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  • Executive’s guide to the evolution of enterprise software Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 2 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Executive’s guide to the evolution of enterprise software Copyright ©2013 by CBS Interactive Inc. All rights reserved. TechRepublic and its logo are trademarks of CBS Interactive Inc. All other product names or services identified throughout this book are trademarks or registered trademarks of their respective companies. Reproduction of this publication in any form without prior written permission is forbidden. Credits Editor In Chief Jason Hiner Head Technology Editor Published by TechRepublic Bill Detwiler May 2013 Head Blogs Editor Disclaimer Toni Bowers The information contained herein has been obtained from sources believe to be reliable. CBS Interactive Inc. disclaims all warranties as to the accuracy, completeness, or adequacy of such information. CBS Interactive Inc. shall have no liability for errors, omissions, or inadequacies in the information contained herein or for the interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. Senior Editors Mark Kaelin Jody Gilbert Selena Frye Mary Weilage Sonja Thompson Teena Hammond Graphic Designer TechRepublic Kimberly Smith 1630 Lyndon Farm Court Suite 200 Louisville, KY 40223 Online Customer Support: http://techrepublic.custhelp.com/ Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 3 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Contents 4 Introduction 5 Does ERP still make sense in 2013? 7 Six tips for achieving a successful ERP implementation 9 How to make an ERP selection 12 Four rules to maintain ERP sanity 15 CRM for ERP: Built-in or best of breed? 17 Leverage your CRM to its full potential 19 What enterprises need to know about cloud deployments 22 How cloud platforms are letting business get experimental 23 Enterprise software: Win over the staff and you’ll win over the business 24 SAP’s strategy: Cutting complexity, boosting cloud and big data 27 GE’s $200 million bet to resurrect IT Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 4 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Introduction Enterprise software is the glue that holds together teams and business processes in today’s most efficient companies, especially globally distributed organizations that rely on real-time coordination and analytics.  But adopting an enterprise software solution is a complicated undertaking—from targeting your business needs to selecting the right vendor to deploying the tools and making sure your IT staff knows how to use them. In addition, the cloud, mobility, and social networking have added to the challenge of gaining the benefits of these critical applications. To help you understand the evolution of enterprise software and its potential for transforming your business, ZDNet and TechRepublic rounded up this collection of articles that address the trends, technologies, and decision factors you need to understand as you guide your organization to the best enterprise software strategy. Sincerely, Jason Hiner Editor in Chief Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 5 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Does ERP still make sense in 2013? By Patrick Gray We are regularly inundated with stories about the latest and greatest in technology, from computers that fit on an SD card to a world of cloud computing where 20 minutes and a credit card will be all you need to deploy enterprise IT functionality. Despite all the sound and fury, most enterprise IT shops spend the majority of their time and money on more mundane applications, ERP being one of the biggest. Cloud proponents in particular make a seemingly compelling argument that large-scale systems like ERP are slated for extinction, to be replaced by cloud applications that can quickly be deployed and integrated. As you stare down the barrel of costly upgrades and continued maintenance, you might legitimately wonder if ERP still matters at this point. The “why” of ERP Critical to the consideration of any major IT investment should be the question of what business problem you’re solving. With ERP, the “why” usually comes down to a combination of a few key areas: handling an increasingly complex process, centralizing and integrating data to aid decision making, transitioning from a “burning” platform, and mitigating compliance or legal concerns. The most legitimate “why” of an ERP implementation should be centralizing data to allow for better decision making. While the other concerns are legitimate, in the age of cloud computing and commodity applications, a centralized, integrated foundational business application is the key item that keeps ERP relevant and highly valuable. A question of size Part of the answer to the ERP question is the size and complexity of your company. For decades, the main ERP players have been pushing for the middle and small business markets with scaled-down versions of their mainstream packages. While companies like Microsoft have done well in this space, the larger and more complex systems (I’m looking at you, SAP and Oracle) have been less successful. There was once a fairly obvious tipping point, where a company’s size and complexity pushed it into the arms of SAP or Oracle. But that line has blurred as mid-tier players have increased their capabilities and cloud providers like Salesforce.com have made legitimate headway into areas that were once the exclusive domain of in-house software. Operating under the assumption that ERP’s key asset is a consolidated platform that improves your decision making, if your company has the right data to support its decision-making process without ERP, there’s little need to embark on the huge investment until other alternatives are exhausted. But I already wrote the check While the list of reasons for a new installation of a major ERP system has been reduced, at this point suggestions that CIOs abandon existing ERP installations are shortsighted. In many ERP deployments, the difficult work of initial deployment is performed at great expense. Then the ERP is largely ignored save for minor enhancements. This is exactly the wrong approach to take with ERP. Once the “big check” is executed to Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 6 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE underwrite the initial deployment, additional enhancements are comparatively cheap. Even an optimized and generally effective ERP installation is likely diligently harvesting data that is unused and could support more effective decision making and analysis. If I had to ballpark, I would guess most companies use less than 30 percent of the capabilities of their ERP, essentially leaving money on the table. So what’s changed? While there have been major changes in technology since ERP was in its heyday, most of these changes have affected the decision-making process on whether to embark on a new ERP installation or some major enhancement, like adding a new core module. Despite the hype, I believe it is premature to consider abandoning an existing ERP and would suggest looking for areas where minimal investment can improve reporting, analytics, and data acquisition. After all, ERP’s core promise of integrated applications and data is still an asset that cloud solutions and emerging technologies can’t yet replicate. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 7 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Six tips for achieving a successful ERP implementation By Eric Kimberling and Patrick Gray With cloud, social media, and Big Data at the fore in the IT press, it’s easy to think of ERP as yesterday’s news and a walk in the park compared to modern technologies. It’s true that some of the risks of early ERP implementations have been mitigated, and timelines are generally shorter than the half-decade slog that used to characterize an ERP implementation. In addition, many ERP vendors now offer “accelerated” implementations, furthering the impression that ERP is a risk-free endeavor. But implementing an ERP solution is still a complex undertaking, and stories of ERP nightmares continue to abound. The following pointers will help ensure that your ERP implementation is a success. 1: Remember that you’re buying processes One of the major selling points of ERP, and the key success factor for “accelerated” implementations, is that ERP is a collection of automated business processes rather than just a bunch of software. To realize the promises of the accelerated implementation methodologies, you must largely implement the “out of the box” processes built into the product. Each change to the shipped processes increases cost, timeline, and risk. While this is easy to grasp during the sales cycle, it can become a project killer if your business can’t be cobbled into the prepackaged processes, either due to stakeholder resistance or legitimate business need. Rather than focusing on flashy features during the sales cycle, ensure that you understand how your company’s differentiating or legally mandated processes fit within the ERP package and what customization (and associated cost) will be required to modify the software if necessary. 2: Check the cloud fine print Cloud-based ERP has made recent strides, and even the traditional players are now touting cloud offerings. While there are a handful of true cloud vendors that require little more than a credit card number to be up and running in some basic fashion, most cloud-based ERPs are traditional software cobbled into a cloud-style environment. This can make for convoluted pricing and mercurial relationships between the software vendor, hosting provider, and support organization. Make sure you do your due diligence before signing on for “ERP in the cloud.” Look for case studies and references of companies that are using the software suite you’re considering as well as the same delivery method. 3: Get everyone on the same team Many of the major ERP disasters are due to poor decision making, endless customization, and pursuit of perfection rather than “good enough”—in many cases aided and abetted by the implementation partner. While reputable partners usually aren’t nefarious in their actions, they may be billing for time and materials and are all Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 8 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE too happy to analyze, customize, tweak, demo, and wait, since their revenue increases as your timeline drags on. Where feasible, build performance metrics into your implementation and ensure that the software provider, implementation partners, and internal staff are all incentivized to implement on time and on budget. 4: Involve users early and often While you’re still in the sales cycle, you should take vendor implementation duration estimates with a grain of salt. It’s important to develop a comprehensive project plan that involves key stakeholders and end users as early as possible. This plan should be developed prior to your final software decision so everyone in the business and IT organizations fully understands the cost and resource commitments required to make the project a success. Many of the big ERP failures were due to IT producing a system that didn’t actually meet the business requirements and discovering this error in testing, when it was too late to correct. 5: Track the potential business benefits of the new system If you don’t measure it, you likely won’t achieve it. Chances are your organization is looking at ERP as a way to reduce costs, increase revenue, or scale for growth, and you should estimate and measure benefits against these metrics if you are going to realize the full potential of ERP. Highlight metrics where ERP can generate the largest bang for the buck and make sure project resources are allocated to these areas first, rather than chasing the nosiest stakeholder or technically interesting challenge. 6: Look for objective and independent advice Ask colleagues, employees, and peers in noncompeting companies about their experience with their ERP. Many industries will be dominated by a particular vendor’s package, so industry trade organizations and events are great sources for industry-specific information. If you’re still not sure, consulting organizations large and small can help with an initial requirements gathering and assistance during vendor “beauty pageants.” The best might even suggest an alternative to ERP. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 9 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE How to make an ERP selection By Mark Pimperton Do you actually need ERP (or just “joined-up business software” as I like to think of it)? If you need convincing, I suggest that you: • Take an audit of your current information systems and business processes. Do you have multiple systems? Or duplicate data entry? Do you rely on spreadsheets or databases on individual PCs? If so, the chances are that you could benefit from ERP. • Do some reading. A search on “Does a small company need ERP?” will lead you to supplierspecific articles but also general reviews and advice like this and this. Having made the decision to go for it, expect to spend several months on your specification and selection project. In the case of my company, it took about 12 months from inception to signing a contract, but you might well be able to do it much faster. What matters more are the stages you go through to arrive at your choice. Here are the ones we used. Requirements gathering At every level, from shop floor to manager to director, we asked for input. Directors were asked to provide strategic input, highlighting specific aims or directions for the company. Other staff were simply asked for their opinions on the current system. The majority, however, were asked to think in terms of business processes. We asked them to do three things: • Identify the business processes that take up most of their time. • Analyze the problems, inefficiencies, or opportunities for improvement in these processes. • Describe the benefits of changing the process. The end result was a lengthy User Requirements Document, broken down roughly by business area. From this we distilled a Project Benefits Document highlighting the key areas of improvement. (Both of these are essential reference points when you’re embroiled in an implementation and can easily forget what it was you set out to achieve.) Prequalification Based on our existing knowledge and Internet searches, we drew up a list of 18 possible suppliers. We emailed them asking if they wanted to receive a brief questionnaire as the first stage of a selection process. The questionnaire was based on our Project Benefits Document and invited the suppliers to tell us about their company, their product, and how it would help us achieve our hoped-for benefits. 15 suppliers responded. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 10 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Request for proposal Our RFP documents were unashamedly adapted from templates we found on the Internet. The results were: • A Word document giving a detailed description of us, our project, and our current system, together with information on how the RFP process would work. • An Excel spreadsheet with tabs for supplier information, references, prices, and most important, a detailed functional specification covering every area of the system. • The functional spec, which is critical. Break it down by business areas such as general ledger, accounts payable, purchasing, sales order processing, and stock control. Within each area, list what you need the software to do. For example, in our Stock Control section, we included the following: îî Supports the recording of actual cost by product îî Supports user-defined Unit of Measures (UOM) îî Supports multiple inventory locations and bins per warehouse We labeled each criterion Essential or Desirable. The supplier then had to respond with a code indicating how far their system met the requirement (or not). We also gave them a column to enter free text comments. We allowed the suppliers to send supporting documentation but were insistent that they complete our spreadsheet in detail. We resisted supplier requests to come and see us at this stage. Having received five responses to the RFP, we used another spreadsheet to aggregate the scores and give us an overall picture. Based on the functionality score and the price, we put three of the five through to the next stage. Demonstrations We finally allowed suppliers to come and see us. But this was not the standard sales presentation; we again required them to demonstrate the product against our specific requirements. We created a script based on our functional spec and expected them to follow it. For each criterion in the script, we had staff assigning scores according to whether the product fit the bill—and how easy it looked to use. The idea was again to try to make the comparison objective as far as we could. This stage eliminated one supplier, but we had the other two back for a second visit to look at specific areas of concern. Selection and due diligence In the end it was a close-run thing between the final two. And, it has to be said, we deliberately allowed subjective opinion to creep in. No matter what the scores and prices told us, there was still an element of gut reaction involved in the final choice. Nevertheless, we could say with some pride that the process was rigorous Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 11 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE and systematic. (Apart from anything else, this is a comfort when we hit problems and somebody asks why we chose this particular system.) The last stage was that of due diligence—checking out the preferred supplier by reviewing its accounts and visiting or speaking to existing customers. We negotiated a deal, signed a contract… and then the fun began! Summary Choosing an ERP supplier is about the software and about the supplier. Run a systematic selection process to find the product that best meets your needs. It won’t be perfect, but you’ll greatly increase your chances of a successful implementation and reaping the benefits for your business. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 12 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Four rules to maintain ERP sanity By Scott Lowe In this day and age, the term enterprise resource planning (ERP) seems almost anachronistic. After all, with the rise of the cloud and service-oriented architectures, the ERP gets no media love and often inspires scorn due to the solution’s perceived inflexibility and monolithic approach to service. The cold, hard truth, though, is that many an organization still runs on this stalwart technology platform. In higher education, for example, enrollment/admissions, student life, financials, grades, and even fundraising all operate by virtue of these tightly integrated platforms. Moreover, that doesn’t appear to be changing anytime soon. The ERP does and will have a significant presence in the organization for a long time. That doesn’t mean that once the ERP is implemented, all innovation and progress simply stops until the next major upgrade or replacement takes place. Rather, the ERP has become the center of a whole, with any number of third-party services linked to it. And not every organization will stay on a single ERP forever. As an organization grows and evolves, a new ERP may become necessary. In today’s fast-moving and IT-centric environment, there are a number of ERP rules that should be observed. Which rules apply will depend on the situation at hand; not every rule will be applicable 100 percent of the time. Rule 1: Don’t migrate to a new platform with dirty data Unfortunately, “dirty data” is and will probably remain a problem for a long time. Dirty data happens when people ignore data entry standards, when there are no data entry standards, when data is entered inconsistently, and when codes and data standards “drift” over time. Of course, these are just some of the ways data gets dirty. But however it happens, it happens. In some cases, organizations take a “blame the ERP” approach. Rather than correct processes that may have led to inconsistent data, they lay the blame at the ERP vendor’s doorstep and decide that the only way to clean up is to move to a new ERP. Yes… this really happens. In these cases, there are a couple of ways a migration can take place: • The data can be cleaned in the legacy system and then migrated to the new system. • The data can be cleaned on the way over to the new system through the development of data transformation matrices. I’ve seen both methods done. No matter what, data translation matrices will almost certainly have to be created for an ERP migration, so the thinking is that a few more won’t hurt anything. But there’s a huge downside. There’s no really good way to quickly and 100 percent accurately “fact check” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 13 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE dirty data that’s been run through a ringer. When possible, clean the data in the legacy system before moving it. This way, existing processes and reports can be tested with the newly cleaned data in a known way. Sometimes, time constraints will prevent this from taking place, but be aware that migrating dirty data and cleaning it up on the way or at the end is a major risk that needs to be considered. Rule 2: Migrate for the right reasons Previously, I mentioned that some organizations make the decision to migrate to a new ERP for the simple fact that their data is dirty and, as a result, reporting is a mess and automated processes simply break. In addition, organizations often do a great job getting people trained when an ERP is implemented but then end the training programs. Before you decide to move to a new system, ask yourself a few questions: • Would clean data solve your problems? It’s much less expensive to clean data than it is to move to a new system. • What kind of continuous training program do you have in place? None? Get one! Get your people trained up on the current version and its capabilities before you leap. • Do your people take some responsibility for their own training? If the answer is no, you have a bigger problem. The end user must be an active participant in the training solution, not a passive viewer. • Is IT viewed as the training department? That’s not IT’s job and if that’s the expectation, it’s probably not going to be successful. Rule 3: Engage your ERP vendor If the last time you talked to your vendor was when you signed your ERP contract, you’re doing it wrong. You probably pay a hefty annual fee for ERP support. Engage the vendor! They see the same problems you’re seeing in a multitude of environments and may be able to help. In one organization at which I worked, staff perceived the ERP as poor software primarily due to training issues. The ERP vendor offered to perform a free assessment of the situation that could be presented for action. Yes, they had a vested interest, but it was enough to loosen the purse strings for access to training and conference funds. Rule 4: Ensure integration The rise of the cloud presented particular challenges for the ERP. By their very nature, ERPs are not all things to all people. They are most things to most people. Third-party solutions—sometimes cloud-based and sometimes not—will fill the gap. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 14 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Any third-party solutions that are deployed should be a part of the whole and not just tacked on. If a solution requires major rekeying of data on a constant basis, it’s a non-starter. If a solution can’t sync data back and forth, it’s a non-starter. There are too many good solutions out there that can be integrated into your software to choose one that’s going to make life miserable for your staff and mess up your data. Summary Although cloud has become a great buzzword, many companies still run on the tried-and-true ERP. By following a few simple rules related to either maintenance or migration of an ERP, you can maintain insanity around these process workhorses. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 15 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE CRM for ERP: Built-in or best of breed? By Mark Pimperton This post isn’t a market survey of customer relationship management (CRM) or enterprise resource planning (ERP) packages; it’s simply the story of our journey as a small (fewer than 100 staff) manufacturer using three ERP systems over the last 20+ years. Your mileage may vary, as they say. I’ll also give away the ending and tell you that in 2012, we bought a dedicated CRM package and integrated it with our ERP. It’s early days, but we’re very happy so far and believe we made the right choice. Why CRM? I define ERP, rather facetiously, as “joined-up business software.” In other words, it links, at a minimum, functions such as order processing, stock control, purchasing, production, shipping, and accounts. ERP packages may also include functions such as quoting, personnel, or customer returns. CRM is much more about marketing campaigns, sales opportunities, pipeline analysis, and recording interactions with individual contacts. ERP, typically, doesn’t record or manage these activities. ERP system #1 Back in the 90s, when we ran our first character-based ERP system, we discovered one of the fundamental advantages of CRM: visibility. We had a team of applications engineers and we kept hitting the issue of the team not being aware of what had been said, or sent to, a customer or prospect. The engineer who had taken the call or sent the fax (as it was then) knew what he had done, but nobody else did. We lacked the most basic “contact management,” and there was no way the ERP system could be altered to accommodate it. To try to tackle the problem we invested in a third-party product (also character-based and running on UNIX, for those who like to know). While this was well-intentioned, it suffered from being clunky and not widely adopted. I don’t recall to what extent it was integrated with the ERP (if at all) but results were patchy to say the least. ERP system #2 Our second ERP system (EFACS from Exel Computer Systems) was a Windows/SQL product but, true to form, had a weak contact management module. This time we tried to build our own and got a little way toward the visibility goal, but again with patchy uptake (and, I can say with hindsight, some strange database design decisions on my part). What’s more, what we created was of little use to our marketing staff, who resorted to using a completely separate GoldMine database. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 16 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE ERP system #3 In 2008/2009, we embarked on our third ERP implementation. In the version we were implementing there was next to nothing in the way of contact management or what could be called CRM. A new version seeking to address this was released just too late for us to go live with it (of course). Knowing this was on the way, we didn’t attempt any DIY CRM-building this time. When we did get to see what had been released, it was a little underwhelming, but we were promised improvements in the next release. Finally, when that version came out, we gave it a thorough road test and didn’t like it—it just wasn’t capable or slick enough. The appeal of being fully integrated with our ERP was outweighed by its shortcomings. Disappointing. So we decided to go for a separate CRM package that could be suitably integrated with our ERP. We drew up a spec taking into account the needs of sales, marketing, admin, and production. We again ran a thorough selection process, the winner of which was Gold-Vision from Esteiro Business Solutions in the UK. (To be fair to our ERP vendor, it continues to improve the CRM element of the system; it just never quite caught up with what we needed.) Our implementation of Gold-Vision took less than three months. Integration is currently one-way only (ERP to CRM), accomplished by means of scheduled SQL Server Agent jobs that run very quickly. We now have the longed-for visibility of customer interactions and can track appointments, sales opportunities, service calls, and so on. With a much improved marketing tool and the general stimulus to sales and service activity, we’re expecting a relatively quick return on our investment. Summary In our case, our manufacturing ERP just wasn’t strong enough on CRM. Choosing a best-of-breed CRM package and integrating it with our ERP has proved the right decision. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 17 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Leverage your CRM to its full potential By Patrick Gray With the recent technology renaissance that’s given us everything from ubiquitous tablets to commoditized data center virtualization, CRM seems like a bit of a quaint technology. Even mom-and-pop companies have access to a variety of cloud-based offerings from startups to enterprise darlings. For medium and large companies, rocky CRM implementations and struggles to drive sales force adoption are likely distant memories, and aside from an occasional report request or minor enhancement, CRM is low on the “attention list.” If this describes your organization, you may be leaving money on the table and not leveraging your CRM to its full potential, especially in light of recent technology shifts. Dust off the “we’ll do it later” list One of the biggest missed opportunities that come from large, complex IT projects like a CRM implementation is burying what I call the WDIL (We’ll Do It Later) list. When time and budgetary constraints loom over a project as its deadline nears, there are always good ideas you simply can’t get to, which end up on some form of WDIL list. In many cases, there are enhancements or functionality on which you’ve done 80 percent of the hard work, but the few extra hours required to implement just couldn’t be found at the time. With CRM, a critical concern is whether sales and marketing will embrace the new technology. Many companies err on the side of caution when implementing, legitimately focusing on change management rather than fully leveraging the tools. About six to 18 months after implementation is a perfect time to dust off the WDIL list. Users and management are familiar with the tools, and items from the WDIL list are not yet forgotten, creating a minor PR coup for IT when you actually deliver on your promise to do something after the fact. With most WDIL lists containing bushels of low-hanging fruit, there are lots of opportunities to squeeze more value out of what was already a significant expenditure. Getting mobile Many of the recent CRM innovations have involved mobile technology, both in terms of gathering information about your customers and providing information to your sales force. As your channels for interacting with customers have expanded, most CRM systems have expanded their integration with everything from email marketing tools to social media tracking and reporting. While there’s a danger of capturing data and generating reporting for reporting’s sake, careful use of this data can provide a more detailed view of your customers and their interactions with your company and products. Internally, most of the CRM tools are now integrated with mobile devices, like smartphones and tablets. There’s an obvious benefit to a salesperson walking into a meeting with current information on the customer, insight into product availability, and all the usual information you would expect—but delivered rapidly, in real time, literally to their pocket. Mobile data delivery was once the province of high-dollar, complex systems, but with the rising popularity of cloud-based CRM, it has become a freebie with even the most basic systems. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 18 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Better databases A more technical trend that could potentially revolutionize enterprise computing is the evolution of the databases that store all the data captured by our enterprise applications. Until recently, database technology had been surprisingly consistent for decades, with advances in speed and functionality but little change to the core technology. While traditional relational databases have been “good enough” for most applications, new generations of databases change everything, from the fundamental way data is stored to the ability to rapidly gather and analyze changing data. Relational databases have traditionally struggled to do CRM-related tasks, like analyzing the performance of a massive marketing campaign on different demographics. While this type of reporting is available, it literally takes hours to generate. Some of the new technology promises this type of analysis in minutes, essentially allowing marketing and sales promotions to be tweaked in real time. This is an area that is rapidly evolving, and it’s worth considering when you get requests for complex analytics that were once impossible. Where next? One of the great, largely unfulfilled promises of CRM technology was that it would allow us to predict with reasonable accuracy which customers would likely buy our products and effectively allow us to focus our sales efforts on those customers. Being able to increase the odds of a sale by a dozen or more percentage points is a lofty goal, but I don’t think the current crop of CRM tools has reached it. Some of the developments mentioned here, however, push us further in that direction. To offer this predictive capability, we need to know more about how our customers interact with us, have near real-time visibility into how our marketing and sales efforts are performing with different classes of customers, and deliver that information to the people actually doing the marketing and selling. The recent evolutions in the CRM space are pushing this trifecta forward, and while your happily functioning CRM may not be on your radar now, it’s worth investing some time and effort to prepare for this future. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 19 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE What enterprises need to know about cloud deployments Krishan Sharma So you have decided to make the switch to the cloud—you want your organisation to take advantage of the automation, scalability, and cost savings that the cloud brings to the table. But what do you need to know before embarking on the cloud path? Public cloud vs. private cloud vs. hybrid cloud If you’re an organisation with standard service offerings that have relatively repetitive or straightforward workloads, shifting to a third-party managed public cloud, where you no longer need to carry the infrastructure burden, would seem like a smart business decision. If, on the other hand, you’re an organisation running applications that store highly sensitive data with a focus on governance, security, and compliance, you would want to look down the path of a managed private cloud. And if you’re a large organisation that has a mix of custom in-house applications and standard applications, it is more than likely that you have already invested quite a bit in bare metal infrastructure with your own data center. Moving to the cloud doesn’t necessarily mean you need to forfeit past investments. Hybrid cloud models allow organisations to benefit from the automation of public clouds while reaping the security and privacy benefits of the private cloud. It also enables organisations to run their custom applications in their existing data center with the option of leveraging a number of software-as-a-service (SaaS) applications in the public cloud. There are plenty of cloud models for enterprises to consider, but it is important to understand that there is no silver bullet. The cloud often acts as a catalyst for IT maturity. This means that it is necessary to understand your own processes before thinking of using infrastructure as a service (IaaS) or the cloud. This leads me to my next piece of advice. Cherry-pick your apps for IaaS Does your company have a well-defined application or service catalogue? Having a clear understanding of your organisation’s service catalogue will help you make a more informed decision as to the applications or infrastructure layers that can be moved to the cloud. Giri Fox, the manager of the Australian branch of cloud management provider Right Scale, stresses the importance of having a filter against which you can check candidate applications. “Some applications go quickly to the top of any list, such as those that are already web delivered on the intranet. The considerations for the lower layers of infrastructure include dependencies on other systems Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 20 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE for user authentication, access control, queries, latency sensitivity, and the volume of data moving between systems,” Fox said. With some good fortune, there will be a few discrete applications, which generally make for ideal candidates to move to cloud infrastructure first, as they tend to be less mission-critical applications with considerably lower system dependencies. Have contingency plans for when things go wrong You have to design with the assumption of failure in the cloud. For example, the recent massive Azure outage was a problem only if you had not designed around the possibility of that cloud failing. Amazon Web Services (AWS) has had outages of a similar impact. A backup strategy, such as adding copies of your server instance in multiple regions and data centers, will ensure that you’re covered even if multiple regions or cloud service providers experience outages. A disaster recovery strategy should also be part of any contingency plan. A number of cloud service providers offer cloud disaster recovery, where they can recover physical or virtual machines in a cloud within minutes, but it is important that you have the backup server processes in place to avoid unnecessary downtime. Understand vendor risk management Many companies tend to view cloud companies with rose-coloured glasses and don’t ask the hard questions that would otherwise be the norm for any vendor qualification process. What’s the history of outages? How can I get my data out if I stop using your services? What format is that data in? Is the service extensible with its own APIs? What happens in the event that the data is leaked or lost? What processes does the cloud provider have to mitigate this risk? These questions should have a dramatic weight in the overall criteria of selecting a suitable cloud provider. This is a business and cultural change as much as one of technology Do not assume that your existing ideas, processes, resources, and tools for monitoring, backup, configuration management, licensing, and availability are appropriate for the cloud. Mostly, they need to change toward an agile, service-oriented approach. This also means internal IT teams that were previously developing software and system administrators who were maintaining bare metal infrastructure will need to learn new cloud-era skills. These resources certainly still have a place within the organisation, but some will need to shift toward support and maintenance, and traditional support engineers will need to adopt more of a product management or project management role. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 21 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE It’s important that you engage with the internal IT teams from the outset and help them understand how this new service should operate and how it will affect their career and value to the organisation. After all, it will be the very same teams that will be the number one consumer of this cloud. This process may also involve hiring a new cloud administrator, which leads me to my final piece of advice. Partner with a proven cloud-oriented consultancy or hire a cloud admin Partnering up with a proven cloud-oriented consultancy or hiring a dedicated cloud admin to act as a coach to senior management and the internal IT teams is key in driving the transition process. The value in having a developer or architect who approaches the cloud not from the traditional infrastructure up, but as a service, will go a long way in aiding your organisation’s transition to the cloud. Don’t assume that your IaaS provider is appropriate for this role, or that you are aware of all the possibilities the cloud has to offer. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 22 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE How cloud platforms are letting business get experimental By Nick Heath Deploying infrastructure to test out every idea a business comes up with can rapidly burn through the IT department’s budget. But by using private and public cloud platforms to try out services, companies are finding a cost-effective way to experiment with new ideas. European airline easyJet has been using the Microsoft Azure cloud platform since 2008. It makes use of a service on the platform that allows organisations to securely expose endpoints for in-house systems to the Internet. The Azure platform and the publicly exposed end points allow the airline to trial services that would otherwise be too costly to try out, like allowing staff to use mobile devices to check in passengers and their bags at eight airports. “You can take a suck-it-and-see approach to things that previously required massive infrastructure investment,” said Bert Craven, enterprise architect at easyJet, at Cloud Expo Europe in London. “We could build it ourselves, but I would have to create a VLAN, put some servers in it, secure the whole thing, get all the firewall changes made, get all the restrictions and VPNs set up to allow the inbound connections. “Or I just go to my existing server, add a binding to WCF to expose the endpoint out on Azure, and by the afternoon I’ve got publicly visible but secure services,” Craven said. “It’s not that we couldn’t deliver that trial ourselves, it’s that when someone says, ‘I think we might make £100,000 a year selling this new service’ somebody would say, ‘If you want to spend £50,000 on servers you better prove it. ’ “If instead they say, ‘I need IT for an afternoon to help me configure these bindings,’ then of course they will get the go ahead to try it. It gives us a whole new way to approach business problems.” Other companies are using public cloud services to enable a similarly experimental approach, according to a Microsoft-commissioned report by Forrester. The study found that staff from outside the IT department were increasingly likely to use cloud platforms to test out new services they thought could benefit the business. “Where IT lacks the understanding or the speed to cope with fast changing business needs, change agents from the business side become the main driver for enterprise cloud projects,” the report said. IT departments could consider becoming “cloud brokers,” the study suggested, offering a marketplace of services and applications that the business can call on to innovate and deliver value. In fact, it found this is already happening at some of the 22 enterprises surveyed for the study. easyJet’s Craven said it was about knowing when to advise the business and say, “We shouldn’t be building this for you; have you considered buying it from those guys? Let me make an introduction and you can get cracking and take six months off the delivery time.” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 23 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Enterprise software: Win over the staff and you’ll win over the business By Nick Heath Whereas IT managers may once have been the target market for enterprise software, today firms are better off designing apps to appeal directly to staff, the London Web Summit heard recently. This approach relies on the so-called “Dropbox effect,” where staff start using apps they have discovered themselves rather than those handed down to them by corporate IT. The software then permeates throughout the business via word of mouth, until it is favoured by a critical mass and the IT department has to consider officially incorporating it into the business’ IT estate. ”When I think about how to sell to enterprise I think about how to engage with the grass roots, how I can build a tool that people like using,” said Andy McLoughlin, co-founder of cloud-based collaboration and content management software maker Huddle. ”People now expect enterprise software, or the software they’re using everyday at work, to be as sexy and easy to use as the tools they use in their social lives.” A big part of that “sexiness” is how simple a product is to use, the panel agreed, which means that today, the UI and user experience are far more important for enterprise software than they once were. “Now it’s not about how do I make a product that I can sell to IT, where user interface is the last thing they’re interested in after features, security. It’s how do I make my product sexy for the consumer,” said Phillipe Botteri, of venture capital firm Accel Partners. ”One quote from our head of U.S. was that, ‘generally the bar for enterprise software user experience is so bloody low that we can immediately put ourselves right at the front of this category just by doing the simple things right,’” McLoughlin said. Panelists were keen to stress that winning over staff is only the way into a business. Vendors need the management and security features that enterprise expects if they don’t want to find themselves on a CIO’s blacklist. ”The worst thing you can do is spread across 30 percent of the company and think you’re on the home straight and the CIO nixes you because he’s not happy with your enterprise credentials,” McCoughlin said. “Security is a given. IT buyers don’t buy security, they buy something that solves their problem, but by God it has to be secure because if it’s not they’re not going to buy it.” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 24 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE SAP’s strategy: Cutting complexity, boosting cloud and big data By Nick Heath Software giant SAP has expanded into areas far beyond its roots selling ERP software. But as SAP’s service and product portfolio has ballooned—from on-premise software into cloud, mobile, and in-memory computing—the complexity of buying SAP has also grown. Today, customers report it can be difficult to know which product or service to invest in and whether they are getting value for money. This complaint was raised at the UK and Ireland SAP User Group Conference last fall, where attendees called on SAP to reduce licensing and upgrade complexity. SAP says it has an answer for customers confused by its complexity: its new 360 offerings. These are packages of products and services designed to provide everything needed to serve a specific business area. The first to be released is SAP 360 Customer, a CRM-oriented package that bundles SAP CRM-related tools—SAP CRM, its cloud-based Customer OnDemand, the SAP Jam social software platform, and mobile device management services—to serve content across a range of devices. Customers can buy the entire package at a single price or choose the components they want. Speaking at the SAP Sapphire Now conference in Madrid last year, SAP co-CEO Jim Hagemann Snabe said, “This is the first of a series of solutions that [simplify] the install, the decision, the use, the implementation, and the pricing.” Carter Lusher, chief analyst for software and enterprise solutions at Ovum, also spoke at the conference. “Something that seems to be pulsing through all the presentations is relevance and simplification. So simplifying the technology, the user experience, the deployment options on the product side. Then on the business side you’re simplifying the licensing and pricing,” he said. “What they’re really looking at is how they can be more relevant to the customer.” But satisfying the customer on issues like licensing and upgrades is going to be something of an uphill struggle. SAP’s UK and Ireland User Group released a survey showing the majority, 80 percent, don’t understand how to upgrade to or integrate the cloud-based SAP OnDemand modules with existing SAP implementations. Migration costs also remain confusing for customers, with 70 percent of UK and Ireland users saying that SAP has not been clear enough about the cost of migrating from SAP BW and BI to SAP BusinessObjects. The primary complaint by SAP users in the UK and Ireland about SAP licensing is, according to vice chairman of the regional user group, Philip Adams, the inconsistent way in which SAP licenses its products and services. For example, while some are by licensed by user numbers, others are by data use. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 25 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE However, SAP is trying. Tim Noble, SAP’s managing director for UK and Ireland, pledged to the UK & Ireland User Group Conference that SAP would endeavour to stick to a single metric when licensing and said the group is committed to making licensing 20 percent less complex. Speed of delivery For SAP, being relevant to customers also means matching the competition when it comes to the time it takes to implement its software and services. Since its launch in 2010, SAP Rapid Deployment Solutions (RDS) has been helping reduce the time to get up and running with SAP. RDS bundles SAP software, services, and tools, along with best practices for implementing them. Generic, preconfigured software and services are favoured, rather than bespoke offerings, with a view to implementing them rapidly. SAP claims delivery usually takes 12 weeks or less. Lusher said that SAP had to get nimbler, as it was losing out to competition like cloud CRM vendor Salesforce on speed of implementations. “They were getting killed by people saying, ‘Sorry can’t wait a year,’” he said. SAP is also improving the rate at which it releases new products. According to Snabe, SAP has halved the 18 months it used to take to get from product conception to release. Cloudy future SAP’s pursuit of faster deployment and greater customer choice has also driven development of an extensive portfolio of cloud services. Today, it offers counterparts to its suite of products in the cloud, even if they don’t yet share all the on-premise functionality. “SAP used to say it never wanted to bring the core ERP to cloud and yet that has not proven to be true,” said Henry D. Morris, senior vice president of worldwide software and services research at analyst house IDC. Morris believes that over time, SAP recognised there is a market for purchasing individual ERP components through the cloud and decided to make moves into the space to keep pressure on competitors like Salesforce. SAP has services for targeting customers with SAP CRM OnDemand: staff, through SuccessFactors, suppliers, through Ariba, and financials through its recently released Financials OnDemand. It also has its cloud business suites, Business ByDesign and Business One. By offering cloud alternatives to every product in its portfolio, SAP is hoping to meet those twin goals of simplicity and agility. Upgrades will be pushed out instantaneously and its cloud offerings can be paired with its mobile device management offering, Afaria, to present that information to many different devices. Their centrally managed, always connected nature also makes it easy to build in support for social features, like social and collaboration platform SAP Jam. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 26 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Sven Denecken, VP of SAP’s OnDemand solutions and head of co-innovation, said that SAP plans to eventually give its on-premise and cloud services the same functions and features. But while SAP’s OnDemand offerings may appeal to new customers, many existing customers can’t see a good business case for switching to its cloud services. 58 percent of the UK and Ireland SAP User Group felt that the company is not making it attractive enough for on-premise customers to migrate to cloud solutions. Alan Bowling, chairman of the UK & Ireland SAP User Group, said the biggest challenge for SAP is persuading its existing customer base that they need to add a cloud service to their on-premise software. “You move to the cloud because you’ve got some significant functional advantage that you really can’t get any other way or it provides a more cost-effective way of working once you’ve exhausted your current infrastructure. You’re not going to abandon infrastructure; that’s not a great use of assets.” Big Data and better performance SAP is also looking to bring performance improvements to its software and services. It plans to offer its inmemory computing platform, Hana, as a base for many of its products and services. This applies both to its cloud services—where Hana is already used as a backend database and computing platform for the likes of Customer OnDemand and Business Objects BI OnDemand—and its on-premise software, where it already can be used with SAP CRM. Hana’s in-memory storage, column store, and parallel processing architecture excel at Big Data analytics, in particular analysing hundreds or thousands of terabytes of data from many sources and making predictions in real time. SAP reports that Hana can reduce time taken to return reports by up to a factor of 100, allowing businesses to operate in ways not previously possible. For instance, it could allow a retailer to offer personalised promotions to shoppers via their mobile based on where they are in a store, their purchasing history, and other data. SAP sees the addition of Hana to its product and service line as a feature to give it the edge over competitors rather than an opportunity to raise prices, Snabe said. Although the Hana platform isn’t a panacea when it comes to analytics, SAP’s commitment to expanding support for Hana in its portfolio should reassure UK and Irish users who say they are “having challenges around the speed of processing and analysing SAP data.” Bowling called Hana a “game changer” for Big Data analytics and said its release, at a moment when businesses are amassing huge amounts of data, is “timely.” Future challenges SAP is changing because its customers are demanding simpler and more powerful ways of running their business. Lusher said this change is increasingly driven by the sky-high expectations set by our experiences as consumers: We expect computing to do what we want, when we want it, on the device of our choosing. Today, the same is increasingly expected of business software, he said. “The complexity equation goes up for vendors but it goes down for their customers. It’s a wholly different mindset that’s driving the vendors crazy but they can’t push back the tide.” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 27 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE GE’s $200 million bet to resurrect IT By Jason Hiner GE Appliance Park is an icon of American industry in Louisville, KY. | Photo credit: Jason Hiner “IT can’t be what holds this project back.” That’s what Charlene Begley, CEO of GE Home & Business Solutions, told CIO Alan Kocsi. The project she was talking about has become the poster child of the “Revitalization of U.S. manufacturing.” That’s how it’s hailed by politicians, business leaders, and workers. They view it as proof that America is still a great place to make things. At its core, the project is about manufacturing refrigerators, water heaters, and washers at GE’s historic Appliance Park in Louisville, KY—a plant that was on the verge of shutting down just four years ago. In 2009, General Electric Chairman and CEO Jeff Immelt said that GE was committing to a $1 billion reinvestment in U.S. factories and the creation of 1,300 new American jobs by 2014—mostly manufacturing jobs returning from China and Mexico. As a result, GE’s Appliance Park has sprung back to life, sprucing up its warehouses, retraining workers, and purchasing the latest manufacturing equipment so that it can launch new product lines of appliances from the Louisville plant. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 28 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE However, the company had an IT problem that threatened to derail its ambitious plans for 21st century manufacturing. The GE Appliances division was running outdated software and systems that were cobbled together over decades. It was a tangled mess of custom apps that didn’t talk to each other and the result was that it took way too long to get reliable information about the state of business processes and the overall health of the business. The systems were simply not nimble enough to support the kind of lean manufacturing operation that GE needed to make it economically viable to build appliances in America. IT was a game-stopping obstacle. How GE Appliances overcame that obstacle—or more accurately, is still in the process of overcoming it—says a lot about where GE is going as a company and how today’s enterprise IT departments are having to make radical changes to adapt to the relentless pace of a faster, leaner, and more global business environment. Inside GE, this initiative has been dubbed “ERP+.” TechRepublic interviewed executives, IT leaders, and key employees at GE Appliance Park to get the story on how they are pulling it off. The near-death experience GE broke ground on Appliance Park in 1951. Just two years later, the site employed nearly 10,000 workers and became a paragon of American industry when GE purchased a UNIVAC computer to handle payroll for all those employees. It was the first business in the world to own a computer—only governments had owned them up until that point—and Appliance Park was the first non-governmental site to host one. Appliance Park was a beacon of progress in America’s post-World War II manufacturing boom. By the 1970s, Appliance Park was churning out millions of appliances—from washers and dryers to refrigerators to air conditioners—and employment at the manufacturing facility peaked at almost 20,000. With that many employees, it became a hotbed for labor disputes and was the site of several highly publicized worker strikes. But by the 1980s, GE began shipping some of its manufacturing work overseas to Mexico and China to reduce costs, and Appliance Park started to shrink and wither. From 1994 to 2007, GE avoided hiring new hourly workers at Appliance Park. Employment dropped to about 5,000 workers. Then, the 2008 global recession nearly wiped out the facility. The U.S. housing market collapse brought new home GE had the first commercial UNIVAC computer in the 1950s. Photo credit: GE Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 29 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE construction to a halt and since more than 95 percent of the sales of GE appliances are to the American market, it had an immediate and devastating effect. In 2007, the appliances business had been the business of the year inside GE, riding the hot U.S. economy and the red-hot housing market to strong sales. But when the bubble burst on U.S. housing, the dependence on a single market led GE executives to consider spinning off or selling the appliance business to one of its appliance competitors that was more diversified globally. However, when GE shopped around its former golden child, it didn’t find any buyers. It was too expensive, and the long-term prospects of the U.S. market were too uncertain. Those were dark days in Appliance Park. No one knew which company might end up owning the business, and there were serious doubts about whether any buyer would want to keep the aging facility open. Employment at the plant dropped to under 3,000. Then came a ray of light. When GE failed to find a buyer, Immault announced in 2009 that not only was the company keeping its appliance business, but it was going to make a dramatic reinvestment in Appliance Park and bring a lot of the product development and manufacturing for appliances back to Louisville. There were three factors behind the startling about-face: • The federal government stepped in and provided assistance from the Recovery and Reinvestment Act of 2009 and ultimately gave a slew of tax breaks and incentives for GE to build a new breed of energy-efficient appliances using U.S. labor (a.k.a. “green jobs”). The Kentucky state government and the Louisville city government also put together aggressive tax incentive plans. • The local union in Louisville agreed to a wage reduction in which new manufacturing employees would start at $13/hour (roughly $26,000/year), or the same wage that workers at the plant received in 1980. That was down from $22/hour, as the union and the community made the tradeoff of more work versus higher paying jobs. • GE decided that it could change its business model for appliances. It had previously outsourced much of its product development and manufacturing to overseas suppliers (many of whom were now entering the market with their own products). GE had relied on the strength of the GE brand and the company’s distribution to make money. However, GE made a bet that it could “invest, in-source, and innovate.” In other words, by bringing product development and manufacturing back to the U.S., it could decrease the time it would take to bring new products to market and out-innovate its competitors in the appliance market. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 30 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE GE’s Appliance Park campus is 900 acres and has its own zip code. | Photo credit: GE GE’s Appliance Park campus is 900 acres and has its own zip code. | Photo credit: GE The IT problem Despite the victory of keeping Appliance Park open, and all the excitement around bringing jobs back to the U.S. and launching new product lines from Louisville, a dark cloud threatened to rain on the parade. The existing IT systems in Appliance Park were not prepared to support the kind of hyper-innovative environment that GE Appliances was staking its future on. “We didn’t really invest in IT for 20 years,” said Kevin Uhls, IT Director of GE Appliances. GE Appliances had 2,673 disconnected workflows, 530 applications, 444 IT platforms, and thousands of databases. The integration between these systems was almost nonexistent. Uhls characterized the IT environment as “very good silos and very little trust.” It was a mess. And it couldn’t support the high-tech manufacturing juggernaut that GE wanted to create at Appliance Park. So GE went hunting for a CIO who could lead an IT transformation. They called Alan Kocsi. Kocsi had worked at Appliance Park 15 years earlier. Since leaving Louisville, he had worked at several divisions within GE, including Healthcare and Capital, and he spent a good deal of time in Asia with GE Corporate. Since an important segment of the IT department at GE Appliances was located in India, that experience was highly valuable. When GE Appliances approached Kocsi in late 2010, he was living in Florence, Italy, and working as the CIO of GE Oil & Gas. Kocsi earned recognition at Oil & Gas for leading the integration of the company’s ERP, PLM, and CRM systems, which saved $38 million and reduced the time it took to create proposals from 15 days down to a single day. Copyright ©2013 Alan Kocsi, CIO of GE Appliances CBS Interactive Inc. All rights reserved.
  • 31 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE “I got the phone call,” Kocsi recalled. “And they said, ‘Would you be willing to come back to Appliances to lead this project?’” Kocsi was intrigued. He remembered the GE executives telling him, “We’re reinvesting in the business. We’re going to change the game. You know the [appliance] business.” It was a new challenge, a big challenge. But Kocsi was quietly confident that he had the experience to help Appliance Park pull off the kind of big transformation it needed. “I had a track record at GE for doing some different things,” he said. “I was the one who had set up all of our software development centers in India. And I had a history of doing ERP projects. It was good fit.” ERP+ When Kocsi returned to Louisville, it didn’t take long to figure out that he had a huge task in front of him and a lot of urgency to drive change quickly. “When I got here we had no budget, no plan, no team,” Kocsi said. “But we knew we had these M1 product go-lives staring us in the face and we didn’t want to put the new business model on the old systems.” M1 was GE’s internal name for the reinvestment program that was bringing product development and manufacturing back to Appliance Park. GE was on the verge of committing a lot of time and resources to the legacy platform that tied together the most important parts of the computing environment. Kocsi knew that it wasn’t the answer for what the team needed to build. “I sat down with the CEO and the CFO and they told me that the thing they loved about the IT department here is that it did everything they asked. The thing they hated was that the IT department did everything it was asked. They were looking to us to provide guidance as opposed to just following orders, to take a swing and do something different.” It was January 2011 when Kocsi arrived. He was ready to do something different—really different. Kocsi quickly evaluated the tangled mess of systems that Uhls described. In fact, he recognized a lot of them. “I knew most of the systems because they really hadn’t changed in 15 years,” he said. He decided to pull the plug on the vast majority of them. The problem with the existing systems wasn’t just that they were outdated and didn’t integrate well with each other. It was also that they were so customized and specialized that only the employees at GE Appliance Park knew how operate them. In some cases, that meant only a handful of people. There were times when the company had to practically beg employees not to leave or retire because they were the only ones who knew how to operate the systems. A standard solution was needed. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 32 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Kocsi said, “We cancelled about $6 million of stuff that we were going to do on the legacy environment. We sat down and in 90 days we crunched a plan that said, ‘This is the tech stack we’re going to go to.’” The tech stack involved taking hundreds of apps and platforms and a bunch of custom ERP solutions and consolidating into one standard ERP from Oracle and a handful of supporting apps. Here’s what the primary stack looked like: • Supply chain management (SCM): Oracle and Proficy (a product from GE Intelligent Platforms) • Order ship bill: Oracle • Financial resource management (FRM): Oracle • Product lifecycle management (PLM): Windchill • Customer relationship management (CRM): Salesforce and Siebel (an Oracle product) The first three items on the list are traditional components of ERP, which is all about driving efficiency by closely integrating these systems. However, Kocsi and team wanted to tightly integrate all five components, in a move that they dubbed “ERP+.” Photo credit: Jason Hiner Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 33 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE “We rolled up an original estimate of what this was going to cost. It was in the neighborhood of $150 million,” Kocsi said. “We sat down with the business and we said, ‘Look. We’re going to stop working on a whole bunch of other things that are not strategic to the business and we’re going to replace about 75 percent of the environment.” The reason Kocsi was able to do that without freaking out the entire business unit was that he went to Mark Shirkness, General Manager of Appliance Distribution Services, and made him a partner in the project. Kocsi said he had heard a lot of great things about Shirkness as a leader, so he went directly to his office and sold him on the plan. Then he got the CEO to appoint Shirkness as the business leader for the ERP+ project. By the end of the first quarter of 2011, Kocsi and Shirkness had their plan. “We pushed about 70 percent of our resources to [ERP+],” Kocsi said. “We looked at licensing costs and we said, ‘If we stop doing the other work, it’s about $40-60 [million]’ at the time over a five-year spread and we said, ‘That’s not bad. The business can digest that.’” But as part of the overall technology plan, GE Appliances would also need a modern data center to support the kind of cutting edge systems required to run this type of environment, and that was going to add cost to the plan. So at a time when more and more American companies were outsourcing their data centers to the cloud, GE Appliances decided to build one of the world’s first LEED Platinum Certified data centers right in the middle of Appliance Park—not far from where it had implemented the world’s first commercial UNIVAC computer five decades earlier. (It should be noted that a variety of tax breaks and government incentives helped make it economically feasible to put the data center in GE’s Louisville facility.) Agile deployment Even with its aggressive plan to move to a more standard technology stack, getting full buy-in from the business stakeholders, and a new data center on the way to support the whole operation, Kocsi and his team still faced one seemingly insurmountable obstacle: Time. After taking 90 days to put the plan together, the leadership team entered the second quarter of 2011 with a lot of enthusiasm about the plan but no idea how it was going to pull it off in time to help the business start shipping its next-generation appliances by the first quarter of 2012. Using the traditional “waterfall” project management methods, a project of this scale would have taken at least 18 to 24 months to implement. It would have meant gathering tons of requirements, creating sequential schedules, and delivering all the value at the very end when the project completed. “We knew that there was no possible way of using traditional waterfall [if] we were going to hit any of our dates,” Kocsi said. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 34 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE “We would have overdeveloped,” Shirkness added. “We would have been trying to create too much solution, instead of trying to phase it. Our appetite is too big.” So the team started searching for alternatives. “We also looked around the industry,” Kocsi said. “For example, we talked to some folks who had been involved in the Whirlpool [ERP] implementation that broke the business. We did some benchmarking around people who weren’t as successful and that was our number one [goal]: ‘Don’t break the business.’” What the group ended up doing is the part where this story gets really interesting. Knowing that it needed to create business value much faster than the usual enterprise IT project, the team decided to try a mashup of bleeding-edge techniques from several playbooks—business management, manufacturing, and software development. The result was creative, risky, and highly unorthodox. But it has been so successful that it may turn out to be a new model for how to run business technology projects and how to organize IT. A decade from now, I expect you’ll find a full description of it in college courses and textbooks on business management, and it will be filled with fancy jargon about Agile, Gemba, Lean Manufacturing, Moonshining, and Andon. For now, we’ll mostly try to sum it up in simpler terms. What GE Appliances decided to do was break up the project into smaller chunks. Things that essentially would have been software components or features in a bigger rollout were now treated as individual products, and as they were completed, they were rolled out into production so that users and the business could start benefitting from them—and improving them—right away. This approach is based on Agile Development from the software programming world, where the focus is on a continuous set of incremental releases rather than one big software release. “We started the process in the April/May [2011] time period,” Uhls said. “The team went through the Agile process and getting into their sprints and builds and releases. We had our first release in late October.” In other words, within six months of starting the project, the group was already pushing out new pieces of the platform for employees to begin using. But part of the formula was that they pushed out the release to a department or subset of users, who used it and gave feedback. Then the release got refined and improved and the rollout went out more broadly to the rest of the company. Uhls said, “Instead of pushing it out to everybody, we pushed it out to one product at a time. That gave us the ability to learn quick and fail fast. We learned that there were issues with some of the things we needed to do. We were able to work quickly to get that fixed within two weeks and then continue the rollout process.” One of the challenges of the incremental approach is that some processes were moved to the new system while other processes were still in the old systems. Uhls said, “Because we’re doing it in stages, we had to build bridges—temporary bridges.” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 35 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE Shirkness said, “It’s a challenge to the user because we’re used to delivering the whole pie or cake. It’s part of our culture. We’re used to getting it all. Now we’re just giving them one piece of the cake at a time. And there’s a challenge there in saying, ‘I’m going to give you something but you can’t do your whole job with it.’ You kind of have to grow into it. So you get pieces of the functionality, and that’s a little unsettling because they’re worried about when’s the next piece coming, what does it look like? … The user needs to get used to a different way of dieting, of getting their nutrition.” The Big Room The way the team overcame the user challenge was to make the users part of the process from the very beginning. They broke down the walls between the business and the IT department and between the technologists and the users. What was the magic formula? They put them all in the same room. They created a mission control room for the ERP+ project and co-located the IT people, the business stakeholders, and the employees who would eventually be operating the software all in the same room. Shirkness said, “That’s the whole idea behind The Big Room: It’s to create collaboration from the get-go and it’s one seamless team. You really can’t tell the difference in many respects between one of Mark’s business people and one of Kevin’s IT people. In many aspects they walk and talk and do many of the same activities. The idea of The Big Room is to get the people that have to make decisions as close together as possible without barriers in between.” GE employees collaborate in the ERP+ Big Room. | Photo credit: Jason Hiner Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 36 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE “There are no handoffs, by design,” Uhls said. “If you’re in a circle instead of a sequential, there are no handoffs.” Kocsi said, “We drive decision-making faster. And you just break down all the communication barriers by doing it this way.” This is based on the Lean Manufacturing concept of Gemba, which means “The real place” in Japanese. The idea is that you have to go to the place where the real work is being done to create value and make a change. At Appliance Park, one of the key components of The Big Room, where most of the work for ERP+ was being done, was visual decision-making. All the active teams and working groups had charts, diagrams, timetables, giant post-it notes, and other visuals stuck to the walls in their area of the room. In a traditional project, this information would be locked away in spreadsheets, documents, computer files, or employee notebooks. Putting it all up on the walls made it easy for anyone on the team to walk around the room and see the status of all the active parts of the ERP+ project, and it established a consistent level of accountability for everyone working on it. The ERP+ Big Room uses visual management as part of the Gemba process. | Photo credit: Jason Hiner It’s an analog process in a digital world—and in the future maybe all the paper will be replaced by LED screens—but the visual element is a centerpiece of The Big Room and one of the factors that drives a powerful sense of unity among the larger team. It’s also critical for executive engagement in the project, since it gives Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 37 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE them an incentive to do Gembas—or walk-arounds—on a regular basis so that they can check on the state of the project. “They’ve used things like this in manufacturing,” Kocsi said. “We’ve just taken that approach, stolen it, and applied it to an IT project. Never done that before.” Shirkness added, “We stole the principles of ‘Moonshine’ [rapid prototyping], ‘Andon’ [bottom-up quality control], and ‘Gemba’ from the manufacturing world here and have been able to apply it…. It’s mission control but a vast majority of time is actually spent with the user. That’s Gemba. Andon is the ability to raise your issues and get a resolution and speed decision-making. So those are the principles that the room is built on that allow us to work with such speed. You can make good decisions and be informed because you’re at the place where the work is. You’re able to raise your issues and get decisions made [and] evaluate your risk faster. And you’re able to experiment and get experience and grow and learn from ‘Moonshining.’” Here’s an example of the visual charting in the ERP+ Big Room. | Photo credit: Jason Hiner The new normal One word you rarely hear from the CIO and the tech leaders at GE Appliances is “IT.” Rob Freshman, IT Governance Leader, said, “It’s about business process transformation. It’s not an IT project. And that’s the difference-maker.” Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 38 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE ERP+ still has more than a year left before it’s completed, but it’s on schedule and the team continues to methodically roll out the pieces of the platform. The new data center launched in August 2011, and the whole IT revitalization initiative remains on budget at $200 million. Most important, GE Appliances manufactured and launched its first new product, the GeoSpring Hybrid Water Heater, in February 2012. Shortly thereafter, in March 2012, it launched an even more ambitious new product line from Appliance Park with a set of French-door bottom-freezer refrigerators. Photo credit: Jason Hiner The motto for ERP+, which I heard over and over again from Kocsi and the other members of the team, was, “Fail fast to succeed sooner.” Everyone I spoke with at GE Appliances has embraced the incremental approach. Copyright ©2013 CBS Interactive Inc. All rights reserved.
  • 39 EXECUTIVE’S GUIDE TO THE EVOLUTION OF ENTERPRISE SOFTWARE “Never let best get in the way of better,” Kocsi said. “It’s a continual evolution and improvement as opposed to designing something perfect up front…. I love the concept. I love the visual management. I love the Gembas. I think this will be the way we work on projects for the foreseeable future.” Ultimately, it’s given GE Appliances the speed, flexibility, and efficiency that it needs to produce better appliances. That makes this brand of IT a force multiplier and a competitive advantage. “It’s about turning the company around to play offense against our competitors,” Freshman said. IT is playing its role in that. If necessity is the mother of invention, the IT department at Appliance Park should be strangely thankful that it had to rethink its operations to meet an impossible deadline. In the process, it came away with powerful new ways of running the company. And there are plenty of other organizations that can benefit from the example. “Seriously, I’m sold,” Kocsi said. “I’ll never go back to managing an IT department any other way.” Copyright ©2013 CBS Interactive Inc. All rights reserved.