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Why There's Really Only One IT Option for Sustaining Profitable Growth

by SAP's Peter Graf | SAPinsider

October 1, 2004

For long-term success, a company must grow and innovate more successfully than its competition, with an IT infrastructure that facilitates continuous change. SAP’s Peter Graf advises all SAP customers to move their current infrastructure -- in an evolutionary fashion -- to a service-oriented model, a model that SAP provides with the SAP NetWeaver platform and the Enterprise Services Architecture blueprint.

Peter Graf,
Senior Vice President
Product Marketing,
Collaborative Solutions,

Q. Many companies exhibit growth. Few do it profitably, and even fewer sustain profitable growth over the long haul. Are there specific IT factors that separate the winners from the losers in this continuum?

The long-term success of organizations is largely defined by their ability to grow and innovate more successfully than their competition. Whether growth comes through superior collaborations with partners, relationships with customers, acquisitions, global expansion, or process improvements and efficiencies, it requires that changes be made to your IT landscape. Organizations with IT infrastructures that can readily accommodate change can sustain profitable growth; those that lack an adaptive infrastructure can't.

Take acquisitions and mergers, for example. These constitute very common growth scenarios. Profitability obviously hinges on the time and resources you expend to adapt and reconcile business processes across landscapes. International expansion is another common growth scenario. How readily can your current systems mesh with those of your global subsidiaries, partners, distributors, and customers? Can the infrastructure be easily configured to support global tariffs and regulations? What about new product design and introductions? Bringing new offerings to market certainly requires changes to procurement, manufacturing, and sales and distribution processes. I could go on and on.

The bottom line is that growth requires that your IT infrastructure facilitate continuous change. The reason few companies succeed is that most IT landscapes are not built for change.

Q. If growth is an ever-present priority, why aren't more IT landscapes more adaptable?

The issue really has become a major pain point in the last 10 years. Consider the latest wave of "point solutions," which were triggered by the Internet. If your CRM system, ERP system, portal, and data warehouse come from different vendors, you've got to contend with what amounts to hard-wired connections between systems, each with a custom approach to integration. Today, there is one way to integrate things within a system (often done through database integration), and then an entirely different way (often done through messaging) to integrate systems across your IT landscape.

Needless to say, this makes it enormously difficult to grow and innovate. A change to one system precipitates changes in lots of other systems. Without sufficient infrastructure support and standardization, that change is laborious, error-prone, and costly, which is why the wrong technology strategy can seriously jeopardize the long-term profitability of an organization.

Q. Do Web services solve this problem?

Yes, but remember, Web services are just a technology. You need a platform to capture the business side of the house. We provide such a platform with SAP NetWeaver. And you need a sound technology strategy to govern the deployment of Web services. We provide that with Enterprise Services Architecture (ESA), SAP's blueprint for service-oriented business solutions. (See Figure 1.)

Figure 1
Enterprise Services Architecture, SAP's Blueprint for Service-Based Buisness Solutions

Solutions now being released by SAP have been built with and are delivered on the SAP NetWeaver platform and adhere to ESA. Any solution that SAP now has on its drawing board will do the same. IT initiatives on your drawing board can too. The SAP NetWeaver platform and the ESA blueprint are for IT landscapes at large, covering both SAP and non-SAP systems alike. The beauty of this approach is that it is open, evolutionary, and doesn't require you to replace any existing solutions. Moreover, it provides one common approach to management and change within and across IT systems.

We are advising all SAP customers to adopt the ESA blueprint today and, over the next few years, to incrementally move your IT landscape in this direction. Don't wait until you upgrade an SAP system to forge your blueprint. You've got to nail down the vision now. The rate of IT change is so fierce that you need to be proactive. With one common IT playing field, continuous change becomes easier, faster, and far less expensive. This is the best way to foster profitable growth and innovation.

Q. Key benefits of SAP NetWeaver include reduced TCO of an overall IT landscape and less overhead, which frees up resources for innovation. Couldn't the same be said for outsourcing?

It's a matter of degree. Outsourcing select subprocesses makes sense. Outsourcing a process end-to-end does not. Do that, and you outsource your ability to change and innovate at the required speed. Sure, there are some things that are worth being "out-tasked," that is, tasks that are relatively stable and not strategic to the organization. But outsourcing a process in its entirety? That's a bad idea. Your ability to change, grow, and innovate — these are not things you cede to an outside firm. These are things you want under your direct control. Besides, once you've factored the cost of change and missed business opportunities into the outsourcing equation, the financial prospect of outsourcing doesn't look nearly so rosy.

I don't view outsourcing of overall processes as a viable option. In fact, I think it contradictory to recognize innovation as being key to successful IT practices and at the same time to look at outsourcing of a complete part of your business as a viable option.

I see just one option for organizations today, and that is to move their current infrastructure, in an evolutionary fashion, to a service-oriented model. Then you have the best of both worlds: the ability to control and change overall business processes, and the advantages of out-tasked subprocesses that are stable and non-strategic. This is the key deployment model for IT in the future.

This is also a major benefit of utilizing SAP NetWeaver to enable an Enterprise Services Architecture. Once you do, you have the flexibility to out-task part of a process and keep this change reversible at any time. You are, at all times, in control of the overall business flow, including detailed performance tracking of the outside provider.

Q. It appears that a large number of customers have already put SAP NetWeaver in place and are making the transition from "hard-wired" systems environments to the Web services world. Are there specific factors that prompted them to make this move?

The first factor is certainly cost. Because SAP NetWeaver is one unified technology platform, there is no need for customers to integrate various technology point solutions, like a portal and a business warehouse, by hand. SAP takes care of this. Nor do customers worry about integrating ERP, CRM, and other SAP business solutions with our technology components, since these applications are built around the SAP NetWeaver platform. Dispensing with these integration activities saves companies a lot of money. Moreover, SAP NetWeaver is a unified technology platform for leveraging past investments and keeping TCO of a heterogeneous landscape under control. These are burning issues for CIOs.

Another factor is Enterprise Services Architecture. With ESA, SAP facilitates the transition (and life thereafter) to a service-oriented IT landscape better than any other vendor. It's a bold claim, but one for which you find ample proof across our customer base.

I'd like to leave readers with this thought: To realize benefit from Web services, you've got to be prepared to do a lot more than just introduce some new interface standards. This new business platform requires a combination of technology expertise and a deep understanding of business processes and industry requirements. SAP is unique in this respect and, without question, is the only company out there today that can deliver this type of new business platform.

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