Enterprise architecture

Shifting from ERP to Enterprise Architecture

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The center of the IT universe is shifting from ERP to Enterprise Architecture. Enterprises would need to redirect investments in Applications, Middleware and Infrastructure that enable business transformation at a lower total cost of ownership, says Teck Wee Lim.

The center of the IT universe is shifting from ERP to
Enterprise Architecture. Enterprises would need to redirect
investments in Applications, Middleware and Infrastructure that
enable business transformation at a lower total cost of ownership,
says Teck Wee Lim.

Twenty years ago, the promise of ERP was to enable companies to
standardize their business processes based on aggregating multiple
disconnected enterprise applications into one system. This is 2010.
ERP has served its purpose. Companies now realize that ERP only
took them so far, and that they need to shift their investments to
differentiation and user productivity. The ERP era as a primary use
of IT funds is coming to an end.

When talking to IT executives throughout the industry over the
last few months, we realized that, despite making significant
investments in ERP, many companies are still facing considerable
challenges to drive competitive differentiation in the
marketplace.

Among the main challenges that we hear from industry executives
are that companies spend approximately 80% of their IT budgets just
to keep the lights on. This is a stranglehold for the CIO. It does
not give the CIO enough flexibility to make strategic investments
targeted at achieving business differentiation. Companies need to
reduce the IT funds dedicated to operations and redirect their IT
investments towards strategic projects supporting differentiated
processes and capabilities.

Additionally, we hear that companies are hindered by complex IT
environments, characterized by disconnected processes, redundant
applications and islands of data. Companies need to reduce the
complexity of their IT environments, because that complexity has a
direct impact on their business performance.

Moreover, the gap between the needs of the business users and
the ability of IT to support them is growing. CIOs need to find a
better way to support business innovation. The business requires
more agility and flexibility.

Paradigm shift

Addressing these challenges will require a paradigm shift. It
will require shifting the center of the universe from ERP to
Enterprise Architecture. Enterprise Architecture consists of a set
of open, standard-based technologies that enable a company to build
flexible and configurable business processes, transform data into
insights, deliver more value to the business users, reduce
time-to-value and create competitive differentiation, while
leveraging existing investments. The focus needs to move from
standardization (enabled by ERP) to differentiation (enabled by
Enterprise Architecture).

Within the organization, IT needs to enable the business
transformation required to create sustainable differentiation. With
this, transforming the business means moving …

  • From rigid and proprietary systems to flexible, adaptable and
    interoperable systems;
  • From pre-defined business processes to configurable business
    processes leveraging existing investments;
  • From backward-looking reporting to forward-looking insight to
    action;
  • From massive amounts of data locked in disconnected databases
    to usable information delivered to users in role-based
    cockpits;
  • From an inside-out focus on a single enterprise built around
    the general ledger to an outside-in focus on collaboration built
    around the consumer.

Importantly, there are two primary areas to consider in going
beyond ERP:

  • Enterprise Architecture, such as Business Process Management,
    Business Intelligence, User Experience and Infrastructure.
  • Money-making processes, such as Innovation, Sales and
    Marketing, Demand to Delivery and Service.

These two concepts are intertwined: companies need to invest in
the business processes that make them money and help them create a
sustainable competitive advantage, and they need to leverage a
SOA-based architecture in order to deploy them with more
flexibility and velocity, and at a lower cost.

A “Beyond ERP” strategy will enable companies to:

  • Enhance the value of their ERP investments;
  • Incrementally adopt new capabilities to support strategic
    business needs;
  • Drive value to the business in a modular and flexible way;
  • Create sustainable differentiation;
  • Transform data into usable insights;
  • Empower better decisions with reduced cost and risk.

We live in an era of increased variability and velocity.
Companies cannot engage anymore in costly long term projects and
big bang approaches. This new era requires agility, velocity and
responsiveness – achieved incrementally through value-based
projects targeted at increasing differentiation. This is why we
believe that the “Beyond ERP” era is here to stay.

Getting started

The “Beyond ERP” journey will be made possible by redirecting
investments in Applications, Middleware and Infrastructure that
help your company reduce IT complexity and enable business
transformation at a lower total cost of ownership. The strategic
roadmap will depend on each company’s specific priorities. What are
your most critical needs? Would it be to:

  • Reducing IT complexity?
  • Deploying flexible and adaptable business processes?
  • Improving user productivity?
  • Improving business differentiation?
  • Delivering actionable business insights?
  • Increasing computing power at a lower cost?
  • Reducing data center expenses?

Each one of these strategies will need to be enabled by “Beyond
ERP” investments.

The bottom line is this: in the “Beyond ERP” era, companies need
to allocate their IT funds to projects that will enable them to
reduce cost and complexity while enabling agility, velocity and
responsiveness. How this principle applies to each company depends
on their current situation and strategic goals.

Some companies have already embarked on going “Beyond ERP”.
These projects (and the goal they were pursuing) include:

  • Optimization and simulation solutions (to increase the
    profitability of business investments, such as in Trade
    Promotion);
  • Innovative use of solutions such as transportation and network
    optimization (to deploy assets in a more cost-effective way);
  • Increase in computing power (to gain insights into
    day/store/sku data previously inaccessible overnight due to long
    processing times);
  • Business intelligence and performance management (to gain a
    forward-looking view into actionable insights);
  • Event-driven architecture and complex event processing
    solutions (to deliver real time alerts from operational
    systems);
  • Business process digitization and role-based cockpits (to
    improve employee productivity);
  • Replacement of current hardware by next generation database
    machines (to increase computing power at a lower cost);
  • Database virtualization and compression (to reduce data center
    footprint and carbon emissions).

From the short list of projects mentioned above, going beyond
ERP can take various forms. The key is to engage in strategic
conversations with internal stakeholders and external
partners in order to define a roadmap that will make the best use
of scarce IT funds and produce the sustainable advantage.

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