ERP Optimization: How to Save Cost And Gear Up For Business Innovation Simultaneously


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This slide presentation features Liz Herbert, Principal Analyst with Forrester Research Inc, on how to take control of your ERP system to enable growth and revenue generation by learning to:

-Find the balance between cost control and business innovation
-Manage the TCO of ERP systems by reducing complexity
-Identify performance and stability vulnerabilities by focusing on the quality of customizations

To watch the complete webinar, visit

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  • Delete second Name/Title if not needed, but be sure to keep the Month Day, Year information. For a teleconference, after the date, add a period and “Call in at XX:55 p.m. Eastern time” (change the time to five minutes prior to the start of the teleconference).
  • Core applications must be able to enable innovation. Old versions may not support these newer add-ons (too much customization can inhibit having an up-to-date release).
  • CAST has two technologies – Highlight and AIP. CAST Highlight is a cloud-based portfolio assessment technology. There is no deployment and a CIO can get a meaningful analysis of the entire application portfolio within several weeks.AIP is used to continuously track the risk and cost drivers of complex, critical business applications. Risk drivers are issues that can impact the user experience immediately, or open the door to hackers. Cost drivers represent application characteristics, or health factors, that can drive IT cost and put a drag on business agility in the longer term. With AIP, the customer can also purchase several additional components:The Discovery Portal, to enable architects to distribute system blueprints for fast application discovery and impact analysis. Appmarq is CAST’s industry benchmarking repository, the largest of its kind in the world and the source of the annual CRASH report (CAST Report on Application Software Health). Once an application has been analyzed with AIP, it can be benchmarked against the Appmarq repository, producing a set of detailed benchmarking reports by health factor and even into the incidence of specific violations and technologies.The Function Point Managerturns on the capabilities of AIP to measure CAST Function Points. The functionality includes a wizard to establish application boundaries and set up specific transaction analysis to correlate to the standard Function Point methodologies. If needed, the calibration feature allows manual counting experts to calibrate the AIP to conform to IFPUG, Cosmic and other current manual counting methods. All CAST sizing metrics are best used in continuous mode as input into productivity and production quality measurement.CAST can also be used on a case by case basis to accomplish targeted tasks. CAST can provide deep dive information on specific problem areas of an application that may be unstable or slow. CAST can be used to assess security loopholes and drive compliance to regulations such as PCI. CAST can also be used to benchmark applications to their industry counterparts to quickly identify specific pains or organizational issues.
  • ERP Optimization: How to Save Cost And Gear Up For Business Innovation Simultaneously

    1. 1. © 2009 Forrester Research, Inc. Reproduction Prohibited ERP Optimization How to Save Cost And Gear Up For Business Innovation Simultaneously Liz Herbert, Principal Analyst June 2013
    2. 2. CAST Confidential 2 Speakers Liz Herbert Principal Analyst Forrester Research Chris Manuel Director of Partner Solutions CAST
    3. 3. Innovation and growth top technology spending priorities Source: Forrsights Services Survey, Q2 2012 28% 30% 24% 38% 38% 34% 34% 41% 37% 35% 10% 17% 26% 21% 28% 34% 37% 31% 42% 50% We are bringing in new, smaller, more innovative vendors to help us implement new technologies The increased reliance on predictive analytics to help inform better and timelier business decisions The need to grow/expand the business in new geographies and developing countries Business executives taking a more active role in the provisioning and decision-making for technology and IT services The increased use of software, infrastructure or business process as-a-service offerings Consolidation of business units or streamlining operations The increasing use of smartphones and tablets, as well as the apps on them Senior business management's conservative approach to spending on large projects The need to lower our IT operational costs The need to innovate and grow our business “How much of an impact do you believe the following changes and initiatives will have on your firm's IT services spending over the next 12 months?” Moderate impact Significant impact Base: 1,058 IT services decision-makers
    4. 4. Firms balance “run” with “innovate”
    5. 5. ERP is among the leading software investment categories Source: Forrsights Software Survey, Q4 2012
    6. 6. CAST Confidential POLL: How much do you spend on operations versus new development? 6
    7. 7. Balancing ERP Needs With Wants
    8. 8. © 2012 Forrester Research, Inc. Reproduction Prohibited Future areas driving innovation investments 1. Cloud 2. Mobile 3. Social 4. Business Flexibility 5. Big Data Source: Forrester
    9. 9. © 2013 Forrester Research, Inc. Reproduction Prohibited 9 Too much customization increases cost and hurts innovation
    10. 10. CAST Confidential POLL: How do you measure the extent of customizations? 10 * Respondents could select more than one answer
    11. 11. © 2013 Forrester Research, Inc. Reproduction Prohibited 11 Quantifying the customization problem › Customization costs can equal or surpass ERP software costs • Services can run 10x or more of the ERP software costs, of which customization is a big part. › Organizations strive for vanilla implementations, no more than 20% customization • But valid reasons exist for some customization • And managing business demands is tricky › Outsourcing relationships could be structured to drive out extensive custom code and to optimize • But many are “your mess for less” model
    12. 12. © 2013 Forrester Research, Inc. Reproduction Prohibited 12 Why optimize / modernize? Cost: • Protect investment. • Maintainability – long-term support and TCO. • Deliver agility. Innovation: • Capitalize on new technologies. • Exploit new markets and business models. • Empower employees.
    13. 13. Optimize ERP ROI by: › Move away from extensive custom code – revaluate need for this and usefulness of customizations › Technical upgrade to reduce maintenance and support costs › Functional upgrade to improve business value › Consolidate instances where it makes sense › Upgrade / modernize to be able to leverage new features and add-ons
    14. 14. © 2013 Forrester Research, Inc. Reproduction Prohibited 14 Source: Forrester Research, The Business Applications Playbook Forrester’s business applications strategy approach • Define phasing priorities. • Assess buy versus build alternatives. • Determine candidate software suppliers. • Analyze project dependencies and time frames. • Define the business applications road map. • Calculate the (TEITM) business case based on costs, benefits, risks, and flexibility. • Define functional architecture. • Identify technology characteristics and deployment methods. • Determine how current apps fit into future plans. • Map integration and data management strategies. • Define BI strategies and performance measures. • Define the IT/BT organizational model. 3. Define the target architecture. • Articulate the vision for business processes. • Define the technology innovation strategy to support the process vision. • Define scope and objectives of the strategy. • Develop a preliminary business case for the transformation. • Review business and IT strategies. • Assess current apps and technology environment. • Assess process capabilities. • Determine gaps. 1. Assess apps portfolio and processes. • Select apps software and delivery vendors. • Implement specific phases of the road map. • Manage ongoing ownership costs. • Measure results achieved. • Optimize staffing resources and vendor relationships. • Start the whole process over. 4. Build business apps road map. 5. Execute, measure, and optimize. 2. Set the strategy and vision.
    15. 15. Recommendations 1. Assess your packaged applications: how customized are they, how much is this costing you, is the customization driving the right business benefits, are people still using it 2. Optimize your packaged applications: understand where you can reduce customization, modernize applications, reduce the TCO, and increase the supportability and performance 3. Extend applications to drive business innovation: put cost savings back into business value, extend applications into new areas – mobile, cloud, analytics,
    16. 16. CAST Confidential POLL: How many lines of ERP custom code do you have in your organization? 16
    17. 17. CAST Confidential 17 Industry Reflections – ERP Customization Size • Total of 254 applications • Total of 205,614,000 LOC • Average 809,000 LOC #ofERPapplicationsanalyzed Lines of Code (in thousands)
    18. 18. CAST Confidential CAST Solutions – Powered by Products & Services 18 Highlight Benchmarking Application Intelligence Platform Appmarq • Software Analysis & Measurement As-A-Service • Rapid profiling of large, complex portfolios • Predict maintainability and technical debt • Enterprise-grade software analysis & measurement • Multi-tier, multi-technology, architectural analysis • OMG-standardized automated function point counting • CISQ Risk Drivers: Robustness, Efficiency & Security • CISQ Cost Drivers: Maintainability & Technical Debt • 1,500 applications, over 500 million lines of code • Group by industry, domain, technology, geography Application Portfolio Analysis Productivity Measurement & Improvement IT Portfolio Prioritization & Rationalization IT Risk Identification & Mitigation Code Quality Management Vendor Measurement Program Consulting & Professional Services • Industry expertise in software measurement, code quality management, SAM services deployment
    19. 19. CAST Confidential 19 CAST Results in Actionable Visibility The CAST Application Intelligence Center Reports on application health, team performance, benchmarking CFOs, CIOs and VPs Software characteristics, cost and risk drivers, ARB, architectural governance, root cause analysis… PMs, QA, Architects … and feedback & advice on software quality and engineering Development Teams Actionable visibility across the IT organization Application Source Code • CICS, IMS, COBOL, DB2 z/OS • J2EE, .NET and all Major RDBMS • Web Apps, BI, EAI, C/C++, VB, PB • Siebel, SAP, PSFT, OBS, Amdocs Quality Measurement & Functional Sizing Compliance checks Code, Architecture and Data Structure Analysis AIP Analytical Engine Engineering Platform Measurement Platform CAST Data
    20. 20. CAST Confidential Driving Software Measurement in the ADM Industry 20 Key Influencers Recognize CAST 250 Global Leaders Rely on CAST Institutions Engage CASTSIs Resell CASTSIs Use/Resell CAST Elite technology First in business IT Largest benchmarking DB
    21. 21. CAST Confidential Situation  Market leading energy provider  Multiple instances, multiple versions of SAP  Concerns around control over cost & quality  Development & maintenance provided by 3rd Party Challenge  Consolidate instances based on global template  Upgrade older versions  Implement ongoing quality control program Case Study: Realizing Better Quality at Lower Costs
    22. 22. CAST Confidential 22 Case Study: Realizing Better Quality at Lower Costs Solution  Leverage CAST AIP output to establish quality baselines & measure ongoing deliverables  Measure vendor productivity against effort estimates  Provide coaching mechanism for vendors with regular feedback cycles Benefits  Optimized upgrade by suppressing 50% of custom code  Reduced production support tickets related to customizations  Achieved cost savings in both upgrade activity and refactoring maintenance work to new ABAP development HISPANO P70(ECC5.0) Average Market Range Rank Values Rank Values Rank Values Rank Values Rank Values Rank Values TURBOMECA PSI (ECC6.0) 1 3,02 1 2,87 1 2,67 10 3,11 1 3 11 3,18 SAFRAN IS P56(ECC5.0) 2 2,97 2 2,86 8 2,04 2 3,25 2 2,97 2 3,36 SNECMA P83(ECC6.0) 7 2,91 6 2,78 2 2,4 1 3,26 7 2,85 6 3,26 SNECMA P74(ECC5.0) 8 2,9 7 2,77 3 2,37 8 3,19 3 2,87 5 3,27 HISPANO P70(ECC5.0) 9 2,88 8 2,74 5 2,36 5 3,22 10 2,84 7 3,23 SAGEM P13(ECC6.0) 3 2,96 8 2,74 3 2,37 9 3,13 3 2,87 10 3,2 MORPHO P07(4.6c) 4 2,91 3 2,81 9 1,94 3 3,24 7 2,85 1 3,37 SAGEM INDUSTRIES P09(4.6c) 5 2,93 3 2,81 10 1,89 4 3,23 5 2,86 2 3,36 SAGEM P03(ECC6.0) 6 2,92 5 2,8 11 1,86 7 3,21 5 2,86 4 3,33 SNECMA P80(ECC5.0) 10 2,86 8 2,74 5 2,36 5 3,22 10 2,84 7 3,23 AIRCELLE PRD(4.7) 11 2,82 11 2,65 7 2,08 11 3,02 7 2,85 9 3,21 3,33 TQI Robustness Performance Security Transferability Changeability 3,12 3,06 3,16 3,07 3,1 TINE P56 (ECC 6.0) BRISBANO P13 (ECC 6.0)TINE P41 (ECC 5.0) BOREAL PT2 (ECC 5.0)SCOOP P07 (ECC 6.0)DAISY P80 (ECC 6.0) TINE P06 (4.6) INERGY P65 (ECC 6.0) TYHG-Z (ECC 5.0) INERGY PRD (4.6) SULO (4.6)
    23. 23. CAST Confidential Contact details Pete Pizzutillo @OnQuality