Part 3 in the 6-part “Data-Driven Enterprise” series, which examines the challenges, leadership requirements, measurement models, and best practices to become a data-driven enterprise
With the slew of new technologies that all promise to unleash innovation and growth, enterprises are raising the threshold for taking on new technologies. The central focus is shifting from the capabilities of the application towards the capabilities of the platform. In effect, the chosen platform within the enterprise is becoming a key baseline for considering new technologies: Is a new technology endorsed and certified to run on the enterprise’s chosen strategic platform?
Companies are adopting the lifecycle view that Geoffrey Moore’s Core/Context model used in his book Living on the Fault Line, where enterprises have very different requirements during their useful life in the enterprise:
- Incubation: The new technology is tested for its viability to bring value to the enterprise. The key is speed around testing new ideas and technologies.
- Innovation: The technology must now provide differentiation at scale; thereby, the key is scale, security, reliability, and interoperability with other systems.
- Standardization: The focus is now on running standard processes efficiently, automating as much as possible. Focusing on stability and performance is the key.
- Commoditization: In this phase, the focus is on fully automating and potentially outsourcing the technology, as it is non-strategic to the enterprise.
Over time, all technologies pass through these four stages at varying speeds. As an example, Web design moved from incubation to commoditization within a mere 10 or 15 years.
However, ERP systems stand out as an anomaly in the standardization quadrant. As the core transaction layer for most enterprises, ERP experienced mass adoption prior to the 2000s, and 20 years later, it remains in that quadrant where it might well remain much longer.
The reason for this anomaly is that the continuous changes of compliance regulations and subsequent business control forces enterprises to continuously update their ERP systems; doing so ensures adherence to the required practices to do business. As SAP ERP has evolved and expanded, for example, it has added the capabilities to become more relevant in the innovation quadrant and even into the initial incubation phase. The ability to innovate with the same technology that allows scale increases speed to market and lowers the total cost of ownership.
Why ERP remains business-critical
An often-overlooked part of ERP applications is the frequent updates provided by the vendor through maintenance that ensure compliance to the laws in every country where the enterprise operates, as well as helping control its economic performance. Key aspects include:
All the data and processes are interconnected in the ERP application; any enterprise decision is propagated across all the relevant ERP relations (cost centers, workflows, transactions, and so on). With ERP, enterprises are assured they’re compliant and in control while dispatching material, assets, and people to best serve their markets.
On the other hand, very few of the technologies proclaiming to be eligible enterprise-data platforms have become so. They continue to stay in the Incubation quadrant and engender silos that only narrowly connect to the mission-critical platforms in the enterprise. They build custom hierarchies that do not integrate easily with the core transaction layer and often have limitations on the full data lifecycle including storage, archiving, and deletion.
In the next blog in this series, we’ll examine the importance of leadership.
Read the other posts in the Data-Driven Enterprise series here.