sribar to talk about application research, and we kept coming back to the same question: Do companies need to rethink their application strategies to better reflect today’s collaborative business models? The answer sure seemed like yes, so we thought about the best way to accomplish this.
All Apps Should Not Be Created Equal
The fundamental idea from our discussions is that too many organizations have built their application strategies on a flawed premise: having a single, integrated application portfolio that’s managed against a common set of criteria and evolves on a common timeline. But this has led to the mess many companies are in. Any changes to systems require a tremendous amount of effort because even simple modifications have far-reaching implications to foundational systems.
We identified an approach to reclassify the applications based on the role they play in the organization to help develop a level of abstraction that can accelerate the pace of change for IT:
- Systems of record — These are the systems that form the foundation for your enterprise and manage the information necessary to run your business. They’re transaction oriented and are core to financial reporting and regulatory compliance. Their pace of change is slow, with their life span measured in decades. They’re most likely delivered on premises.
- Systems of differentiation — These are the systems that help drive differentiation for your company. They connect to customers and trading partners, as well as help speed time to market and overall agility. They’re more collaborative in nature, and while they leverage data from systems of record, they capture and maintain additional information. They’re relatively stable and have a life span of anywhere from three to 10 years. Many of these systems will be deployed on premises, but some may be delivered as a cloud application.
- Systems of transformation — These systems create innovation for your organization. They’re often developed out of ad hoc processes and tied to specific initiatives, so they can have very short life cycles. They’re driven, developed and funded out of business budgets. They’re also highly collaborative and involve both structured and unstructured data. The dynamic nature of these applications is well suited for cloud-based deployments.
Applications in the differentiation and transformation tiers will often be funded, created, implemented and managed outside the IT organization (whose role might be to create a platform for that class of application). These application categories should be treated differently because they have different life spans, regulatory implications and change requirements. Unfortunately, many companies have lumped all of them together into one monolithic architecture, which is costly to maintain and hard to change.
The Seeds Have Been Planted
When companies introduce portfolio management discipline, they often start categorizing IT spending across three similar dimensions: run the business, grow the business and transform the business. This categorization gives companies the ability to measure and adjust their IT spending to reflect business priorities. They can also use these metrics as a lever to reduce IT spending on “keeping the lights on” and increase spending for initiatives that will drive revenue growth or margin improvement.
However, it’s not enough to simply track your spending after the fact. Reorienting your application portfolio on these three categories will force a number of changes:
- Business cases are different because the goals and criteria are different.
- Ownership and funding models differ at each level.
- Vendor selection criteria varies significantly.
- Integration, data and security strategy must reflect different goals.
- Overall governance strategy changes to support a more distributed model.
- Application life cycle management differs by category.
More to Come
I believe we’ve hit on an exciting new thread of research that will help customers adjust their application portfolios to better reflect how the business operates and give organizations the power to make IT a truly integrated and differentiated capability. We’re planning a series of research that will help our clients not only understand what these changes mean, but how to make the changes necessary.
Has your organization already made this transformation, or are you in the middle of reassessing your application portfolio? I would love to hear your story at email@example.com.
Category: Applications Enterprise Software ERP Tags:
by Dennis Gaughan | June 11, 2010 | Comments Off
I’ve been going to the annual Supply Chain Executive Conference off and on since 1997. My first few trips to Scottsdale, Arizona, were as the director of IT for AMR Research. I was tasked with making sure the computers worked and the presentations went off without a hitch. Back then, seeing me on stage was a sign that something was amiss.
Since that time, though, I’ve participated on a number of occasions as an analyst on the main stage and in breakout sessions, and I was back in Scottsdale again this year. Visiting Arizona in early June can sometimes feel like a trip to the surface of the sun, but fortunately the weather gods were with us this year, with the temperature comfortable in the mid 90s.
The conference has changed quite a bit in 13 years, with an increased focus on supply chain excellence and a noticeable rise in the visibility and notoriety of the keynote speaker. It’s also our launch vehicle for the Supply Chain Top 25, which has become a key benchmark for supply chain performance. Apple once again took the top spot, with the combination of strong financial performance and peer and analyst voting reflecting the innovation the company continues to demonstrate on all facets of its business.
For the last session of the first day, I joined Mike Burkett, Mike Griswold, Andrew White and Benoit Lheureux on stage for a panel discussion to review some of the key technologies most relevant to supply chain executives. We focused on three main topics — B2B integration, master data management (MDM) and cloud computing — and talked about the opportunity some of these technologies offer to enable multienterprise business processes. We did caution, however, about the potential for issues and complexity related to connecting companies together to drive better collaboration.
Connecting Through the Clouds
I had a number of great conversations before and after my panel discussion, many of them based on the data I had shared from a recent survey on supply chain application deployment in the cloud. Many companies have already implemented or are considering supply chain applications in the cloud, and those that already have are seeing very strong benefits not just in the capabilities of the product functionality, but also in the rapid time to value, pace of innovation and ease of adoption that cloud-based applications can bring.
This data was confirmed during a number of one-on-one conversations I had with customers throughout the event in Scottsdale and my subsequent participation in our SAP and Oracle Peer Forum Summits last week in Chicago.
My colleague Will McNeill and I noticed a resurgence in interest in discussions about the vendors that are in the mix for these types of supply chain use cases, many of which have managed to evolve and sustain themselves from the original trading-exchange hysteria of the late 1990s and early 2000s. In many ways, these vendors were ahead of their customers in thinking that the move to multienterprise supply chains would require a new approach to technology, one that was “in the network.” The rise of cloud computing and new multitenant architectures have given the vendors a better platform to support these mission-critical business processes, with customers now starting to see the benefits of moving these applications into the network.
Supply Chain in the Cloud Still Needs to Evolve
Although I’m hearing great stories about using these supply chain technologies in the cloud, they’re still isolated to a few business processes. I believe there are still a few things the software markets haven’t completely sorted out just yet:
Successful Integration Strategy Patterns
While there’s a noticeable increase in application deployment in the cloud, much of the integration between on-premises and cloud is done in a point-to-point manner. Customers and their vendors need to rethink their integration strategies and remove the artificial barriers between internal integration and B2B integration, since the hybrid deployment model will be a reality for the majority of large companies.
Collaboration Across Communities
Lots of people are talking about community management as a way to improve collaboration between trading partners. I agree this helps, but the technology needs to reflect the fact that companies participate in multiple communities and their power and leverage varies across each one. I don’t want to plug into 100 community management platforms — I want my one community management platform to handle those federation requirements and manage the interactions.
The interaction model needs to evolve to be like the phone networks. My contract is with AT&T, and I get my services from them. I don’t care that the person I want to speak with is on Verizon — I just dial the number and get connected. The research done by Gartner on cloud service brokerage is critical reading to understand how the underpinning technology of cloud will play a key role in helping to build the connection points between supply chain clouds. Without it, the digital supply chain will be out of sync with the physical supply chain.
Is It Time to Rethink the Term “Enterprise Architecture”?
One of the other interesting conversations in Scottsdale flowed out of the discussion on connecting supply chains in the cloud. We talked about how the concepts of enterprise architecture will become even more important as the complexity of the environment increases with the move toward multienterprise business processes. This got me thinking about enterprise architecture discipline and how, for many companies, the focus is still very centered on “within the four walls” of the company and the internal business processes and technologies.
As more of these processes move into the network, I believe it’s going to drive a fundamental shift in how people plan their enterprise architectures. I know there are companies that are already well down this path in their thinking, but many manufacturers and retailers are just beginning to invest in enterprise architecture discipline. They should make sure they’re taking an outside-in approach to their planning to reflect the realities of their company strategies.
Where is your organization on its enterprise architecture journey? Are you adequately planning for the rise of supply chain in the cloud? I would love to hear your story at firstname.lastname@example.org.
Category: Uncategorized Tags: Cloud, Enterprise Software, Supply Chain