Business to IT Alignment – A Practical Discussion

Business to IT alignment is an objective that most technology and business leaders would agree as essential for agility.  However, ask for a definition of Business to IT alignment or how to implement an alignment strategy and the likely results are conflicting information and vague guidance.  In the following blog I will try to add clarity to this topic as well as provide practical guidance.

Definition

Let’s start with a basic definition of Business to IT alignment by addressing some common misconceptions.  Business to IT alignment is far more than just Project Portfolio Management (PPM).  Business to IT alignment consists of several domains:

Knowledge Map for Alignment

Business – IT Alignment Domains

Several Tier I & Tier II ERP software vendors provide software solutions to address certain Business to IT Alignment requirements, including PPM and Communications (social collaboration).  However, it is important to remember that technology alone is not the answer.  Collaboration tools can be used to generate more noise than effective communication.   Also consider that having strategic initiatives stored in a common platform (ex. PPM) does not mean the all stakeholders share a common interpretation.    

Just as Business – IT alignment is more than just PPM, enterprise governance is much more than just IT governance.  In simple terms, enterprise governance is a process that ensures that enterprise capacity (Business, Operations, IT) are working on the right things at the right time to enable business goals. It’s a set of guidelines that focuses on organizational success while managing associated risks.  Alignment is hard to achieve when governance is not consistent across the enterprise.  Knowledge transfer is the most underestimated and misunderstood area.  Effective knowledge transfer is more about education and trust than software and templates.  Before one can be successful with Business – IT alignment it is important to fully appreciate the scope and breadth of effective alignment.  A viable alignment strategy must address the key challenges listed in the next section.

The Challenges of Business to IT Alignment

Consider the following alignment model.  This is a very simple model that I would like to use for discussion purposes.

Governance Model

Business – IT Alignment Governance Model

Allow me to highlight some key challenges associated with the traditional alignment model provided.  First is the notion that Business and IT operate separate silos.  Notice in the example above that there are separate Business and IT goals.  Thus, there must be an exercise to reconcile Business goals and IT goals to identify commonalities and gaps.  Practically speaking, given the level of effort required to align these separate strategies, a reasonable conclusion is that alignments occur periodically based upon corporate milestones.  This is where the model breaks down because effective alignment must be a daily activity.  Every business request from strategic initiatives to daily support tickets is an opportunity to reinforce alignment.  Another possible concern implied in this model is that the majority of alignment effort happens at the enterprise level.  Sustainable alignment must happen at every level within the organization.

A results-oriented alignment strategy must address the inhibitors of alignment.  Consider the following relationship between alignment and communication:

Alignment and Communication Inhibitors

Alignment and Communication Inhibitors

Success alignment requires successful communication.  Successful communication requires the effective use of all the key communication skills

Key Communication Skills

Key Communication Skills

Process is important but the soft skills like communications, emotional intelligence (empathy), and knowledge transfer will have the greatest import on long-term alignment success.

Practical Steps to encourage Alignment

Before you can start implementing practical steps you need to assess the level of alignment within your organization.  The Strategic Alignment Maturity model referenced below was developed by Dr. Jerry Luftman and is based upon the Capability Maturity Model Integration (CMMI).

CMMI - Strategic Alignment

Strategic Alignment Maturity

Once you have identified your current maturity level then you can devise realistic, increment steps to move forward to the next maturity level.  It is also important to periodically assess your organization’s alignment.  What gets measured gets done!

Summary

Why is Business to IT Alignment so hard? Consider the following statements to highlight  the key challenge with alignment.

Business vs IT Value Perspective

Business vs IT Value Drivers

Is Business to IT alignment an impossible goal? No, as long as a practical, measured approach is taken to achieve tangible results.  Business to IT alignment is a strategic goal that can only be reached by taking tactical steps to bring Business and IT closer together to generate mutual understanding and trust. When alignment is achieved communication is effective resulting in valued partnership.

The Next Evolution of ERP: Adaptive ERP

With the initial release of ERP, one of the key “game changers” was the ability of business users to access data and generates reports without direct IT involvement. This empowerment of the business user had a significant impact on business agility. Today, we continue to see ERP vendors focus on providing business-friendly tools for reporting and analysis.  Yet, I can see a new evolution brewing in the ERP industry what I like to call “Adaptive ERP” where business users can perform on-demand actions to meet business changes real-time.  In the next sections we discuss the key capabilities of Adaptive ERP and a practical assessment of where the ERP industry is today.

What is Adaptive ERP?

Adaptive ERP would enable business users to configure, simulate, test, and implement business technology changes with limited traditional IT services (ex. software development).  Predictive analysis will become a reality.  Logical thinking and search methods will be more valuable than technical syntax. Information will become context and even transactional specific.   Following is an illustration of the major domains that Adaptive ERP should address:

Adaptive ERP

Conceptual Model of Adaptive ERP

Domain:  Logical Development

Too often a change in the business model requires an IT development effort.  Any competent IT development will require the following activities:

  • Business requirements gathering
  • Technical design
  • Technical construction
  • Unit, System testing

In general, the greater the number of individuals involved in a project the greater the coordination/communication effort resulting in a greater time commitment.  Enabling business to become agile will require an evolutionary change in how ERP supports business activities.  However, simply removing people out of the equation is not the answer.  What is required is providing business owners the tools and experience required to become more self-sufficient.

Logical Development

Logical Development for ERP

Following is a brief list of the capabilities required to enable business users to perform logical development

  • Business models must be defined as metadata within the ERP software.
  • Business rules are separate from technical components and are exposed directly to business users.
  • Business scenarios are defined separate from the respective business models. Business exceptions are variations to a specific business scenario.
  • Business users should have the ability to run simulations in production (i.e. parallel testing)
  • ERP must provide automated testing support
    • Automated unit and system testing (self-learning via business model metadata).
    • Automated business process test scripting.
    • Test scripts are a results-oriented view of business requirements.
    • Automated impact analysis with logical development change.
  • Business users should be trained in logical and structured thinking.  There has to be a prescribed process to effectively conduct knowledge transfer with the ERP software.  Business users should be able to directly educate (i.e. configure) the ERP software on how they run their business.

Remember that a key value proposition for ERP is to reduce software development.  This is not an argument to eliminate IT but rather to refocus IT from tactical support to strategic activities.  IT will play a very important role in enabling business users in logical and structured thinking.

Domain: Predictive Analysis

Today, there is interest in Big Data and Enterprise 2.0 technologies but they are not the final destination.

Predictive Analysis

Predictive Analysis

At the end of the day, business decisions have an impact on business results. Enterprise 2.0 and Big Data are supportive technologies.  Enterprise 2.0 focuses on the utilization of Web 2.0 standards in developing collaborative technologies like blogs, RSS, social bookmarking, social networking and wikis.  Enterprise 2.0 emphasizes employee, partner and consumer collaboration for creating knowledge.  Big Data is the next evolution in Knowledge Management where it is now viable to manage and utilize both structured and unstructured data.   However, the key challenge remains – how to effectively leverage all the information we are collecting.  We need to flip the following time paradigm:

Data Analysis Cycle

Business Information Cycle

Changing this paradigm will require inference engines that streamline analysis generation and enable predictive analysis.  Following is a brief list of capabilities that will support predictive analysis:

  • Case-Based Inference will provide recommendations based upon data and transactional patterns.
  • Rules-Based Inference will provide tactical, operational decision support based upon standard business principles.
  • Big Data will facilitate the assimilation of structured and unstructured data to identify patterns and provide operational context.
  • Collaborative ERP 2.0 will support collaborative discussions and provide transactional context for decision support.

Advancements like this in analytics will enable business users to focus on the value-add activities of reviewing analysis and drawing conclusions for effective business decisions. 

Domain: Open

Whether or not you are sold on open source ERP,  you have to admire the new paradigm and simplicity that open source ERP promotes.  As we continue to see the consumerization of legacy ERP technologies, the market will continue to drive individual user enablement and vendor independence.  Following is a brief list of capabilities that will promote a more open ERP industry

  • BYOD (Bring Your Own Device)will enableemployees are able to bring their own computing devices – such as smartphones, laptops and PDAs – to the workplace for use and connectivity on the corporate network.
  • BPMN compliance will ensure that ERP business process definitions will agree with business process definition standards outlined in the Business Process Modeling Notation (BPMN) model.  This model is governed by the Object Management Group (OMG).  In my humble opinion, the OMG is in the best position to define a global standard for business process models.  This advancement will be a key enabler to the holy grail of true enterprise system interoperability.  This is no small task and will require significant market demand to promote this standardization initiative.
  • Collaborative Shared Development is a key benefit of an open community.  Sometimes it takes a village of developers to support an ERP solution.  Today, I can go to the Apple App Store to purchase an app for my iPhone.  In the future, we should see an ERP App Store when a customer or an individual business user can download an object (software, report, role-based feature) to customize their ERP experience.
  • Open Partner Network.  The more integrated your ERP is within your business value chain (suppliers, vendors, customers, providers) the more powerful your ERP system can be.  I expect we will see the ERP market put more value in delivered integrations with partner, supplier, and provider networks over software product features.  SOA will be a key enabler for making open partner networks a reality.

Openness is about creating flexibility and the freedom for a customer to respond to the changing business environment in the most effective manner.

Domain: Viable Solutions

A profound lesson I learned the hard way is that regardless of how many features and products an ERP vendor can provide (even for free); it will all be all in vain if the software is unmanageable.  It is unacceptable that a customer has to pay triple and even quadruple the original software cost to maintain their ERP investment.  Some may argue that ERP vendors have not acted in the best interest of their customers by building features upon features without providing tools to significantly reduce the Total Cost of Ownership (TCO).

Simplifying Technical Support

Simplifying Technical Support

Following is a brief list of capabilities that will significantly reduce TCO:

  • Automated testing (self-learning tools).
  • Automated master data management (information awareness tools).
  • Eliminate the need for multiple instances.
  • Assimilated, holistic solutions– loosely coupled point systems will not work and result in greater costs and possible failures.
    • Minimize the technical stack.
  • Higher Quality Assurance
    • Upgrades/Software Maintenance releases included the test cases and results performed by the ERP vendor.
  • Implementation Wizards
  • Support for Hybrid Deployments
    • Software architecture can support either single or multiple tenants.
    • On-Premise, Hosted, Public Cloud, Private Cloud for either applications and/or data.
      • Example:  Customer decides to store mission-critical data on-premise and internal data on the public cloud.

It should no longer be acceptable that an ERP customer has to totally shoulder additional implementation and upgrade costs.  This is not indicative of a true partnership.

Challenge to ERP Industry for Adaptive ERP

Today, we continue to see a consolidation of the ERP industry.  With these acquisitions some ERP vendors provide some limited capabilities of Adaptive ERP but these capabilities are spread across multiple software products and platforms.  An ERP solution is only as strong as its weakest link (integration).  More technologies loosely coupled together usually mean (a) more IT resources, (b) additional points of failure, and (c) a more complicated experience for business users. We have witnessed where ERP software has become bloated with features upon features without any logical progression.  ERP customers are forced to deal and pay for unused features resulting in more frustration than simplicity.

Many top-tier ERP software solution packages use a systems configuration concept to set up the business environment for some time but please allow me to challenge the industry a little more. I agree that several ERP software packages provides configuration concept yet there is no clear decrease in implementation schedule (ex. SAP) or cost savings associated with this approach because the currently exposed configurations do not change that frequently (ex. Earning Codes, GL Accounts). Objects like business rules, scenarios, and exceptions change more frequently. This is a challenge for some ERP software (ex. PeopleSoft) where many business rules are encapsulated within the technical object. Pre-configurations are only a beginning – it adds value in the short-term but ERP is a long-term proposition. In my humble opinion, the key is to expose the underlying business model to business users for greater real-time interaction.

Also, there are Master Data Management (MDM) solutions available to support a tactical level of data governance by removing duplicates, standardizing data and, incorporating rules to eliminate incorrect data from entering the ERP system.  For Adaptive ERP, MDM must advance in what I call “information awareness”.   Information awareness means two things (1) MDM is able to automatically detect and define new information sources within the enterprise ecosystem via data polling, and (2) MDM is able to determine how data is used.  These capabilities will be key enablers for automated impact analysis.

What we need to have is a mature, open, holistic solution where all the individual software platforms are assimilated into a robust, uniformed solution.  This is not simply building a dashboard that brings together two separate user sessions together or an orchestration level that adds another level of technology abstraction and performance overhead.  A viable solution is a manageable solution.

Summary

I’m a firm believer in performing non-competitive business activities as competent and cheap as possible.  In that end I am a firm believer in ERP.  However, the ERP industry has come up short in the areas of total cost of ownership and business adaptability.  Many on both sides of the aisle have wrongly concluded that more software features and increasing the technical stack are the answers for making ERP adaptable.  Putting more power in the hand of business users is the strategic answer for business agility.  People are the most important and adaptive component of a business solution.

IT Should Move Up the ERP Value Chain

A key challenge in my role as an IT ERP Director was to maximize business value with a shrinking budget.  It was quite an education for a person with the majority of his experience in Tier I ERP Consulting.  There are many options competing against IT organizations in providing ERP services (SaaS, Cloud, Off-shore and Near-Shore support models).  Two key battlegrounds are ERP software development for customizations and ERP support.

Show me an IT organization whose key competitive advantage is that they are internal and I will show you a shrinking IT department!  There must be a major shift in IT’s value proposition for ERP support.  In the next sections we will discuss some of the shifts IT ERP shops need to make to stay competitive and relevant.

IT ERP Support Can Be Done Cheaper

For the purpose of this blog discussion let’s broadly assume that there are three tiers of ERP support.

ERP System Support Model

Levels of ERP Support

There has been much discussion regarding outsourcing IT support along with noted advantages and disadvantages.  I will not join the debate on one side or the other but I do consider myself a realist.  Generally speaking, you are looking between 30% to 50% reduction in costs (depending on the study) which just can’t be ignored.  Instead of fighting the change I prefer to control the change in such a manner as to enable my ERP IT support team to generate greater value for our customers. 

Also, consider that there are just some activities you should not outsource.  Referring to above model I have been very cautious with outsourcing Tier I support.  Nothing is more reassuring to a business user with a critical issue than to see their IT support partner face to face and have a real-time discussion.  Cost cannot be the only consideration – just like Dell learned the hard way.    If the activity is not strategic and highly valued by your customer then look for a cheap and competent (not world-class) option that will free your IT resources for greater value-add activities.

Trend:  Competitive Advantage for ERP is Configuration over Customization

With the initial release of ERP, one of the key “game changers” was the ability of business users to access data and generate reports without direct IT involvement.  This empowerment of the business user had a significant impact on business agility.  Today, we continue to see ERP vendors focus on providing business-friendly tools for reporting and analysis.

Yet, I can see a new evolution brewing in the ERP industry what I like to call “Adaptive ERP” where business users will be able to perform on-demand configurations to meet business changes real-time.  This would go way beyond simple user preference configurations.  Adaptive ERP would enable business users to configure, simulate, test, and implement business technology changes with limited traditional IT services (ex. software development).    Today, some Tier I ERP vendors provide some limited capabilities of Configurable ERP but these capabilities are spread across multiple software products and OS platforms.  It’s a great topic for discussion (and future blog) but not what I would consider a sustainable, viable solution for today. 

Key Evolutions of ERP

Major ERP Development Milestones

 

Advice for ERP IT Departments – Focus on Moving up the Value Chain

In my previous experience, I had an opportunity to work for a Tier I ERP vendor developing new service offerings and consulting practices.  A key lesson I learned the hard way was when a service offering is facing significant commodity pressures either you can (a) reduce the cost or (b) move up the value chain where you can generate a strategic competitive advantage. 

Service Categories for ERP Support

ERP Service Categories

In order to move up the value chain not only will include training but more importantly a fundamental change in what IT considers their strategic business value. Remember that a key value proposition for ERP is to reduce software development.  Therefore, software development should not be the key IT value proposition for the IT ERP team.  Many perceptions and expectations must be carefully managed through this organizational transition.  The goal is to evolve IT software developers into IT business technology advisors.  One only needs to look at the ERP professional services industry to observe what the market will bear for software development roles versus technology advisory roles to confirm the above recommendation.  With this move, internal IT organizations will be able to support more advisory and consultative roles once reserved for external consulting organizations.  Just think of the potential cost savings and knowledge retention to your business.

Summary

Is this the end for internal IT support for ERP?  Hardly! However, more will be asked of internal ERP support teams with limited resources.  This may result in a more challenging and stressful work environment.  What use to be considered valuable has become generally accepted and expected from business users.   To remain a strategic partner, IT ERP support teams should look for opportunities to free up their staff to focus higher up the value chain.       

Fact or Fiction: Hybrid ERP Deployments

With cloud computing and cloud ERP gaining additional attention in the marketplace, ERP vendors, resellers, and solution providers are quickly positioning their products and services as “cloud-enabled”.  However, in my humble opinion, to simply put ERP software on a hosted server and provide subscription-based pricing does not a cloud solution make.    A key value proposition for cloud ERP is the ability to support a truly hybrid ERP deployment.  In the next section we will discuss what is an ERP hybrid deployment including the opportunities and challenges this type of deployment presents.

What is an ERP Hybrid Deployment

A hybrid deployment method has the potential to enable customers the flexibility to deliver ERP capabilities in the most cost-effective manner to users. Hybrid deployments would allow for an optimal mix of the major ERP delivery models.

ERP Deployment Types

ERP Deployment Types

An ERP solution that can support a hybrid deployment must be architected in a manner to support multi-platform environments simultaneously.  In general, following are the opportunities that a hybrid ERP deployment can provide to customers:

Advantages for Hybrid ERP Deployments

Advantages of Hybrid ERP Deployment

Opportunity Description
Rapid Implementation A hybrid ERP model may give you the flexibility to quickly implement a new ERP module or feature set.  Even if you decide to deploy on-premise having a hosted site for prototyping and development can give you the opportunity to start design/configuration activities faster.
Shorten Maintenance Cycles As an IT Director I am faced with the reality that IT maintenance cycles are being reduced given increase demand for ERP availability by business users.  Given this fact, I am looking a cost-effective, on-demand IT infrastructure resources (ex. Infrastructure As A Service) to help shorten the ERP maintenance window.
Load Balancing As part of any ERP solution you will have both real-time and batch processing.  There are different performance requirements for real-time versus batch processing. A hybrid model may provide you the opportunity to have unique performance tuning configurations better suited for specific processes.
Greater Vendor Independence I’m not a huge fan of the “single point of accountability” value proposition because I have rarely seen it work.  If an ERP solution can truly support a hybrid ERP deployment then we all should have greater flexibility in choosing the right partners to be a part of our IT value chain to business users.

Challenges with ERP Hybrid Deployments

As the ERP industry moves to a true ERP hybrid model there are several challenges that must be addressed as we take to next evolutionary leap.

Challenges to address as we move to hybrid ERP

Challenges with moving to Hybrid ERP Deployments

Challenge Description
Coordinating Support Activities Coordinating software development and maintenance activities across the ERP platform.  Since ERP support business processes and business processes will cover multiple functional areas (modules), coordination and prioritization of ERP support activities will be critical to reliability.
Integration & Orchestration Integration is a given but business process orchestration will be extremely important to support a seamless business solution execution.
Seamless UI Simply stated, the end-user should not be able to see a notable difference in appearance and performance across the deployment models.
Master Data Management As long as an ERP hybrid deployment requires multiple database instances then Master Data Management will be a key enabler to keep instances in sync.

As one looks across the ERP industry we are observing some real signs of movement with hybrid ERP deployments.  However, at this point I personally would not conclude that the ERP industry has reached the final destination.  In the next section I will list a  few of the core characteristics for assessing an ERP vendor’s ability to support hybrid deployments.

Assessing Vendor Solutions to support ERP Hybrid Deployments

A hybrid deployment approach enable customers to have a more scalable ERP solution versus limiting their sizing options to a single deployment model. Four major factors determine how viable a vendor’s hybrid ERP deployment offerings are:

  • ERP Architecture: Is the ERP solution constructed in such a way that allows software components to reside in multiple delivery platforms (on premise, hosted)? Integration and orchestration of ERP activities are key software enablers to support hybrid delivery
  • ERP Partner Ecosystem: Does the ERP vendor have consistent, reliable partners with a portfolio of hardware/software and professional services to support multiple hybrid delivery models?
  • ERP Pricing Model: Does the ERP vendor allow customers to utilize multiple delivery methods concurrently? Are there any price penalties or legal restrictions imposed on customers from moving between delivery models?
  • Portability: Customers have the ability to move data and customizations from one deployment model to another as needed.

Summary

My view of a true ERP hybrid solution is a software solution that enables the customer the flexibility to deploy both modules and major features across multiple platforms seamlessly.

Hybrid ERP Deployment

Hybrid ERP Deployment Model

A hybrid ERP deployment is a great way to explore the cloud in an iterative, risk-adverse approach.  Hybrid ERP may provide the opportunity for greater innovation, rapid deployment, or isolating batch intensive processes from self-service applications.  The greatest value of a hybrid ERP solution is the additional flexibility it can provide customers to support business processes.  Let’s hope that the wait is not too long.

 

SI Partner for PeopleSoft ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

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