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.