Death of the big package deal

A component-based architecture will cut costs, ease implementation and be future-proof

A component-based architecture will cut costs, ease implementation and be future-proof

There are few greater sources of frustration for a senior executive than large spend on IT, particularly on big enterprise resource planning (ERP) packages.

Why does it always cost more than originally anticipated and is delivered late? Why do the investments typically constrain, rather than increase, the ability to change? Why do these investments rarely provide the return that was once envisaged?

The requirements for IT systems are simple, at least in theory. They need to be cheap, quick, easy-to-use and insulated from any future changes in technology, sometimes characterised as future-proof.

The implementation problem is a structural one, largely a consequence of the limited choices presented by today's software packages. The emerging backlash against major ERP investments or big customer relationship management installations is further evidence of the problem. Change is becoming a reality with the advent of Web services because it is forcing re-examination of the principles that underpin most enterprise architectures - whether to go for components rather than products.

The board must understand that every technology investment will be obsolete soon after its implementation. So an attitude that forces more questions about the cost of replacement or integration than just the cost of the product will prompt an approach where you will be engineering for agility.

The agents of change will not be individual companies, they will be partnerships between suppliers and customers that change the economics of IT investments. This is a revolutionary concept often referred to as sharing the risk and reward.

So how do we achieve future-proofed solutions? The demands of many enterprises on IT are quite simple, at least from a business perspective. Give us critical business information rapidly, effectively and at as low a cost as possible.

The requirements facing companies include visibility on customers, products, financial intelligence and inventory levels to name but a few. However, the real question is: can we make sure that whatever solution we choose today does not constrain us from providing whatever we will need in the future?

It is this last point - making sure that the enterprise is not constrained in the future by the solution to today's problems - that lies at the root of the challenge IT faces. Even if the IT function can address all the other issues, it must not create a new legacy, thereby merely adding to the strategic constraints of the business in the future.

IT is commonly understood to be a key enabler of an enterprise's evolving strategic goals and objectives. But IT's role in large enterprises is possibly the major difference between strategic success and failure and it needs to be recognised as such.

The challenge for enterprises, therefore, rests on their ability to keep moving and to be agile. For this to happen, enterprises must be able to adjust and adapt their processes to support and meet their strategic choices and objectives.

The good news is that the emergence of Web services and associated component-based frameworks is finally making this solution viable. The Web services vision will allow companies to access and use components from multiple internal and external parties, enabling companies to switch components in and out as business needs change.

Enterprises can now opt to implement component-based enterprise architectures and allow the benefits of Web services to be harnessed effectively, wrapping and integrating legacy applications as well as providing new functions. The critical agent of change will come from within major enterprises recognising that they can indeed make smarter IT investments, delivering the returns they need.

The business models of the IT suppliers will be contingent on the quality and success of the solutions they provide for enterprises, with their Web services and components being purchased on a pay-as-you-go basis. Enterprises which embrace this route successfully will, therefore, redefine their relationships with IT solutions suppliers, leading to a notion of proper partnership, where risk and reward begins to be shared.

One thing is certain: the time for large big-bang IT investments may well be up. However, it would be a mistake for companies to use this as an excuse for walking away from the benefits of technology investment.

Charles Mindenhall is co-founder of Netdecisions

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