INDUSTRY OUTLOOK OCTOBER Rethinking ERP for a More Agile World

Transcription

1 INDUSTRY OUTLOOK OCTOBER 2012 Rethinking ERP for a More Agile World

2 In a world where agility is essential, IT must respond quickly to business needs rather than being constrained by a single application suite from a single vendor, even if that means sourcing ERP from multiple cloud and on-premises vendors. ERP systems have served and continue to serve an important role in optimizing business performance. By providing a unified, integrated set of applications for managing multiple core business processes, these systems have enabled companies to streamline operations, enhance visibility into business activity and make better-informed decisions. The world, however, is rapidly changing. Businesses have to be more agile and be able to more rapidly respond to sudden changes in specific markets. And that business agility is highly dependent on the agility of the IT services that support the business. So, while existing ERP applications will continue to play a central role in the automation of the business, companies must start to understand and implement ERP as far more than just a single set of applications from a single vendor. Instead, it is imperative that they now focus on enabling whatever business capabilities they need to enable, whenever and however they need to enable them even if that enablement requires sourcing technology from multiple cloud and noncloud vendors. This adaptive, multisourced approach to ERP and related disciplines will become increasingly critical to business success as companies seek to enter new markets, quickly satisfy escalating customer expectations, efficiently cope with relentlessly evolving compliance mandates, and leverage ever-shifting partner ecosystems. In fact, in a world of growing uncertainty and short-lived opportunities, a highly adaptive, multisourced ERP environment will provide companies with substantial competitive advantages. RETHINKING ERP Three key trends are particularly relevant now: Market reach. Companies are now delivering their products and services globally. This means that they have to cope with different customer expectations, different compliance mandates and different competitive pressures in each geographic market. Companies are also seeking to broaden their footprint by entering multiple vertical markets where these same differences in expectations, mandates and pressures apply. Connected people, connected things. Smartphones and tablets are transforming the way customers, employees and partners interact with each other by providing always-on, location-aware connectivity to data and applications. All kinds of objects from parts and packages to vehicles and vending machines can also now report on themselves over the network. This ubiquitous connectivity is enabling 2 OCTOBER 2012

3 companies to extend and automate a whole new set of internal and customer-facing business processes. Accelerating business cycles. Market pressures such as globalization and ubiquitous connectivity are forcing companies to execute process improvements more quickly and more extensively than ever before. No longer can they take a year or more to roll out a new service. To excel in the new digital economy, they have to be able to introduce new products and services including all the R&D, supply chain, marketing, transactional systems and post-sales support processes associated with those new products and services in just months. Companies that continue to depend exclusively on a single, monolithic instance of an application will not be able to compete in this new environment. No company can wait until such a vendor releases a new application module or engineers an integration with some new third-party resource. Companies must be able to freely and aggressively acquire innovative IT capabilities as soon as the business demands it. Those that can t will always lag behind the companies that can. In a world of growing uncertainty and short-lived opportunities, a highly adaptive, multisourced ERP environment will create substantial competitive advantages. HOW SHOULD COMPANIES RESPOND? To achieve the agility necessary for success in a rapidly changing world, companies can no longer start with a fixed set of ERP capabilities as the premise and then attempt to reach a business conclusion. Instead, they must turn the tables and start with their emerging business process improvement and innovation needs as the premise. The IT capabilities the company needs then become the flexibly sourced, constantly adapting conclusion. This approach can be a major shift for companies where an ERP- and/or IT-centric view of business process automation has dominated for some time. But it is a shift that companies must initiate today if they are going to survive and thrive tomorrow. Companies can do several things to help facilitate this shift: 1) Accurately inventory current and proposed business processes. To ensure that processes are driving technology decisions and not the other way around it is essential to first identify those processes. This is the true enterprise architecture, and it should include both current processes and those that may be necessary to improve KPIs, such as customer retention, customer acquisition and regulatory risk. 2) Create a sourcing heat map for the IT capabilities associated with those business processes. IT and business decision makers should take a fresh, impartial look at which capabilities can be sourced from the cloud, which can be sourced as packaged on-premises applications, which can remain as part of the legacy ERP environment, and which may require customer development. These options will be driven by a variety of factors such as whether a given process provides the company with any real differentiation and/or whether compliance constraints limit sourcing in any way. 3) Initiate corresponding changes in sourcing and integration. Companies can t and shouldn t try to instantly convert from ERP-centric IT strategies to IT strategies 3 OCTOBER 2012

4 that are fully driven by business process imperatives. But they can initiate the conversion process by tearing targeted processes away from their ERP environments on an incremental, prioritized basis. This allows the company to score measurable wins while gaining useful knowledge about how they need to shore up their service orchestration and integration layer. Of course, this process is not easy. Companies typically encounter a variety of challenges as they rethink their approach to ERP, including: Assembling tribal knowledge about business processes. It takes some perseverance and high-level championing to get everyone across the company to do a comprehensive review of existing and proposed business processes. Dealing with existing contractual commitments. Companies often have long-term ERP licensing and maintenance agreements that they have to continue leveraging for some length of time although it may make sense to run incumbent ERP and alternatively sourced systems in parallel during a period of transition. Rationalizing data management and integration. As companies diversify their IT sourcing, they have to ensure that they can still maintain a single version of the truth across their new, more agile IT environments. Look at Business Processes and Possibilities, Not What ERP Can or Can t Do High Business Processes Corporate Product Development Supply Chain Operations Customer IT Services Cloud Service Levels Business Intelligence Environmental Health & Safety HR, Compensation Indirect Procurement Corporate Performance Financial & Managerial Accounting Quality Assurance Product Lifecycle (PLM) Process Design & Development Product Data (PDM) Virtual Prototyping Project, Program, Portfolio Clinical Trials Quality Control Design Collaboration Supply Chain Inventory Visibility Collaborative Planning & Scheduling Sales & Operations Planning Returns Warehouse / Inventory Partner Relationship Supply Chain Performance Transportation & Logistics Execution Systems MRO Routing & Procurement Recipe Operations Monitoring, Maintenance & Tracking Raw Materials, WIP, Finished Goods Pricing & Visibility Contract Process Control Facilities & Maintenance Simulation, Analytics & Performance Strategic Sourcing Process Design & Development Sustainable Quality Enterprise Resource Planning MRPII Sales Order Processing Product Configuration Pricing & Contract Customer Information Systems, Sales Analytics Pharma Covigilance Support & Service Warranty Rewards Trade Promotions Sales Demand Forecasting & Apps Support Hosting & Monitoring Storage & Data Cloud Security Recovery Collaboration Disaster Recovery & Business Continuity Desktop Hardware Production Environment IT Service Infrastructure & App Virtualization Infrastructure Support & Monitoring Dev/Test Env on Demand Application Migration Adoption Maturity / Progressive Scope Low Rentable Potential to Rent Own 4 OCTOBER 2012

5 IS IT WORTH IT? While these challenges are certainly not trivial, they are well worth confronting. Companies that successfully make the move from ERP-driven IT to opportunity-driven business enablement will gain multiple significant advantages over the coming years. The future belongs to companies that put the business back in control. These advantages include: Differentiated business agility. By freeing themselves from the limitations of conventional ERP, companies can more nimbly respond to market volatility than their competitors and more quickly seize new market opportunities whether those opportunities involve new geographies, new verticals, new products or new services. This is especially true as embedded intelligence and other data-related value-adds increasingly become the key to competitive differentiation. Greater innovation. As IT improves its ability to respond to the business, it becomes an enabler of innovation rather than an inhibitor. This creates a virtuous cycle where R&D, supply chain, marketing, sales and support teams can be stimulated and empowered to innovate in ways that delight customers, increase efficiency and expand market presence. Reduced business risk. When companies gain the ability to continuously maintain closer alignment of their IT resources with their business needs, they insulate themselves from a wide range of potential risks including over- and undercapacity, disruption by new market entrants and failure to meet deadlines for regulatory compliance. Reduced technology ownership costs. Companies that can adaptively source IT capabilities from any vendor at any time will be able to maintain greater control over both capital and operating expenditures. Cloud sourcing, in particular, relieves IT of the need to constantly keep building out and maintaining more and more computing infrastructure. More dynamic partnering. The same service orchestration and integration capabilities that enable companies to more adaptively source IT also enable them to create and dissolve secure, digitally bonded relationships with broader ecosystems of suppliers, distributors, partners and other third parties more adaptively than they can with IT environments that are rigidly organized around a single ERP platform. The bottom line is that companies can no longer afford to be slowed down by the IT systems upon which they have come to depend. The future belongs to companies that put the business back in control so it can act more quickly and more intelligently when new market imperatives arise. That s why every company should strongly consider rethinking ERP today. 5 OCTOBER 2012

6 ABOUT WIPRO TECHNOLOGIES Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT), is a leading information technology, consulting and outsourcing company that delivers solutions to enable its clients do business better. Wipro Technologies delivers winning business outcomes through its deep industry experience and a 360-degree view of business through technology helping clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a practitioner s approach to delivering innovation and an organizationwide commitment to sustainability, Wipro Technologies has 130,000 employees and clients across 54 countries. For more information, please visit 6 Copyright Wipro Technologies 2012