ERP – To the Cloud

By Ken Crafford

Part I

ERPs are strategically important as a “must-have” capability for most companies. They are a major investments, and a large component of total IT spend. CIOs know that getting the ERP aligned with business drivers, while remaining efficient and cost effective, is imperative to a company’s long term strategy and financial success. And they understand the importance of being nimble and keeping up with the constantly evolving needs of their business customers.

Historically, ERPs have been large and complex and expensive to implement and maintain – think Oracle and SAP legacy ERP systems. While they may be hosted or running in the cloud, you still have to maintain and upgrade them, and with that comes significant risk and cost. Keeping ERP’s current and adapting to new business requirements also consumes significant portions of IT spend.  And, if your business is changing quickly, it is very difficult to be keep up with those changes when you are running these very sophisticated, and accordingly, very complex software products.

This leads to the question of what are the alternatives?  Many of our clients are looking to the cloud for solutions that can meet their requirements for functionality, cost, and flexibility.

Solutions are indeed emerging, but with some caveats.  As we have seen in other areas – CRM being a primary one – there are great platforms for delivering top tier solutions.

However, before ERP in the cloud would be ready for prime time, both the applications and underlying platform technology must be rock solid.

The platform architecture and capabilities are critical to how the product will scale to meet your demand, how the vendor can add functions and features over time, how you can add enhancements that don’t break when the vendor updates the core product, and the extent of the ecosystem of supporting solutions that run on the same platform.

And so the crux is not just whether cloud ERP products have the functions and features that you need – you must also look at the underlying technology platform and the ecosystem of products and services that are part of the complete solution.

Fortunately, the market is evolving very quickly and we are seeing some solid cloud ERP products emerging that are based on great technology platforms, and provide a solid foundation for a product that you will probably be using for the next 10 years.

In future posts I will be calling up some examples of these solutions and how they can be leveraged.

Stay tuned.

 

Improve Your Information Security Program and Give Back to the Community

We are very excited to announce that Merritt College in Oakland, CA has graduated its first Information Security class. Merritt College serves the San Francisco Bay Area Central East Bay School districts, which include students from less advantaged backgrounds. The Merritt College Information Security program is a fully accredited A.S. degree with majors in Applications and Infrastructure Security. This program has been two years in the making and results from the partnership with the CISE CIO organization, Merritt College, and CIO’s/CISO’s from leading San Francisco Bay Area companies.  Please find a fuller summary of the program below:

• Courses are designed and delivered by security thought leaders from leading companies including Symantec, Wells Fargo Bank, and McAfee
• Security program includes 30 credits of Information Security classes, hands on labs, and internships with Bay Area companies
• Class projects include forensics of a pharmaceutical organization that suffered a security breach, securing systems on Amazon Web Services, and developing Information Security strategies

We are now looking to place these graduates into Information Security roles with leading companies and organizations. Contact Mark Egan if you are interested in hiring our students to improve your Information Security programs.

 

When Using the Numbers Makes for Good IT Decisions

By Reed Kingston

In his recent blog post, Mark Tonnesen explained why he didn’t rely on traditional business case analyses, such as value case and return on investment (ROI) evaluations, to justify IT investments. I agree with Mark that these methods too often fail to support the right projects, and can fail to expose the wrong ones. I’ll put my MIT quant hat on here for a minute: if you are using tools that are prone to both false positives and false negatives, you should be looking for a new tool, or at least use the ones you have differently.

The problem is not that the financial analysis of an IT investment isn’t important—in fact, it is imperative, as it is for all investments. A good financial analysis casts light on some of the assumptions and trade-offs that are implicit in a large investment decision.

Problems arise when an investment comes off as lower profile, as happens often when reviewing IT investments. Decision making will always be biased against standalone technology investments as these are often poorly understood. How will “we’ll reduce network congestion and improve security by x%” fare in budget meetings against the sales and marketing team (“we’ll open up more markets!”), engineering (“we’ll design more products customers love!”) or operations (“we’ll lower costs with a new production process!”). That could be a pretty tough sell.

Getting to Good Decisions

Trying to justify IT investments without a business case driven by an internal customer organization can be an uphill battle. So how can CIOs and CTOs drive support for sound IT investments? Make sure important IT investments are tied to business cases that support increased revenue, reduced costs, increased customer loyalty and lower churn. Then provide financial analyses demonstrating how the proposed IT investment supports those business cases. This step defines the strategic value of the planned IT investment, making it a much easier decision for everyone to get behind.

Reed Kingston is a managing director at StrataFusion. Contact him at rkingston@stratafusion.com; follow Reed at twitter.com/reedkingston.

Why I Never Look at the Value Case or ROI

By Mark Tonnesen

When evaluating potential IT initiatives, the most common approach is to focus on the numbers and look at the return on investment (ROI) or value case. For example, say your company is considering implementing a new Enterprise Resource Planning (ERP) system. Chances are the CEO and CFO will ask, “What’s the ROI?” Or, “If the new system will cost $10 million, can you show me how it will produce a much greater gain?”

As far as I’m concerned, though, if you’re asking about the value case or ROI when evaluating IT initiatives, you may be asking the wrong question and looking at the wrong things.

What You Should Be Asking when Evaluating IT Initiatives

What gets lost in the value case or ROI approach to evaluating IT initiatives are the bigger questions that are more important than the finance-driven calculations:

• What problem(s) are we trying to solve?
• What is the value to the business of solving this problem?
• What objective/end state can we achieve with this initiative that we don’t have today?
• What’s the best way to achieve our business objectives?
• How important is solving this problem or achieving this objective for the business’ ability to reach its goals?
• How will this help us make better decisions and run our business more efficiently?

Not Everything Can Be Measured (Using the Same Yardstick)

A problem with the ROI or value case approach is that you might be trying to quantify the unquantifiable. For example, say you are considering implementing wireless internet service throughout your office for $XX per month. How do you calculate the ROI on this? You can take a best guess at how this might improve productivity and come up with a number. But that would just be a guess. And it would ignore other factors, such as the positive impact this might have on employee satisfaction or addition benefits such as mobile applications. Once new capabilities are in place and available to the full team, they may lead to unexpected innovations and enhancements that further improve productivity. It is difficult to predict the benefits new capabilities unleash.

The Numbers Can Tell You Anything You Want to Hear

Your team’s best guess regarding the ROI of a proposed IT initiative is just that: a guess. As an example, I once worked with a large high-tech company that was big on ROI. The team worked on a series of technical support initiatives to develop self-service tools for customers. To justify these projects the team put together graphs showing a reduction in customer support cases and calls, and an increase in customer satisfaction.

Knowing what the cost of a support call, the team developed analyses that showed that the cost of each initiative was lower than the cost savings it would deliver and the projects were approved. Unfortunately, the projected savings never materialized. The team neglected to include factors such as growth, customer adoption rates, issue severity addressed by the tools, continuous improvement costs and operational support costs for the tools. An analysis that included all the right factors—beyond just cost—would have helped the company make a better business decision.

Where to Focus: Business Impact

When evaluating IT initiatives, I recommend steering clear of the value case and ROI approach. Rather than pulling numbers out of the air to justify (or kill!) a program, take a hard look at the business impact that the initiative will have. Ensure you are solving the right problem and include measurement points along the way to check whether the expected goals are being achieved.

Mark Tonnesen is a partner at StrataFusion. Contact him at mtonnesen@stratafusion.com; follow Mark at twitter.com/mtonnese.