I seem to remember that the academics in the early 90s were writing fascinating papers on the need to rethink the alignment of resources through out the enterprise by using the new wonder technology of Client-Server which of course led to a whole round of investments in ERP systems. Now there is a whole new round of papers saying we got it wrong, this has not added value etc., and not surprisingly, there is Nicolas Carr, of ‘Does IT matter’ fame, or notoriety depending on your point of view right there at the front of the movement.
For a more thoughtful approach on the topic, Andrew Mcfee, of Sloan Business School, offers an evaluation of the pros and cons in his Blog titled ‘Are Enterprise Systems part of the problem or part of the solution?’
As Andrew points out using other pieces of published work from other people as well;
‘if ERP wasn’t working then business managers wouldn’t keep investing in it’
. I think I would go one stage further; my view is; if you want to stay in business with your auditors you will need to invest in your ERP system.
But, this also illustrates what I see as the real issue, namely ERP is now seen as good, but standard, business practice and not as a competitive capability, the usual case of the cutting edge of technology becoming blunted with time and change. Enterprises need effective ERP systems, but not so much for the competitive edge of utilising their resources better, more just to stay in business these days. Why these days? Because rules and regulations assume that you can manage through ERP.
The competitive argument has moved from centralised understanding of resources towards decentralised optimisation of opportunities in doing business. The, so called, Front Office now being the point to focus upon as opposed to the, so called, Back Office of ERP systems. Interestingly there is a fair argument to say that technology has created both the need and the capability through cause and effect. Again Andrew Mcfee comes in with a good contribution, (if you haven’t guessed by now, yup I am really interested in a lot of his work), in which he introduces the idea of ‘de-coupling’. As far as I am concerned is another way of saying ‘loose coupled’ and therefore firmly pins this new focus to changing technology capabilities.
Now comes my own thinking; I believe that the so called ‘Long Tail’ effect is forcing businesses to enlarge their revenues, and profits, by entering more segments in more markets, and that this is where the competitive benefit of a new wave of technology lies. However, there is a corresponding impact on an enterprise in the fragmentation of its core activities, and this drives two requirements; a stable effective ERP for recording commercial transactions through Data integration, and, something new, that I call ‘Synergy Resource Planning’, or SRP. This is a horizontal layer across the business between ERP and the new optimised to differentiated Front Office where integration takes place through process. Yup it’s the SOA argument, but thought about in a different way.
The CEO acquires companies, and reorganises business operations, in order to gain the beneficial leverage across the business from the combination of capabilities. We need to approach SOA with this business driver in mind and design the differentiated element in the front office to be as ‘thin’ as possible, and gain the synergistic benefit across the business in those elements of the business process where shared orchestration will create this elusive business value.
SAP and Oracle, or Oracle and SAP just to ensure that I am not seen as playing favourites here, seem to be pretty close to this, and BEA seems to almost be saying it, but I have yet to see an open and clear statement as to what we are trying to achieve with SOA in these terms. Having advertised other people’s white papers I hope it’s acceptable to mention my own called ‘Changing the Game’ that deals with this in more detail around thinking of four business layers:
- Personalise – the layer of Web 2.0 if you like
- Differentiate – the layer of optimised business solutions
- Organise – the layer of Synergy Resource Planning through correctly applying SOA
- Comply – the layer of ERP
I haven’t talked about Personalise and Differentiate in this blog, that’s a different question about the use of Mashups and Web 2.0 in the enterprise rather than a challenge to the value of ERP.