Would SCM be a differentiator in your Apps Portfolio?
Dennis Gaughan of Gartner in his blog dated 29-Jun-2010 wonders whether its time for corporations to rethink their enterprise applications portfolio strategy (http://blogs.gartner.com/dennis-gaughan/2010/06/29/is-it-time-to-rethink-your-enterprise-application-portfolio-strategy/). Well, I think organizations are thinking about it all the time, sometimes when they do their annual planning and are reminded of the morass in their application landscape and sometimes thanks to M&A (esp for financial institutions) forcing them to look at what to sunset and what to fold in.
In the medieval times, so to speak, all app categorization was done purely on technology basis. For eg:, all java applications whether its claims processing or labor skills management or web order capture would be lumped together with disastrous results on value addition from the IT team to the business. Why? All requests would be seen as tickets to be fixed or enhancements to be completed rather than based on their business criticality. Of late, with business-IT integration increasingly being a reality, its typically done along the lines of departments (finance, HR, supply chain etc) or functions (procurement, sales, logistics etc)
But what was interesting in Dennis' blog was the categorization of all applications into three buckets,
1. System of Record
2. System of Differentiation
3. System of Transformation
This in turn translates to naming these buckets as applications to "run the business, grow the business and transform the business" with progressive reductions in life-cycles.
I am not sure about the life-cycles part though, a lot of master data blues that large organizations face today is because their lumbering old systems are just not in a position to even categorize their item master along UNSPSC lines, instead turning to one kludgy, band-aid fix after another.
The second point I was not in complete alignment was in terms of seeing the word "transformation" (much bandied these days) and "short life-cycles" in one sentence. May be its a mind-set, but I am used to business transformation being typically large-scale, multi-year, mega change management initiatives which cannot gel well with something which Dennis says are developed out of "ad hoc processes", funded out business budgets and having "short life-cycles". IT-led Business Transformation these days is typically used in global-scale examples like instance consolidation, template roll-out and such.
But as a way of looking at the portfolio, this classification is definitely a powerful way to go.
Now, when we take a look at supply chain applications, its clear that those need to come in the second or third category. We've had instances of some of our clients arguing strongly of keeping Sterling Commerce Distributed Order Management or IBM Maximo Enterprise Asset Management as systems of record leading to some intensive discussions (!), but seriously, no one in their right mind would use core SCM applications as a system of record for master data. That said, a lot of SCM apps can be the system of record for transaction data. In the previous scenario, Sterling DOM can be the "single source of truth" for all orders in the enterprise while Maximo can function as system of record for all "work orders" across the enterprise.
Whenever I see the term "grow the business", my immediate connection is with the sell-side supply chain functions or the revenue earners. In that vein, anything that's customer facing (eg: order capture systems) would be the place for maximizing revenue growth. Transformation is a broader word, substantial improvements in existing supply chain (say aroung logistics model or fulfillment options) or even stringing together apps/functions in a unique way would mean transforming the supply chain to something differentiating vis-a-vis the competition.
While we all realize where SCM functions/apps need to fall, the choices would be around what needs to go in which bucket (differentiation vs transformation) when an enterprise looks at its complex, matrix organization built around suppliers, customers, partners, the various business functions they support aligned to the core SCOR philosophy and the applications that help enable these functions. The implications of the new criteria is where Dennis signs of - around vendor selection, security, governance, integration etc - all of which are very valid points within themselves to be deliberated before making the baby steps towards a new portfolio rationalization strategy.