Exploiting Enterprise Applications

An Enterprise Application can mean different things to each person, but a working definition for the purposes of this Report is: 'An integrated application, usually bought from an Independent Software Vendor (ISV), that can be used to run all or part of a business.' Examples of enterprise applications can include Enterprise Resource Planning (ERP), Supply Chain Management (SCM), and Customer Relationship Management (CRM) applications.

Organisations select Enterprise Applications and continue to use them for a multitude of reasons, including taking advantage of standard industry practices and exploiting the skilled resources of a software vendor. Deploying a packaged application enables access to functionality that may not be easily available from an in-house development. However, some Enterprise Application deployments seem to deliver genuine business value, whilst others cause serious business pain, in certain cases even causing severe financial losses.

There can be a number of ways of assessing value. This includes both tangible and intangible measures, although in the past the primary reason many enterprise applications were implemented was to automate manual processes. Regardless of the metrics used to justify the investment, Butler Group believes that one of the most important factors for maximising value is not to treat Enterprise Applications as separate islands of technology, but to fully integrate them with objectives, business processes, management, and infrastructure.

Business Issues

Getting value out of Enterprise Applications can be a major challenge and it is essential that they are aligned with organisation objectives. Unfortunately, IT management tends not to spend enough time relating the organisation's main value drivers to Enterprise Applications. Too many follow a 'me-too' policy or purely a cost saving attitude when considering investment in Enterprise Applications. Without strong links to business aims it is impossible to formulate a strategy that will meet the organisation's needs or get value from Enterprise Applications.

Regulatory pressures are becoming a significant factor for organisations and with it the need for more transparency. Compliance requirements have escalated recently, as a result of new legislation, international agreements, increased globalisation, and because of the financial scandals including Enron in the US, HiH Insurance in Australia, and Parmalat in Europe. Enterprise applications are not immune from these demands and this is leading to focus on security, transparency, and auditability. To provide effective Enterprise Application compliance requires a better understanding of how the system operates and who has access. In addition, organisations frequently need to review and revise operational procedures, placing a greater emphasis on automation to reduce levels of risk and cost.

Another aspect of better visibility takes the form of continuous measurement and benchmarking of performance. Whilst calculations of Return On Investment (ROI) for Enterprise Applications are notoriously difficult to perform, it is essential that the IT department develops relevant Key Performance Indicators (KPIs) which match with the organisation's objectives. Of course, no amount of measurement will bring success on its own. This relies to a large extent on the workforce actually using all the functionality provided in the most effective way. Worryingly, research conducted by West Trax Applications indicates that only 50% of functionality licensed by organisations is actually used and perhaps even more concerning is that a significant proportion of this is customised code, needlessly extending upgrade cycles, and leading Butler Group to conclude that many organisations pay too much for Enterprise Applications.

Education is an important consideration for getting the most from Enterprise Applications, with training, or rather the lack of it, another reason for Enterprise Applications to be less than successful. Good training is not just about the software, but includes understanding as to how the system relates to the tasks and processes in the wider context of the whole organisation; also, an appreciation as to why accurate data is important can prove invaluable. There is a tendency for Enterprise Applications to be less well used over time, leading to degradation in performance. To counter this, training must be an ongoing process, not something that is only provided during the initial implementation.

Obtaining genuine intelligence rather than just reporting from Enterprise Applications is often difficult. Historically, Enterprise Applications have been exclusively transactional systems with little in the way of Business Intelligence (BI) functionality. However, this has changed over recent times with Enterprise Application vendors investing heavily in intelligence capability and the emergence of third party solutions that can be easily integrated. To further increase competitiveness a closed loop architecture is recommended, where information derived from production systems is fed back to those same systems automatically.

Technical Issues

Now is an appropriate time for organisations to start utilising an architectural approach that is centred on a business processes-centric view of the enterprise and its operations. Key to the adaptive enterprise is the ability to quickly transform business processes and for these changes to be easily reflected in the supporting Enterprise Applications. From an Enterprise Application perspective the importance of gaining a good understanding of the current processes cannot be underestimated, as on many occasions the software is unfairly blamed for problems that are in fact due to inefficient or poor processes.

An architecture-based methodology can help to enable a more flexible approach to the way Enterprise Applications are utilised. The visibility and understanding of enterprise application capability can be provided by Enterprise Architecture, enabling the linking of objectives with processes and then the underlying functionality provided by enterprise applications. One of the most significant trends in recent times has been the take up of a Service-Oriented Architecture (SOA), with all the main IT vendors starting to take the approach on board. The implications of this includes that IT departments must start to address SOA in plans for the future and look at how this impacts Enterprise Application delivery. SOA and a common services platform can assist with the integration of other elements into the IT environment, which is vital for getting the full benefit from Enterprise Applications. Data integration and Master Data Management are also becoming essential as organisations realise that controlling information is an important way to make the most of data found within existing Enterprise Applications.

The IT department must have an in-depth understanding of Enterprise Application usage and performance. It is often how the Enterprise Applications fit into the wider IT management perspective that can influence their real value to the organisation. Whilst Enterprise Application functionality in itself may no longer supply competitive advantage, it is the performance of the Enterprise Applications and the provision of a good service to users that can be significant differentiators.

An opportunity exists for organisations to extend the reach of Enterprise Applications by providing support for the Internet, portals, communications convergence (particularly voice), and wireless devices. These access mechanisms will have a big influence on the way Enterprise Applications are utilised in the future. Enterprises should not be put off by the complexity of this multi-channel environment, although care is needed by the IT manager to ensure that key issues, such as security, productivity, and cost, are adequately addressed. Several factors are combining to drive the need for a unified architecture for accessing applications from remote locations and by diverse client types.

The potential for process transformation implied by the use of Radio Frequency IDentification (RFID) technology has caught the attention of some of the most influential organisations in the world, many of which are now using RFID solutions. The benefits of the technology will obviously vary from organisation to organisation, but enough pilots have been successful to expect that RFID will form an integral component of Enterprise Applications going forward.

Market Issues

The Enterprise Applications marketplace has always been fairly dynamic with constant movement in the vendor landscape. The maturing of the market has seen a number of consolidations at the higher end, with the rate of large deals increasing recently. Despite suppliers merging or being bought by larger businesses many of the older Enterprise Applications continue to be used by organisations, especially because significant investments have been made in the software. In addition, with the recent moves in the market, most notably by Oracle, vendor consolidation continues to be an area of concern for organisations. However, this trend should not cause too much unease, as although a few products have quietly disappeared, the majority continue to be actively maintained and supported within the auspices of the larger company.

Although SOA will eventually allow greater abstraction between applications and the underlying software platform, the vendors are increasingly emphasising the benefits of a 'one-stop shop', both from technical and cost perspectives. In addition, the use of a common platform appears to be a significant market trend with Microsoft, Oracle, and SAP providing infrastructure/platform components, as well as applications. However, using a common platform supplied by an Enterprise Application vendor, whilst providing benefits, does inevitably bind the customer more tightly to that supplier. Other vendors, such as BEA, IBM, and Sun, can supply application agnostic middleware platforms.

In addition, the larger vendors continue to highlight the advantages of an integrated enterprise application and now provide products applicable to organisations further down the value chain. Examples are Oracle E-Business Suite Special Edition, and SAP's with All-in-One and Business One editions. Experience and an offering focused on the organisation's vertical sector would appear to take precedence for many enterprises before other aspects of selection. Consequently, most Enterprise Application vendors and also other IT solution suppliers now provide products that are specific to industry sectors.

The use of open source is starting to be an alternative for some organisations, especially in the not-for-profit sector. Linux is now seen as a valid server operating system choice, with open source functionality available in other areas of middleware, such as the application server arena where they are viewed as enterprise standard alternatives, although open source is not very prevalent in the Enterprise Applications space. The release of databases such as Cloudscape and Ingres to open source has added further to the viability of following such a strategy. However, integration between components could be an issue with the open source proposition, where every element of the software stack may require work to integrate and test to ensure a coherent and robust infrastructure. Open source Enterprise Applications do exist but are not yet ready for prime time use by enterprise-scale organisations.

The re-emergence of the managed service model led by Salesforce.com is of interest to many organisations. The development of software as a service will have far reaching consequences for the Enterprise Application market. There are already a number of established players in the IT industry that are offering managed services options. This is an area that organisations should investigate to ensure that they get the best value from existing investments.

Summary

However, it is not just about the finding the best delivery mechanism; it is incumbent on IT management wanting to make the most from Enterprise Applications to consider all aspects of the solution, ensuring the software is seamlessly integrated with business and management processes, along with evolving to an architectural approach and common platform. In the future, Butler Group believes that a key attribute for exploiting Enterprise Applications will be the ability to make functionality available through composite applications.

Key Findings

• Out of 60 organisations surveyed none used more than 50% of the licensed Enterprise Application functionality.1
• A significant proportion of unused code is customised, unnecessarily prolonging upgrade cycles. This also indicates that standardised functionality is a myth, with many organisations paying too much for Enterprise Applications.
• To exploit the value from Enterprise Applications the IT department must ensure that they are fully integrated with objectives, business processes, management, and infrastructure.
• Investment in Enterprise Applications must be directed by organisation objectives, not by a 'me-too' policy or solely cost saving considerations.
• Enterprises must deploy an architectural approach that includes linking business processes with Enterprise Applications.
• Effective management of Enterprise Applications and the quality of service provided can be important differentiators, leading to improved performance.
• Real competitive advantage can be achieved by making use of intelligence capability now found in Enterprise Applications and easily integrated third-party solutions.
• To meet regulatory pressures there is a need to provide greater visibility into Enterprise Applications, with improved analysis and readily available audit trails.
• Access to Enterprise Applications needs to be independent of software type, communication channel, client device, and physical location, enabling improved utilisation.