Integrating All Information Assets Part One: Why is integration an issue?

Integrating All Information Assets
Part One: Why is integration an issue?
Featured Author - Cindy Jutras - April 14, 2004

Integrating All Information Assets

As we continue to explore the extension of ERP for the express purpose of maximizing profits in the world of e-business, we seem to come back again and again to the topic of integration. More and more companies today face a significant challenge in integrating multiple business applications. This is the natural result of fewer companies running a single, all encompassing business application, either in a lone facility or across multiple sites of a multinational, multi-organizational enterprise. The inability to integrate leaves an incomplete or disjointed view of your enterprise.

In addition we have seen the growing need to effectively interoperate within an integrated business community. The inability to integrate can prevent you from actively participating with the most successful value chains. In our definition of full e-business integration we uncovered the need for new business models that involve multiple companies working cooperatively and collaboratively together, in a seemingly seamless manner, as if they were a single, virtually vertical enterprise. All these factors only increase the importance of integrating all your information assets. And successful integration paves the way for profits.

This chapter will examine this growing need for enterprise application integration, and as we do so, we uncover the magic number three. There seem to be three general reasons why this becomes a critical issue, three levels of integration that need to be considered, and three alternative approaches to the problem.

This is Part One of four-part excerpt from the book ERP Optimization (Subtitle: Using Your Existing System to Support Profitable E-Business Initiatives). Available through www.crcpress.com.

Parts One and Two present the reasons integration is an issue.

Part Three covers what constitutes integration.

Part Four discusses what approach you should take.

Why is integration an issue? Reason 1

For many companies today, the collection of business applications that form the foundation, upon which they run their business, has grown over time. Few of these applications date back to what I would call the BERP era—no pun intended. BERP stands for Before ERP (enterprise resource planning). Some of us in the aging population today can recall back to the days when packaged software of any kind was viewed with disdain for any but the smallest of companies. That was back when the IT department was known as "data processing" and software developers, architects, and engineers were simply known as programmers. Back then when companies of any substantial size at all needed an inventory system, or an accounts payable system, they either hired programmers who designed and coded the application, or they hired companies that would come in and design and program it for them. I essentially just described the first two companies I worked for right out of college, and thereby probably dated myself even more than my gray hair does.

And the reason most of those applications don't exist today is because most of them never made it past Y2K. Years that didn't begin with "19" weren't something you worried too much about in 1975. Yet while few applications date back to the BERP days, there are many applications that may be known as "legacy" systems that operate at the very core of enterprises—systems of a certain age and maturity that may not take advantage of the latest technology available. They may have been homegrown or they may have been purchased. They may be individually developed applications that needed to be interfaced or integrated with other applications, or they may be early versions of ERP systems. They may be rudimentary or they may have grown to be comprehensive, mature and feature rich over time.

So this is the first reason for the growing need for enterprise application integration. These legacy systems—whether they were developed as individual applications or as an early-integrated ERP system—simply did not have a broad footprint. They have never done everything that integrated systems can do today. This has led to a proliferation of applications over time. If the engineering department's needs were not met, they looked elsewhere—or the sales or service departments—or human resources or any number of other departments within a single company. Whether this proliferation was because of a conscious decision to purchase, install and implement "best of breed" systems, or because there were maverick departments that went their separate ways, the result was the same.

This problem is further aggravated by the fact that business requirements have become more sophisticated over time, creating the need for extensions to the typical ERP solution. These might be applications for supply chain planning (SCP) or supply chain management (SCM), customer relationship management (CRM) or product lifecycle management (PLM). Those companies who implemented ERP systems did so with the expectation that the ERP system would continue to grow with them, expanding to satisfy new requirements. And in fact most ERP vendors today are striving to extend their solutions with new products or new modules.

But the reality of the situation is that sometimes business needs grow more rapidly than the ERP vendor is able to respond, since these vendors are constrained in two ways. First of all they are constrained by the technical architecture of their existing products. While development tools and the technology that drives business applications have matured significantly over the past years, new tools are usually incompatible with existing systems and architectures. Secondly, ERP vendors are constrained by their installed base of customers. On the surface this may seem like a contradiction, but in fact users of enterprise applications typically demand their existing applications be enhanced with user requested features to existing modules and products.

This enhancement process has the potential over time of becoming more and more difficult. As the ERP vendor's system grows in scope, it becomes more difficult to touch one area of the application without impacting other areas. Therefore directing the enhancement of the entire system becomes akin to steering a battleship.

Point Solution Applications Emerge

It is exactly through this set of circumstances that point solution applications have emerged. If the ERP system is a battleship, point solutions are the PT boats, quick to be launched and easily maneuvered. As a new business requirement is recognized, point solution vendors can respond much more quickly than an existing ERP vendor. First of all, they have the luxury of choosing their development environment and technical architecture, taking advantage of the latest and greatest in Web services and other technologies. They are not constrained by legacy architecture. Nor do they have existing customers to satisfy with bug fixes and enhancements to installed software.

Point solution vendors enjoy a first to market advantage. Depending upon their goals, target market and early level of success, they may or may not continue to develop their solutions as best of breed (BOB) applications. Many will start as small companies with a bright idea and a viable plan, but they may not have a magnitude of success quickly enough to insure continued self-funding or outside capital investment to take them to the next level of a Siebel, for example. Siebel is perhaps the most widely recognized BOB vendor in the world. It has become the world's leading vendor of customer-facing software and the best of breed for CRM (customer relationship management).

From the emergence of companies like Siebel and other BOB vendors has arisen the age-old dilemma of choosing between BOB and extensions from your incumbent ERP vendor. First there is the question of timing. Will your ERP vendor have a module, feature or new product before your need becomes critical? Then there is the trade-off between the additional functionality typically available from a BOB software supplier and the level of effort required to interface or integrate the solution with your other applications.

Such is the case for BOB vendors like Siebel, which have extensive functionality and immediate availability, but usually also come with an expensive price tag. But for every Siebel, there are dozens of other small companies who create a product, are perhaps among the first to market yet gain only a modest market share. These alternatives are typically more attractively priced, although probably not as fully functional as a BOB. In their quest for additional market penetration they typically seek partnerships with ERP and other software vendors with established sales forces. The advantage of these partnerships to these point solution vendors is obvious. But what is the advantage to the ERP vendor? The lure for the established software vendor is the ability to extend their product solution almost immediately, by-passing the majority of the time and effort of extensive research and development efforts.

In purchasing one of these complementary products from your ERP vendor's partner, you would logically expect the issue of integration to be ameliorated. Unfortunately in the software world these partnerships often progress no further than the joint press release. Even when two vendors offer an integrated solution, this integration falls far short of customer expectations.

Many times initial "quick and dirty" interfaces come with the promise of more extensive and seamless integration in the future. More often than not, however, these promises of seamless integration go unfulfilled. Why? One simple reason is because these integration efforts between two software companies are never as simple as they appear to be at first glance. Another contributing factor can be because after the first blush of success fades, with several new software licenses sold, the partnership simply does not yield the kind of revenue results expected for either party and the enthusiasm wanes. The other possibility of course is that the ERP vendor simply used the point solution as a stop gap measure until it was able to provide a fully integrated solution of their own, one which involves no partnership agreements or royalty payments.

In order not to portray the ERP vendor as the "bad guy" in this situation, it is necessary to point out that it is equally likely that the point solution vendor will continue to enter into other partnership agreements. One of these could potentially lead to a situation of conflict of interest, or more likely, acquisition by a competitor to the ERP vendor. This leaves what was initially a fragile relationship in a potentially dysfunctional state.

So while there are many paths leading here, the destination is the same, the proliferation of individual applications and the potentially great need for integration.

This concludes Part One of four-part excerpt from the book ERP Optimization (Subtitle: Using Your Existing System to Support Profitable E-Business Initiatives). Available through www.crcpress.com.

Parts One and Two present the reasons integration is an issue.

Part Three covers what constitutes integration.

Part Four discusses what approach you should take.

About the Author

Cindy Jutras has over twenty-nine years of experience in applying software solutions to business problems. Experienced in a wide range of functions related to the software industry, including sales, marketing, product development, customer support and product management, she is also an industry observer and trend-setter in business and business applications. Having worked with manufacturing companies for the full extent of that time, she is both a visionary and a pragmatist.

She is currently the Director of Solutions Management for SSA Global, since their acquisition of interBiz, previously a division of Computer Associates. At Computer Associates she was the divisional Vice President of Product Strategy and was instrumental in defining and guiding the product direction of ERP systems as well as advanced technology products.

Ms. Jutras' work has been published and she is frequently quoted in industry publications on a variety of topics including manufacturing, ERP, e-commerce and e-business management, and CRM. She is the original author of the concept of "Virtually Vertical Manufacturing" and speaks at industry events on this and other topics.