Think big, think governance
Rationalize IT investments and think holistically, rather than one app at a time
By Joy LePree, contributing editor -- Manufacturing Business Technology, 4/1/2002 7:00:00 AM
Information technology (IT) managers at M/A-COM were faced with an integration nightmare. The manufacturer of wireless communication devices acquired a number of companies over several years and had maintained each one's legacy business system. On top of these systems, M/A-COM introduced an enterprise resources planning (ERP) system to serve as the common order-entry solution across the entire company.
"This was placing a lot of demand on all of these business applications, and was destined for failure if we kept adding legacy systems," says Phil Stathas, IT director at Lowell, Mass.-based M/A-COM.
To avoid such failure, the company began the process of IT governance—an organized venture into evaluating management applications. To do this, M/A-COM formed a committee comprised of executive management, IT managers, and strategic leaders in the production and manufacturing areas. This committee was charged with examining the existing systems.
Based on business needs, the multifaceted team decided to retire the legacy systems and migrate all core transaction and business management functions to an ERP suite from Newtown Square, Pa.-based SAP—the same ERP solution M/A-COM had begun to install as an order management backbone. "In essence, we scrapped all the original applications and began anew," says Stathas.
While the M/A-COM team was confident in the ability of the ERP suite to handle most functions, it chose to go with a best-of-breed approach for certain functions. These included collaborative product commerce (CPC) software, for which M/A-COM chose eMatrix, a CPC solution from Westford, Mass.-based MatrixOne, and integrated it with the ERP system. Additionally, the company deployed Promis, a manufacturing execution system from Billerica, Mass.-based PRI Automation, which is geared to the semiconductor industry.
But the carefully considered decisions didn't stop with ERP, CPC, or even plant-floor execution. "We knew we had something that worked within these four walls, but we still needed to give our customers more information so we could reduce the burden on our customer service and application engineers," Stathas says.
This business need required the team to start another project that examined various Web application server products that could be integrated with back-end systems, including the ERP suite. Web application servers, also known as "app servers," are middleware products that play a central role in today's n-tier system architectures. They act as traffic cops for Web-based applications, and connect with back-end systems, data, and application logic. Some app server product suites also bundle in develop tools, personalization software, and workflow capabilities. The M/A-COM team decided to deploy WebLogic, an app server from BEA Systems, San Jose, Calif., to serve this role of supporting Web-enabled systems and external collaboration.
The way to IT governance
While M/A-COM successfully completed a major IT overhaul, many other companies aren't so lucky. However, it is possible to get an IT governance project successfully started and completed, if you choose the right way to do it.
According to the experts, it's important to understand exactly what an IT governance project should do. "IT governance considers the organizational structure and the processes used to align a business strategy with an IT strategy," explains Lance Travis, a vice president with Boston-based analyst firm AMR Research. "Any time a team sits down to evaluate the company's business applications, it needs to make sure those investments are aligned with what they are trying to do as a company. All IT projects should be examined to be sure they solve a business problem."
Since by its very definition IT governance mandates that technology projects link to business strategies, creating a team that is devoted to this task is a crucial step. This governance committee must include a cross-functional mix of resources, according to Alan Rudolph, a managing director with Answerthink, a Miami-based business consulting and systems integration firm. As was the case at M/A-COM, this team should include members from senior levels, including the chief information officer and vice presidents of each line of business that will be affected, as well as key IT personnel.
It's vital that the team represent all facets of the business because it will be required to develop a business plan that identifies objectives and needs, and then translates those business terms into IT terms. This group must also prioritize the projects so they are accomplished in the order that makes the most sense, both from a business and IT perspective.
Experts warn that members of this team should be selected carefully for several reasons. "First, the group has to have the right muscle behind it so that when its members make decisions, they can actually turn them into actions," says Dean Teglia, a partner with Accenture, a New York-based consulting firm. "Second, the members must have the ability to go in pretty ruthlessly and ask how each application is really contributing value to a company. Members also must be empowered and have top-level sponsorship that allows them to make tough decisions about applications."
Wheat from chaffe
Since a large part of IT governance requires that existing systems be examined to determine whether they should remain in place or be retired, it's important to have some guidelines that aid this decision-making.
Experts recommend evaluating existing applications based on several criteria. First, if a company is trying to determine whether a system should be retained as is, enhanced, or replaced, team members need to consider the technical obsolescence of the system, says Teglia. "If a system is based on technology that isn't supported by vendors anymore, you need to determine whether you want to support it internally, or if you want to upgrade to a new technology that has outside support," he says.
Further, users need to examine the capabilities of existing systems relative to the business strategies. "Does the system have the ability to be maintained or enhanced to support your needs at a reasonable price?" asks Teglia. Determining this means a company must perform an analysis of what it would cost to do all the enhancements to an existing system and maintain those enhancements over time, versus the costs of bringing in and maintaining a new system.
Most likely, some systems will be retired and the decision to terminate an application can be difficult, says Bob Tipton, a vice president with Salt Lake City-based consulting firm SBI. "You need to approach the process from a business-oriented view, by looking at the longevity and usefulness of an application, just as you would any asset," says Tipton. "If you have a way to evaluate when it's time to retire a piece of software, you can make that decision more rationally."
To decide when it's time to retire a given solution, Tipton recommends considering how difficult or easy it is to make changes to a system. Often times, he says, companies have a backlog of common requests for important changes. "If you get much past six months in terms of the time it will take to make the changes to software so that it fits the business needs, this demonstrates that the software isn't responsive enough," says Tipton. "That's a clear read flag that it's time to look at something different."
Benchmarking your company against others in terms of IT expenditures is another way to determine if it's time to put a solution out to pasture. "Using metrics that are available from various research organizations will show you what your relative cost for IT expenditures is compared to the rest of the marketplace," says Tipton. "If you spend a lot for outside contractors, or to hire people to support old applications, it's probably an indication that you aren't getting the most out of your software."
Similarly, if you've lost the architects for a given application, it's probably a sign that it's time to replace the solution. "Quite often these long-term legacy programs are supported by people that are leaving the company and you are usually at risk if you continue to lose key individuals," says Tipton.
Evaluating new systems
The IT governance process normally requires that new applications be added in an effort to replace retired systems. While this evaluation process is a bit easier, there are still some important factors to consider.
Initially you need to decide whether buying or building a system will be more cost-effective and beneficial to the business. If the decision to purchase an application is made, you must determine whether it's best to purchase an integrated system from one vendor, or take a best-of-breed approach. Under a best-of-breed approach, the need for system integration consulting, or for middleware products, becomes part of the equation.
Also, when considering the integration issue, keep in mind that a manufacturing company has special needs in this area. "One of the key areas of importance is the global front-office and back-office systems," says Answerthink's Rudolph. "You have to look at how business systems integrate with manufacturing systems. The type of data the manufacturing systems collect, analyze, and make decisions on is based at a tremendously greater level of detail than broader business systems. So integration from business applications to shop-floor systems becomes a critical component of any decision."
After making tough decisions based on integration issues, the committee will need to evaluate available applications. Determine whether a solution will truly meet your individual business needs by asking the vendor to run through some business scenarios you're likely to encounter. "Make the vendor demonstrate the keystrokes needed to handle a particular scenario so you can see how close the software really is to helping you with what you do in your business," says Teglia. "Find out what you must do to enter an order, for example, or to create a work receipt. Then you can determine which product is easiest to use and most suitable for your needs."
M/A-COM used this method to evaluate the functions and business process workflows supported by SAP's ERP offering. "We had them run business scenarios for everything from order entry to shipping," says Stathas. An example, he says, was to show variations on handling customer order quotations.
Additionally, in this economy, vendor viability is an increasingly important issue. "These days, when companies implement a software application, they plan to stick with that application and upgrade rather than replace," says Rudolph. "But following this plan of action means you really have to do your due diligence when you select a vendor."
Part of this due diligence includes checking to see how long the company has been around, examining its financial condition, and how much it invests in upgrading the product from year to year.
Finally, while IT decisions are made almost every day, the actual process of IT governance is done infrequently from the ground up, although adjustments to a governance plan are normal as business needs change. In any case, the initial governance plan needs be taken seriously by top-level executives.
With executive backing for a governance plan, say experts, companies will be more inclined to take action. Accenture's Teglia concludes, "IT governance is a process that a company must take a bold and thoroughly planned approach to, or it won't retire applications that aren't delivering value, or add solutions that will meet their business needs."
| FOR MORE INFO: | ||
| Accenture: www.accenture.com | Answerthink: www.answerthink.com | BEA Systems: www.beasys.com |
| MatrixOne: www.matrix-one.com | PRI Automation: www.pria.com | SAP: www.sap.com |
| SBI: www.sbiandcompany.com | ||
