Half of enterprise application functionality licensed by organizations is not used, Butler study asserts; disconnect seen between apps, value drivers
London — April 7, 2006 — Standardized functionality in enterprise applications is a myth, and many organizations are paying too much for these solutions while not using even half the full functionality of the apps that they license, according to a new report from Butler Group, a European IT research and advisory group.
Butler drew this conclusion from an analysis of 60 organizations with an application benchmarking tool. The research revealed that none of the organization used more than 50 percent of the licensed enterprise application functionality, and a significant proportion of unused code was customized, unnecessarily prolonging upgrade cycles.
"Unfortunately, IT management tends not to spend enough time relating the organization's main value drivers to enterprise applications", said Teresa Jones, senior research analyst with Butler Group and coauthor of the study. "Too many follow a 'me-too' policy or purely a cost saving attitude when considering investment in enterprise applications. Without strong links to business aims it is impossible to formulate a strategy that will meet the organization's needs or get value from enterprise applications."
Avoiding Technology Islands
Butler points out that adaptive enterprises must have the ability to quickly transform business processes and must ensure that these changes are reflected in the supporting enterprise applications. One of the most important factors for maximizing value is not to treat enterprise applications as separate islands of technology, but to fully integrate them with objectives, business processes, management and infrastructure, Butler asserts.
Good training is another key factor. Making the most of enterprise applications relies to a large degree on the workforce actually using the provided functionality in the most effective way. Employees need to understand how the system relates to the tasks and processes in the broader context of the business as a whole, Butler writes.
In addition, the IT department must have an in-depth understanding of enterprise application usage and performance. It is often how the enterprise applications fit into the wider IT management perspective that can influence their real value to the organization. While enterprise application functionality in itself may no longer supply competitive advantage, it is the performance of the enterprise applications and the provision of a good service to users that can be significant differentiators.
Complexity Is Not the Problem
"An opportunity exists for organizations to extend the reach of enterprise applications by providing support for the Internet, portals, communications convergence (particularly voice) and wireless devices," said Jones. "These access mechanisms will have a big influence on the way enterprise applications are utilized in the future."
Jones added that enterprises should not be put off by the complexity of this multi-channel environment, although care is needed by the IT manager to ensure that key issues — such as security, productivity and cost — are adequately addressed. "Several factors are combining to drive the need for a unified architecture for accessing applications from remote locations and by diverse client types," Jones said.
An architecture-based methodology can help to enable a more flexible approach to the way enterprise applications are utilized, Butler asserts. The visibility and understanding of enterprise application capability can be provided by enterprise architecture, enabling the linking of objectives with processes and then the underlying functionality provided by enterprise applications.
The Promise of SOA
One of the most significant trends in recent times has been the increasing adoption of a service-oriented architecture (SOA), with all the main IT vendors starting to take the approach onboard. The implications of this include that IT departments must start to address SOA in plans for the future and look at how this impacts enterprise application delivery.
SOA and a common services platform can assist with the integration of other elements into the IT environment, which is vital for getting the full benefit from enterprise applications. Data integration and master data management are also becoming essential as organizations realize that controlling information is an important way to make the most of data found within existing enterprise applications.
Education is another important consideration for getting the most from enterprise applications, with training — or rather, the lack of it — another reason for enterprise applications to be less than successful. Good training is not just about the software, but includes understanding as to how the system relates to the tasks and processes in the wider context of the whole organization. Also, an appreciation as to why accurate data are important can prove invaluable.
"Key to the adaptive enterprise is the ability to quickly transform business processes and for these changes to be easily reflected in the supporting enterprise applications," said Jones. "From an enterprise application perspective, the importance of gaining a good understanding of the current processes cannot be underestimated, as on many occasions the software is unfairly blamed for problems that are in fact due to inefficient or poor processes".
Additional Articles of Interest
— For five steps to help your company decide whether or not outsourcing is the right move, read the SDCExec.com exclusive "Strategic Sourcing Not Just Procurement Anymore."
— Who are today's supply chain thought-leaders? Supply & Demand Chain Executive honors today's supply chain avant-garde. Read more in "2006 Pros to Know," in the February/March 2006 issue of Supply & Demand Chain Executive.
London — April 7, 2006 — Standardized functionality in enterprise applications is a myth, and many organizations are paying too much for these solutions while not using even half the full functionality of the apps that they license, according to a new report from Butler Group, a European IT research and advisory group.
Butler drew this conclusion from an analysis of 60 organizations with an application benchmarking tool. The research revealed that none of the organization used more than 50 percent of the licensed enterprise application functionality, and a significant proportion of unused code was customized, unnecessarily prolonging upgrade cycles.
"Unfortunately, IT management tends not to spend enough time relating the organization's main value drivers to enterprise applications", said Teresa Jones, senior research analyst with Butler Group and coauthor of the study. "Too many follow a 'me-too' policy or purely a cost saving attitude when considering investment in enterprise applications. Without strong links to business aims it is impossible to formulate a strategy that will meet the organization's needs or get value from enterprise applications."
Avoiding Technology Islands
Butler points out that adaptive enterprises must have the ability to quickly transform business processes and must ensure that these changes are reflected in the supporting enterprise applications. One of the most important factors for maximizing value is not to treat enterprise applications as separate islands of technology, but to fully integrate them with objectives, business processes, management and infrastructure, Butler asserts.
Good training is another key factor. Making the most of enterprise applications relies to a large degree on the workforce actually using the provided functionality in the most effective way. Employees need to understand how the system relates to the tasks and processes in the broader context of the business as a whole, Butler writes.
In addition, the IT department must have an in-depth understanding of enterprise application usage and performance. It is often how the enterprise applications fit into the wider IT management perspective that can influence their real value to the organization. While enterprise application functionality in itself may no longer supply competitive advantage, it is the performance of the enterprise applications and the provision of a good service to users that can be significant differentiators.
Complexity Is Not the Problem
"An opportunity exists for organizations to extend the reach of enterprise applications by providing support for the Internet, portals, communications convergence (particularly voice) and wireless devices," said Jones. "These access mechanisms will have a big influence on the way enterprise applications are utilized in the future."
Jones added that enterprises should not be put off by the complexity of this multi-channel environment, although care is needed by the IT manager to ensure that key issues — such as security, productivity and cost — are adequately addressed. "Several factors are combining to drive the need for a unified architecture for accessing applications from remote locations and by diverse client types," Jones said.
An architecture-based methodology can help to enable a more flexible approach to the way enterprise applications are utilized, Butler asserts. The visibility and understanding of enterprise application capability can be provided by enterprise architecture, enabling the linking of objectives with processes and then the underlying functionality provided by enterprise applications.
The Promise of SOA
One of the most significant trends in recent times has been the increasing adoption of a service-oriented architecture (SOA), with all the main IT vendors starting to take the approach onboard. The implications of this include that IT departments must start to address SOA in plans for the future and look at how this impacts enterprise application delivery.
SOA and a common services platform can assist with the integration of other elements into the IT environment, which is vital for getting the full benefit from enterprise applications. Data integration and master data management are also becoming essential as organizations realize that controlling information is an important way to make the most of data found within existing enterprise applications.
Education is another important consideration for getting the most from enterprise applications, with training — or rather, the lack of it — another reason for enterprise applications to be less than successful. Good training is not just about the software, but includes understanding as to how the system relates to the tasks and processes in the wider context of the whole organization. Also, an appreciation as to why accurate data are important can prove invaluable.
"Key to the adaptive enterprise is the ability to quickly transform business processes and for these changes to be easily reflected in the supporting enterprise applications," said Jones. "From an enterprise application perspective, the importance of gaining a good understanding of the current processes cannot be underestimated, as on many occasions the software is unfairly blamed for problems that are in fact due to inefficient or poor processes".
Additional Articles of Interest
— For five steps to help your company decide whether or not outsourcing is the right move, read the SDCExec.com exclusive "Strategic Sourcing Not Just Procurement Anymore."
— Who are today's supply chain thought-leaders? Supply & Demand Chain Executive honors today's supply chain avant-garde. Read more in "2006 Pros to Know," in the February/March 2006 issue of Supply & Demand Chain Executive.
- More research from Butler Group.
