Unified iT STraTegy

1. Unified iT STraTegy Best Practices for Midsize Businesses[]

2. sap playbook: unified iT sTraTegy Unified best practices for midsize businesses IT StrategydDear Reader,Profitable growth is a goal midsize busi-nesses share with their bigger brethren. Butsmall and midsize businesses face unique ITchallenges around managing and maximiz-to offer the same depth and breadth offunctionality to small businesses andmidsize companies. Growth-orientedbusinesses have come to recognize thatan agile, unified and integrated IT infra-structure is a fundamental requirementing that growth: fewer resources, smaller ITfor businesses challenged with managingdepartments, time constraints and more. profitable growth. Thats why SAP hasexpanded its solutions portfolio for smalland midsize companies to include SAPsThis Unified IT Strategy Playbook outlines a stra-Business ByDesignTM. An on-demand so-tegic framework for small and midsize businesses that lution, it offers simplified IT, the flexibil-have reached the inflection point that demands they ity to accommodate growth and change,take steps to evolve their IT infrastructure. These pages the lowest cost of ownership, along withexplore those challenges and will help IT and businesshigh-availability data securityall keydecision makers in small businesses and midsize compa-ingredients for profitable growth.nies chart a reasonable course for IT-supported growth. With this playbook, SAP providesFrom the fundamental decisions around what to keepsmall and midsize businesses with a roadon-premise versus what to shift to an on-demand model,map to guide their journey to biggerto using key performance indicators, compliance, secu-and better sales, profits and growth. Byrity, reporting and a host of other issues, this playbook building on a foundation of a unified IToffers tips, techniques, resources and best practices for strategy, these organizations can be suresmall and midsize businesses. that they have taken measured, provenIn putting together this playbook, SAP taps into itssteps toward their business goals, andindustry leadership in business software for the business that they are positioned for success. [ ] 3. Chapter i n appendix: Previously The Tipping Point Published articles A unified IT strategy: Enable profitable growth for your midsize business 2 How to Get More Chapter 2 From Tech Vendors 19 getting Started Taking the first steps toward a unified IT strategy:5 Business Process assess, understand and sell Management: It Aint All About the Technology 20 Chapter 3How to Use a Unified Strategy The Trouble with as a Strategic Weapon Online Collaboration Tools21 Metrics like KPIs enable midsize businesses to measure and improve performance 810 Keys to a Successful Business Intelligence Chapter 4 Strategy 22 fundamentals: On-demand or On-Premise?Complex IT Will Kill With myths out of the way, software as a10 Your Business23 service can be fairly evaluated On-Demand Software Chapter 5 Software-as-a-Service Appeal 25 Selecting a Partner/Vendor A structured approach to making the most of this critical relationship 13 Chapter 6Optimizing for Success On the optimized IT checklist: align, simplify, streamline, collaborate 15Cover illustration byJim Frazier Chapter 7next Steps: The Business-ready enterprise With end-to-end process alignment and metrics in place, its time to look ahead17 [] 4. chApTEr 1 ThE TIppIng poInT A unified IT strategy:The Enable profitable growth for your midsize businessTipping PointD Despite the emergence of the midsize company as a crucial cog in the wheel of the U.S. economy, these businesses have been largely overlooked by technology providers. Midsize companies have historically lacked specific systems to help manage growth and deal cater to your specific needs.You typically buy technology solutions that purport to solve your business problems, yet they often dont meet your needs because theyre designed for much larger companies.Growing businesses need a tailor-made, unified IT strategy to manage change and agility. A unified IT strategy links all of an with an increasingly complex business environ-organizations business processes, enabling maximum operational efficiency, asset ment. While theyre smaller than their Fortuneutilization and a deep understanding of the 500 counterparts, midsize companies face thecompanys financial metrics, customers and same challenges.products.All companies, whether theyre a 100-employee local Are You Ready organization or a multibillion-dollar global business, need tofor a Unified IT Strategy? respond quickly, efficiently and accurately to ever-changingHow do you know when your company is market conditions and customer needs, and to control costs. ready for an IT infrastructure that does away Regardless of size, companies need access to information to with stand-alone accounting packages and help them understand the state of their business and to makespreadsheets in favor of integrated systems? the best possible decisions. That information needs to be cor- Each company is different, but here are rect, coordinated and consistent. five telltale signs your company is at the The best, and in fact the only way to do that is to tightly tipping point, and may be ready to integrate align business and IT goals and processes via a unified ITdisjointed IT systems to accommodate the strategy. next phase of growth. You face unique challenges in aligning these goals, and when it comes to delivering controlled and profitable growth. Consistent year-over-year top-line Thats partly because you have fewer resources and partlygrowth: As revenue grows, a company because most technology providers dont offer products thatnaturally becomes bigger and more[ ] 5. complex; revenue forecasting and his-torical analysis become critical.Aligning Business and IT: Employee growth: More employeesA Strategic Imperativerequire more technology to help themcollaborate in real time.A common thread among successful companies is the align- Global demand for products/ment of business and IT to improve the operational efficien-services: Coordination becomes cy and performance of the business and to accommodateincreasingly difficult, if not impossible, growth.when a business becomes distributed Operational excellencean ongoing challengecan bestbeyond four walls. be achieved with a unified IT strategy that enables visibility Increase in staff-driven IT needs: in to all areas of the business including customer service,Your growing company and its growing HR, sales, marketing, finance and manufacturing. This fos-employee base require an integratedters collaboration and accountability across all departmentsinfrastructure.so the best decisions can be made. Increased complexity of IT and dimin- The most efficient, successful companies are those thatished capability of existing IT infra- leverage IT to achieve business goals and solve businessstructure to handle processes andproblems. A few examples:transactions: Distributed organizationsn Business Requirement: Control costsrequire more sophisticated and inte- IT Role: automate and streamline core processes includinggrated technology; stand-alone businessinventory, purchasing and logistics; enable offshore outsourc-applications no longer get the job done. ing; improve manual and automated processes to forecast labor requirements. Growth is a great thing, except when youre n Business Requirement: not equipped to handle it. Haphazard growthMeet/exceed performance benchmarks can be nearly as dangerous as no growth.IT Role: innovate product/service development cycle; inte- Smaller companies can easily become over- grate processes to enable quality control; gather customer whelmed by the demands of global custom-satisfaction ratings; build scalable employee training model. ers, suppliers and partners. If your businessGlen Raven, a North Carolina-based textile company, is a requires a consolidated, automated, updated case in point. The century-old company has prospered even view of data from any corner of the company,as its American counterparts have folded amid competition the time has come for a unified IT strategy.from Asian manufacturers. Its a feat that Glen Raven CIOUnfortunately, small businesses andAllen Gant Jr. attributes to its unified IT infrastructure, with- midsize companies have been underserved out which the company would be unable to coordinate its by providers of traditional ERP in this regard. global sales and manufacturing operations. Traditional ERP systems do not meet the needs of small businesses and midsize companies because theyre too unwieldy, expensiveThe Case for a Unified IT Strategy and generally not user-friendly. On the other Decision making must be based on facts rather than gut end of the spectrum, stand-alone spread-instinct. Companies cannot make sound business decisions sheetsa staple of business productivity andif they do not have access to all of the relevant information. the centerpiece analysis tool in many small Information therefore must not be stuck in corporate silos. It businessesare not suitable for business-wide must be available across all business units. or collaborative tasks because theyre proneExamples of what a well-run midsize business is able to to error and not accessible to everyone in thedo include: organization. Easily measure business performance.[] 6. chApTEr 1 ThE TIppIng poInT Gain full visibility into sales and sales pipelines to make youll know when your business is outgrow-sound investment decisions. ing your standalone accounting software Track performance metrics, e.g. revenue per employee, and CRM. If your business has at least 100customer attrition and supply chain costs.employees, has seen consistent sales and em- Capitalize on opportunities that emerge from changing ployee growth, and is experiencing nationalmarket conditions; change course as needs dictate.or global demand for products and services, Replicate and extend efficiencies as growth dictatesthe time has come for a unified IT strategy. Automate business processes.Dealing with growth, especially suddengrowth, can be daunting. There are dozens growth is a great thing, exceptof case studies of once-promising compa-nies that flamed out because they didnt or when youre not equipped tocouldnt automate business processes or use handle it. haphazard growth can be technology to connect their disparate depart-ments to make informed business decisions. nearly as dangerous as no growth. A unified IT strategy, where all systemstalk to each other and all relevant data isIT elements of a unified strategy include:made available instantaneously, is the key toeffectively managing growth and taking your1. One version of the truth, available as decision-ready data company to the next level.2. Automated and integrated core business processes linked to end-to-end business metrics3. A flexible technology platform built for changeTechnology can be a great equalizer. Big companies long ago began investing in technology to address their information management shortcomings, but the cost and complexity of those solutions kept them out of reach for small businesses and midsize companies. But technology has evolved, and information management is now within reach of midsize companies like yours. This lets you collect and distribute more accurate information, and make better decisions based on that data, faster than ever before. The capabilities offered by a unified IT strategy were once only available as packaged software costing tens of millions of dollars. Now they can be deployed as a hosted service or an on- premise solution (see Chapter 3).Conclusion Midsize businesses are well aware of the unique challenges they face. Your survival depends on your ability to turn a profit. You must reduce inefficiencies or risk being undercut by competitors, and you must be able to see around corners to predict market conditions and customer needs.The key to that is a unified IT strategy that aligns business and information technology goals and processes. Chances are[ ] 7. chapTer 2GeTTInG sTarTedTaking the first stepsGettingtoward a unified ITstrategy: assess,understand and sell StartedY Your organization is ready to move toward a unified IT strategy. But where do you start? Should you pick a line of business? Do certain functional areas lend themselves as a good starting point? This chapter provides some basicbusiness performance using key performanceindicators, or KPIs, and use that intelligenceto make informed, strategic business decisions.In an automated business, managers and theiremployees are freed from most manual andadministrative tasks, and can devote their ener-gies to core business activities. The result is guidance and proven best practices to assess yourgreater, lasting efficiency and profit. current status, sell the idea to the business andQuick Self-Assessment answer some critical questions that will helpHere, we will establish the most important guide your evolution to a unified IT strategy. key performance indicators at your organiza-tion, then assess your visibility into those Assessing Where You AreKPIs. In later chapters, we will use this assess- How automated and integrated are your business processes?ment to prioritize your automation/integra- First, let us define the terms. Business process automation, ortion activity. BPA, is exactly what it sounds likethe automation of businessTable 1 on page 7 presents a list of busi- processes, using software, to achieve consistent and accurateness areas; inefficiencies common to those ar- performance while spending less money and using less labor.eas; and paths to value, through which those A simple example is a financial application that automatically business areas contribute to your business generates invoices.bottom-line and sustainability; and the KPIsEnterprise application integration (EAI) is the connectivityused to measure efficiency and success along among applications through computer systems architecture.those paths to value. Ideally, an enterprise is completely integrated, with every The most successful companies know process working off the same data and sharing its own data withexactly how they are performing and mea- other functions. Integration enables automation; for instance, a sure themselves against predetermined KPIs. shipping application tells the billing application to generate Senior management uses these KPIs to make an invoice.decisions for that day and chart performanceWith a wholly integrated system, managers can measure over time. Department managers use KPIs[] 8. chapTer 2GeTTInG sTarTedto identify areas for improvement, and employees at all levels know how and where to find those KPIs. Step 4 Questions Step 1: Determine with senior management which KPIs are most important to maximizing profitability. Ask them to1. oyouhavevisibilityintotheD review Table 1, and identify the one or two most important process(es),andisthedata KPIs in each business area. They will likely see business valueunifiedandclean? Y/N in each one, but will focus on a few indicators that are critical2. recurrentcoreprocessstepsA to your profitability and competitiveness.automated?Y/N Step 2: Assemble a rank and file self-assessment team. 3. reprocessesintegratedendtoA This cross-functional group of individuals can tell you, realisti-end;acrossthebusinessnetwork cally, where the inefficiencies are, and thus where time andtosuppliersandpartners?Y/N money might be recovered.4. otoolsandanalyticsexisttotrackD Step 3: Assess where you currently are. Here, the team uses performanceacrosstheprocess? Y / N Table 1 and the questions below to conduct an honest assess- 5. oyouhavetheabilitytomakeD ment of your companys degree of automation/integration, andcriticalgo/no-godecisionsor determine a plan of action: strategiccoursechanges? Y/N6. oestheprocess/systeminvolveD Do we need to automate basic tasks? Which ones?oneinterfaceforuser(thus,one Do we need to integrate our processes end to end?interfacefortraining)? Y / N Do we need to change and extend our existing processes? 7. otheprocesses/systemsenableD youtoshowonefacetothecustomer First, using Table 1 on page 7, ask your team to highlight in (thatis,asinglecustomerrecord)?Y / N the Inefficiencies column those inefficiencies they recognize8. oestheprocessdecreasetheD in their departments. Second, ask them to read the Paths toprobabilityforusererror? Y/N Value, so that they understand how integration or automation9. oesthetechnologyencourageD can overcome those inefficiencies. Third, ask them to priori- collaboration?Y/N tize the KPIs in each business section that indicate success or10. oesthetechnologysupport D failure in overcoming those inefficiencies and adding value.individualaccountabilityand They should do so independently of senior managementstacticaldecision-making? Y/N earlier review. You now have a short list of functional areas, 11. antheprocess(es)bequickly C prioritized KPIs and processes that support those KPIs. andeasilychanged,extendedor Step 4: Assess current IT support for those areas. Answer the repeated? Y/N questions on the right for each of the KPIs on your list.RealisticallyHow Robust Is Your IT Capability?tions and indicate which are available on For rich process automation and integration, the answer to demand or on premise. each of the 11 questions at right should be Yes. So, for a list of 10 KPIs, 10 yes answers would be a perfectly integrated Conclusion enterprise with 100 percent business process automation. Once you know where you stand, you can However, that is unrealistic, even for Fortune 1000 com- start to plan your implementation. With the panies with IT departments of hundreds of professionals. buy-in of key stakeholders, an honest self- Likely, you had less than 50 percent yes answers. But, richassessment and clear business-related goals applications exist in each of these performance areas, fromdefined, youre ready to tie together your enterprise vendors and their partners, and through third-party disparate systems into a cohesive, integrated providers. In Chapter 3, we examine some of these applica- whole.[ ] 9. Table 1: Paths to Value and KPIs AREA OF INEFFICIENCIES PATHS TO VALUE NEEDED KPIs BUSINESSAccountingsoftwareisinflexible,requiresmanualprocesses,andIncreaseaccounting Cashflowandcapitalfunding. Financecontainsinsufficientreportoptions.transparency.Dayssalesoutstanding(DSO).Accountingsoftwarefunctionalityistoolimited. AutomatemanualtaskstoProfitability.Accountingsoftwaredoesnothelpmeettaxrequirements.enablefastercloses.Salesrevenue/salespipeline.Manualreconciliationeffortsaretime-consumingandpronetoerror.MaximizetheefficiencyofCostofgoodssold.Reportsfrommultiplesystemsoncriticalbusinessdatasuchasworkingcapital. Margins.salesbookings,stocklevelsandcashflowareinconsistent.Simplifycollaborationwith Humancapitalcostandnumber.Difficulttogenerateaccurate,relevantreports. financialauthoritiesand Assetutilization/capacitypartners.utilization.AssurecompliancewithTotalcompanyvalue/worth.applicablelocalandTotalcompanyassets.internationalregulations. Employeedataresidesinmultiplesystems,suchaspayroll, ManageorganizationalNumberofemployees/trends. Human Capital employeedirectoryandotherapplications. changeefficiently. Employeeturnover.SimplifyHRprocesses.Laborcostsasapercentofsales.IntegrateHRbusinessAbsenteeratesforemployees.processesintootherparts Laborlawcompliance.ofthebusiness.Voluntaryterminationratio.Enableemployeeself- Revenueperemployee.service.Benefitcostsperemployee.Safety(lostworkdays/injuries). Salesandinventorysystemsarenotinsync,leadingtoaninability Supportcontinuedbusiness Salesrevenue. Sales and Marketing tofulfillorders. profitability.Salespipeline. ItsdifficulttomanageandcollaborateonsalesteamtasksandShortenlead-to-closecycle. Salesforceproductivity. calendarsduetounintegratedapplications.Expandthecustomerbase. Margins. Itsdifficulttoseeacompleteviewofcustomerdata,salespipelines Customermetrics. andorders.Productlinerevenue. Thereisntacentralizedwaytoanalyzeandforecastsalesand Orderbacklog. financialsfromthesalesteams. Forecasts. Thesalesteamdoesnthaveacompleteviewofcustomerdata, DSO. suchasbalances,opencasesandorders. Marketstatistics. MobilesalespeoplecantaccessthelatestinformationaboutMarketingcostsasapercentof customersandinventorywithoutcallingtheoffice.sales. Currentinventorydataisnotintegratedwiththeorderquotation Marketingcampaign process. effectiveness. Lackofinsightintocustomeraccountstatusthatcanresultin Leadsgenerated/lead sendingquotesorproposalstocustomersthatareoverdueonconversion. payments. Onlycustomerslocatednearphysicalstorescanbeserved. Urgentcustomerissuesgounnoticed. Facilitatecommunication Customerretention.Production / Customer Relationships/ Services Supply Chain Customerscannotgettimelyanswersorservice.withcustomers. Responsetime.EnsurecustomerCustomercomplaints.satisfactionandloyalty. Time-to-resolutionforproblems.Managespendandcontrol Revenueperserviceorder.costs.Numberofserviceescalations.IncreasethequalityofFirst-timefixrate.servicesdelivered. Warrantyclaimrates.Servicelevels.Productivity.Servicedeliverycycletime. Difficultytrackingorderscanleadtoduplicateshipments.Simplifyandoptimizethe Supplychaincost(inventory ManufacturingSupply Chain Inadequatereturntrackingcanleadtoerrorsinaccountingentries, valuechain. carrying,transportation, inventorylevelsandcustomercharges. procurement). InventorytrackingisasiloedprocessresultinginlimitedvisibilityOn-timedelivery/shipments. intowhatsinstock.Qualityofgoodsandservices. Manualproductionrequirementplanningcanresultinhavingthe Warehousing/distribution wrongamountsofmaterialstomanufacturefinalproduct.facilityutilization. Therearetoomanydifferentversionsofthemasterbillof Employeeefficiency. materials(BOM). Laborcosts. ThetimespentresolvingcrisesimpingesonproactivebusinessAutomatereportCustomizedreportdelivery. Reporting & Administration management.generation. Customizedreportutility. ReportingtoolsaretoocomplicatedforuserstocreatecustomizedCustomizereportsbyjob Usersatisfactionwithinterface. reports. functionanduser. ItsdifficulttogeneratecomprehensivereportswithouttechnicalSimplifyreportinterface(s). assistancebecausedataresidesindifferentapplications. Itstoodifficulttorunreportsondetailedbusinessdatawithout technicalassistance.[] 10. ChaPTer 3 usIng a unIfIed sTraTegy as a sTraTegIC weaPon Metrics like KPIs enable midsize businesses to measure How to Use aand improve performanceUnified Strategy as aStrategic WeaponC Creating unified IT and business processes makes it easier for organizations to measure performance. Midsize businesses can implement and measure key performance indicators to keep tabs on virtually every facetcan include increased accounting transpar-ency, automation of manual tasks to enablefaster closes, maximized efficiency of workingcapital, simplified collaboration with finan-cial authorities and partners, and compli-ance with applicable local and internationalregulations. of the business, improve decision making and The KPIs that are needed include cashflow and capital funding, days sales outstand- deliver business value.ing (DSO), profitability, sales revenue/sales When a company has a disjointed, ad hoc infrastructure, its pipelines, cost of goods sold, margins, human difficult if not impossible to ensure that performance stan- capital cost and number, asset utilization/ dards are being met, and that business goals and operational capacity utilization, total company value/ excellence are being achieved. By having end-to-end business worth and total company assets. process alignment and metrics for every aspect of the busi-To measure performance in finance, com- ness, companies can experience the benefits of operational panies need a single version of trusted, up-to- efficiency through faster, smarter decision making, more rapid date information from which they can view response to market changes, better control over cost structure business status, perform financial reporting and consistently achieved performance standards. and make informed management decisions. All of this gives midsize companies a competitive edge atThey also need built-in compliance features a time when they need every advantage to succeed. The KPIs to help ensure that records are auditable and that measure how well processes are being performed can be meet all major accounting standards. applied to several major areas of the business. These includeHuman Capital. In the human capital finance, human capital, sales and marketing, manufacturing function, the possible paths to value include supply chain, services supply chain and customer relation- the ability to manage organizational change ships. efficiently, simplified human resources pro- Heres a breakdown of how performance and value cancesses, integration of human resources busi- be measured, including some suggested paths to value.ness processes into other parts of the business, Finance. In the finance function, the main paths to valueand employee self-service.[ ] 11. The KPIs that companies need hereing, shipping and logistics, human capital, production and include the number of employees, rate of procurement. employee turnover, labor costs as a percent-Services Supply Chain. In this business function, the age of sales, absentee rates for employees,paths to value might include the ability to manage and labor law compliance, voluntary terminationcontrol costs, and increased quality of services delivered. The ratio, revenue per employee, benefit costs per KPIs needed to measure success are service levels, productivi- employee and safety (lost work days/injuries). ty and service delivery cycle time. Successful measurement of To measure performance in human capital, performance requires integration of the systems that manage businesses must have the latest data on em-service delivery. ployees, including job status and benefits andCustomer Relationships. The paths to value for this func- total compensation, as well as financial datation can include facilitating communication with customers such as sales. and ensuring customer satisfaction and loyalty. Sales and Marketing. In this function, the paths to value can include such things as support of continued business profitability,Its important to remember that KPIs shortened lead-to-close cycles and expanded are only helpful if they are embedded customer base. The key performance indicators that into unified business processes. are needed include sales revenue, sales pipelines, sales force productivity, margins, customer metrics, product-line revenue,The KPIs needed here are customer retention, response order backlog, forecasts, market statistics, time, customer complaints, time-to-resolution for problems, marketing costs as a percentage of sales,revenue per service order, number of service escalations, marketing campaign effectiveness, and leadsfirst-time fix rate and warranty claim rates. Midsize companies generated/lead conversion. need to have unified systems in customer service, call cen- Measuring performance in sales and ters, sales and other areas to measure the value of customer marketing requires tight integration among relationships. systems in finance, sales, customer service, In general, unifing processes and IT not only simplifies the marketing, supply chain and other areas of management of business applications and helps midsize busi- the business.nesses anticipate change, but it also enables them to use KPIs Manufacturing Supply Chain. The typicalto effectively evaluate performance on a regular basis. path to value in this business function is a Business systems such as SAP Business ByDesign include simplified and optimized value chain. Supply reporting features that use dashboards to display KPIs based on chain inefficiencies can be costly in terms of accurate real-time information. Easy reporting and analytics lost sales and poor use of labor.make it simpler for managers to customize reports, monitor The KPIs that midsize companies need business trends and influence performance. to measure success are supply chain costsThe best-run midsize businesses establish KPIs and measure (inventory carrying, transportation, procure-them frequently. But its important to remember that KPIs are ment); on-time delivery of shipments; qualityonly helpful if they are embedded into unified business proof goods and services; warehouse/distributioncesses. They need to be built into automated tasks, reports and facility utilization; employee efficiency andreal-time analytics. labor costs. A unified business environment enables midsize compa- Effectively measuring performance in nies to gain full visibility into how the business as a whole is the manufacturing supply chain requiresperforming, and allows everyone in the organization to work unified systems in areas such as warehous- toward the same goals.[] 12. chapter 4Fundamentals:on-demand or on-premise?Fundamentals:On-Demand or On-Premise?With mythsout of the way,software as aservice can befairly evaluated L Like most IT-related decisions, deciding whether software as a service (SaaS) is right for your organization requires you to assess numerous criteria, ranging from the internal IT personnel and budget to how quickly you need the solu-As for those who contend that SaaS wontstand the test of time and wont have a signifi-cant impact on the software industry, Kaplansays a survey he conducted revealed that athird of respondents were already using SaaSand another third planned to in the comingyear. As SaaS gains mainstream acceptance, tion up and running. it is becoming an important disruptive forcein the software industry, he writes. And as Before diving in to those issues, its important to fully under- long as the quality and reliability of SaaS stand what SaaS is and what it is not. That means dispelling solutions continue to improve, the appeal of certain myths about it. Jeff Kaplan, an independent consul-SaaS isnt going to go away. tant who focuses on SaaS and operates the SaaS Showplace Web site, addressed a number of those myths in an April 2006 Overview of SaaS vs. article on BusinessWeek.com. On-Premise Ownership One is that SaaS is new and untested, which Kaplan re- It is certainly no myth that SaaS represents a futes by noting that Salesforce.com has been around for more fundamental shift in an organizations approach than six years, and the payroll software and service firm ADPto IT resources. The age-old in-house model has been in business for nearly 60 years. He also refutes theof software ownership means the business notion that SaaS only saves users the up-front cost of softwarebuys all its application software or develops it in- licenses by pointing out that it also saves on the cost of muchhouse. SaaS operates on a utility model, where surrounding computing infrastructure and allows users to companies pay for only what they need. avoid paying for excess capacity.Lets look at the business requirements and Another myth Kaplan cites is that SaaS only applies to cer-characteristics of each model. tain applications, such as sales force automation and customer relationship management. While SaaS certainly makes sense Conducting a Self-Assessment for many front-office functions and team-oriented collabora- Deciding which model is right for your tion purposes, SaaS solutions are emerging to address nearly organization requires you to honestly assess every business application need, he writes. various criteria.[ 10 ] 13. The in-house model requires the following: The organization owns the software and infra- Part- or full-time IT staff to install and configure structure and is free to use it for as long as it wants,the solution as well as to manage and optimize it and to repurpose components such as servers andover time. Ongoing management and optimizationdesktops as it sees fit.is an important consideration that many companiesNow lets examine characteristics of the SaaSfail to recognize. IT environments are like living,model:breathing entities that constantly change. No up-front fee for software purchases. Customers Up-front investment in software and the infra- instead pay a lower fixed monthly fee.structure to support it. Depending on the size of No additional IT infrastructure. The solutionthe organization and its specific requirements, thisprovider provides all required server and storageinfrastructure may range from a single server to afacilities, enabling the customer to avoid potentiallymulti-server farm complete with a storage net-large up-front costs.work and backup facilities. Additionally, software No need to increase IT staff. Indeed, companiesmaintenance fees can run 15 percent or more of thethat are outsourcing an existing solution may beoriginal purchase price every year. able to reduce the size of their IT group. Corporate commitment to routine upgrades. Fail- Routine optimization and upgrades. As new soft-ure to continually update and optimize its variousware versions become available or vendors releaseapplications can, at best, leave an organization with security and other updates, the solution providera suboptimal solution that doesnt take advantage will implement them in a timely fashion.of the latest features. At worst, the organization Predictable long-term cost. With the SaaS model,may be leaving itself open to security risks if it failscustomers know exactly what they will pay eachto update its applications with appropriate patches month for service, support and updates.as they become available. Naturally, the SaaS model also comes with its own Support for branch locations, where applicable. Itset of issues and challenges for user organizations,can be a challenge to provide application supportincluding:to remote sites from a central location. If members Less direct control over the infrastructure, applica-of the central IT team must travel to the branchestions and data.periodically for support, that increases costs. The organization must be able to effectively man-Of course, for many organizations, these invest-age the SaaS provider in order to make the most of ments in time and personnel bring important ben- the relationship. efits, including: The organization is dependent on the service pro- Complete control over the IT environment, whichvider for enhancements and innovation.can be important if the IT infrastructure is a distinct As in a car lease, for example, at the end of the con-differentiator for the business, and to ensure regula-tract or relationship, the user doesnt take owner-tory compliance, for example. ship of any of the software or infrastructure. The potential to consistently produce innovative Many SaaS providers are startups, making it diffi-technology that provides the organization a com-cult for users to determine whether they will remainpetitive edge.viable for the long haul.implementation speed to the solution and the depth of knowledge of its IT team. InFirst, how quickly do you need to imple-practice, many companies dramatically underestimate implement the solution? In-house software imple-mentation times because they fail to dedicate resources. mentation times vary dramatically, depending SaaS solutions can generally be installed quickly, since on the IT resources a company can dedicate customers benefit from the experience of engineers and tech-[ 11 ] 14. chapter 4Fundamentals:on-demand or on-premise? nicians who have installed the same solution many times.Alternatively, they may be able to purchasetime to valuethe application from a value-added reseller orClosely related to implementation speed is time to value,hire an outside developer to help. Both op- which is the elapsed period of time before a business beginstions would mean an increased up-front cost, to benefit from new software or other IT deployment. Theand potentially a longer time to value. real downside of implementations that drag on too long is that Many SaaS providers already have ver- the business loses the potential value of its new solution, and sions of their offerings tailored for different perhaps new opportunities as well.For example, getting its SAP Business ByDesign solution up and running quickly helped Viper Motorcycles realize as long as the quality quantifiable improvements in a number of areas, including:and reliability of saas 12 percent annual improvement in the productivity ofits purchasing and procurement processes solutions continues to 17 percent annual improvement in procurement improve, the appeal ofmarginssaas isnt going to go away. 27 percent increase in output per production worker,year over year 18 percent average reduction in warehouse inventoryverticals, or perhaps focus on just a handful oflevels verticals, giving them deep domain expertise. Serus Corp., for example, offers a SaaS-basedsecurity manufacturing information system specifical-Customers must also ask themselves some honest questions ly for semiconductor makers that outsource about whether they can provide proper security for any newmanufacturing. Other SaaS providers will application. For an in-house implementation, that requirestailor their solutions to a specific vertical at an significant security expertise, which many small businesses and additional cost, but with their deep expertise midsize companies simply dont have.and dedicated personnel can often completeWith SaaS, security is handled by the solution provider. But the job much more quickly than a customer the customer should ask the provider detailed questions about could on its own. how it handles security. In a research note published in July 2007, Gartner vice president and research fellow John Pesca-Netting It Out tore recommended customers ask potential providers aboutAs you can see, the decision on whether to issues such as: choose SaaS over an in-house deployment How the provider ensures administrative security for its largely comes down to the level of IT exper-own routers and switches tise you have on hand, as well as the avail- Whether it performs routine penetration testsability of the appropriate experts. Be realistic: How it protects against denial-of-service attacksif your best and brightest IT folks are spend- Whether the provider uses content monitoring and filtering ing 95 percent of their time just keeping youror data leak prevention tools to detect inappropriate data companys existing systems running, theyflowsarent going to have time to implement a new solution unless you somehow free them up Vertical Customizationfrom day-to-day chores. Customers in different vertical industries often use the same If it seems like SaaS may be a viable solu- application in very different ways. Here again, customers thattion for you, read the next chapter to find out have internal software development expertise may be able to how to go about picking a provider you can adapt an off-the-shelf application to meet its requirements.live with.[ 12 ] 15. chApter 5selecting ApArtner/vendorSelecting aA structured approach to making the most of this critical relationship Partner/VendorF Functionality is paramount in selecting business software, but you also need rich support as you integrate the application into your business; a commitment to updating the application; training as your workforce evolves and a solution that can scale up as your business grows. In turn, a then take competitive bids through requests for proposals (RFPs) or request for quotations (RFQs). Smaller organizations, however, often dont have the luxury of months, and the decision-making time frame is more likely condensed to about six to eight weeks.A Strong Partnership strong vendor/partner will look to you for ideasAt the fundamental level, look for a vendor that is willing to work with you on getting the to improve their products and generate newRFP right. Just determining what you need business. can be a huge part of the process, and a vendor can provide a fresh look at your systems Here we examine key points to find the perfect combination of and requirements. Look for these clear signs a strong application and a strong vendor/partner. that the vendor is a strong, viable partner, committed to the long-term success of your Form an Evaluation Committeeorganization: Enlist the self assessment team you assembled in Chapter 2, The vendor can deliver software, support Getting Started. These same individuals who recognized theand services, and training, either personally, gaps in performance are best qualified to select applications thator through strong partnerships with third- solve the inefficiencies. The entire team should select a businessparty integrators, trainers, etc. application, while certain individuals may have a stronger role The vendor is willing to write noncompli- in selecting applications specific to a business area. In any case, ance clauses into your contract. A well-estab- IT should be involved.lished vendor is used to delivering on commit- ments and is willing to make good (e.g., with Expect the Evaluation to Take Up to 8 Weeks rebates, discounts) on nondelivery of goods or Large companies typically allot several months to select busi-services. ness software. They require each vendor to walk through their The vendor has a progression plan, and a businesses and processes, narrow the field to one or two vendors, one-, five- and ten-year business plan, that it[ 13 ] 16. chApter 5selecting ApArtner/vendor can articulate. This should encompass plans for both technol- and a well-integrated product. Major vendors ogy and the company. Regarding technology, a company todayhave rich partner networks for specialized should have a plan to incorporate office business applicationsapplications that should integrate easily with into its offerings, or a convincing explanation why it does not.their solutions. The vendor partners with an enthused, involved user Reputable vendors are eager to provide group. User groups form independently of the applicationreferences and will allow you to talk to those ref- vendors. They are typically very vocal about their likes anderences, versus simply handing you case studies. dislikes, very willing to talk to prospective users about their The vendor offers the full breadth of func- experience and able to provide references; and in the best cases, tionality you defined in Chapter 2. You have taken the time to define what you want your look for these clear signs that software to achieve. Look for an application that has that functionality, versus a force fit requir- the vendor is a strong, viableing a lengthy and expensive customization. partner, committed to the long-term The vendor offers a robust support structure. Ideally, a business application is so easy to success of your organization. use that its users never require help, but it should be available. very involved in the product evolution. In the case of SAP, the The vendor can provide scalability and Americas SAP Users Group holds an annual conference, offers extensibility. You likely will focus on key areas benchmarking expertise, and oversees a portal that includes of your business as you roll out a solution; finan- forums and discussion boards. cials is the usual starting point. However, it is important to select a vendor based on the com- More Things to Look for pany you plan to be. Be certain the vendor can Before You Sign on the Dotted Linefulfill your next priorities, perhaps CRM or HR Stability and reputation in the industry. After years of acquisi- functionality. Also, be certain that the vendor tions, partnering and consolidation, the field of business soft-can grow the application to suit your company ware vendors has narrowed considerably. Be certain the vendor as it grows. If you are not already, do you plan to you choose has a track record of success in companies of your be a global operation in five years? size and industry. The companys Web site, sales representatives The vendor can provide a detailed cost of and user groups can give you that information. If you are riskownership and ROI. They should also be able averse, pay attention to the companys market sharea longtimeto estimate what return on investment you will major player will likely be here five years from now to service see through your installation. increased productivity,Still, it is more important that a vendor offers expertise in lower labor costs, your business processes and vertical industry than in your exact better financial performance, service or commodity. A toy manufacturer may not find toy- less costly technology maintenance and industry functionality in a business solution, but the vendor support, and likely has dozens of references from durable-goods manu- improved or automated processes. facturers that practice just-in-time logistics to meet seasonal demands, and so can answer a toy manufacturers uniqueConclusion concerns very well. Youre choosing more than a vendor. Leading Small and midsize businesses have limited time and bud-companies turn these relationships into part- get for project overruns, and should be cautious of vaporware nerships. They look to their vendor/partners and completely new applications that are not yet functioning. to help drive process innovation and improve- A single provider usually ensures a lower cost of ownershipment in their organizations.[ 14 ] 17. chapTer 6OpTIMIzIng fOr successOn the optimizedIT checklist: Optimizingalign, simplify,streamline,collaborate for SuccessM Midsize companies can get the most value out of a unified environment by taking certain steps to improve operations. These include better aligning IT with the business, simplifying the IT infrastructure, streamlining and creating transparency of processes, deliver- easy, having a unified environment can help get IT and the business on the same page. A unified environment gives a clear view of how a companys processes flow, and helps ensure that IT is delivering what the business needs, at the right time. There are a number of steps companies can take to align IT with their business goals. ing decision-ready information and collaborat-These include clearly articulating those goals to the IT department, making IT leader- ing effectively.ship (such as the CIO) a part of the business strategy team, and putting in place best-prac- Heres a look at each of these initiatives and how a unifiedtices models and frameworks, such as the business and IT environment helps enable them.IT Infrastructure Library (ITIL), to improve Business and IT Alignment. Its a significant challenge technology services. that businesses have faced for years: how to link technologyStreamlining Processes. A big part investments and projects with business goals. Business and IT of simplifying IT infrastructures involves alignment is no less important for midsize companies. streamlining day-to-day business processes. Recent research by CIO magazine and IDG ResearchThrough automation, midsize businesses can shows that aligning IT with business goals is a high priority streamline or even eliminate many common for IT departments, and that it will grow in importance in theadministrative tasks within their organization coming months. But there are challenges. For one thing, the and across their network of customers, suppli- business goals are not always made clear to people in IT. Who ers and other business partners. the CIO reports to makes a difference as well. CIO magazine Software tools provided from vendors research shows that even though CIOs are moving towardsuch as SAP are available to proactively a strategic role, the majority still are focused on operational deliver the most relevant and meaningful excellence, not strategy or transformation. And the majority of information and key performance indi- strategic or transformational CIOs report to the CEO. cators, including alerts and requests for While business and technology alignment is not always approval, to employees based on their role[ 15 ] 18. chapTer 6OpTIMIzIng fOr success within the company. Rather than getting bogged down withCollaboration. Collaboration is critical these tasks, people can focus on initiatives that help drive for any midsize business today, especially one the growth of the business.that relies heavily on teamwork and innova- Simplifying IT. Technology infrastructures have become far tion, or has a lot of far-flung operations or more complex in recent years, for midsize companies as wellremote workers who need to be in frequent as for larger businesses. Businesses rely on a growing numbercontact with each other. of applications and systems to support day-to-day processes.In a unified environment, information Adding to the complexity is the increased use of all sorts offlows across the organization in such a way mobile computing and communications devices and applica- that effective collaboration can take place. tions, as well as the rise in the number of remote workers and For example, workers in customer service home offices. Companies are also using more open sourcecan easily share customer records, or mem- software, and are increasingly sharing systems and information bers of the marketing team can collaborate with customers and business partners around the world. with people in procurement about product All this complexity can present problems for midsize com-availability. panies that are trying to keep IT overhead costs down.Whether its through more tightly The integration of key business systems and the automation aligned technology and business, simplified of tasks, processes, reports and analysis can greatly simplify the IT, streamlined processes, greater trans- business and the systems that support processes. parency, decision-ready data or improved On-demand solutions such as SAP Business ByDesigncollaboration, midsize businesses can opti- move IT departments toward simplicity by taking some of themize their operations by creating a unified infrastructure off-site. Hosted services like Business ByDesign, environment. which provides end-to-end automation of business-critical processes, simplify management and maintenance, freeing up IT resources to work on initiatives like innovation and business-IT alignment. Transparency. Companies, particularly those in industries such as manufacturing, need a transparent and comprehensive overview of functions such as product design, planning, pro-Learn More duction, costs, logistics and human capital. Having complete visibility into key business processes enables managers to make SAP Business ByDesign is the most better-informed business decisions. With an integrated system complete on-demand business solu- that aggregates data from multiple processes, companies can tion to help dynamic, growing com- operate and make decisions based on one version of informa- panies control, run and adapt their tion, rather than multiple, conflicting versions. business quickly. As the most com- If a company doesnt have an integrated approach and theplete on-demand business solution, transparency and visibility that a unified environment enables, automating and integrating more the result can be poorly functioning operations and workflows.business operations than any other Decision-Ready Information. Having a unified IT envi- on-demand solution, it helps compa- ronment provides executives and managers the most relevant, nies like yours build a unified IT strat- accurate and up-to-date information available when theyreegy designed for change. To find out making decisions. more about SAPs Business ByDesign Building a unified environment that includes standardized,and SAPs full portfolio of solutions end-to-end business processes can help executives gain thefor small and midsize businesses go visibility into The result is potentially huge savings or growthto www.sap.com/usa/cio opportunities for the business.[ 16 ] 19. chapter 7 the business-ready enterpriseThe With end-to-end processNext Steps: alignment and metrics in place, its time to look aheadBusiness-ReadyEnterprise I Indeed, small businesses and midsize companies face unique IT challenges that can limit their growth, including fewer resources, smaller IT departments and time constraints. But a unified IT strategy can make a world of differencetoward a cohesive, integrated IT infrastructure.Key considerations for unifying IT as astrategic business weapon are also provided.Unified business processes make it easier tomeasure performance, and putting KPIs towork helps companies execute successfullyacross any number of critical functions. As a by providing end-to-end process alignment with result, organizations can anticipate change, visibility into the metrics that can make or break improve decision making and deliver realbusiness value. a business. The preceding chapters delve intoA deep exploration of the pros and cons many aspects of how unified IT can make enter- of software as a service versus on-premise prises business-ready in their quest for growth. ownership reveals that SasS has many ad-vantagesfrom no up-front fees and staffingrequirements to predictable cost schedules. Taking Stock The ins and outs of selecting the right Businesses that are poised for (or perhaps already in the midst) vendor are also examined. Simply looking for a of growth need to keep pace with everything around them product isnt enough. Businesses need to think from market conditions to customer demandsall the while in terms of long-term partnerships with their remaining mindful of the ever-present mandate to do more vendors. And when it comes to the application with less. A unified IT strategy can help them manage growth,itself, look for scalability, ease of use, integra- doing away with silo approaches in favor of unified business tion capabilities and breadth of functionality. processes, deep integration and an unwavering eye toward With the right choice, a savvy company can alignment of business and IT.turn an ordinary vendor transaction into aFirst, its important to assess where the organization is along partnership that will drive process innovation the process automation and integration continuum. Then, with throughout the organization. a full understanding of the business advantages unified IT offers, With an end goal of business-IT alignment, its important to decide which functional areas to tackle. Once aa unified IT strategy can increase integration clear picture has been formed, companies can start their journey while reducing complexity and streamline[ 17 ] 20. chapter 7the business-readyenterprisecommon administrative tasks through automation, all the while had to replace those lost systems quickly, enhancing visibility. Bottom line: Decision makers get the most while keeping operations going. In this case, accurate, up-to-date information available to realize benefitsit turned to SAPs Business ByDesign. The that can often be the catalysts for innovation and growth.on-demand solution can be implemented quickly, rolled out with minimal employee Landing the Big Fishtraining and supported by a small IT staff. Growth comes in many ways, but for small and midsize businesses organic growth is one of the most exciting and rewarding Going Global and Mobile avenueslanding the big fish, entering a lucrative market orAnother form a growth for small and introducing that next big moneymaker. These efficiencies canmidsize businesses is most assuredly going make capturing even the most elusive customer a reality.to come from globalization and mobiliza- With plans to go to market soon, Sunflower Corp., a startup tion. Some companies have already taken located in Colorado, realized its assortment of stand-alone the leap, only to find themselves held back spreadsheets on employees PCs and its PC-based accountingby the constraints of a siloed infrastructure. package were not up to the demands of its lean supply chain Taking a unified approach to IT allows them and aggressive customer acquisition plans.to empower every remote office and mobile An integrated software solution that can adapt to its rapidly employee as a virtual branch, providing changing business environment as Sunflower grows nationally anywhere access to the information and ap- and globally in the months and years ahead was a must. With plications they need to be successful. SAP Business ByDesign, Sunflower has sophisticated functionality at a low total cost of ownership. The on-demand solutionConclusion will enable the company to be productive from day one, andWith a unified IT strategy, business and IT will supply it with the tools necessary to configure its opera- leaders are able to make informed decisions tional processes and then change them quickly and cost-effec- about IT resources and strategies that foster tively as new business requirements spring upall without a growth, increase their agility and ability to large IT infrastructure and staff.scale, and position the company to react quickly to new opportunities. All of this Mergers and Acquisitionsinevitably facilitates profitable growthand, Mergers and acquisitions are certainly another means to a perhaps, helps turn good companies into bigger end. Businesses need to act swiftly to capitalize on great ones. evolving market conditions. But the success of any M&A is heavily influenced by the ability to execute. That means integrating separate IT infrastructures into a single formidable entity, one company in every sense of the word. A unifiedFor More Information approach aids in such transactions by enabling faster, more effective integration and reducing IT complexity. For Com- SAP offers a wide range of solutions that pass Pharma Services LLC, acquired in January 2007 fromdrive operational efficiency for small and a large, publicly owned corporation, acquisition spurred midsize companies. Developed to enable the demand for an integrated on-demand IT strategy. Theprofitable growth, this portfolio of solu- New Jersey-based provider of outsourced contract packag- tions gives organizations visibility and ing, manufacturing and distribution services to the worldscomprehensive control over their core best-known pharmaceutical companies had plans to doubleareas of business. To find out more, and in size over the next few years. to download valuable information andBut it had to leave many of its business systems behind resources, go to www.sap.com/usa/cio with the parent company as part of its acquisition. Compass[ 18 ] 21. appendix:previously publishedarticles of your vendors do testing on new versions of products. This can help you get a say in the development of How To Get More the tool, plus an early heads-up toFrom Tech Vendors new functionality, Schnorbus says.5. Show em the competi- Mid-market cios share their tips on how totion. One of the best things weve work more collaboratively with technology vendors done is a vendor appreciation day by laurianne Mclaughlin event. Typically this is a golf outing that includes everything from prizes and lunches to a first-class lobster dinner, says Kevin Lupowitz, CIOM id-market CIOs often feel like theyre not receiving full attention from their vendors. After ness plans often helps the vendor understand just what is at stake, says Sandy Rasel, Vice President, for Liquidnet Holdings. Last years was a huge success. Very few organizations do this type of no strings all, the big guys have more money Global Process and Applications to spend and more staff to help Management, McCormick and manage vendor relationships. This Company. If you share your plans, youll be amazed what means if youre a mid-market CIO, you are able to have a much richer you can find when you you need to get a bit crafty. At adialogue that supports your future recent leadership conference, somedirection and engages the vendor tosearch on a particular CIOs shared their strategies. work with you.hardware part number Check them outand please,2. When negotiating,or software package . add your own tips and tricks. IllGoogle first. Youll be amazed also share the best advice in anwhat you can find when you search upcoming print article. on a particular hardware part By the way, several mid-marketnumber or software package, says aattached event for their vendors. It CIOs told me at the leadershipmid-market CIO who uses this tac- builds great partnerships and indi- conference that theyve yet to feel tic repeatedly, most recently whenvidual loyalty. It also lets our vendors the love that some of the biggest purchasing a WAN acceleration see who else were working with, name vendors, including SAP and device and some high-end analysis which helps maintain the sense of Oracle, are proclaiming for themsoftware. (He prefers his vendors urgency to stay competitive. at the moment. These vendors aredont know hes hip to this trick, so 6. Poach a sales rep who making big marketing pushes for we agreed not to share his name.) wants an entre to IT. Hire away mid-market customersnow that You will be surprised how many one of the vendors sales reps to work theyve won over as many Fortunepeople scan invoices or leave price for you, to manage your relationship 1000 companies as possible. But data online, he says. This shouldwith that vendor. After all, he or she from the mid-market customerhelp you determine reasonable will know all the players, processes point-of-view, its still at the stagediscounts.and angles for that vendors sales of talk, not walk. Itll be interesting3. Whet the vendors appe- operation. to see how that changes over thetite. Hint at potential growth within 7. Play the Google card. Let coming months, given the expect-your parent company organizationvendors know that youre interested ed debut of new SAP on-demand if the price is right and the product in the current and future apps that services for mid-market companies.is excellent, says Jeremy Schnorbus,Google has to offer. Better still, con- Now onto the tips:director of technology services for sider having a meeting with Google1. Share your business plan. NERA Economic Consulting. and several other CIOs to discuss I am very much into collaboration4. Be the early bird whoGoogle Apps, then let your vendors and find sharing your future busi-gets the beta. Offer to help some know you liked it. [ 19 ] 22. appendix:previously publishedarticlesAberdeen describes as industry aver-Business Process Management:age, Donham advises purchasingservice-oriented architecture (SOA)It Aint All About the Technologytools. When evaluating BPM toolsfor your company, make certain that how to minimize islands of application functionality and manualthey are SOA-enabled, he writes. workflow integration points to lead to more flexible businessRetrofitting a non-SOA applica- processes, fewer integration headaches and achievable roi goalstion into your SOA-based BPM by thoMas WailguMsolution later on is needless work.He also advises the deployment ofdashboards: In addition to provid-W hether your company is a business process management (BPM) leader, or perhapsproducts pull data from a slew ofback-end business systems andmake them available to other ap-ing business analysts with insightinto running processes, deployingdashboards helps business users youre somewhere in the middle ofplications, while workflow products understand the value of their BPM the pack, or even if youre still trying provide process modeling, automa- investments, something that the in- to figure out just what BPM means, tion and monitoring.dustry average group struggles with. heres what Aberdeen Group saysHowever, Getting these two And for those best in class you can do to get to that next level oftypes of software to work togethercompanies, Donham recommends BPM maturity.has traditionally been a challenge,two steps to make their BPM efforts First, for those scratching theirDonham writes in BPM Conver- even better. First, he advises them to heads right now, BPM is looselygence: Workflow and Integration focus on what he calls event-driven defined as the place where businessMeet in the Middle, a SeptemberBPM. Event engines will help bring2007 report. The result has been is- your BPM efforts into real time, he a clear roi will makelands of BPM functionality scatteredwrites. Being able to monitor andthroughout the organization, each manage discrete transactions as they it easier to get serving a discrete function. happen within a process will bring critical buy-in from So, lets start with what the lag-insights into how to further optimizegards should do. Donham advises the workflow. Next, he says that business units fortwo things. First, laggards need to they should establish a repeatable the next project.document their business processes.ROI model for BPM projects thatsBPM is business process man- based on what happened in previ- processes and the technologies thatagement, not an application, heous efforts. Identifying and tracking can help make them more efficientwrites. Understanding your key operational costs are a great place intersect. The ultimate goal of anybusiness processes is the first step to to start, he notes, because they are BPM effort is, of course, an improve-any BPM implementation. Investsimple to measure. He adds, A clear ment in how a companys manage-the time to understand the flow ofROI will make it easier to get critical ment team runs its operations, information through your enter- buy-in from business units for the getting there by gradual, plannedprise. Second, get some outsidenext project. evolutions rather than in one Big- expertise. Donham points out that Lastly, Donham warns CIOs to Bang revolution. the companies that Aberdeen iden- not fall into what he calls the tech-According to Perry Donham,tifies as best in class understandnology trap. BPM requires expertise director of enterprise applicationsthat management consultants are and commitment on the process side research at Aberdeen Group, BPMkey to improving their processes andas well as the product side, he writes. offerings have traditionally beenbusiness. He notes, Engage a con-Research shows that the best in focused on one of two enterprise sultant firm early in order to lay theclass companies are using converged areas: integration or workflow. He ground for choosing a BPM tool.BPM products as a natural extension notes that business integrationNext, for those companies thatof their existing BPM practice. [ 20 ] 23. gies dont always give the businessThe Trouble with (or more specifically, your CFO) the hard ROI typically demandedOnline Collaboration Toolsfor IT investments, 95 percent of CIOs say they see an increase in everyone wants to collaborate using it. worker productivity, LeSueur says. the problem it leaders cite: a lack of integrationThat alone should encourage fur- among the tools, and frustrated end-users ther investments. by c.g. lynchRight now, it can be hard to justify, says LeSueur. But in theC ollaborative technologies areget a hard number, but that only tellsin most cases, great and all, but right now a piece of the picture.respondents gripe were not terribly satisfied with Its also tough to measure worker them at our business. Thats the productivity gains as a result ofabout a lack of report from more than half of 400these technologies being present. integration between CIOs and IT decision makers sur- But while collaborative technolo-the collaborative veyed by Avanade, an IT consulting firm, about the use of collaborative applications, which technologies.in turn frustrates Examples covered in the survey included e-mail, instant messaging, In Search of Betterend users. video conferencing and intranets. Collaboration Technologies In most cases, respondents gripe about a lack of integration between The Avanade survey found that end, they know these technologies the collaborative applications, 45 percent of U.S. companiesare paradigm changing, he says. which in turn frustrates end users, are satisfied with the impact of says Larry LeSueur, Avanades vicecollaborative and communica-Best Practices for president of technology infrastruc- tion technologies. One contrib- Adopting Collaboration Tools ture solutions. uting factor: Only 11 percent Start smart. Before you invest Only 11 percent of them hadhave a fully documented and in collaboration, take the time for a some strategy around how to imple-implemented collaboration and sober assessment of your other pro- ment these technologies with theircommunication strategy across ductivity applications (even e-mail). existing environments, he says. Itsthe enterprise. If complaints exist, you may want to not that e-mail isnt driving valuePlanned Fixes: 71 percent of tie up those loose ends first. or that IM isnt. Its that both thoseU.S. companies say they needEmphasize integration. Try technologies arent integrated.to add new technologies toto think of collaborative technolo- As a result, he adds, end users enhance their digital collabora-gies as one big picture or even as one have to deal with too many windowstion capabilities. For example, 79application. More and more, vendors on any given workday. The informa- percent will implement enter- design systems to be agnostic toward tion worker really bears the bruntprise search tools, compared to other software. of these technologies not being 59 percent who say they havePlay up soft benefits. Hard integrated, LeSueur says.these implemented today. AndROI will be tough. One simple CIOs also struggled to identify 68 percent will implement virtual way to quantify value can be speed: the value of collaborative technolo-work spaces, compared to 48 Perhaps a group can use an IM chat gies with hard numbers, like ROI. percent who say theyre using room to devise work plans in an It is the hardest thing to quantify,them today. hour instead of taking a day using LeSueur says. Sometimes you cane-mail threads. [ 21 ] 24. appendix:previously publishedarticles thing else to consider is whether to build and maintain a physical data10 Keys to a Successful warehouse or go with the virtual, Business Intelligence Strategy so-called semantic layers to link operational systems. Traditional data warehousing means duplicat- before implementing business intelligence technology, ing data, which means bringing in first take the time to develop a strategy operations systems in real time will By dIAnn dAnIEl be next to impossible. You can save space with an abstract definition layer, but this is difficult to design,With all the mergers and acqui-sitions in the business intelligence (BI) space, its easy to forget ently, which means that numbers will not matchin effect, negating the value of automation. To combat as is any metadata repository. Before even considering which vendors to choose, you must resolve this issue. that BI is about much more than the this problem, get subject matter ex- 5. Understand what us- technology thats behind it.pertise throughout lines of businessers need. The three broad classes You need to establish your vision from front-, middle- and back-officeof business intelligence users are for your business intelligence strategy staff. At this stage, ITs participa- strategic, tactical and operational. before you bring technology into thetion should be limited to running Strategic users make few decisions, conversation, says Boris Evelson, a the project management office and but each one can have a profound Forrester Research analyst and lead taking ownership of compliance andeffectfor example, should we author on the upcoming study, Its business standards and policies. Sec- close operations in Europe and Time to Reinvent Your BI Strategy. ondly, start small and choose onlyopen them in China. Tactical users Heres how. 10 to 20 key performance indicators make many decisions a week, and 1. Choose a C-level spon- and create standards and governance use both aggregate and detail-level sor (whos not the CIO). Business with them in mind.information, and likely need updated intelligence implementations should3. Assess the currentinformation daily. Operational users absolutely not be sponsored by any- situation. You should analyze the are the front-line employees, such one in IT, says Evelson. Instead, BIcurrent business intelligence stack as call center staff. They need data should be sponsored by an executive and processes and organizationalwithin their own set of applications who has bottom-line responsibility; structures surrounding current BI to execute the enormous numbers has a broad picture of the enterprise implementations. Both IT andof transactions. Understanding who objectives, strategy and goals; and the business should be involved.will use BI and for what purposes can knows how to translate the companyEvelson cautions against under- show the type of information needed mission into key performance indica-estimating this phase, and points and its frequency, and help guide BI tors that will support that mission.out that a full BI diagnostic fromdecision making. This executive is often the CFO.Accenture contains 1,500 questions 6. decide whether to buy This sponsor should govern theagainst 325 best practices and 75 or build the analytical data implementation with a documentedsubject areas.model. One size does not fit all. business case and be responsible for 4. Create a plan for dataIn general you may benefit from an changes in scope. storage. Many organizations out-of-the-box, industry-specific data2. Create common defini- begin with an isolated data mart, model if you have a more homo- tions. Without common defini- since its quick and cheap, but geneous IT environmentsuch tions, a BI implementation cannot consider that this tactic means as one ERP, one CRM system. Do succeed. And lack of agreement is a additional silos will need to bewatch for extensibility and hierarchy widespread problem in companies created as additional data storageflexibility. More complex enterprises today. For example, finance and sales needs arise, which can grow out ofmay benefit from customization, may define gross margin differ- control within a few years. Some- although you may still want to [ 22 ] 25. consider beginning with an industry- standard model as a template or a set of guides (such as typical facts, dimensions and so on).7. Consider all business Complex IT Will Kill Your Business intelligence components.your competitive edge is becoming dull under the weight Components that affect the successof your business processes and the technology that underpins of business intelligence imple- them. heres some advice to help you sharpen up mentations include: metadata, By dIAnn dAnIEl data integration, data quality, data modeling, analytics, centralized metrics management, presenta- tions (reports and dashboards), portals, collaboration, knowledgeA s the business landscapebecomes more brutal, two outof three companies will need a newanother third had to fundamentallychange their core strategy in orderto be successful. Only 28 percent management and master data business strategy to stay alive. Thats experienced no significant change, management. Be sure to define thethe conclusion of the recent book compared to the period from 1985 to architecture for all layers of the Unstoppable: Finding Hidden Assets1994, when 51 percent of companies business intelligence stack; evento Renew the Core and Fuel Profitable were stable. And the survival rate is though they may not be part of the Growth, by Chris Zook, head of Bain likely to continue to decrease in the BI strategy itself, they will affect & Co.s Global Strategy Practice. next decade because of the pace of the success of implementation. However, notes Rudy Puryear, whochange, because of the difficulty of8. Choose a systems integra-heads IT for Bain in the Americas change. The problem is that a lot of tor. Business intelligence imple-region, theres a problem: Its hardorganizations have built unnecessary mentations require guidance from to create a new business strategy and complexity into their business, and a partner who has deep experience. find new customers when complex ITthis complexity is beginning to act Evelson says be prepared to spendblocks the way. Puryear, who contrib- like reinforced concrete. Its a barrier $5 to $7 on services for every $1uted research to Unstoppable, spoke toto change. on software, and cautions: Do notCIOs Associate Online Editor Diann The second point relates to IT. In outsource the fine-tuning of businessDaniel about why IT has become toomany ways, IT reflects the complexity intelligence. The process requires a complex and how companies can use thats been built into business. Un- high degree of collaboration among data to innovate. necessary complexity in the business end users, analysts and developers.diann daniel, CIO: Why do has resulted in a lot of unnecessary 9. Think actionable andcompanies have trouble stayingcomplexity in IT. Thats slowing baby steps. Choose an end user,competitive?down the cycle times in IT. The cycle business analyst and developer toRudy Puryear, Bain: First oftimes in IT are increasingly much create a first proof of concept within all, business change continues to slower and out of sync with the cycle a few days. Choose a few key perfor- acceleratewhat I oftentimes call times required by the business to stay mance indicators and build a few the MTBS, or mean time betweencompetitive. reports, then add new releases every surprises, continues to get shorter. In Can you give me an example? few weeks. an environment where that happens,A high-tech manufacturing com-10. Choose low-hangingthe mean time between surprise andpany Ive been working with had fruit to start. Evelson recom- response also has to get shorter. A pushed business autonomy out to its mends choosing high-value, simplecore notion in Unstoppable is that if manufacturing plants. It woke up to components to begin. For example,you look back at Fortune 500 compa- discover that it had over 25 different a sales analytics data mart may pres-nies over the last couple of decades, manufacturing platforms. Virtually ent high-value targets that also havea third ended up in bankruptcy, got nothing was shared and common plenty of existing models and best acquired, or otherwise became inte- from a business or business process practices. grated into another company. Aboutstandpoint, and therefore it wasnt [ 23 ] 26. appendix:previously publishedarticlesfrom an IT standpoint. I was with a CEO recently who business capabilities are going to be IT, as it has tried to serve unique- said, Our problem is that we cant required to enable and unleash inno- ness in the business, has a lot of innovate as fast as our competitors.vation. And you can make sure that times not had the clout to say, No, We think its got something to do as you make decisions about IT, you were not going to build 25 dif- with IT. In fact, a significant amount can highly skew them toward those ferent manufacturing platforms. of IT spending at this company wascapabilities that support innovation. Theyve basically said, Were going for keeping the lights on, manag- I think business architecture is a to try to be as responsive to what ing the complexity. That squeezes huge tool, and leveraging service-ori- the business believes are its unique out dollars for spending on innova- ented architecture (SOA) is going to needs. Company after company is tion. We have observed that in most be incredibly important. Then you waking up today and saying, ITsorganizations 70 to 90 percent or can position [other] kinds of tools in too expensive and its too slow,more of the IT spend is locked up the right context. but when you peel back the covers, in depreciation, business as usual, For example, you need the ability you discover a lot of that is becausekeeping the lights on, and manag- to cleanse and sync a lot of data, there were a couple of decades ofing the complexity, often leaving a then provide analyses that enable unnecessary business complexityvery small portion of the spend thatproduct developers or salespeople thats now mirrored with significant can truly make a difference in busi-or customer service people to have unnecessary complexity in IT.ness performance. deep knowledge of the customers at What can IT leaders who face What are some ways in which the point of interaction. Call center a legacy of business complexity do companies mine data to innovate?technology, for instance, is making about the problem? The ability to segment customersavailable to the call center rep the There are two broad objectives.and then customize value proposi- history of all the interactions with the One is to think about ways to sim- tions to segments of customers is particular customer on the line. We plify IT. For example, for a lot of thea core element of any successfulpotentially have the intelligence to undifferentiated areas of a business,competitive growth strategy. Andmap that person or route that person off-the-shelf, plain vanilla packagesyet so many of those customer datato the call center agent who has the may be good enough. There mayassets are hidden in organizations. I greatest probability of meeting his be only a few core areas where the was at a company recently where the needs, which increases the probabil- complexity is actually necessary.CEO was saying, We know more ity that you will have a satisfactory The overarching rule should be about our customers than any othercustomer interaction. simple as possible, but complex asplayer in the space, and yet that Does every company need to fol- necessary. Second, the companiesinsight is locked up in our informa-low the path you have outlined in that have been able to succeed bytion systems. Because weve got 30order to succeed? Or is innovation making fundamental changes incustomer systems instead of one,not a priority for everyone? their core strategy often did so bybecause weve got 16 different ways ofI dont think innovation is a priori- uncovering and leveraging what wereferring to a customer and namingty for every single company. For some referred to as hidden assets. Thoseconventions for a customer, we cantcompanies delivering a least-cost hidden assets could be customerget at it. Its locked up because of the product on a least-cost platform is re- assets, hidden platforms for doing business and IT complexity, and the ally important because theyre in an business or hidden capabilities. discussion were having with them isindustry where innovation is not key. Oftentimes we find that those arehow they can unlock that data and Beyond that, innovation comes in dif- information-based assetsdeepunleash the insight.ferent flavors: ranging from product information you have about the And how do you use technology innovation to process innovation or customer. So, the CIO also has toto do that? to customer experience innovation. work with the business to uncoverEnterprise architecture and gover-The quality of the innovation and the hidden assets in order that they nance are at the core. As you lookthe time to innovate are both critical can be leveraged for fundamentally top down through the enterprise ar- in many industries. Unnecessary IT reinventing the core of the business.chitecture, youll understand which complexity constrains both. [ 24 ] 27. Ventana settled on SaaS technol-ogy from Salesforce.coma mix ofmarketing automation, analytics and On-Demand Software other applications. The benefits ofhaving a hosted solution outweighed Software-as-a-Service (SaaS) Appeal the benefits of the in-house solu-tion, King says. Plus, the time tothree companies put saas to the testget it up and running was significant-By john EdWARdS ly shortened with a hosted solution.Initial deployment and training tookless than four months, King says.L ike other midsize enterprises shopping for CRM software, Ventana Medical Systems faced applications without a hassle. In some cases, customization options are limited.SaaS technology gives Ven-tana the same features offered bytraditional CRM softwareinclud- two basic choices in 2005: choose aNevertheless, a growing numbering capture, storage and analysis of traditional application or opt for theof midlevel enterprises have decided customer informationwithout in- newer software-as-a-service (SaaS)SaaSs benefits far outweigh its draw- curring the extra burden of running model and have CRM tools deliveredbacks. Theres no application in theits own servers, operating a network directly to end users via the Web. In world that you cant run in-house if to connect branch offices and hiring hindsight, the decision turned outyou have the money, resources anda large IT staff. to be something of a no-brainer, says expertise, says Laurie McCabe, an Its just significantly easier, King Anthony King, CIO for the medical analyst at technology research firmsays. We have a very good Oracle diagnostics equipment manufac-AMI Partners. The problem is that ERP system, but trying to keep it up turer. Software as a service beats the most medium [-size] businesses to date across the organization and alternative in maintenance, training, dont have that capability, she says. supporting it is a pretty substantial ef- user flexibility and several other keyIn most cases, SaaS is economically fort. With SaaS, the service provider areas, he says.a better way to go. does all the work to run, maintain In the past few years, several key and update the CRM system. factors combined to make SaaS anditching the CRM AntiquesVentana also values Salesforce. increasingly popular choice at com- Fortunately, SaaS meshes wellcoms ability to provide multiple panies like Ventana: Web technolo-with CRM technology, allowinglanguage interfaces on demand, fa- gies matured, applications grew morecompanies with small IT budgets to cilitating work with offices worldwide standardized, and the appeal of lower run modern, sophisticated customer and a staff that speaks more than 20 up-front capital costs, streamlined analysis applications on a pay-as- languages. To change the language, maintenance and easier scalabilityyou-go basis, with only a minimalyou literally click a button on the only became stronger. up-front investment. screen, King says. This contrasts Most midsize enterprises turn At Ventana, the search for a CRM sharply with Ventanas on-premises to SaaS expecting significant cost, solution had reached critical mass ERP system, where adding a new lan- deployment speed and maintenanceby 2005. Customer contacts, crucialguage requires IT staffers to painstak- benefits.Theyre looking to SaaS to to the companys continued financial ingly design and test new modules. improve efficiency for core processes health, were not readily available for For a government-regulated com- such as CRM, sales compensation field personnel because the data was pany like Ventana, SaaS can also management and ERP. But beforeeither on paper or buried in an ERPsave time and money by cutting red they rush toward SaaS, these organi-system. We basically were manualtape. In a regulated industry, you zations also need to be sure that the for the most partDay-Timers,spend most of your time validating functionality of the solution meets paper files and such, says King.and updating software, King says. their business requirements and thatAfter evaluating several on-de-Thats not your true competency; they can integrate with their existingmand and traditional CRM products, it really doesnt add value to your [ 25 ] 28. appendix:previously publishedarticlesbusiness. On-demand software dropswasnt in a position to run on-prem-Suite Success much of the time-consuming valida- ises compensation software. Our IT As SaaS steadily builds a real-world tion onto the software provider. department is a dedicated group oftrack record, more midsize enterprisesKing feels that his SaaS-basedpeople thats very small, he says. Ientrust the technology with not one CRM technology offers more featuresneeded to have this capability provided but multiple core business tasks. than most premises-based counter-from the outside to avoid adding to Olympus NDT, a manufacturer of parts while creating less work for their burden.testing equipment, uses NetSuite, a business and IT staffers.Cox doesnt feel that he was forced fully integrated suite of services, forKing says the only significant roadto settle for a second-rate technology. accounting, CRM and e-commerce. bump he faced was convincing endCompels dashboard view gives sales Data integration was NetSuites big- users to take full advantage of the sys- representatives a real-time view of gest drawing card, says Fabrice Can- tems information management and their position and ultimate objective cre, Olympus NDTs chief operating analysis features. Basically showingduring any given quarter. Managers officer, who oversees the enterprises the field folks whats in it for them,love it because theyre able to focus IT operations.The sales reps, the ac- he notes. Once they could see that, their time where its needed most, hecountants, the inside salespeople tak- then there was a lot of buy-in. says. They can understand right away ing the orders, the customer serviceswhos winning and whos losing on a repseverybody is entering data into Compensation Strifesales rep basisand theres no disput-the same database, he says. Sales compensation managementing the data.SaaS gave Olympus NDT the has something in common with CRM On the downside, although the ability to obtain ERP benefits at some midsize companies. Evenproject was envisioned with the needwithout the complex hardware and though calculating compensation forfor minimal IT involvement, thingsmaintenance infrastructure that sales reps is a key process, especiallydidnt quite turn out that way, though

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