unified iT sTraTegy
d Dear Reader,
Profitable growth is a goal midsize busi-
nesses share with their bigger brethren. But
small and midsize businesses face unique IT
challenges around managing and maximiz-
to offer the same depth and breadth of
functionality to small businesses and
midsize companies. Growth-oriented
businesses have come to recognize that
an agile, unified and integrated IT infra-
structure is a fundamental requirement
ing that growth: fewer resources, smaller IT for businesses challenged with managing
departments, time constraints and more. profitable growth. That’s why SAP has
expanded its solutions portfolio for small
and midsize companies to include SAP’s
This 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 with
explore those challenges and will help IT and business high-availability data security—all key
decision makers in small businesses and midsize compa- ingredients for profitable growth.
nies chart a reasonable course for IT-supported growth. With this playbook, SAP provides
From the fundamental decisions around what to keep small and midsize businesses with a road
on-premise versus what to shift to an on-demand model, map to guide their journey to bigger
to using key performance indicators, compliance, secu- and better sales, profits and growth. By
rity, reporting and a host of other issues, this playbook building on a foundation of a unified IT
offers tips, techniques, resources and best practices for strategy, these organizations can be sure
small and midsize businesses. that they have taken measured, proven
In putting together this playbook, SAP taps into its steps toward their business goals, and
industry leadership in business software for the business that they are positioned for success. •
n appendix: Previously
The Tipping Point
A unified IT strategy: Enable profitable
growth for your midsize business 2
How to Get More
Chapter 2 From Tech Vendors 19
Taking the first steps toward a unified IT strategy:
assess, understand and sell Management:
It Ain’t All About
the Technology 20
How to Use a Unified Strategy
The Trouble with
as a Strategic Weapon
Online Collaboration Tools 21
Metrics like KPIs enable midsize businesses
to measure and improve performance 8 10 Keys to a Successful
Chapter 4 Strategy 22
On-demand or On-Premise? Complex IT Will Kill
With myths out of the way, software as a
Your Business 23
service can be fairly evaluated
Chapter 5 Software-as-a-Service
Selecting a Partner/Vendor
A structured approach to making
the most of this critical relationship 13
Optimizing for Success
On the optimized IT checklist:
align, simplify, streamline, collaborate 15 Cover illustration by
The Business-ready enterprise
With end-to-end process alignment and
metrics in place, it’s time to look ahead 17
ThE TIppIng poInT
A unified IT strategy:
growth for your
Despite the emergence of the mid-
size company as a crucial cog in the wheel
of the U.S. economy, these businesses have
been largely overlooked by technology provid-
ers. 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 don’t meet your needs because
they’re 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- organization’s business processes, enabling
maximum operational efficiency, asset
ment. While they’re smaller than their Fortune utilization and a deep understanding of the
500 counterparts, midsize companies face the company’s financial metrics, customers and
same challenges. products.
All companies, whether they’re a 100-employee local Are You Ready
organization or a multibillion-dollar global business, need to for a Unified IT Strategy?
respond quickly, efficiently and accurately to ever-changing How 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 make spreadsheets 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 IT disjointed 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
That’s partly because you have fewer resources and partly growth: As revenue grows, a company
because most technology providers don’t offer products that naturally becomes bigger and more
complex; revenue forecasting and his-
torical analysis become critical. Aligning Business and IT:
• Employee growth: More employees A Strategic Imperative
require more technology to help them
collaborate 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 accommodate
increasingly difficult, if not impossible, growth.
when a business becomes distributed Operational excellence—an ongoing challenge—can best
beyond 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 integrated ters collaboration and accountability across all departments
infrastructure. so the best decisions can be made.
• Increased complexity of IT and dimin- The most efficient, successful companies are those that
ished capability of existing IT infra- leverage IT to achieve business goals and solve business
structure to handle processes and problems. A few examples:
transactions: Distributed organizations n Business Requirement: Control costs
require more sophisticated and inte- IT Role: automate and streamline core processes including
grated technology; stand-alone business inventory, purchasing and logistics; enable offshore outsourc-
applications no longer get the job done. ing; improve manual and automated processes to forecast
Growth is a great thing, except when you’re n Business Requirement:
not equipped to handle it. Haphazard growth Meet/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 business Glen 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. It’s a feat that Glen Raven CIO
Unfortunately, small businesses and Allen 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 compa-
nies because they’re too unwieldy, expensive The 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
sheets—a staple of business productivity and if 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
businesses—are not suitable for business-wide must be available across all business units.
or collaborative tasks because they’re prone Examples of what a well-run midsize business is able to
to error and not accessible to everyone in the do include:
organization. • Easily measure business performance.
ThE TIppIng poInT
• Gain full visibility into sales and sales pipelines to make you’ll 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 100
customer attrition and supply chain costs. employees, has seen consistent sales and em-
• Capitalize on opportunities that emerge from changing ployee growth, and is experiencing national
market conditions; change course as needs dictate. or global demand for products and services,
• Replicate and extend efficiencies as growth dictates the time has come for a unified IT strategy.
• Automate business processes. Dealing with growth, especially sudden
growth, can be daunting. There are dozens
growth is a great thing, except of case studies of once-promising compa-
nies that flamed out because they didn’t or
when you’re not equipped to couldn’t 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 systems
“talk” to each other and all relevant data is
IT elements of a unified strategy include: made available instantaneously, is the key to
effectively managing growth and taking your
1. 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 metrics
3. A flexible technology platform built for change
Technology 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 informa-
tion 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).
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 com-
petitors, 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
Taking the first steps
toward a unified IT
understand and sell
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 start-
ing point? This chapter provides some basic
business performance using key performance
indicators, or KPIs, and use that intelligence
to make informed, strategic business decisions.
In an automated business, managers and their
employees are freed from most manual and
administrative tasks, and can devote their ener-
gies to core business activities. The result is
guidance and proven best practices to assess your greater, lasting efficiency and profit.
current status, sell the idea to the business and
answer some critical questions that will help Here, 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 Are KPIs. 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, or tion activity.
BPA, is exactly what it sounds like—the automation of business Table 1 on page 7 presents a list of busi-
processes, using software, to achieve consistent and accurate ness 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 KPIs
Enterprise application integration (EAI) is the connectivity used 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 with exactly 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 performance
With a wholly integrated system, managers can measure over time. Department managers use KPIs
to 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 to 1. o you have visibility into the
review Table 1, and identify the one or two most important process(es), and is the data
KPIs in each business area. They will likely see business value unified and clean? Y/N
in each one, but will focus on a few indicators that are critical 2. re current core process steps
to your profitability and competitiveness. automated? Y/N
Step 2: Assemble a “rank and file” self-assessment team. 3. re processes integrated end to
This cross-functional group of individuals can tell you, realisti- end; across the business network
cally, where the inefficiencies are, and thus where time and to suppliers and partners? Y/N
money might be recovered. 4. o tools and analytics exist to track
Step 3: Assess where you currently are. Here, the team uses performance across the process? Y / N
Table 1 and the questions below to conduct an honest assess- 5. o you have the ability to make
ment of your company’s degree of automation/integration, and critical go/no-go decisions or
determine a plan of action: strategic course changes? Y/N
6. oes the process/system involve
• Do we need to automate basic tasks? Which ones? one interface for user (thus, one
• Do we need to integrate our processes end to end? interface for training)? Y / N
• Do we need to change and extend our existing processes? 7. o the processes/systems enable
you to show one face to the customer
First, using Table 1 on page 7, ask your team to highlight in (that is, a single customer record)? Y / N
the “Inefficiencies” column those inefficiencies they recognize 8. oes the process decrease the
in their departments. Second, ask them to read the “Paths to probability for user error? Y/N
Value,” so that they understand how integration or automation 9. oes the technology encourage
can overcome those inefficiencies. Third, ask them to priori- collaboration? Y/N
tize the KPIs in each business section that indicate success or 10. oes the technology support
failure in overcoming those inefficiencies and adding value. individual accountability and
They should do so independently of senior management’s tactical decision-making? Y/N
earlier review. You now have a short list of functional areas, 11. an the process(es) be quickly
prioritized KPIs and processes that support those KPIs. and easily changed, extended or
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.
Realistically—How 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, rich assessment and clear business-related goals
applications exist in each of these performance areas, from defined, you’re 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.
Table 1: Paths to Value and KPIs
AREA OF INEFFICIENCIES PATHS TO VALUE NEEDED KPIs
Accounting software is inflexible, requires manual processes, and Increase accounting Cash flow and capital funding.
contains insufficient report options. transparency. Days sales outstanding (DSO).
Accounting software functionality is too limited. Automate manual tasks to Profitability.
Accounting software does not help meet tax requirements. enable faster closes. Sales revenue/sales pipeline.
Manual reconciliation efforts are time-consuming and prone to error. Maximize the efficiency of Cost of goods sold.
Reports from multiple systems on critical business data such as working capital. Margins.
sales bookings, stock levels and cash flow are inconsistent. Simplify collaboration with Human capital cost and number.
Difficult to generate accurate, relevant reports. financial authorities and Asset utilization/capacity
Assure compliance with Total company value/worth.
applicable local and Total company assets.
Employee data resides in multiple systems, such as payroll, Manage organizational Number of employees/trends.
employee directory and other applications. change efficiently. Employee turnover.
Simplify HR processes. Labor costs as a percent of sales.
Integrate HR business Absentee rates for employees.
processes into other parts Labor law compliance.
of the business. Voluntary termination ratio.
Enable employee self- Revenue per employee.
service. Benefit costs per employee.
Safety (lost work days/injuries).
Sales and inventory systems are not in sync, leading to an inability Support continued business Sales revenue.
Sales and Marketing
to fulfill orders. profitability. Sales pipeline.
It’s difficult to manage and collaborate on sales team tasks and Shorten lead-to-close cycle. Sales force productivity.
calendars due to unintegrated applications. Expand the customer base. Margins.
It’s difficult to see a complete view of customer data, sales pipelines Customer metrics.
and orders. Product line revenue.
There isn’t a centralized way to analyze and forecast sales and Order backlog.
financials from the sales teams. Forecasts.
The sales team doesn’t have a complete view of customer data, DSO.
such as balances, open cases and orders. Market statistics.
Mobile salespeople can’t access the latest information about Marketing costs as a percent of
customers and inventory without calling the office. sales.
Current inventory data is not integrated with the order quotation Marketing campaign
Lack of insight into customer account status that can result in Leads generated/lead
sending quotes or proposals to customers that are overdue on conversion.
Only customers located near physical stores can be served.
Urgent customer issues go unnoticed. Facilitate communication Customer retention.
Production / Customer Relationships/
Services Supply Chain
Customers cannot get timely answers or service. with customers. Response time.
Ensure customer Customer complaints.
satisfaction and loyalty. Time-to-resolution for problems.
Manage spend and control Revenue per service order.
costs. Number of service escalations.
Increase the quality of First-time fix rate.
services delivered. Warranty claim rates.
Service delivery cycle time.
Difficulty tracking orders can lead to duplicate shipments. Simplify and optimize the Supply chain cost (inventory
Inadequate return tracking can lead to errors in accounting entries, value chain. carrying, transportation,
inventory levels and customer charges. procurement).
Inventory tracking is a siloed process resulting in limited visibility On-time delivery/shipments.
into what’s in stock. Quality of goods and services.
Manual production requirement planning can result in having the Warehousing/distribution
wrong amounts of materials to manufacture final product. facility utilization.
There are too many different versions of the “master” bill of Employee efficiency.
materials (BOM). Labor costs.
The time spent resolving crises impinges on proactive business Automate report Customized report delivery.
management. generation. Customized report utility.
Reporting tools are too complicated for users to create customized Customize reports by job User satisfaction with interface.
reports. function and user.
It’s difficult to generate comprehensive reports without technical Simplify report interface(s).
assistance because data resides in different applications.
It’s too difficult to run reports on detailed business data without
usIng a unIfIed sTraTegy
as a sTraTegIC weaPon
Metrics like KPIs enable
midsize businesses to measure
How to Use a and improve performance
Creating unified IT and business pro-
cesses makes it easier for organizations to
measure performance. Midsize businesses
can implement and measure key performance
indicators to keep tabs on virtually every facet
can include increased accounting transpar-
ency, automation of manual tasks to enable
faster closes, maximized efficiency of working
capital, simplified collaboration with finan-
cial authorities and partners, and compli-
ance with applicable local and international
of the business, improve decision making and The KPIs that are needed include cash
flow and capital funding, days sales outstand-
deliver business value.
ing (DSO), profitability, sales revenue/sales
When a company has a disjointed, ad hoc infrastructure, it’s 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 at They 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 include Human 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-
Here’s a breakdown of how performance and value can cesses, 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 value and employee self-service.
The KPIs that companies need here ing, 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 termination control 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 and Customer Relationships. The paths to value for this func-
total compensation, as well as financial data tion 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, It’s important to remember that KPIs
shortened lead-to-close cycles and expanded are only helpful if they are embedded
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 leads first-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 typical to 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 costs The best-run midsize businesses establish KPIs and measure
(inventory carrying, transportation, procure- them frequently. But it’s important to remember that KPIs are
ment); on-time delivery of shipments; quality only helpful if they are embedded into unified business pro-
of goods and services; warehouse/distribution cesses. They need to be built into automated tasks, reports and
facility utilization; employee efficiency and real-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 requires performing, and allows everyone in the organization to work
unified systems in areas such as warehous- toward the same goals.
on-demand or on-premise?
On-Premise? With myths
out of the way,
software as a
service can be
Like most IT-related decisions, deciding wheth-
er 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 won’t
stand the test of time and won’t have a signifi-
cant impact on the software industry, Kaplan
says a survey he conducted revealed that a
third of respondents were already using SaaS
and another third planned to in the coming
year. “As SaaS gains mainstream acceptance,
tion up and running. it is becoming an important disruptive force
in the software industry,” he writes. “And as
Before diving in to those issues, it’s 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 isn’t 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 organization’s approach
than six years, and the payroll software and service firm ADP to IT resources. The age-old in-house model
has been in business for nearly 60 years. He also refutes the of software ownership means the business
notion that SaaS only saves users the up-front cost of software buys all its application software or develops it in-
licenses by pointing out that it also saves on the cost of much house. 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. Let’s 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 ]
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 and
over time. Ongoing management and optimization desktops as it sees fit.
is an important consideration that many companies Now let’s examine characteristics of the SaaS
fail 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 solution
the organization and its specific requirements, this provider provides all required server and storage
infrastructure may range from a single server to a facilities, enabling the customer to avoid potentially
multi-server farm complete with a storage net- large up-front costs.
work and backup facilities. Additionally, software • No need to increase IT staff. Indeed, companies
maintenance fees can run 15 percent or more of the that are outsourcing an existing solution may be
original 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 various ware versions become available or vendors release
applications can, at best, leave an organization with security and other updates, the solution provider
a suboptimal solution that doesn’t 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 fails customers know exactly what they will pay each
to 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. It set of issues and challenges for user organizations,
can be a challenge to provide application support including:
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 branches tions 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, which vider 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 doesn’t 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 remain
petitive edge. viable for the long haul.
implementation speed to the solution and the depth of knowledge of its IT team. In
First, how quickly do you need to imple- practice, many companies dramatically underestimate imple-
ment 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 ]
on-demand or on-premise?
nicians who have installed the same solution many times. Alternatively, they may be able to purchase
time to value the application from a value-added reseller or
Closely 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 begins tions would mean an increased up-front cost,
to benefit from new software or other IT deployment. The and 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 of
its purchasing and procurement processes
solutions continues to
• 17 percent annual improvement in procurement improve, the appeal of
margins saas isn’t going to go away.
• 27 percent increase in output per production worker,
year over year
• 18 percent average reduction in warehouse inventory verticals, or perhaps focus on just a handful of
levels verticals, giving them deep domain expertise.
Serus Corp., for example, offers a SaaS-based
security 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 new manufacturing. Other SaaS providers will
application. For an in-house implementation, that requires tailor 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 don’t have. and dedicated personnel can often complete
With 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 about As 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 tests ability of the appropriate experts. Be realistic:
• How it protects against denial-of-service attacks if your best and brightest IT folks are spend-
• Whether the provider uses content monitoring and filtering ing 95 percent of their time just keeping your
or data leak prevention tools to detect inappropriate data company’s existing systems running, they
flows aren’t going to have time to implement a new
solution unless you somehow free them up
Vertical Customization from 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 that tion 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 ]
A structured approach
to making the most of
this critical relationship
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; train-
ing 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 don’t 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 ideas At the fundamental level, look for a vendor
that is willing to work with you on getting the
to improve their products and generate new RFP right. Just determining what you need
business. can be a huge part of the process, and a ven-
dor 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 Committee organization:
Enlist the self assessment team you assembled in Chapter 2, • The vendor can deliver software, support
“Getting Started.” These same individuals who recognized the and services, and training, either personally,
gaps in performance are best qualified to select applications that or through strong partnerships with third-
solve the inefficiencies. The entire team should select a business party 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 ]
can articulate. This should encompass plans for both technol- and a well-integrated product. Major vendors
ogy and the company. Regarding technology, a company today have rich partner networks for specialized
should have a plan to incorporate office business applications applications 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 application references and will allow you to talk to those ref-
vendors. They are typically very vocal about their likes and erences, 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, viable ing a lengthy and expensive customization.
partner, committed to the long-term • The vendor offers a robust support struc-
ture. Ideally, a business application is so easy to
success of your organization.
use that its users never require help, but it should
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 Line fulfill 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 company’s Web site, sales representatives • The vendor can provide a detailed cost of
and user groups can give you that information. If you are risk ownership and ROI. They should also be able
averse, pay attention to the company’s market share—a longtime to 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 manufacturer’s unique Conclusion
concerns very well. You’re 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 ownership ment in their organizations.
[ 14 ]
OpTIMIzIng fOr success
On the optimized
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 company’s 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-
Here’s a look at each of these initiatives and how a unified tices models and frameworks, such as the
business and IT environment helps enable them. IT Infrastructure Library (ITIL), to improve
Business and IT Alignment. It’s a significant challenge technology services.
that businesses have faced for years: how to link technology Streamlining 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 Research Through 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 the administrative 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 toward such 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 ]
OpTIMIzIng fOr success
within the company. Rather than getting bogged down with Collaboration. 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 well remote workers who need to be in frequent
as for larger businesses. Businesses rely on a growing number contact 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 of flows 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 source can 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 it’s 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 ByDesign collaboration, midsize businesses can opti-
move IT departments toward simplicity by taking some of the mize 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 busi-
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 doesn’t have an integrated approach and the plete 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 they’re egy designed for change. To find out
making decisions. more about SAP’s Business ByDesign
Building a unified environment that includes standardized, and SAP’s full portfolio of solutions
end-to-end business processes can help executives gain the for small and midsize businesses go
visibility into The result is potentially huge savings or growth to www.sap.com/usa/cio
opportunities for the business.
[ 16 ]
With end-to-end process
Next Steps: alignment and metrics in place,
it’s time to look ahead
Indeed, small businesses and midsize compa-
nies face unique IT challenges that can limit
their growth, including fewer resources, smaller
IT departments and time constraints. But a uni-
fied IT strategy can make a world of difference
toward a cohesive, integrated IT infrastructure.
Key considerations for unifying IT as a
strategic business weapon are also provided.
Unified business processes make it easier to
measure performance, and putting KPIs to
work helps companies execute successfully
across 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 real
a business. The preceding chapters delve into A 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-
vantages—from no up-front fees and staffing
requirements 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 isn’t enough. Businesses need to think
from market conditions to customer demands—all 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 a
First, it’s 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,
it’s important to decide which functional areas to tackle. Once a a unified IT strategy can increase integration
clear picture has been formed, companies can start their journey while reducing complexity and streamline
[ 17 ]
common 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 benefits it turned to SAP’s 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 Fish training and supported by a small IT staff.
Growth comes in many ways, but for small and midsize busi-
nesses organic growth is one of the most exciting and rewarding Going Global and Mobile
avenues—landing the “big fish,” entering a lucrative market or Another form a growth for small and
introducing that next big moneymaker. These efficiencies can midsize 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 accounting by 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 function-
ality at a low total cost of ownership. The on-demand solution Conclusion
will enable the company to be productive from day one, and With 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 up—all 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 Acquisitions inevitably facilitates profitable growth—and,
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 MA is
heavily influenced by the ability to execute. That means in-
tegrating separate IT infrastructures into a single formidable
entity, one company in every sense of the word. A unified
For 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 from drive 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. The profitable 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 world’s comprehensive control over their core
best-known pharmaceutical companies had plans to double areas of business. To find out more, and
in size over the next few years. to download valuable information and
But 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 ]
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 to
From Tech Vendors
new functionality, Schnorbus says.
5. Show ’em the competi-
Mid-market cios share their tips on how to tion. “One of the best things we’ve
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, CIO
M id-market CIOs often feel
like they’re 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 year’s
was a huge success. Very few orga-
nizations 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, you’ll be amazed what
means if you’re 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 a dialogue that supports your future
recent leadership conference, some direction and engages the vendor to
search on a particular
CIOs shared their strategies. work with you.” hardware part number
Check them out—and please, 2. When negotiating,
or software package .
add your own tips and tricks. I’ll Google first. You’ll be amazed
also share the best advice in an what you can find when you search
upcoming print article. on a particular hardware part
By the way, several mid-market number or software package, says a attached’ event for their vendors. It
CIOs told me at the leadership mid-market CIO who uses this tac- builds great partnerships and indi-
conference that they’ve yet to feel tic repeatedly, most recently when vidual loyalty. It also lets our vendors
the love that some of the biggest purchasing a WAN acceleration see who else we’re working with,
name vendors, including SAP and device and some high-end analysis which helps maintain the sense of
Oracle, are proclaiming for them software. (He prefers his vendors urgency to stay competitive.”
at the moment. These vendors are don’t know he’s 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 entrée to IT. Hire away
mid-market customers—now that “You will be surprised how many one of the vendor’s sales reps to work
they’ve won over as many Fortune people scan invoices or leave price for you, to manage your relationship
1000 companies as possible. But data online,” he says. This should with that vendor. After all, he or she
from the mid-market customer help you determine reasonable will know all the players, processes
point-of-view, it’s still at the stage discounts. and angles for that vendor’s sales
of talk, not walk. It’ll be interesting 3. Whet the vendor’s appe- operation.
to see how that changes over the tite. Hint at potential growth within 7. Play the Google card. Let
coming months, given the expect- your parent company organization vendors know that you’re 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 Google
1. Share your business plan. NERA Economic Consulting. and several other CIOs to discuss
“I am very much into collaboration 4. Be the early bird who Google Apps, then let your vendors
and find sharing your future busi- gets the beta. Offer to help some know you liked it. •
[ 19 ]
Aberdeen describes as “industry aver-
Business Process Management:
age,” Donham advises purchasing
service-oriented architecture (SOA)
It Ain’t All About the Technology tools. “When evaluating BPM tools
for your company, make certain that
how to minimize islands of application functionality and manual they are SOA-enabled,” he writes.
workflow integration points to lead to more flexible business “Retrofitting a non-SOA applica-
processes, fewer integration headaches and achievable roi goals tion into your SOA-based BPM
by thoMas WailguM solution later on is needless work.”
He also advises the deployment of
dashboards: “In addition to provid-
W hether your company is a
business process manage-
ment (BPM) leader, or perhaps
products pull data from a slew of
back-end business systems and
make them available to other ap-
ing business analysts with insight
into running processes, deploying
dashboards helps business users
you’re somewhere in the middle of plications, while workflow products understand the value of their BPM
the pack, or even if you’re 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.”
here’s what Aberdeen Group says However, “Getting these two And for those “best in class”
you can do to get to that next level of types of software to work together companies, Donham recommends
BPM maturity. has traditionally been a challenge,” two steps to make their BPM efforts
First, for those scratching their Donham writes in “BPM Conver- even better. First, he advises them to
heads right now, BPM is loosely gence: Workflow and Integration focus on what he calls “event-driven”
defined as the place where business Meet in the Middle,” a September BPM. “Event engines will help bring
2007 report. “The result has been is- your BPM efforts into real time,” he
a clear roi will make lands of BPM functionality scattered writes. “Being able to monitor and
throughout 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, let’s start with what the lag- insights into how to further optimize
gards should do. Donham advises the workflow.” Next, he says that
business units for
two things. First, laggards need to they should establish a repeatable
the next project. document their business processes. ROI model for BPM projects that’s
“BPM is business process man- based on what happened in previ-
processes and the technologies that agement, not an application,” he ous efforts. Identifying and tracking
can help make them more efficient writes. “Understanding your key operational costs are a great place
intersect. The ultimate goal of any business processes is the first step to to start, he notes, because they are
BPM effort is, of course, an improve- any BPM implementation. Invest simple to measure. He adds, “A clear
ment in how a company’s manage- the time to understand the flow of ROI 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, planned prise.” Second, get some outside next 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” understand nology trap.” “BPM requires expertise
director of enterprise applications that management consultants are and commitment on the process side
research at Aberdeen Group, BPM key to improving their processes and as well as the product side,” he writes.
offerings have traditionally been business. He notes, “Engage a con- “Research shows that the ‘best in
focused on one of two enterprise sultant firm early in order to lay the class’ companies are using converged
areas: integration or workflow. He ground for choosing a BPM tool.” BPM products as a natural extension
notes that business integration Next, for those companies that of their existing BPM practice.” •
[ 20 ]
gies don’t always give the business
The Trouble with
(or more specifically, your CFO)
the hard ROI typically demanded
Online Collaboration Tools for 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 integration That alone should encourage fur-
among the tools, and frustrated end-users ther investments.
by c.g. lynch “Right now, it can be hard to
justify,” says LeSueur. “But in the
C ollaborative technologies are get a hard number, but that only tells in most cases,
great and all, but right now a piece of the picture.” respondents gripe
we’re not terribly satisfied with It’s also tough to measure worker
them at our business. That’s the productivity gains as a result of
about a lack of
report from more than half of 400 these technologies being present. integration between
CIOs and IT decision makers sur- But while collaborative technolo-
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 Better end 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. companies are paradigm changing,” he says.
which in turn frustrates end users, are satisfied with the impact of
says Larry LeSueur, Avanade’s vice collaborative 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 had have 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 their communication strategy across ductivity applications (even e-mail).
existing environments,” he says. “It’s the enterprise. If complaints exist, you may want to
not that e-mail isn’t driving value Planned Fixes: 71 percent of tie up those loose ends first.
or that IM isn’t. It’s that both those U.S. companies say they need Emphasize integration. Try
technologies aren’t integrated.” to add new technologies to to 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 windows tion capabilities. For example, 79 application. 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 brunt prise search tools, compared to other software.
of these technologies not being 59 percent who say they have Play up soft benefits. Hard
integrated,” LeSueur says. these implemented today. And ROI 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 they’re 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 can e-mail threads. •
[ 21 ]
thing else to consider is whether to
build and maintain a physical data
10 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,
W ith all the mergers and acqui-
sitions in the business intel-
ligence (BI) space, it’s easy to forget
ently, which means that numbers
will not match—in 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 that’s behind it. pertise throughout lines of business ers need. The three broad classes
You need to establish your vision from front-, middle- and back-office of business intelligence users are
for your business intelligence strategy staff. At this stage, IT’s participa- strategic, tactical and operational.
before you bring technology into the tion 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 and effect—for example, should we
author on the upcoming study, “It’s business standards and policies. Sec- close operations in Europe and
Time to Reinvent Your BI Strategy.” ondly, start small and choose only open them in China. Tactical users
Here’s 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 (who’s not the CIO). Business with them in mind. information, and likely need updated
intelligence implementations should 3. Assess the current information 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, BI current business intelligence stack as call center staff. They need data
should be sponsored by an executive and processes and organizational within 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 and of 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 company Evelson 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” from decision making.
This executive is often the CFO. Accenture contains 1,500 questions 6. decide whether to buy
This sponsor should govern the against 325 best practices and 75 or build the analytical data
implementation with a documented subject areas. model. One size does not fit all.
business case and be responsible for 4. Create a plan for data In general you may benefit from an
changes in scope. storage. Many organizations out-of-the-box, industry-specific data
2. Create common defini- begin with an isolated data mart, model if you have a more homo-
tions. Without common defini- since it’s quick and cheap, but geneous IT environment—such
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 be watch for extensibility and hierarchy
widespread problem in companies created as additional data storage flexibility. More complex enterprises
today. For example, finance and sales needs arise, which can grow out of may benefit from customization,
may define “gross margin” differ- control within a few years. Some- although you may still want to
[ 22 ]
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 success of your business processes and the technology that underpins
of business intelligence imple- them. here’s 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, knowledge
A s the business landscape
becomes more brutal, two out
of three companies will need a new
another third had to fundamentally
change their core strategy in order
to be successful. Only 28 percent
management and master data business strategy to stay alive. That’s experienced no significant change,
management. Be sure to define the the conclusion of the recent book compared to the period from 1985 to
architecture for all layers of the Unstoppable: Finding Hidden Assets 1994, when 51 percent of companies
business intelligence stack; even to 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, who change, because of the difficulty of
8. Choose a systems integra- heads IT for Bain in the Americas change. The problem is that a lot of
tor. Business intelligence imple- region, there’s a problem: It’s hard organizations 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 IT this complexity is beginning to act
Evelson says be prepared to spend blocks the way. Puryear, who contrib- like reinforced concrete. It’s a barrier
$5 to $7 on services for every $1 uted research to Unstoppable, spoke to to change.
on software, and cautions: Do not CIO’s Associate Online Editor Diann The second point relates to IT. In
outsource the fine-tuning of business Daniel about why IT has become too many ways, IT reflects the complexity
intelligence. The process requires a complex and how companies can use that’s 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” and companies have trouble staying complexity in IT. That’s slowing
“baby steps.” Choose an end user, competitive? down the cycle times in IT. The cycle
business analyst and developer to Rudy Puryear, Bain: First of times 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- accelerate—what I oftentimes call times required by the business to stay
mance indicators and build a few the MTBS, or mean time between competitive.
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-hanging the mean time between surprise and pany I’ve 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, simple core 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 have a 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. About standpoint, and therefore it wasn’t
[ 23 ]
from 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 can’t 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 it’s got something to do as you make decisions about IT, you
we’re 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 was capabilities that support innovation.
They’ve basically said, “We’re 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, “IT’s organizations 70 to 90 percent or can position [other] kinds of tools in
too expensive and it’s 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 because “keeping the lights on,” and manag- to cleanse and sync a lot of data,
there were a couple of decades of ing the complexity, often leaving a then provide analyses that enable
unnecessary business complexity very small portion of the spend that product developers or salespeople
that’s 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 customers available 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 the a core element of any successful potentially have the intelligence to
undifferentiated areas of a business, competitive growth strategy. And map that person or route that person
off-the-shelf, plain vanilla packages yet so many of those customer data to the call center agent who has the
may be good enough. There may assets 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 other customer interaction.
“simple as possible, but complex as player in the space, and yet that Does every company need to fol-
necessary.” Second, the companies insight is locked up in our informa- low the path you have outlined in
that have been able to succeed by tion systems. Because we’ve got 30 order to succeed? Or is innovation
making fundamental changes in customer systems instead of one, not a priority for everyone?
their core strategy often did so by because we’ve got 16 different ways of I don’t think innovation is a priori-
uncovering and leveraging what we referring to a customer and naming ty for every single company. For some
referred to as hidden assets. Those conventions for a customer, we can’t companies delivering a least-cost
hidden assets could be customer get at it.” It’s 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 they’re in an
business or hidden capabilities. discussion we’re having with them is industry where innovation is not key.
Oftentimes we find that those are how they can unlock that data and Beyond that, innovation comes in dif-
information-based assets—deep unleash 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 to to do that? to customer experience innovation.
work with the business to uncover Enterprise architecture and gover- The quality of the innovation and
the hidden assets in order that they nance are at the core. As you look the 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, you’ll understand which complexity constrains both. •
[ 24 ]
Ventana settled on SaaS technol-
ogy from Salesforce.com—a mix of
marketing automation, analytics and
On-Demand Software –
other applications. “The benefits of
having a hosted solution outweighed
Software-as-a-Service (SaaS) Appeal the benefits of the in-house solu-
tion,” King says. “Plus, the time to
three companies put saas to the test get it up and running was significant-
By john EdWARdS ly shortened with a hosted solution.”
Initial deployment and training took
less 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
SaaS technology gives Ven-
tana the same features offered by
traditional CRM software—includ-
two basic choices in 2005: choose a Nevertheless, a growing number ing capture, storage and analysis of
traditional application or opt for the of midlevel enterprises have decided customer information—without in-
newer software-as-a-service (SaaS) SaaS’s benefits far outweigh its draw- curring the extra burden of running
model and have CRM tools delivered backs. “There’s no application in the its own servers, operating a network
directly to end users via the Web. In world that you can’t run in-house if to connect branch offices and hiring
hindsight, the decision turned out you have the money, resources and a large IT staff.
to be something of a no-brainer, says expertise,” says Laurie McCabe, an “It’s just significantly easier,” King
Anthony King, CIO for the medical analyst at technology research firm says. “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, don’t have that capability,” she says. supporting it is a pretty substantial ef-
user flexibility and several other key “In 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 an ditching the CRM Antiques Ventana also values Salesforce.
increasingly popular choice at com- Fortunately, SaaS meshes well com’s ability to provide multiple
panies like Ventana: Web technolo- with CRM technology, allowing language interfaces on demand, fa-
gies matured, applications grew more companies 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 scalability you-go basis, with only a minimal you 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 Ventana’s on-premises
to SaaS expecting significant cost, solution had reached “critical mass” ERP system, where adding a new lan-
deployment speed and maintenance by 2005. Customer contacts, crucial guage requires IT staffers to painstak-
benefits.They’re looking to SaaS to to the company’s 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 before either on paper or buried in an ERP save time and money by cutting red
they rush toward SaaS, these organi- system. “We basically were manual tape. “In a regulated industry, you
zations also need to be sure that the for the most part—Day-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 that After evaluating several on-de- “That’s not your true competency;
they can integrate with their existing mand and traditional CRM products, it really doesn’t add value to your
[ 25 ]
business.” On-demand software drops wasn’t 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 of track record, more midsize enterprises
King feels that his SaaS-based people that’s very small,” he says. “I entrust the technology with not one
CRM technology offers more features needed 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 doesn’t feel that he was forced fully integrated suite of services, for
King says the only significant “road to settle for a second-rate technology. accounting, CRM and e-commerce.
bump” he faced was convincing end Compel’s dashboard view gives sales Data integration was NetSuite’s big-
users to take full advantage of the sys- representatives a real-time view of gest drawing card, says Fabrice Can-
tem’s information management and their position and ultimate objective cre, Olympus NDT’s chief operating
analysis features. “Basically showing during any given quarter. “Managers officer, who oversees the enterprise’s
the field folks what’s in it for them,” love it because they’re able to focus IT operations.“The sales reps, the ac-
he notes. “Once they could see that, their time where it’s needed most,” he countants, the inside salespeople tak-
then there was a lot of buy-in.” says. “They can understand right away ing the orders, the customer services
who’s winning and who’s losing on a reps—everybody is entering data into
Compensation Strife sales rep basis—and there’s no disput- the same database,” he says.
Sales compensation management ing 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. Even project was envisioned with the need without the complex hardware and
though calculating compensation for for minimal IT involvement, things maintenance infrastructure that
sales reps is a key process, especially didn’t quite turn out that way, though usually accompanies on-premises
for firms in growth mode, it may be not for reasons having to do with the ERP packages.
ignored until it creates a true mess. Compel product. Olympus NDT still relies on
At Trex, a decking and railing The deployment took longer than traditional software, Infor Visual
manufacturer, business users found anticipated, because it took Trex’s IT Manufacturing, to support another
themselves caught in their own staff longer than planned to create core business process, production
version of “Excel Hell.” Sales reps the necessary export file, using data operations. The onsite software tracks
and managers were tracking com- from Trex’s aging J.D. Edwards ERP parts, coordinates ships and handles
pensation via spreadsheets, leading to data engine. During this process, various other manufacturing-oriented
endless conflicts and disputes. “Excel Trex IT also discovered that the data tasks. “NetSuite is definitely not able
spreadsheets are typical for a lot of in the J.D. Edwards application did to do that,” Cancre says.
companies our size,” says Mitch Cox, not always reconcile with the data On the other hand, NetSuite does
vice president of sales. “You end up that its finance department used to exchange key business data with
doing the calculations manually and, calculate commissions. The deploy- the manufacturing ERP software.
unfortunately, the accuracy is always ment spanned most of 2006’s second “We’ve set up our systems so that we
called into question.” quarter; tweaking, training and other consider our factories as a vendor,
The activity also burned away follow-up tasks dragged well into the at least from the NetSuite point of
time. “You’ve got a bunch of people next period. view,” Cancre says. “NetSuite then
spending an inordinate amount of Cox says he’s pleased with both trades with the ‘customer.’”
time tracking something that, frankly, Compel and the SaaS model. “There’s Cancre says midsize enterprises
they shouldn’t have to waste their been a decent productivity gain, be- need to view software in the same
time tracking,” Cox says. cause people aren’t doing that one-off light as other essential business
Cox turned to SaaS provider Cen- tracking like they were in the past,” services. “I mean, we could have our
tive and its Compel software. Cox he says. Cox says he’s open to the own lawyers too,” he notes. “But we
says he was drawn to the software, and possibility of using more SaaS-based don’t have them—we hire them as
the SaaS model, because Trex simply tools in the future. we need them.” •
[ 26 ]