Or in other words leveraging both:
Digital Innovation and greater Business Insights = i Squared

Blog by Tim Main – IBM Analytics – Information Management and ERP – Technical Director

24^th January 2018

Executive Summary – The challenge facing CxO’s, CIO’s, CTO’s and Chief IT Architects

It is clear businesses across multiple industries are having to manage unprecedented rates of technology change, whilst concurrently having to Innovate to both manage and address new “Digital Platform” challengers and/or adjacent industry competitors.

Where prior physical asset centric “Leverage our global scale and reach” business models are being challenged by asset light digital partner eco systems.

Businesses need to effectively balance global scale and reach with local flexibility, agility whilst still being response to Insight driven innovation and adaptability, in the past this was described this as the “GLOCAL challenge”.

As both senior business leaders (CxO’s) and aligned senior IT Executives (CIO’s, CTO’s, CDO’s, Chief Architects, etc) have to both make and balance complex strategic Digital Innovation and IT Investment priorities, choices and trade off decisions.

Within this context it’s relatively easy to be drawn back towards what would have been considered to be prior safe “major ERP platform” eco system aligned solution investments, we are a SAP shop or an Oracle shop etc.

However, in the practical reality a postmodern ERP and Information enabled age, these prior safe choices can rapidly turn into a storm / sink hole “vortex of IT investment/s”.

Where unless carefully managed they then carry a significant risk diverting finite strategic IT investments away from front office Insight driven digital innovation.

Where these are firmly targeted at customer and channel enabled relationship and revenue growth opportunities that typically generate a faster real rates of return / ROI with a significantly lower “start small prove (or fail fast) and scale fast” risk profile.

If we accept the principle that “Factory IT and “Innovation IT” (Some call this Bimodal IT) naturally operate at very different rates of change, often with different, disparate supporting technology stacks  and architectural building blocks (ABB’s).

Then as a direct consequence Enterprise Clients need to develop both strong and viable Enterprise Application Integration (EAI), DevOps and Information Architecture and Information Management architectures (IA & IM) in parallel.

Let’s call this Dev/Ops plus the “other eAI” and IA + IM for a moment, or indeed the eAI and IA + IM “Twins”  plus the AI/ML Ladder as described below.

We then end up with a Business into IT Strategy construct that could be summarized as follows:

Figure 1 – Essential Capabilities in a Postmodern ERP environment.

Then within this context we have a framework to prioritize both capability development in critical Digital Innovation (or/or disruption) and information driven insight area’s to help respond challenging business into IT Innovation requirements and that operate at viable rates of change.

Some traditional or hybrid postmodern ERP vendors and their implementation partners (CSI’s) will typically strongly recommend that a re-implementation and simplification of typically deeply customized core ERP (transactional) application template and MRPII planning systems is a prerequisite for effective Digital Innovation in the front office, in addition to relatively tight coupling of “Edge ERP” / SaaS portfolios with the prior Core ERP / SAP NetWeaver functional portfolio’s.

Personally I do not subscribe to this point of view for the following reasons:

• Whilst essential, typical ERP processes are no longer differentiating capabilities vs simply being “must have, must work, table stakes” whilst needing to be cost efficient and optimized where practical relative to the required effort and/or ROI, not re-engineering one set of ledger structures for AN other.

  A number of Clients I talk to are actually deciding to “Digitally Innovate” around the edge of prior Core ERP Investments in a hub and spoke or 2 tier ERP modelIndeed the DSAG Investment Survey from late 2016 into 2017 was a clear pointer in this respect plus the latest DSAG 2018 Survey that can be found here.

• We have observed the strong emergence (& acquisition and/or integration) of SaaS based “Edge” complementary ERP providers leveraging SaaS / Cloud native delivery models, examples include:
  • Workday, (HR) NetSuite (ERP), Salesforce.com (CRM+), Anaplan all come to mind..
• Even for the “Mega ERP” vendors like SAP and/or Oracle, have typically acquired “bolt on” complementary SaaS solutions (for example SuccessFactors, Concur, Fieldglass, Ariba) which are built out on disparate information management and platform architectures.Hence these also depend on effective API/Microservices integration and flexible Information Integration, Management and Governance processes and flows back to a given ERP core.
• Additionally, when we then examine typical new Dev/Ops and/or Open Sourced enabled front office Digital Innovation and Insight driven workloads.These tend towards being clearly back office “ERP System & Ledger Neutral” and open standards enabled as the majority need to seamlessly integrate with extended eco systems of partners, channels, supply chains. In this case a homogenious ERP+ platform strategy actually then becomes a Digital Innovation inhibitor vs enabler.
  Where one thing is clear in ERP platform terms, these will simply not be uniform or indeed dominated by a single ERP provider; examples include IoT, Blockchain, Extended Collaborative Logistical and Manufacturing 4.0 Supply Chains, Big Data, API Enabled Weather Data etc
• Typically implementing Modern, Consumable User Interfaces (UI’s) like SAP Fiori vs the prior very network efficient SAP GUI are and/or should not be dependent vs independent of application logic or data platform choices (a layered SAP NetWeaver and/or fundamental SOA design & separation of duties principle).

A number of these topics are discussed in a Gartner Paper (G00311163) “Schrodinger’s Cat: How ERP is both Dead and Alive” Published on the 28^th of June 2016.

Which I would recommend as further reading material, also there are a number of papers from Forrester, SAP and other providers that describe 2 Tier ERP strategies and solutions that mostly all revolve around a hybrid strategy of complementary SaaS / ERP / Best of Breed capabilities around an existing deployed, customized and working ERP Core.

Now let’s move on to consider what are the essential strategies and capabilities a typical large Enterprise client needs to develop to be successful in a postmodern ERP environment and information age.

A number of these data management capabilities are described in a “Stretch the three C’s” Context – Culture, Competency and Capability” in a recent Forrester Paper by Brian Hopkins, published on January 10^th 2018 – “Stretch Your Data Management Capabilities”

Also I’d recommend the following Blog, by the General Manager of IBM’s Analytics Business, Rob Thomas which uses a motor industry analogy to describe the logical steps and prerequisites that are required to successfully navigate the AI (Artificial Intelligence) and Machine Learning (ML) Ladder.

With a guiding principle being to gain increased business insight, value and/or process automation (or RBA) there is simply put no AI or ML without a clear Information Architecture (AI) and Information Management (IM) strategy, plus a step wise logical approach to developing capabilities and maturity working step wise up the AI/ML maturity ladder.

Hence in terms of a Line of Business and/or IT Executive recommended course of action in this context would or could then be an appropriate combination of:

1. Avoid being drawn down the complex re-implementation of back office ERP function spiral or Vortex..

   Unless it is a natural time for a complete refresh of your ERP platform / application template and aligned back office business processes vs an “optimize of what you already have strategy”.

2. Find way to increase the efficiency and optimization of your existing ERP, SAP Business Suite / NetWeaver platform investments to free up IT Investments for:
3. Increased Front Office, System of Engagement, Insight and Digital Innovation investments.
4. Enabling new value creating Cognitive solutions via IBM Watson API’s services integration.
5. Build out a clear Information and Data Management Strategy as a foundation for:
   • Artificial Intelligence (AI) and Machine Learning (ML) enabled Business Insight & Value

     ..following a logical step wise AI / ML “Ladder Strategy” and capability development.

   • Also as a sound information foundation for continued Process Automation (and/or RPA)
   • Develop an effective Information Architecture (AI) and Information Management (IM) and Data Governance and Security (DG&S) strategy

     Understanding for example that Data Lakes projects, without a parallel and sound information management and governance strategy typically fail to deliver the expected ROI, unless this aspect is properly addressed upfront (in particular within regulated industries and/or for example where GDPR clearly applies).

   • Look closely at providers within your Information Management “Eco System” do they offer a combination of flexibly choice, scale with platform integration vs point solutions
   • Enable a clear, Open Source enabled and leveraged strategy to effectively combine both “Big and Little Data” sources (Data at Rest + Data in Motion, SQL Schema Before & After)
   • Employ tools and methods (like IBM’s Data First Method) to define existing Information management maturity and required target capabilities aligned to specific Line of Business (LoB) sponsored and value creating use cases.
   • Develop parallel Application API / Microservices and Information Integration and Management Strategies and architectures (the twins represented by the top and bottom half of figure 1)
   • Ensure that ERP vendor driven proposals that re-engineer often working ERP solutions have realistic and accurate ROI vs risk vs cost / investment profiles.Refer Note *

   • Look closely at solutions that balance a standardized Core ERP processes with locally optimized front office process automation as per the following diagram.(apologies for the old style SAP logo, but this is not a new strategy, also as per the prior Veissmann IBM SOA + SAP White Paper I previously referenced)

     

     There is a good case study / example of striking this balance at Carlsberg
     

6. Enable a clear, flexible Dev/Ops platform management strategy and API/Microservices integration capability (inner / outer ring ESB / API integration hubs)  Refer my prior Blog on this topic
   

Note * We have observed that significant ERP re-engineering projects can become all engulfing in focus and IT budget terms may take and cost x2-x3 times the initial budget & time estimates.

Sources of information researched for this Blog item include, but are not limited to:

• The road to AI leads through information architecture – Rob Thomas IBM GM Analytics
• Gartner Paper (G00311163) “Schrodinger’s Cat: How ERP is both Dead and Alive”Published on the 28^th of June 2016.

  Authors: Denise Ganley, Coral Hardcastle plus various related Gartner ERP platform and market related papers.
   

• SAP S/4 HANA as the Digital ERP Core for organisations on a Digital Reinvention journeyMark Dudgeon, IBM CTO SAP IBM Global Services – January 5^th 2018

  IBM offers a S/4 HANA Impact Assessment Service as follows
  

• Forrester – Stretch Your Data Management Capabilities by Brian Hopkins, Jan 10^th 2018Continuous Improvement: The Data Management Playbook
  
• IBM’s Institute for Business Value – The Software Edge to drive competitive advantage
• SAP S/4 HANA: From 2 Tier ERP to the N Tier Enterprise – Fall 2016, Joshua Greenbaum
• Forrester – It’s time to clarify your Global ERP Strategy. Dec 2010, George Lawrie

Also I would refer readers to an excellent IBM Institute of Business Value study that looks at Innovation in an API Economy which can be found here.

Open Source and Standards driven enabled and business process optimization

My prior Blogs, LinkedIn items on:

API / Microservices “Inner / Outer Ring” ESB / Messaging and Application Integration

Via IBM’s API Connect, Node RED, IBM Watson IoT Capabilities

Including the following related Dual Speed IT Summary approach

The opinions within this blog are the authors, they do not represent a formal IBM corporate point of view, copyrights are respected and/or sources acknowledged and referenced as and where applicable.