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Does Your IT Organization Rank Among the "Successful"?

by Shai Agassi | SAPinsider

October 1, 2003

by Shai Agassi, Member of the Board, SAP SAPinsider - 2003 (Volume 4), October (Issue 4)

Q. Companies that read SAP Insider have balance sheets that reflect hefty IT budgets. With those large allocations come high expectations for quality and quantity of service, yet IT resources seem to be universally stretched to the limit. What successful practices are you seeing to reconcile these competing concerns?

First, a definition of “successful practices” seems in order. In an age where business advances are fueled by IT activities, IT organizations that meet expectations — no matter how ambitious — may not necessarily be “successful.” Reconciling deliverables with expectations certainly makes for happy constituents, but only for a short while if you don’t also ensure that what you’re delivering distances your organization from its competitors. Competitive advantage comes from innovation. I think successful IT organizations do more than meet expectations — they are innovators, too.

So the real question isn’t how you reconcile quality and quantity of IT service with your constituents’ expectations. It’s how you reconcile these things and find money, bandwidth, and resources to devote to innovation!

The answer is found by aggressively reaping IT savings and efficiencies where you can, and reinvesting in groundbreaking processes. You’ve got ample opportunity: IT infrastructures are generally riddled with inefficiencies that translate into needlessly high TCO, mostly inherited through years of corporate integration and divergence. Most organizations pay far too much for one-off, point-to-point integration, for the connective tissue that holds their applications and systems together. The cost for maintaining just one connection runs upwards of $100,000 over the life cycle of your solutions. Multiply that cost across the hundreds — or more commonly today, the thousands — of connections that integrate the numerous solutions you have running now, and the result is whopping integration expense.

Q. What about the cost of maintaining the applications themselves?

Looking at the cost of an individual application is the wrong way to look at TCO. Besides, if you did your homework, you probably factored TCO into the buy-decision you originally exercised when you first bought the application. Let’s face it — if it were cheaper to devise financial, CRM, supply chain, or HR solutions on your own, you wouldn’t be inclined to buy them from SAP. The fact is, it isn’t. The cost of research, development, testing, and so forth is far too high for any one company. As a vendor, we spread the product development costs across thousands of customers. Everybody wins.

But this isn’t how that connective IT tissue works! How and why you bind applications and systems together is wholly unique to your way of doing things. This is what formulates the processes that drive your business. And that formulation is constantly changing. That’s why an application integration platform like SAP NetWeaver is essential. Integration is everywhere. You can’t run a business process without looking at it in a fully integrated, holistic way — from workflows and Web considerations, to analytics and reporting, to security, management, and maintenance, to extensibility and process integration, and on up to end-user access, roles, and navigation.

As such, we have to look at a radically new TCO equation, one that has three elements: application platform, integration platform, and the cost of integrating the two platforms. That third element is the one that is now radically escalating, as more and more applications need to be connected through the integration platform. The combination of the current set of objects and the processes embedded in the application, as provided through the integration platform, becomes your enterprise’s future platform for all innovation.

mySAP applications are built on SAP NetWeaver (see Figure 1) for this very reason. For the thousands of customers out there today that have licenses for mySAP applications, they have ready-made application content, templates, and business objects at their disposal. All of these elements are engineered for integration — not just with SAP offerings, but also with all the other solutions you’ve got running across your landscape.

Figure 1
    SAP NetWeaver

Getting started with this technology is easy. Customers are now piloting simple, role-based SAP Enterprise Portal solutions, Web-enabling R/3 applications with the SAP Web Application Server, using the mobile infrastructure to build simple solutions for select users, leveraging BW analytics, and tapping into our knowledge management offerings for search capabilities and categorization of documents. I’m seeing pilots that take 4 to 12 weeks to execute and yield tremendous returns.

At the same time, I’d like to set your expectations correctly, so that you build a plan for long-term success with the following recommendations:

  • Very early on, create blueprints for the platform solution you ultimately want to attain, so the effort you expend on your early NetWeaver trials contributes to a holistic final target.
  • Understand what SAP xApps are all about (visit, and if they make sense for you, incorporate them into your blueprint. These packaged composite applications bring you the next practices of the innovators in your industry at the cost of a packaged application and, as such, can offer very immediate and sizable gains.

At the end of the day, if you run all the TCO calculations and perform all the ROI evaluations, SAP NetWeaver proves to be orders of magnitude better than any alternative, especially for the SAP customer base. The TCO equation looks even more impressive if you use SAP NetWeaver to drive an enterprise consolidation effort — creating a landscape built on NetWeaver that, over time, consolidates into fewer applications and relies more heavily on unmodified applications to replace custom legacy solutions.

Q. You recommend consolidation, but doesn’t the flexibility that you give up leave you exposed?

You can certainly run a portal from one vendor, a BI platform from another, and a Web application development platform from yet another. Then the onus of integration rests squarely on your shoulders. Even if integration between these elements works well today, what happens when it comes time for them to proceed down different upgrade paths? What happens when they need to be resized or reconfigured, and you find these activities can’t easily be done in a coordinated and foolproof fashion? The price of this so-called flexibility will become your worst nightmare — and a rigid and stagnant platform! So the first TCO reduction for you is to get a consolidated platform that moves forward with grace and coordination — not at your direct expense.

I want to be clear, however, that I’m not suggesting that embracing the full-blown NetWeaver platform be an overnight change. Start small — think big. Just be sure to put a roadmap in place soon, because the pace at which integration scenarios are growing should sound TCO alarms for IT managers and CIOs. Users want more portal-based services. Executives and analysts want better, faster analytics that call upon data from multiple systems. Competitive demands require more automation up and down the length of your supply and demand chains. There are also new challenges, like Sarbanes-Oxley compliance, that can be much more readily tackled with a consolidated platform. In the wake of the Sarbanes-Oxley Act, the notion of taking information out of your systems and then pumping it into Excel — where there exists the potential for manipulation of the data — isn’t going to work anymore. The processes by which you extract data and ready it for public consumption have to be comprehensive, systematic, and bulletproof. This requires process transparency across your financial systems and the systems that feed into them, and that is based on solid integration.

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