Contemporary Business Intelligence and Its Main Components

Economic and regulatory pressures, along with the need to stay competitive in the marketplace, have made business intelligence (BI) more important than ever for enterprise application users. BI gives users the ability to extract, consolidate, change, and analyze data in ways that are not possible in other approaches to enterprise applications. BI also allows users to exploit subsets of data within disparate organizational systems, such as customer relationship management (CRM), enterprise resource planning (ERP), finance, and human resources (HR), to combine various dimensions of organizational data in order to create a single view.

For example, manufacturing and distribution enterprises of all sizes would benefit from leveraging software that not only senses the daily pulse of the operations, but that also spots incongruities, analyzes the performances of multiple areas, and initiates corrective adjustments. BI tools help employees harness data which might be too complicated for manual manipulation. For instance, in departments such as purchasing and sourcing, there are constant and rapid increases in materials costs, deviations in lead times, and growth and instability in the supplier base—all of which require ever increasing buyer dexterity. BI gives organizations the ability to manage these issues proactively.

To build BI solutions within an organization, data warehousing, data integration, analytics, scorecards, and dashboards must also be considered. Each organization has its own use for some (or all) of these tools, depending on how it chooses to use the available tools. We'll look at the main BI components, and at the way BI tools can be applied within an organization.

Contemporary BI Solutions

Contemporary BI solutions enable business users to author, publish, and distribute enterprise reports via a fully integrated report writer, with an easy-to-use report creation wizard. Users can also customize and tailor reports to specific information needs. Report writing and graphing capabilities should enable even nontechnical users to create and share clear representations of complex business conditions. In addition to being easy to use, report writers must also incorporate advanced features like exception filtering and highlighting, calculations with sub-queries, rankings, drill-throughs, and so on.

Nowadays, BI tools generally provide graphical analysis of business information in multidimensional views. Most companies collect a large amount of data from their business operations; to keep track of this information, users require a wide range of software programs, along with more sophisticated database applications for departments throughout their organization. However, using multiple software programs makes it difficult to retrieve information in a timely manner and to perform analysis of the data.

BI represents all the tools and systems that play a key role in the strategic planning process by allowing a company to gather, store, access, and analyze corporate data for decision-making. Generally, these systems assist organizations in customer profiling, customer support, market research, market segmentation, product profitability, statistical analysis, and inventory and distribution analysis, to name only a few.
Data warehousing is a collection of data designed to support management decision-making. A data warehouse (DW) contains a wide variety of data that presents a coherent picture of business conditions at a single point in time. Its purpose is to create a database infrastructure that is always online, that contains all the information from the online transaction processing (OLTP) systems (including historical data), but that is structured in such a way that it is fast and efficient for querying and analysis (as opposed to a database for processing transactions).

Separating these two functions may improve flexibility and performance. The development of a DW includes the development of systems to extract data from underlying transactional operating systems. The DW also installs a warehouse database system that provides managers flexible access to the data. The term data warehousing typically refers to the combination of many different databases across an entire enterprise. This is in contrast to a data mart, which is a database (or collection of databases) designed to help managers make strategic decisions about their business. While a DW combines databases across an entire enterprise, data marts are usually smaller and focus on a particular subject or department, although some data marts, called dependent data marts, can be subsets of larger DWs.

Dimensions of Data Integration

With the advent of data warehousing came the creation of extract, transform, and load (ETL) tools, which use metadata to transfer information from the source systems into the DW. The three functions of ETL combine to pull data out of one database and place it into another:

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Extract—the process of reading data from a database.
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Transform—the process of converting extracted data from its previous form into a form that can be placed into another database. Transformation relies on rules or lookup tables, or on the combination of data with other data. This allows disparate data sources to be merged, which creates a centralized view of organizational data.
*

Load—the process of writing the data into the target database or DW.

Again, ETL tools are typically used to migrate data from one database to another, to form data marts and DWs, or to convert databases from one format or type to another. Additional tools, which also make use of structured query language (SQL), have also been developed to give users direct access to the data in the DW. With time, these query tools have become more user-friendly, and many such tools now have a parser (a program that dissects source code so that it can be translated into object code) which can turn natural language questions into valid SQL commands.

Enterprise information integration (EII) is a category of software that confronts the longstanding challenge of enterprise data integration over diverse data sources in scattered enterprise systems. Companies that have overcome the problem of scaling and managing data are now pondering how to unify their data sources and leverage them to solve near real-time business problems. To that end, EII aims to provide unified views of multiple, heterogeneous data through a distributed (“federated”) query. One way to think of EII is as a virtual database layer that allows user applications to access and query data as if it resided in a single database. In other words, the concept takes the existing database capability to merge a query across different tables, but on a virtual basis, shielding users from the underlying complexities of locating, querying, and joining data from varied data source systems.

EII is a fundamentally different approach to such data integration technologies as enterprise application integration (EAI), which provides data or process-level integration, or enterprise portals, which merely integrate data at the presentation level. EAI can be defined as the unrestricted sharing of data and business processes throughout networked applications or data sources.

EII is also different from conventional ETL tools for data warehousing because it neither moves data nor creates new data stores of integrated data. Rather, it leaves data where it is, leveraging metadata repositories across multiple foundation enterprise systems, and visibly pulls information into new applications. As a result, customers may be content to trade in expensive DWs for a data extraction and presentation layer that sits on top of existing transactional systems—but only on the condition that they receive unimpaired performance.

ERP: When Transparency Becomes Tunnel Vision

The idea behind an enterprise resource planning (ERP) system is to give organizations the transparency and visibility they need to have into their business activities. But what if the ERP system in fact creates a "blind spot" for the business? How could this happen, you might ask? Well, before we answer this question, a little history is needed.

In developed nations, many manufacturing activities have moved offshore. Manufacturers have done this because the cost of labor is cheaper in developing nations. But offshore manufacturing has led to some key concerns:

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How do you measure quality assurance?
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Is it really cheaper to outsource production, given rising energy prices?

From an economic and an IT perspective, several negative factors about moving manufacturing offshore have become apparent:

Negative economic factors:

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The manufacturer is subject to the stability of the local economy where their facilities are located, meaning that labor may be tougher to acquire.
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The speed at which components and parts are acquired is subject to global—and potentially faulty—supply chains.
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Offshore currency instability may make components more expensive to acquire or sell.
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Tracking the cost of resources and reverse logistics can prove to be difficult.

Negative IT factors:

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Access to critical, real-time data may be impeded by disparate enterprise applications in different regions.
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Tracking components may be more difficult due to a low-quality IT infrastructure or minimal IT resources. Or perhaps the ERP software is too inflexible to service the entire organization.
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Financial tracking can be difficult to maintain, due to the factors listed above.

Traditionally, ERP systems come with financials and human resources modules to track all costs throughout the organization. The system controls these processes through a manufacturing management module. The manufacturing management module of a typical ERP solution includes multi-level bills of materials (BOMs), advanced plant scheduling, shop floor control, field service and repair, production planning, project management, product data management, inventory management, purchasing management, quality management, and sales management.

This range of traditional functionality can be sufficient for most manufacturers, giving them the ability to manage their operations very well within the four walls of the manufacturing plant. However, if a manufacturer's business is carried out in multiple locations across continents, and if its supply chain involves complex activities, then a more robust ERP system is needed. This is because such a manufacturer is faced with changing economic, quality, and logistical problems, and its traditional ERP system can actually impede its growth and flexibility by not delivering what this manufacturer needs most: transparency and visibility into all manufacturing and supply chain activities. The manufacturer can develop a sort of "tunnel vision" with respect to their operations if nothing is done.

So what can a manufacturer do if the ERP system provides faulty vision? Can an ERP system really adapt to a fluctuating manufacturing environment?

ERP: When Transparency Becomes Tunnel Vision

The idea behind an enterprise resource planning (ERP) system is to give organizations the transparency and visibility they need to have into their business activities. But what if the ERP system in fact creates a "blind spot" for the business? How could this happen, you might ask? Well, before we answer this question, a little history is needed.

In developed nations, many manufacturing activities have moved offshore. Manufacturers have done this because the cost of labor is cheaper in developing nations. But offshore manufacturing has led to some key concerns:

*

How do you measure quality assurance?
*

Is it really cheaper to outsource production, given rising energy prices?

From an economic and an IT perspective, several negative factors about moving manufacturing offshore have become apparent:

Negative economic factors:

*

The manufacturer is subject to the stability of the local economy where their facilities are located, meaning that labor may be tougher to acquire.
*

The speed at which components and parts are acquired is subject to global—and potentially faulty—supply chains.
*

Offshore currency instability may make components more expensive to acquire or sell.
*

Tracking the cost of resources and reverse logistics can prove to be difficult.

Negative IT factors:

*

Access to critical, real-time data may be impeded by disparate enterprise applications in different regions.
*

Tracking components may be more difficult due to a low-quality IT infrastructure or minimal IT resources. Or perhaps the ERP software is too inflexible to service the entire organization.
*

Financial tracking can be difficult to maintain, due to the factors listed above.

Traditionally, ERP systems come with financials and human resources modules to track all costs throughout the organization. The system controls these processes through a manufacturing management module. The manufacturing management module of a typical ERP solution includes multi-level bills of materials (BOMs), advanced plant scheduling, shop floor control, field service and repair, production planning, project management, product data management, inventory management, purchasing management, quality management, and sales management.

This range of traditional functionality can be sufficient for most manufacturers, giving them the ability to manage their operations very well within the four walls of the manufacturing plant. However, if a manufacturer's business is carried out in multiple locations across continents, and if its supply chain involves complex activities, then a more robust ERP system is needed. This is because such a manufacturer is faced with changing economic, quality, and logistical problems, and its traditional ERP system can actually impede its growth and flexibility by not delivering what this manufacturer needs most: transparency and visibility into all manufacturing and supply chain activities. The manufacturer can develop a sort of "tunnel vision" with respect to their operations if nothing is done.

So what can a manufacturer do if the ERP system provides faulty vision? Can an ERP system really adapt to a fluctuating manufacturing environment?

Tactical Human Resources Evolves into Strategic Human Capital Management

Given the examples of the changes in human resource (HR) management discussed in Thou Shalt Manage Human Capital Better, and the mushrooming number of point solution providers, many enterprises have realized the significant shortcomings of traditional HR (in terms of technology, beliefs, processes, and practices) that require a strategic-level mind-set change. This is particularly relevant during times of economic sluggishness and low investment capacity (which typically translates into layoffs or hire freezes, cost containment, and stalled innovation), when most enterprises and their employees are left wondering if they can (or should) rely on each other for their future.

In the early 2000s, with the economy in a downturn, HR administration delivered some organizational value by outsourcing an increasing number of HR business processes, either wholly or in part. In many cases, outsourcing to some trusted technology vendors that have already demonstrated their HR domain expertise may help companies achieve additional efficiencies and functionality, reduce head count, and cut costs.

Of the many solutions in the HR realm, the most predominantly outsourced have been payroll processing, employee assistance programs, payroll tax filing, and background screening. The most appealing and achievable benefits of outsourcing are streamlined operations, access to better HR capabilities and industry expertise (when it is not a core competency of the user enterprise), freeing up of internal staff, reduced labor costs, and accurate and predictable monthly costs.

However, the returns from layoffs (often undertaken without much thought to who should really go, potentially resulting in the hasty release of the lynchpins of the enterprise’s ongoing performance) and relentless cost-cutting have proved to have only a limited (if not negative) effect. While some organizations have tried to cut labor costs to be competitive in their markets, the most progressive companies have embraced their labor forces and used them as a strategic differentiator.

As products and technologies become commoditized in this information-based economy, companies are beginning to realize that the best way to differentiate themselves and create long-term strategic advantages over their competitors might be through their people. It is no longer what one owns that counts, but rather what one knows, which is particularly critical in information technology (IT) and similar professional services organizations (PSOs), because it is the technical expertise and experience of knowledgeable staff that means the difference between success and failure.

In fact, according to Forrester Research, more than 85 percent of the market value of a typical Standard & Poor’s (S&P) 500 company today is the result of intangible assets. For many companies, the bulk of these intangible assets is their people (or human capital), and such companies spend as much as two-thirds of their overall costs on labor. Thus, they should focus on business processes, using technology to more effectively manage employees and improve their productivity. Combining training, incentive management, and compensation management tools delivered through a role-based dashboard, emerging people-centric software category aims to transform each individual in the workforce into an enterprise asset.

Technology's Role in Strategic Human Resources

Most chief executive officers (CEOs) are challenging their human resources (HR) departments to make more strategic contributions to the organization. With HR traditionally viewed as a cost center, it is often difficult to know precisely what that means. CEOs, who are focused on growth, earnings, and shareholder returns, want HR to support corporate business objectives and to have the necessary data to support business decisions. These roles are necessarily integrated with HR's responsibility to ensure that there are qualified and satisfied workers when and where they are needed. The way to fulfill these roles is through process excellence, integrated HR systems, and accurate and actionable data from all HR departments. When these elements come together, HR can have a tremendous and meaningful impact on the bottom line.

It sounds like a lot to ask, but these demands are achievable today. And the HR department doesn't have to go it alone. There are technologies and service providers that can help move HR from the administrative rut, free up manpower for strategic tasks, and employ business intelligence capability to align HR with desired business outcomes.

The Role of Outsourcing

Human resources outsourcers play a critical role. Companies often choose to work with outsourcers to gain access to the latest technologies without having to make the associated capital investment. At most enterprises where HR functions have been outsourced, the initial tier of value is well-established. Processes are standardized and employee interactions are professionalized. Transactions are faster, more user-friendly, and less costly. As employee programs continually become more complex and difficult to administer, outsourcing consistently delivers high levels of service.

But it's that next critical tier where advanced HR outsourcing technologies are delivering strategic leverage by gathering and combining fragmented data from discrete vertical HR systems. When data from various departments is integrated into a reliable, consistent source of centralized information, HR can make better-informed and more strategic business decisions daily. The impacts of HR programs and practices can be assessed, and critical insights into the workforce revealed.

Sophisticated analytics can measure how HR systems and programs affect employee behavior and influence customer behavior (for example), ultimately impacting financial results and corporate growth. Companies are beginning to see that reducing HR administrative costs is only the tip of the iceberg. A new priority is to employ the technologies that provide data and analysis, in order to realize the savings that lie in HR.
For example, your time and attendance program tracks worker hours and absences, and is the entry process for generating payroll. A separate program handles short-term and long-term disability payments. Both of these systems are important. But viewed separately, they reinforce HR's traditional administrative role. An outsourcing solution that combines information from both systems and employs business intelligence functionality delivers a human asset management program that tracks absenteeism, peak work periods, and turnover. Now your data shows impacts on labor costs, overtime, and the amount of money spent on temps and employee replacement. This business intelligence can be used to closely align the workforce with long-term labor needs, manage absence and labor utilization, and thereby reduce operating costs.

Training, staffing, and recruiting programs can be linked in beneficial ways, too. There are lots of technology tools that enable prospective employees to submit r�sum�s online. But does your HR department use that information beyond the recruiting process? By integrating prospective employee data and skill sets against the company's development plan and training programs, qualified individuals can be "pipelined" into the organization over time, and existing staff can be educated. This ensures more strategic hiring decisions from the outside, and better use of existing personnel.

Succession planning is another key area where HR outsourcing can provide strategic value. For example, if a company has a 10 percent turnover rate, and it typically takes 30 days to fill a job, what does that mean for its staffing at any given point in time? It means the company is nearly one percent understaffed at all times. In an organization of 50,000 employees, that's 400 workers not meeting deadlines or producing, which negatively impacts customer satisfaction.

In that same scenario, add in the ramp-up time required for new hires to fill the open slots, and the "downtime" could be as much as sixty days per opening. Factor in absenteeism, short- and long-term disability, sabbaticals, maternity and paternity leave, job sharing, and other benefits, and the staffing levels are likely to be much lower than imagined. Using business intelligence technologies and analytics allows HR departments to better see and manage what is really happening with staffing levels, and predictive measurements can help plan more accurately for the normal ebbs and flows of business.

Selecting the Right Outsourcing Provider

As important as deciding to outsource HR functions, however, is selecting the right partner. Partnering with an HR provider is a critical business decision, and should be considered with the same due diligence as a merger or joint venture. Companies should be culturally compatible and share a common vision.

An outsourcing partner's service framework and delivery model should be engineered to meet your requirements, and there should be a clear definition of the scope of services and defined service levels. The objectives of outsourcing should be translated into service-level agreements so performance can be measured against stated expectations. Most large enterprises will want a full-service provider rather than one that handles just one element (such as payroll). References should be checked, and the provider should demonstrate capabilities in full-spectrum HR outsourcing (and have the financial backing to be around for the long term).

Remember, working with an outsourcer is not about giving up control. Rather, it is about finding the best ways to deliver quality service, impact organization economics, and provide the data that aligns the HR department with business outcomes.

A High-level look at Ramco HCM Solution Suite

Ramco understands the need to address important issues such as workforce and succession planning, and proactive talent management (HR, M&As, and baby boomer exits). As such, Ramco’s approach is an enterprise solution suite that is tailored to the needs of its clients, where users can install only the modules that they need, and leave out the ones they don’t need. Depending on the country, some of those modules are essential, while others are elective, such as payroll, workforce planning toolkit (HCM Interventions), informed compensation management, and integrated talent management suite.

By co-creating, adapting, or delivering existing solutions that are built for change and innovation, Ramco HCM addresses the entire employee life cycle. So, rather than redeploying an enterprise system as an organization reacts to regulatory changes, corporate initiatives, and market conditions, Ramco’s underlying platform can help businesses leverage their existing business process models to quickly compose new business models. And it quickly delivers these new capabilities with virtually no disruption to the IT infrastructure.

VirtualWorks: Key to Delivery

Some of the key differentiators of Ramco’s HCM and its innovative HCM practice is through its unique technology and analytics platforms which enable rapid co-creation and integration of highly targeted, strategic HCM solutions.

I’ll use the following analogy to give you a better idea how VirtualWorks works. When you want to use a microwave oven, you know that it will have a door, a timer, and some other common features. You do not have to assemble the microwave from parts; you just have to buy one and learn how to use it. You can upgrade your microwave to another model in a few years, and you would not have to relearn how to use it. The microwave is a module with known functionality.

This same concept extends to the careful design of programming modules; they are modules that you can plug into a base. In the case of Ramco HCM, that base is VirtualWorks. The module concept, known as service-oriented architecture (SOA), has a property in which the module is a building block, which you can include or not. The concept of applications using SOA modules is one that most ERP vendors today strive for. Ramco, with their VirtualWorks platform, has implemented SOA.

With the Ramco VirtualWorks platform, application code can be built or assembled from components very quickly. VirtualWorks has a repository of over 1,000 solution components and a code generation engine. What this combination translates to is that one can say yes or no to the inclusion of the module. The HCM application with selected modules is an easily built, flexible business process focused on delivering high-level analytics.

Ramco’s HCM practice is still relatively new, having been formally launched as a practice in the spring of 2008. Its co-creation/tailoring/"solutioning" model leverages its platform (which is built for rapid and constant change) and is radically different from an off-the-shelf solution. As such, potential problems could occur if you—as a customer—decided to move your data to another hosting platform. Would that platform provide the same reliable, rich functionality?

But First … A Little Background About Ramco Systems Corporation

Ramco Systems Corporation (part of Ramco Group) was founded in 1989 and delivers enterprise software and services to over 450 customers in 35 countries. Its headquarters are located in Chennai (India).

In many countries, Ramco partners with local companies to promote its products. In other locations, the businesses are wholly owned by Ramco. HCM is only one of a family of products and services that Ramco offers. Services include business transformation, consulting, enterprise resource planning (ERP) solutions, and software as a service (SaaS). Over the past year, Ramco has shown positive growth with recorded revenues of $50 million (USD).

Today’s HCM Landscape

Many of the human resource (HR) issues that businesses face today are common points of interest for HR (and related software) vendors. As such, software products are designed to address these issues by helping organizations to properly manage

* new talent recruitment;
* employee productivity tracking;
* workforce or succession planning and modeling; and
* baby boomer retirements.

While Ramco’s aim is similar, there’s an added feature that most HR solution providers are just beginning to get a handle on: analytics. Ramco’s HCM practice, while relatively new, tackles old challenges, including analytics, by focusing on strategic workforce management issues that to date have not been supported well with technology or analytics in the HCM space. For example, Ramco’s HCM solution provides unique technology and analytics platforms and predictive tools that help with employee retention and productivity

Together, these capabilities provide the ability for organizations to have the right data and tools at the right time.

In an e-mail exchange, Goldberg explained that

Ramco's Workforce Planning Toolkit (also known as HCM Interventions) is a brand-new HR solution concept involving predictive analytics and modeling in the context of very practical HR decision-support frameworks. These data technology solutions are aimed at managing game-changing workforce events and issues such as baby boomer exit planning and risk mitigation, HR mergers and acquisition (M&A) planning and decision support, top-grading, workforce consolidations and reduction, and other workforce restructurings.

TARGIT BI Product Certified

Recently, I met over the Web with TARGIT’s Ruben Knudsen and Ulrik Pedersen, along with some TEC cohorts to verify TARGIT’S BI product. TARGIT had completed a TEC-designed RFI containing a list of BI capabilities that every BI vendor could support “out of the box.” The RFI is a common list of BI capabilities that we send to all BI vendors, and from the long list of TARGIT responses, we chose 172 entries for them to demonstrate. Without missing a beat, TARGIT demonstrated all the 172 selected entries from a total of 1900 criteria we chose using a “live meeting” and telephone sessions. TARGIT passed with 100 percent verification – no omissions.
TARGIT is a Danish company. Specializing in business intelligence, TARGIT works through a world-wide distribution channel that includes distributors (VARs), OEM partner relationships, and direct sales to the customer. Their product has both a real-time interface and a batch system interface. TARGIT standard data marts and OLAP facilities allow for drill downs to detailed information, desktop and Web reporting, as well as drill through analysis via SQL functions. TARGIT indicated that the majority of their implementations are done via resellers.

I asked Ruben and Ulrik about TARGIT as a company and I liked what I heard. Many of their 75 employees and 80+ distributors have been with the company since it was founded, 22 years ago. Major clients include municipalities. They do most of their sales via distributors such as Fujitsu, and retailers. Their product is very robust, efficiently coded, and geared to the tier-2 and tier-3 companies (from 50 employees to 500, and companies with $500 million in earnings or below).

From a technical perspective, there are several BI business areas for which they provide out-of-the-box analytical solutions that interface to several different enterprise resource planning (ERP) systems: Microsoft Dynamics AX, NAV, GP, Oracle, SAP. The business areas covered include supply chain management (SCM), customer relationship management (CRM), finance, sales, and projects.

TARGIT is strong in the area of activity-based costing analytics. From the user interface, TARGIT provides scorecards, bubble charts, dashboards, hierarchical org charts (not the chart itself though) and alerts. If the client wants to, he can build reports using the usual statistical distributions and the associated functions for regression and correlation analysis, calculations of the mean, variance, standard deviation, and other statistical measures.

Human Dynamics

One interesting observation of the ERP ecosystem is that, although the three parties are very different from each other and there are clear organizational boundaries between one another, the barriers for ERP professionals to switch from one party to another are not that significant. An employee at an adopting organization may move to a consulting firm after accumulating enough experience working on the company's ERP project. A seasoned ERP consultant may be invited by an adopting organization to fill the chief information officer (CIO) position. Consultants may also have a choice between being hired by a firm and working as an independent consultant. In addition, migrating between vendors and consulting firms is also not unusual.

There are several benefits of this mobility. For one, the whole ERP industry benefits, as this human dynamic improves knowledge exchange and transfer. Also, this provides a bigger human resource pool for specific needs of each party in the game. And of course, to the individual professionals, mobility helps them to be better rounded, which aids them in reaching higher achievements in their careers. Each time they switch, it might be an opportunity for them to improve their professional status.

The Commoditization of ERP and External Challenges

In his famous article IT Doesn't Matter, Nicholas G. Carr "examine[s] the evolution of information technology in business and show[s] that it follows a pattern strikingly similar to that of earlier technologies like railroads and electric power"[2] . It is true that IT is commoditized and becoming a necessity for today's companies. ERP is not an exception. A decade ago, limited knowledge of SAP might not have hindered a person from starting a career in ERP consulting, but nowadays, the bar has been raised to a much higher level. The massive adoption of ERP makes it an indispensable part in the business environment—and ERP knowledge is no longer limited to a small pool of professionals.

Following the commoditization of IT and standardization of business processes, the halo of ERP may fade out if the industry can't add new elements to it. The prosperity of business intelligence (BI) is a recent example that ERP is moving with market needs. Generally speaking, as long as the industry can always stay on the edge of using IT for better business operation and performance, this ecosystem will exist; but one has to be aware that everything has a life span and that commoditization implies it has reached a stage of maturity.

There are also external factors that threaten the traditional ERP business model. The first is open source ERP. Developers such as ComPiere and Openbravo represent a new business model in which collecting license fees might no longer be developers' strongest approach towards profitability. This new model may impose significant impact on the technology source in the ERP ecosystem: the vendors.

Another threat comes from the prosperity of web applications. When business processes become more standardized, browser applications will be able to move to more sophisticated areas. For example, founded in 1999 by former Oracle executive Marc Benioff, SalesForce.com (an on-demand CRM solution vendor) went public on the New York Stock Exchange (NYSE) in June 2004. The company, according to its web site, has its services translated into 15 different languages and currently has over 43,600 customers and 1,000,000 subscribers. Within the web application model, to what extent consulting services can be involved becomes a question.

Exposed to these challenges, the landscape of the ERP ecosystem may change. Either the vendors or the consulting services may experience significant consequences, and conflict between players may arise if the trends keep growing stronger.

Success Factors for Adopting Organizations

1) In-house expertise
Very often, adopting organizations overestimate their capability on the business processes side and underestimate their need to become stronger on the IT side. Although there are consultants that help enterprises build ERP systems, adopting organizations should not limit themselves to being passive adopters of the technology.

If companies can have or develop their own expertise in areas such as project management, information integration, and other technological aspects during ERP implementation, they will have better control of their ERP initiatives, and thus lower risks. I had a chance to listen to GSK Canada's ERP project leader Diane Connolly describe her experiences in integration, and discovered how these experiences not only helped the business unit achieve its project objectives, but also how they became an asset for ERP implementation across the whole corporation.

2) Financial capability
The investment in an ERP system is usually comprised of two major parts: software licenses and implementation services. When project scope and scale are determined and a software vendor is selected, the license investment is relatively stable, but the implementation part is associated with more uncertainties (consulting fees are more likely to change, compared with license fees). It is not rare to see an ERP project go over the initial budget due to unexpected issues or changes that come up during implementation. As soon as it is realized that things aren't going as planned, the adopting organization needs a strong contingency plan to address the uncertainties.

Another reason that the adopting organization needs financial capability is that the implementation may: 1) require the business to go into a period of downtime; and 2) cause the business to performs below its pre-implementation level for a period of time. These two factors both place additional financial pressure on the organization and should be foreseen and planned for.

A Three-party Game

The ERP ecosystem is comprised of three major parties: software vendors, consulting services (including both consulting firms and independent consultants), and adopting organizations. In the ERP game, these parties work closely to achieve a common goal—to improve operation performance for the adopting party, through the establishment of ERP systems.

The vendor is the main source of software technologies. Without the software (behind which are methodologies, system designs, programming and testing, and all other efforts that make the delivery of a software package possible), the adopting organization would have to build its own system from scratch at much greater cost.

The adopting organization is the financial source for the whole ecosystem. Without this party, the whole ERP industry would not exist.

Consulting services are the bridge between the other two parties. The existence of consulting is the result of a division of labor, which allows every party to focus on what it does the best.

If we look at this three-party game from a short-term perspective, or on the level of a single case, it is possible to see that only one or two parties win the game at the cost of the rest. For example, we have seen certain cases in which vendors made good money, but the systems they provided didn't work well. However, taking a long-term perspective, this game is able to reach a triple-win situation in which every party receives what it deserves.

"Triple-win" Success Factors

As there are already many articles talking about key factors for successful ERP projects, it would be interesting to take a different view of success. And so I'll begin by zooming in on the main factors each party requires to be successful in this ecosystem, based on observations and perceptions formed as a result of recent visits to different parties within the ERP ecosystem. To the vendors, the most important factors are development capability, market leadership, and the ability to maintain the balance of the ERP food chain. To the consulting services, knowledge capital, human capital, and creativity are critical, while to the adopting organizations, winning factors are in-house expertise, financial capacity, and independency.

Success Factors for Vendors

1) Development capability
Development capability can be divided into two parts—the technology side and the business side. First of all, as application system developers, vendors need to have sufficient technology inventory. Generally speaking, all the technologies that are involved in a software package for commercial purposes should be mature. However, due to the fast pace of the IT industry, application system developers should always work with the latest mature technologies. For example, the evolution from SAP R2 to R3 and then to mySAP is in tune with improvements to the architecture of information systems.

Secondly, development capability on the business side is also critical since the value of ERP software is to help businesses run better. Some exemplary approaches include: building solutions and best practices on an industry level; maintaining a certain proportion of employees as an in-house consulting team in order to insure direct and tight connections with customers' businesses; and having a group of industry experts who keep the development in line with business processes, to accommodate real business needs.

Hosted vs. On-Premise CRM

There are two primary types of CRM solutions for businesses: hosted CRM and on-premise CRM. Hosted CRM (also known as 'on-demand CRM') entails a company outsourcing a portion or all of its CRM functions to an ASP (application service provider). Unlike licensed on-premise CRM software, hosted CRM tools are payable on a monthly basis without requiring complex implementations or the assistance of an in-house IT team. The result is a cost-effective solution that promises to deliver a quick ROI (return on investment), while freeing a company to focus on its core competencies.

In fact, according to a study from Nucleus Research, more than 80 percent of companies that outsourced CRM achieved a positive ROI. The study reported that problems with the on-premise CRM model include high software and consulting costs, ineffective user adoption, and poor management.

But for all its promises of immediate payback, the hosted CRM model does have its shortcomings. For one thing, whereas on-premise CRM solutions can be tailored to the particular needs of an organization, on demand solutions don't allow for the same degree of customization. What's more, on-premise solutions are easier to integrate into a company's existing business processes and applications.

For small- to medium-size businesses, however, the price is right when it comes to hosted CRM tools. By paying per user per month, a company can gain access to a sophisticated application in a mere 30 days without having to burden its IT department or cut of its cash flow. And of particularly good news to growing companies is the fact that today's on-demand CRM solutions are highly scalable and easy to upgrade.

Wilden Pump & Engineering

At Wilden Pump & Engineering, " Engineered Revolution" is more than just a marketing tag line. It's away of life that represents Wilden's commitment to providing its customers with the most advanced pumps available. And Walter Bonnett, Marketing Technology Coordinator at Wilden, has taken on this way of life by revolutionizing the way business is done. Step by step, he is streamlining operations and creating processes to increase sales productivity and improve marketing - to secure its position as the industry leader.

When Bonnett joined Wilden, between Wilden' s inside sales team, regional field sales managers, and a network of over 200 distributors worldwide, lead delivery was slow and the information about each lead was incomplete. Distributors were unhappy, because the delay in receiving leads - which were of ten duplicates of previous leads - was too slow so by the time they received them, they were no longer "hot". The daily summary of basic information on leads was not good enough and they were losing sales because of it. Further, the marketing team of ten had to guess what their customers' pains were, how their existing pumps were working, and what upcoming expansion projects they had. Even basic information like the application for the pump was missing from the customers' records, and they had to blindly market all pumps to a multitude of industries.

After investigating several CRM packages to help overcome these internal challenges, Wilden selected Maximizer Enterprise and implemented the software to fit into the company's sales and marketing process and help achieve its sales object ives.

Now, the inside sales represent at ives assign leads to each region by creating a new opportunity for each qualified lead. Distributors log into the web-based portal to view all the details on each of t heir leads. And each regional sales manager accesses the information from the field to view all opportunities for the distributors in his area. So distributors receive "hot" leads in real-time and have all the background information needed to make an informed and effective sales call.

More importantly, giving distributors and remote employees access to the customer base enables them to input details into each opportunity as it progresses from lead to close. Information such as what the prospect's problems or needs are, what they want to pump, what type of facility they have, and what pumps they are currently using are input ted into the customer record in customized fields so the data can later be analyzed. This is proving valuable for managers to know the status of sales opportunities, or why certain deals may have been lost. Further, the marketing team was previously unable to distinguish effectively between new and old prospects. Now they can precisely target their direct mail and email campaigns to the right audience.

"Historically, we have been out of touch with our end users, since we let the distributors build the relationships with them," says Bonnett. "Maximizer Enterprise puts us closer to the end users, which means we now have a better understanding of their needs. The processes we established and information we are gathering are helping us stay competitive in our position as the industry leader."

Business Challenges and Successful Solutions

Small to medium-sized businesses want to stay competitive, increase revenue, and remain profitable at the same time. This can be a challenge. Whether companies find this chal lenging because of a slow economy, market saturation, or other reasons, many companies are re-evaluating business strategies and internal processes to overcome these obstacles. Companies are realizing that in order to maintain their status or grow, they need to focus on their existing customers as much as or more than acquiring new customers, and do so cost-effectively. They cannot afford to lose a customer,ignore specific customer demands, or treat even one customer poorly, because for most companies, hanging on to a customer means increased revenue through cross-selling, up-selling, and repeat business year after year. Losing one customer over a dispute over a $50 part has a far greater impact than today's $50 - the company would lose hundreds or even thousands of dollars in future revenue from that customer who will spend money with the competition for years to come.

Real igning a company's employees and processes to focus on customer satisfaction is not always easy. The sales department is focused on closing deals for the month, the marketing department is focused on generating new leads with new campaigns, and the service department is trying to pull in their own revenue - so who's job is it to care about the customer? It 's everyone's job.

For many successful companies, creating a customer -focused business strategy was the first step. The companies' leaders proactively implemented customer -focused plans, processes, tools, and corporate culture. By instilling the commitment throughout the organization - in sales, marketing, customer support, and other departments - employees became dedicated to serving customer needs and treating each customer as an individual. To help employees do their job, companies refined workflow and business processes and invested in software that connects everyone in the organization to each other, and to the customer.

That's where Customer Relationship Management (CRM) software fitsin. Using CRM software, marketersare able to profile and market to customers, sales teams can collaborate on sales opportunities, service representatives can manage customer support cases, and everyone in the organization can track contacts, communications, and account activities. The results that successful companies have seen include gaining a competitive edge, increasing referral business, increasing market share, rising sales, and cost savings.

Senior Flexonics Pathway (manufacturing), Wilden Pump & Engineering (manufacturing), Ipsos-Reid (research services), The Oxford Princeton Programme (education), and Connect Tech (high-tech/distribution) are five examples of how companies are winning with a customer -focused culture, redefined business processes, and CRM software tools. They are succeeding in their commitment to satisfying customers throughout their life with the company, and building profitable relationships by doing so.

Business Technology Solutions Overview

At Business Technology Solutions, our mission is to help our clients enhance their business processes through the implementation of technology solutions, making them more efficient and profitable as a result. Our clients are typically small and mid-size organizations in the distribution, manufacturing, service, and health and long-term care industries. In addition, many of our clients use specialized applications specific for their industry, like point of sale for retail and restaurants, and/or require integration to an accounting or HR and payroll solution. As a technology consulting organization comprised of Certified Public Accountants (CPAs) and certified Human Resources and Payroll professionals, we have the ability to understand our clients’ unique accounting, business management and human resource needs. Working in concert with each client’s team, we take the time to really know their business, its objectives and chief concerns. Then, we’ll apply technology to improve efficiency and customer service and reduce redundancy and cost – helping streamline business processes and enhance their bottom line. At Business Technology Solutions (BTS), we strive to orchestrate real business solutions to meet our client’s needs.

Human Resource Management Center (HRMC) Overview

Founded in 1984, Human Resource Management Center (HRMC) is a pioneer in applying cutting edge technology to solve business' most pressing human capital challenges. The company's flagship HRMC AcclaimSM solution simplifies the management of all phases of the employee lifecycle, and the identification of opportunities for improvement. HRMC's technology automates a range of interrelated processes within a flexible, user-friendly framework, enabling organizations to streamline the acquisition and assessment of talent, evaluate new employees' readiness to contribute, and analyze the impact of a company's culture on retention and performance. Whether accessed over the Web or the phone, users--from job prospects to long-time employees--are led through an interactive experience that approximates true human dialogue, resulting in more effective interviews and employee surveys. HRMC Acclaim is easy to deploy and can be up and running within two weeks. It can be integrated with and extend the functionality of existing applicant tracking and HRIS systems, or provide companies with a complete, end-to-end automated solution from the ground up.

Deployment of Learning Management Systems

Related to talent management are learning management systems, since for organizations of virtually any size, ongoing training is an essential component of developing a workforce. Learning management software essentially delivers training to the desktop (often via a web browser, and is thus sometimes also called e-learning). It allows organizations to track and monitor which employees receive training (in other words, verifies attendance), when they are trained, and how well they understand the training material (for instance, by centrally testing their comprehension). Such systems are particularly relevant in industries that are bound by regulation and compliance issues (such as finance and health care) or that require employee certification.

To that end, these systems have also caught on in manufacturing, retail, and even casinos—due in part to the impact a better educated workforce can have on the top line. Manufacturing companies specifically are in need of more effective ways to manage their employees amid shrinking workforces (driven by plant closings and outsourcing) and skyrocketing benefits and disability expenses, and they have been grappling with how to deliver learning modules to employees with specific information. For instance, a company could design an event-driven workflow that is triggered by mandatory learning assignments, whereby a touch screen kiosk situated near the factory floor work area administers a training program. The interactive kiosk would then track, for instance, which individuals completed the module as well as what direct association they have with lowering machine downtime as a result of completing the training session. That would then tie back to HR and other associated enterprise applications.

Learning systems are also deployed to train employees on new products—either those they are using internally, or those they are selling to customers. Such systems are based on foundational software that acts as a database or administrative hub, tracking employees, course content, and other components, whereas on top of that may sit content creation tools and other middleware that helps distribute content. And then, there is the training content itself, which can be developed in-house or obtained from a universe of third parties. Cost avoidance (due to paper and travel elimination) and efficiency (for example, an enterprise has to quickly train its sales force prior to the launch of a new product and service) can be a primary reason for deploying learning systems, although one often has to reckon with a price tag in millions of dollars. GeoLearning, Knowledge Anywhere, Plateau Systems, SumTotal Systems, Intellinex, Saba, and Convergys are among the pure-play providers in this space, while some traditional ERP providers like SAP and Oracle/PeopleSoft have learning management functions as part of their human capital management (HCM) suites, like SAP HCM, Oracle HRMS, and PeopleSoft HCM.

Managing Contingent Labor

Also, more companies are reliant upon contingent or temporary contract labor and services now than at any other time. For the majority of companies, contingent labor is a significant component of the workforce mix, and they expect their reliance upon contingent labor to increase during 2006 and beyond. According to a recent survey conducted by Fieldglass, a provider of contingent workforce management solutions (which manage the business process of finding, hiring, managing, and monitoring contingent or contract labor or services), companies that take the opportunity to streamline their contingent workforce management processes stand to gain competitive advantage. The most cited motive (from about 60 percent of respondents) for improving the management of contingent labor and services was "improving the efficiency of procuring and managing services resources."

If organizations view employees as assets, then it follows that those assets should be allocated effectively, and in the context of business goals and demands. To that end, workforce management software generally involves staffing, developing, tracking, and rewarding employees. In practical terms, such software schedules employees based on business volume, and also tracks labor activities, projects being worked on, work orders, hours, and how workers should be paid. Workforce management software grew out of time and attendance (T&A) monitoring systems, and can now address many facets of the workforce, from making sure that assembly lines are adequately staffed on any particular shift, to identifying the best salespeople to tackle a new account and making sure they are rewarded properly. Workforce management software vendors include Ultimate Software, Kronos (which also recently acquired SmartTime), Automatic Data Processing (ADP), Softscape, Workbrain, 360Commerce (now part of Oracle), Kaba Benzing, MBH Solutions (including the recently acquired Concur HR product), WorkForce Software, and CyberShift.

The Total EAM Vision Strategic Advantages in Asset Management

Enterprise Asset Management systems (EAM) continue to point the way into the future for capital intensive industries. The combination of functionalities, asset focussed business intelligence and advanced management consulting have allowed some vendors to provide consistently high results to those industries whose operating model involves the management of large numbers of physical assets.

This specifically refers to industries in the areas of Mining, Oil and Gas, Defense, Utilities and Transport although it does also offer positive benefits for companies in some areas of manufacturing.

The Gartner Group defines EAM as the following:

"EAM consists of asset management, materials management, HRMS and financials"

Figure 1: Complimentary Effects between Managerial Functions in Capital Intensive Industries

The focus and structure of an EAM system recognises the strategic importance of asset management and provides a structure and depth of functionality dedicated to providing clear strategic advantages in these areas. It is for this reason that it is directed at the central role played by maintenance and includes the three additional functional areas in capital intensive industries that have a synergistic relationship with asset management. They have truly evolved into solutions for enterprise performance management in this industry sector.

It represents a key strategy to increase plant capacity, using information technology in lieu of new construction in large, asset-intensive enterprises. It integrates key plant control systems (PCS) and ERP with maintenance activities and functions to reduce downtime and minimize maintenance spending

The emergence of EAM as the solution for this style of industry has at times been confused both by clients, as well as by vendors.

Myth 1: EAM are only transactional Systems

While there are lower standard systems that offer only transactional functionality, a true EAM system builds on this data by providing advanced functions in critical areas affecting asset management. For example:

* Risk management and reliability engineering (Including predictive maintenance management)

* RCM

* Root Cause Analysis

* Advanced Workforce and Human Capital management

* Advanced Inventory Management

It is the inclusion of these ranges of functions that EAM systems are able to provide strategic advantages in asset management. Advantages that can separate industry leaders from their competitors.

Myth 2: Misunderstanding of the Areas of EAM

A common ploy by vendors of lower quality systems is to attempt to include other functions as a part of the core functionality of these systems. This effort of re-branding by specific vendors is not only misleading but affects the overall goals of asset management in industry. For example:

1. Addition of CRM (Customer / Client Relationship Management)
2. Addition of SCM (Supply Chain Management)

While these two system functionalities are important parts of managing enterprises., they are not vital parts of asset focussed industries. In fact the use of these systems, functions, in lieu of basic EAM functionalities, can substantially reduce benefits from the overall asset-centric solution. (Note: Basic CRM is considered to be a part of EAM)

An EAM provides a means of generating strategic advantages through the management of physical assets. And uses the issues of Asset Management as key drivers for achieving these advantages.

Recognised Benefits of E.A.M
In Q4 of 2001, the analyst organization ARC stated:

"Fast ROI and Hard Savings Keep the EAM/CMMS Software Market Healthy...The recent success of Enterprise Asset Management (EAM)/ Computerized Maintenance Management System (CMMS) solutions is directly related to strong corporate concentration on profitability. EAM/CMMS solutions are the only ones where a substantial and quick ROI can be realized."

This underscores the ability of these style systems to produce rapid results through advanced physical asset management functionality. The strategic importance of this, in terms of financial and non-financial returns on investment, cannot be overlooked by companies with large asset bases.
For a corporation to understand the potential impact of EAM it first needs to understand the strategic importance of asset management. The management of physical assets offers a vast area of potential strategic advantage for many companies. A thorough and accurate approach in this area can bring benefits in the areas of:

* Productivity

* Risk Management

* Asset utilization

* Quality of product and of client service

When combined with the added benefits available in applying EAM systems this adds potential areas of strategic advantage in:

* Utilization and development of human resources

* Financial optimization of the maintenance function

* Reduced inventory holdings

* Better vendor selection and management

* Human Capital Management

This requires a truly proactive approach to asset management. An approach that involve looking forward to take decisions instead of looking back. Proactivity, when expressed in terms of EAM, means:

* Use of "what if scenarios" and forecasting. This is a vastly under used area of all implementations. The ability of a company to be able to forecast differing scenarios when analysing the asset management function can add substantial value to a company.

* Accommodation of RCM style analyses

* Extensive use of Business Intelligence as a strategic asset for managers

* Providing for the creation of asset specific decision support information tools

* Allowing for asset policy decisions, in terms of redesign, changes to policies, identification of root cause analysis opportunities

* Inventory reduction, or increased efficiency decision support information

* Future workforce planning

It does not merely mean reacting to analysis. This practice, although recommended, is a reactive practice and focuses on what has happened. The key to proactivity is in focussing on what could happen in the future and planning accordingly.

Software as a Service beyond Customer Relationship Management and Sales

Despite the fact that this seems to be the focus of Microsoft's, SAP's, and even Salesforce.com's software as a service (SaaS) initiatives, surveys conducted by renowned analyst houses suggest that the more widespread use of technology accessible services through a Web browser is not necessarily centered on customer relationship management (CRM) or sales force automation (SFA) solutions, which focus on sales leads and customer targeting. Rather the technology is being used to share information and collaborate. The fact is that most enterprises have thus far invested tremendously in information technology (IT) support for administrative processes, whereas there has hardly been any investment in support for non-routine, cognitive information, which is of paramount importance for business decision makers, service and product innovators, and other staff members, who increasingly create the competitive advantage for the business. The tasks performed by these people require a mix of technologies, not just new technology. Users need access to unstructured data, unstructured content, and collaboration support. Yet, most collaborative teams have e-mail as the only mechanism of information exchange among knowledge workers. This is incredibly inefficient and can become increasingly overwhelming—to the point of becoming a negative productivity tool. For example, for anyone trying to collaboratively design a new aircraft and source its parts and assemblies, or manage a thousand scientists around the world working on a new drug, e-mail is a far cry from being an ideal tool for knowledge worker collaboration. Also, many smaller enterprises may need as much functionality as their larger brethren, making offering enterprise-level functionality via the SaaS model necessary, but also even more challenging. Given their enterprise resource planning (ERP) or accounting origins, the recent successes in the market of NetSuite and Intacct might vouch for this need.

In fact, applications are more often outsourced than infrastructure, and this is increasingly done through SaaS. These applications include travel services, human resources (HR) management (personnel, benefits, and payroll, from vendors like Taleo, Employease, Kronos, Ultimate Software, etc.), and billing and payment processing. Business to consumer (B2C) e-commerce and product catalogs are also delivered through SaaS. This includes dynamic pricing models, customer loyalty groups, targeted sales promotions, and other sophisticated sales tactics, as well as integration with other supply chain applications, those which do not necessarily need a large internal team of sales support people. Financial, tax, procurement, and customer service management have also followed suit. Companies are choosing to promote SaaS-based strategic sourcing and procurement applications ahead of well-publicized CRM deployments for a number of reasons, including, globalization, Web-based collaboration, manufacturing outsourcing in far-flung regions, and distributed order management (DOM).
Given this focus on information and collaboration, WebEx may very well be a leader in SaaS. Many of us have used the services of this on-line conferencing pioneer many times, but would not identify it as an SaaS leader. However, it should be straightforward to see how the multiple aspects of Web conferencing lend themselves well to the SaaS model. It moves well beyond shared presentations, workspace, and applications, and is supplemented by instant messaging (IM) and integrated with video and audio conferencing, often using voice over Internet protocol (VoIP) technology to bring the whole experience to the personal computer (PC). All of these features and benefits are available without purchasing, implementing, or managing a stack of hardware and software that is only used on occasion. Aside from e-meetings and presentations, another important use of WebEx is remote training, for example for regulatory compliance or IT support, as this reduces travel and increases business productivity.

WebEx uses a multi-tenant architecture, and the same core application serves every customer. Consequently, it is a far more stable business model than first-generation application service providers (ASP), which hosted specific instances of applications for each customer. The vendor also lets partners self-brand its WebOffice collaboration service, which offers group calendaring and scheduling, bundled with messaging, white boarding, and IM. WebOffice can also be billed directly from WebEx, typically for $10 (USD) per user, per month. It is thus not surprising that WebEx reportedly served its 14,000 customers with 2.2 billion on-line minutes in 2004. Moreover, approximately 60 percent of those conferences involved people from more than one organization.

While the market might have heard of Arena Solutions, which has long been offering an on-demand product lifecycle management (PLM) solution (see On-demand Product Life Cycle Management: Not Just for Small to Medium Businesses Anymore), a lesser known SaaS provider is Webcom, Inc. Webcom offers software solutions that simplify the quote-to-order process for the sale of complex products and services, such as those offered by Rockwell Automation, Motion Computing, Cray Computer, General Electric Industrial Systems, and ABB. Requiring only a browser, its solution, WebSource CPQ, allows customers to configure, price, quote, and ultimately propose their offerings across multiple sales and distribution channels, including customer self-service in a B2C setup, virtually at any time and anywhere. The software not only handles the traditional bill of material (BOM), routing, and diagram generation tasks frequently associated with product or engineering configurators, but also addresses the guided selling, proposal generation, and multilevel channel management tasks associated with sales configurators (for more information, see CRM for Complex Manufacturers Revolves Around Configuration Software).

Webcom touts that its software solutions provide the same level of depth as the on-premise peer products from Cincom Systems, Oracle, Trilogy, Selectica, Firepond, Big Machines, Access Commerce, etc., but without the highly involved and lengthy implementations typically associated with implementing these products on the customer site. One should, however, note that some of these competitors have been AppExchange participants, which indicates they also have SaaS prowess. The CPQ product, nevertheless, represents one of over thirty new partner-developed applications available via Salesforce.com's AppExchange (and linked by Web services), and it lets customers augment the base Salesforce.com functionality for more complex configurable product sales processes. Earlier in 2005, Webcom also joined the Siebel Alliance Program as a CRM On Demand Software Partner.
Another vendor has also caught our eye recently. MCA Solutions, the provider of the Service Planning and Optimization (SPO) suite of solutions, which helps companies in industries ranging from aerospace and defense (A&D) and semiconductors to industrial and medical equipment improve asset utilization and customer support, made a notable announcement in November 2005. It announced the availability of its SPO On-Demand solution, offering user companies one more way to gain access to its best-of-breed service parts planning solution. Generally available, the on-demand version is reportedly already helping some MCA customers across the high technology, telecommunications, and semiconductor industries reduce inventory, increase fill rates, and improve customer satisfaction.

As MCA recently closed a couple of hosted deals, interest in the vendor does not appear to be waning, as it has for many other prospects. This is no surprise, given the hosted software is faster to implement (in several weeks only), reduces the upfront hardware and software capital expense, and minimizes IT resistance to new software solutions. The announcement also means that smaller companies like Tellabs can now enjoy the benefits of software capabilities that larger companies like Cisco Systems are also using.

MCA's original, on-premise SPO suite is a Web-based suite of advanced inventory planning, forecasting, and execution solutions that gives companies the ability to manage and monitor inventory levels of mission-critical materials by providing global, real time visibility throughout the extended service supply chain. As commercial software devised to optimize assets in a multi-echelon service supply chain network, it supports these collaborative processes by linking the ERP and CRM systems of a user's company.

Simply put, the software supplies inventory forecasts based on the customer installed base, provides contract coverage analysis, and determines where to position spare parts most effectively to meet customer service requirements (i.e., it suggests the optimum stock levels and location for spare parts while balancing the required level of customer service with the allowed inventory investment). SPO is able to provide that level of information by using sophisticated risk-based algorithms specifically designed to handle the uncertainty inherent in knowing when or where a particular piece of equipment may fail, and a spare part will be needed. For more information, see Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts SCM.

Software as a Service Is Gaining Ground

One does not have to closely watch the enterprise applications market to realize that the hosted delivery model is enjoying a new glorified, (or reinvented, if you prefer) status. Referred to as on-demand, utility computing, or software as a service (SaaS) delivery approaches, hosting has not only achieved buzzword status overnight, but the concept has been gaining ground through real deployments. Hosting was once known as application service provider (ASP), which has negative connotations stemming from the "dot.com propaganda, boom and bust," but this term is being replaced by these other, "sexier" terms (which are also quite possibly better value propositions). Industry giants (and some thought-leaders, which are not necessarily large vendors yet) are spending significant marketing dollars vouching for this old concept reborn.

Although there are subtleties and even distinct differences separating these terms and their associated business models, the various hosting flavors are all variations of the same market. New business models, markets, and providers are taking advantage of Internet-based technologies and standards to provide solutions based on the notions of standardization, interoperability, software component reuse, and automation. These terms describe a shift away from traditionally heavily customized (and supposedly unique) packaged software suites, owned and managed by user enterprises, which were expensive and time-consuming to develop, implement, and maintain (see The "Joy" of Enterprise Systems Implementations), and toward standardized, componentized, common, and lower cost software services sourced (and even cancelled) at will from service providers.

Whether referred to as hosted services, ASP services, SaaS, utility computing, or software on-demand, the idea is basically the same: instead of buying and installing expensive and pesky packaged enterprise applications, users can simply access applications over a network, with an Internet browser being the only absolute necessity. Thus, often there is no software and hardware to buy per se, since the application is used over the Internet and is paid for through a subscription or supported by a third party, such as an advertiser. Advertising-based software offerings emerged several years ago in the form of Web e-mail and Web calendaring. More recently, advertisers have realized that Web-based software applications are just another type of digital content that can be used to reach a targeted audience, and companies such as Google, Yahoo!, and Microsoft, are refining their capabilities to target users with context-based advertisements.
Burned by negative experiences deploying unwieldy packaged software suites on their premises, users are now wiser and more assertive. Increasingly, they are demanding software that is easy to purchase, easy to consume, and has tangible payback or return on investment (ROI). For users, their purchasing demands have almost become akin to retail purchases that can be made via credit cards. Rather than spending millions of dollars on software before seeing any inkling of ROI, users have started to demand a performance-based, shared risk model of software provision. The licensing and delivery of enterprise software products is therefore undergoing a fundamental shift from traditional upfront fees for perpetual licenses to incremental, per transaction, pay as you go (PAYG), or even success-based pricing. These are becoming popular alternatives, especially for small businesses and startups that do not have the same, large information technology (IT) budgets as larger, established companies. Companies can acquire software for a lower entry cost and pay for more only as their business expands (see Trends in Delivery and Pricing Models for Enterprise Applications: Pricing Options).

Though the price of hardware is decreasing and becoming more affordable, a major predicament remains: enterprise software applications, such as complex enterprise resource planning (ERP), supply chain management (SCM), product lifecycle management (PLM), and customer relationship management (CRM) systems, are often too expensive and too intricate for small companies to govern. While they can afford the necessary hardware, they do not have the IT staff and infrastructure required to support a major enterprise application. Relatively cheaper solutions are now becoming widely available, and vendors are addressing their customers' desire to use technology as needed. Users do not want to buy entire software packages or infrastructure when, typically, only a small percentage of the overall capability is used. User enterprises have also become more agile, requiring more flexibility in IT delivery and usage, as well as licensing and payment structures, and vendor business models. In the enterprise applications space, many customers are moving away from large upfront licensing contracts (with ongoing maintenance fees), to one that is variable, based on usage, and defined by a subscription-based relationship bundling the entire offering. There might also be a financial advantage to having the software be an expense rather than capital, which will depreciate over time.

A slew of recent moves by the most prominent contemporary market players may be another sign of enterprise applications' slow but ongoing evolution to SaaS, on-demand, and related hosted models. The market may be experiencing the beginning of the end of traditional user-based licensing on the customer's premises for a given period of time and product version. The vast majority of business application software vendors still generate most of their revenues by selling their software licenses (via compact discs [CDs] or similar physical media gadgets) based on the number of named or concurrent users or seats or on the number of processing hardware units (and sometimes on a per module basis, though this is often based on an unnecessary "wall-to-wall", "all you can eat" functional scope). Revenues are also derived from accompanying implementation services, post-implementation service, and support and maintenance, which are priced as a percentage (or more often as multiples) of these software license fees.

This model might be wearing out its welcome on both the vendor and customer side. For one, it tends to be cyclical, since vendors first sell their present product versions into the market, and then sell subsequent upgrades. Logicallly, sales revenue should peak after each major upgrade or product release, and then drop until the next one (on average every twelve to eighteen months). This creates a cyclical, yet erratic revenue stream, which, in turn, creates cyclical, volatile stock prices (for public vendors) and also has other business performance-related ramifications. Bundled with this is the inability of licensed, on-premise, packaged software to keep up with ever-evolving "best industry practices", since traditional packaged software is largely stuck in revolving major release cycles. These cycles require most of the research and development (R&D) effort to be spent on building and testing compatibility for operating systems (OS), databases, application servers, and other platforms.
On the other hand, many user companies are unhappy with the rigidity of the model, especially in terms of the tiresome and endless upgrade process, and maintenance fees that keep creeping up. This, coupled with the non-standard pricing, leaves them wondering what kind of deal they have gotten (and particularly whether they are paying for functionality they will not use any time soon). To put this into perspective: how often do we buy a lifetime's worth of snacks and coffee during one trip to the grocery store? Such shelfware comes in many forms, such as products that are acquired but never used, or modules that are bought as part of an entire suite. They are modules that were once bought to fulfill a function that no longer exists in the business, for whatever reason; and capabilities that have become redundant as they are replaced by new software applications. Though these gratuitous capabilities are hardly ever used, they still require license and maintenance fees. SaaS gives users the option of buying software applications as appetizers, which are far more sensible portions that satisfy a need. It decreases software bloat, and is far more kind to the IT system's "waistline". For more information, see Application Erosion: Eating Away at Your Hard Earned Value .

The widespread use of personal computers (PC), the Internet, and ensuing Web-based applications has had an essential impact on the way business applications are being sold and delivered. The development of Web-based applications has decoupled the user interface (UI) from the business application logic and its underlying software and hardware platforms. As a result, any user working at a PC with a Web browser can access a variety of business applications running on different software or hardware platforms in any number of different locations for the cost of a mere Internet connection. This decoupling has therefore allowed enterprise application vendors to begin to change their business model from traditional on-premise software license sales to the delivery of SaaS offerings.

However, a more important factor in the shift to SaaS might be a change in the way the software itself is created nowadays. Rather than software components being developed and bundled together to form a monolithic, rigid solution, systems are increasingly being developed as a "federation", "mash up" of services, or composite applications, which are only tied together at the point of execution. This will eventually enable alternative software components to be substituted between each use of a system, allowing much finer grained flexibility. A simple analogy is the use of an electrical appliance. The user does not directly negotiate with the electricity company to use power for the specific appliance. There are standards and controls, but they are broad enough that an electrical appliance can be plugged into the service without the user's notifying the electrical utility. On its side, the electrical utility takes care of the complexity of power generation, including matching capacity to demand, and it can change which generators and circuits deliver the power—all without coordinating these events with the millions of users who rely on the service.

The Imperative for Strategic Contribution

Most chief executive officers (CEOs) are challenging their human resources (HR) departments to make more strategic contributions to the organization. With HR traditionally viewed as a cost center, it is often difficult to know precisely what that means. CEOs, who are focused on growth, earnings, and shareholder returns, want HR to support corporate business objectives and to have the necessary data to support business decisions. These roles are necessarily integrated with HR's responsibility to ensure that there are qualified and satisfied workers when and where they are needed. The way to fulfill these roles is through process excellence, integrated HR systems, and accurate and actionable data from all HR departments. When these elements come together, HR can have a tremendous and meaningful impact on the bottom line.

It sounds like a lot to ask, but these demands are achievable today. And the HR department doesn't have to go it alone. There are technologies and service providers that can help move HR from the administrative rut, free up manpower for strategic tasks, and employ business intelligence capability to align HR with desired business outcomes.

The Role of Outsourcing

Human resources outsourcers play a critical role. Companies often choose to work with outsourcers to gain access to the latest technologies without having to make the associated capital investment. At most enterprises where HR functions have been outsourced, the initial tier of value is well-established. Processes are standardized and employee interactions are professionalized. Transactions are faster, more user-friendly, and less costly. As employee programs continually become more complex and difficult to administer, outsourcing consistently delivers high levels of service.

But it's that next critical tier where advanced HR outsourcing technologies are delivering strategic leverage by gathering and combining fragmented data from discrete vertical HR systems. When data from various departments is integrated into a reliable, consistent source of centralized information, HR can make better-informed and more strategic business decisions daily. The impacts of HR programs and practices can be assessed, and critical insights into the workforce revealed.

Sophisticated analytics can measure how HR systems and programs affect employee behavior and influence customer behavior (for example), ultimately impacting financial results and corporate growth. Companies are beginning to see that reducing HR administrative costs is only the tip of the iceberg. A new priority is to employ the technologies that provide data and analysis, in order to realize the savings that lie in HR.
For example, your time and attendance program tracks worker hours and absences, and is the entry process for generating payroll. A separate program handles short-term and long-term disability payments. Both of these systems are important. But viewed separately, they reinforce HR's traditional administrative role. An outsourcing solution that combines information from both systems and employs business intelligence functionality delivers a human asset management program that tracks absenteeism, peak work periods, and turnover. Now your data shows impacts on labor costs, overtime, and the amount of money spent on temps and employee replacement. This business intelligence can be used to closely align the workforce with long-term labor needs, manage absence and labor utilization, and thereby reduce operating costs.

Training, staffing, and recruiting programs can be linked in beneficial ways, too. There are lots of technology tools that enable prospective employees to submit r�sum�s online. But does your HR department use that information beyond the recruiting process? By integrating prospective employee data and skill sets against the company's development plan and training programs, qualified individuals can be "pipelined" into the organization over time, and existing staff can be educated. This ensures more strategic hiring decisions from the outside, and better use of existing personnel.

Succession planning is another key area where HR outsourcing can provide strategic value. For example, if a company has a 10 percent turnover rate, and it typically takes 30 days to fill a job, what does that mean for its staffing at any given point in time? It means the company is nearly one percent understaffed at all times. In an organization of 50,000 employees, that's 400 workers not meeting deadlines or producing, which negatively impacts customer satisfaction.

In that same scenario, add in the ramp-up time required for new hires to fill the open slots, and the "downtime" could be as much as sixty days per opening. Factor in absenteeism, short- and long-term disability, sabbaticals, maternity and paternity leave, job sharing, and other benefits, and the staffing levels are likely to be much lower than imagined. Using business intelligence technologies and analytics allows HR departments to better see and manage what is really happening with staffing levels, and predictive measurements can help plan more accurately for the normal ebbs and flows of business.

Selecting the Right Outsourcing Provider

As important as deciding to outsource HR functions, however, is selecting the right partner. Partnering with an HR provider is a critical business decision, and should be considered with the same due diligence as a merger or joint venture. Companies should be culturally compatible and share a common vision.

An outsourcing partner's service framework and delivery model should be engineered to meet your requirements, and there should be a clear definition of the scope of services and defined service levels. The objectives of outsourcing should be translated into service-level agreements so performance can be measured against stated expectations. Most large enterprises will want a full-service provider rather than one that handles just one element (such as payroll). References should be checked, and the provider should demonstrate capabilities in full-spectrum HR outsourcing (and have the financial backing to be around for the long term).

Remember, working with an outsourcer is not about giving up control. Rather, it is about finding the best ways to deliver quality service, impact organization economics, and provide the data that aligns the HR department with business outcomes.
In today's economic climate, all CEOs have a growth agenda that requires a solid and committed workforce—in other words, they need to have the right people in the right place at the right time. The true value of the human resource team will be measured in how well it aligns with this growth agenda. Effectively integrating HR business intelligence technologies is foundational to HR's metamorphosis from administrative cost center to strategic contributor to corporate growth.

Examples of Strategic HR

Here are some quick takes on how companies can strategically leverage HR for measurable gains. The impact areas and results in the list below are far from complete, and are provided here only as samples:

* Staffing levels: Aligning time tracking with disability and leave information fosters greater understanding of staffing needs.
* New hires: Melding r�sum� data with future business needs "pipelines" qualified individuals for impending job openings.
* Succession planning: Assessing skill sets of existing employees and overlaying it with upcoming job openings promotes hiring from within.
* Benefits cost: Integrating HR survey data with corporate goals can help predict changing corporate contribution rates that would result in more job turnover.
* Hiring assessments: Extracting data from various HR functions allows you to determine if increased hiring is due to growth and skill upgrades, or to unwanted turnover.

Essential Considerations When Selecting an Outsourcing Provider

Beyond general considerations with respect to the utility of outsourcing providers, there are specific questions which enable companies to determine the compatibility of a prospective provider:

* Do the provider's systems have the capabilities to meet specific technology and business requirements? Note that inadequacy with respect to this question can of course come on two counts: either the provider's systems are too "generic" to meet these specific requirements, or else (in the case where they do in fact address the particular requirements) they simply underperform.
* Does the outsourcer have a clear understanding of needed capabilities?
* Will the operation be transparent, both financially and managerially?
* Do the outsourcer and your company share a common vision?
* Does the outsourcer have a partnering mindset?
* Is the outsourcer's culture compatible with your corporate culture?
* Will the outsourcer be proactive in engaging your company to resolve problems?
* Are the scope of services and performance levels clearly defined in a service level agreement?
* Can the provider enable your company to deliver business performance impact?

By conducting a thorough review of the tangible and intangible elements underlying these questions, companies should be in a strong position to ensure that HR is not only a fundamental element for achieving corporate objectives, but an integral driver of success.