Future Compatible

  • Written By: Sean Wheller
  • Published On: July 15 2004



Introduction

Many organizations are near, at, or past the end of their enterprise resource planning (ERP) systems supported life cycles. These organizations might be readily convinced of the need to upgrade and of the benefits associated with remaining on a supported version. Yet, moving to a supported version of an already existing system may not always be the best decision if that system is not future compatible.

For organizations that have opted to move to a supported version of their current ERP system, this article takes a look at the future of enterprise business applications and the requirements they will have to meet in order to be future compatible. Our objective is to help organizations determine whether or not the investment they are preparing to make will enable them to function in a world where global processing capabilities are the norm.

To understand why simply upgrading to the nearest supported version may not be the best option, we examine old and new ERP business drivers. Examination of these drivers brings into perspective the differences between the traditional and current ERP eras. This understanding is important to define what is meant by "future compatible" and why it is importance that user organizations not merely look to remain on a supported version. If they have any intention of protecting their business in the future, these organizations must ensure future compatibility.

This article has been sponsored by SYSPRO

Old Business Drivers

In the 1990's ERP emerged as a welcome enabler of enterprise-centric process optimization. Since then, organizations have been on a continuous upgrade path that has seen at least two major iterations of the ERP concept bring enterprise-centric improvements. These iterations included "extended ERP," where vendors started adding the capability to handle inter-enterprise transactions, and the "enterprise application suite," where vendors sought to provide rich-client functionality across the enterprise desktop through partnerships, acquisitions or native product development.

The move toward the enterprise application suite (EAS) took the lead up to the year 2000. This was a period where the combined effect of Y2K compliance initiatives and the technology bubble gave rise to the largest number of IPO's and corporate acquisitions ever. There seemed to be no end in sight to the success of ERP, and vendors' share value continued to increase as CEO's continued to demonstrate increased earnings.

However, this was also a period where the new concepts of e-business and e-commerce rose to challenge the vision of ERP and where many organizations, disillusioned with ERP, started to reduce their ERP investments in favor of the e-model. The seduction of "e" combined with ERP disillusionment is one of the reasons why many organizations have not upgraded their ERP systems beyond "extended ERP" and now find themselves with an iteration of ERP that is about to become unsupported. The golden glow of "e" has worn off, and there is a realization that "e" is only an extension to ERP and in order to succeed, there needs to be a balanced approach to ERP and "e"-model investments.

As we know, the period leading up to the year 2000 was an incredible glut period, driven in part by fear and part by an intoxicating euphoria as the gold rush grew. Yet, we also know the glut was brought to an abrupt halt after Y2K, and the bubble burst. As the dust started to settle, organizations which had invested in Y2K and EAS started to take stock of what they had bought and looked to take advantage of their newly acquired information technology capabilities. What they found in their ERP was a monolithic, enterprise-centric, architecture that was ill-suited to doing business in a world where the business drivers had changed.

New Business Drivers

The new world organizations made demands that promised to render the majority of today's ERP systems obsolete from an architectural standpoint and inadequate from a business perspective. One can image that this would not only be a major concern for ERP user organizations, but an even greater concern for ERP vendors now finding themselves faced with having to justify both historical and future investments.

The new world requires user organizations and vendors to make a transformation from a focus on internal resource optimization and transactional processing to a new focus on process integration and external collaboration.

This is being brought about as organizations cut back in the leaner economic climate and retrain themselves to focus on executing their core-competency, as opposed to trying to do and be everything to everyone. The result is that organizations that once shaped themselves on traditional, vertical models where practically everything was done internally are now delegating all that is not their core-competency. Today the once vertical domains are being replaced by horizontal infrastructures comprised of multiple entities communicating in a borderless, "always-on" environment across the public domain of the Internet. Each is focused on executing core-competencies within the body of an extended and collaborative business ecosystem.

In an environment where everyone is focused on core-competency and acting for the good of their community of interest, the new focus is on improving competitiveness across the horizontal infrastructure. Faced with this new challenge, many organizations found that they were not able to participate in the new ecosystem because of the enterprise-centric and monolithic nature of their existing IT systems. So, while they posses capabilities, these assets could not be leveraged, because they could not be cost-effectively deployed and subscribed to by community members.

It was the realization of this limitation that gave birth to what the Gartner Group in 2001 first termed "ERP II." ERP II is the next iteration of ERP that expands beyond enterprise-centric optimization and transaction processing to focus on improving enterprise competitiveness. The vision behind ERP II begins as an application strategy that sees all enterprise-centric business and "e-applications" integrated without requiring a single vendor approach.

In essence, ERP II means that the business processes, applications, and data of all members in an ecosystem are integrated. The ability to interconnect key business partners directly is one of the main capabilities of ERP II. However, it is not the sole defining characteristic. ERP II expands ERP, extended ERP and EAS in role, domain, function, architecture, and data.

The drivers behind ERP II are both business and technological. From the business perspective, ERP II is driven from the previous disillusionment with ERP when it failed expectations. However, this failure may not have been a problem if it were not for the emergence of the "Net Connected Enterprise" that gave enterprises an insight into the ubiquitous power of the Internet as a tool via which to do all types of business transactions not just those related to "e" models.

The demand for collaborative commerce ("c-commerce") is being enabled by advances in communications and protocols that enable the transportation of data across the Internet and by extensible mark-up language (XML) to describe or define that data. In addition, software development concepts born out of object orientated methodology are now being employed in virtually every layer of the system and not just in the development environment. This is giving rise to component architectures, such as the "service orientated architecture" (SOA) and more recently Web services architectures.

Future Compatible

By this point, you should have a pretty good idea of where your organization in situated in respect to where ERP is going in the future. It should also start to be clear why it is important for user organizations to seriously consider whether or not a "supported version" of an ERP is future compatible.

Simply moving to a supported version that does not enable an ERP II deployment strategy may be a costly exercise that sees the organization increasingly marginalized as business partners, suppliers, and customers choose to adopt c-commerce strategies. The end result may be that the organization is not able to speak with anyone but itself, a situation that is not conducive to growing a business and in which no amount of internal resource, process or transaction optimization will help improve bottom line results.

Organizations that embrace c-commerce and mobilize their IT capabilities in a manner that enables ERP II deployment strategies will be in the best position to command the "lion's share" of their market. Their organizations will have the benefit of support from a community of interest that empowers them with capabilities and expertise at a fraction of the cost required in the traditional, vertical model.

In addition to the direct benefits inherited from their membership in an ecosystem, their adoption of ERP II will serve to increase organizational reach and provide unprecedented ability to take advantage of and tap into global markets. What's more, the value of real time information shared within the ecosystem will become knowledge that will optimally position the ecosystem with the ability to react with agility and velocity that is proportionate to the new, increased speed of business in the new world. Enabling everyone in the system with an extended and holistic view of the business will decrease the time required to react to demand and opportunity. Conversely, it will increase resilience to those unforeseen events that could spell disaster and so reduce or eliminate the overall risks involved in doing business in an unpredictable global economy. Organizations that do not have the benefit of these advantages will find it increasingly harder going forward.

Some may think that all of this is just a bit of "blue-skying" about the future—that there is no urgent need to upgrade beyond the oldest supported version and that a lack of ERP II capability will not impair performance. Let me assure you this is not the case. User organizations are already feeling the pressure, and many more are realizing that they will have to make a move toward attaining ERP II attributes before year end 2005. To support this statement, I wish to point skeptical readers to the following Gartner prediction. The need to support collaborative business processes will cause some enterprises to perform an ERP migration simply to achieve ERP II capabilities.

—Gartner [Research Note COM-18-7378]

Conclusion

Upgrading an existing ERP system for the sole purpose of remaining on a supported version may not be strategically prudent, particularly if the new version does not enable an organization to embrace ERP II deployment strategies in the future.

In this situation a user organization may be better served by evaluating the most up-to-date version of their chosen vendor's product to identify whether or not they have any possibility for an upgrade path that will enable them to attain ERP II capabilities.

If this is not the case, then user organizations will be best served into the future by replacing their current system with a product from another vendor that does enable ERP II capabilities. This product should ship ERP II functionality as an integral component of the core system. This will enable the user organization to address current business requirements while they define, develop and gradually start to incorporate ERP II capabilities into their overall business strategy and corporate culture.

This article has been sponsored by SYSPRO

About the Author

Sean Wheller is an author, management consultant and the president of enbaya, a consulting firm that assists hi-tech businesses as they chart a course and get underway with new initiatives-products, markets, partnerships, and entire businesses. Wheller is the author of the book "SYSPRO e.net solutions - The Definitive Guide" which is available from SYSPRO. Over the past fifteen years, he has been a consultant to leading European, American, Middle Eastern, and African based information services and software firms. Prior to founding enbaya, Sean held the position of CEO at MediaOneIT. Currently, his clients include Lucent, Avaya, Nortel, IBM, Comverse, SYSPRO, and numerous early stage technology firms.

He can be reached at sean@enbaya.co.za

 
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