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What is IT Strategy?

July 7th, 2014 by
What is Business and IT Strategy?

Business & IT Strategy

We hear it almost every day, IT Strategy, Business Strategy, strategic customer accounts, strategic widgets, etc. Strategy is applied to so many areas and so many things that the word has almost become meaningless.  The term “strategy” has become trite because it is used so much with so little understanding.

With all the buzz around strategy, and the lack of clarity and simplicity for what Strategy actually IS, I did a lot of research several years ago and produced my own model:

 

Making IT and ERP Investments Strategic and Business Aligned

What I discovered is almost universal confusion of what is tactical and strategic. The reason is simple, strategy is hard– really, really hard. Tactics are not easy but lots of folks can take a more limited and more focused approach to produce tactical advantages, and in turn they call this strategy. Here is an oversimplification:

  • Tactics – execution steps which provide short term wins (short term competitive advantage)
  • Strategy – methods, which includes the tactics, to prevent opponents from winning (mid-long term barriers to competition)

Looked at another way, tactics are more like operational effectiveness. This is how well you execute in a given area or context. Strategy is more directly related to market strength. How well you engage, penetrate, and hold markets in comparison to your competitors.

For an illustration of tactics vs. strategy, Wayne Gretzky said it best: “I skate to where the puck is gonna be, not where it has been.” Most hockey players ran to the puck where it was in play, just in time to see it passed to another player. Gretzky would go to where the puck was going to be and was prepared for the puck when it arrived.

Do You Have an IT Strategy?

First let me be candid, at the risk of offending my CIO and CTO friends at some pretty large companies, I’m not sure there is a genuine “IT Strategy.” Unless you are in a Technology business I don’t think the term applies.

There IS however an IT Enabled Business Strategy. By ensuring IT is focused on Business Strategy, the IT organization becomes a strategic business asset. By focusing on how IT can help a business to become more competitive now (tactical), by gaining market share, helps IT demonstrate value. By focusing on how IT can work create barriers to competition (hold on to market share), IT becomes strategic. To put this in business terms, customer acquisition is more like a tactic (an event) while customer retention and selling into your customer base is strategic.

What Would an IT Strategy Look Like?

What do I mean by all this? If your IT organization is able to engage, penetrate, and hold the “internal IT market” within your enterprise, you might have an “IT Strategy.” Like any marketspace, if you are doing this through monopoly power, then you are not strategic but relying on enterprise enforcement to ensure your monopoly position. It is only a matter of time, or changing directors, that this monopoly will be broken up. Business units across various enterprises are taking their own budgets and bypassing the “IT monopoly” through BYOD (Bring Your Own Device), Cloud, etc.

If you are not operating in a monopoly environment, the way to engage, penetrate, and hold the IT organization’s “market” is to deliver real, lasting, and hard to duplicate value to the greater enterprise.

Conclusion on Building a Strategy

This short post only scratches the surface of strategy development. However, if you really want to become strategic you must learn your enterprise’s competitive landscape. If you can’t identify your enterprise’s marketspace competitive pressures, and understand your place in those areas, then real strategy will be elusive if not impossible. In fact, even genuine tactical advantage will be extremely difficult. After all, what are you trying to gain competitive advantage against?

So, if you want to make an SAP, ERP, or other IT project strategic it is important to understand how to design for business value and competitive advantage.

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SAP & IT Outsourcing – RESULTS MATTER!

June 24th, 2014 by
In House vs. Outsource

In House vs. Outsource

Business today is looking for a way to provide shareholder value.  Outsourcing has become one of the latest “crazes” to boost stock values because shareholders believe it will reduce costs.  While your share price may increase in the short term, you may not see the cost savings and your share price will suffer later as your cost basis increases.

It is sad that the cost saving “dream” presented during all those sales pitches often become a “nightmare” of spiraling costs and management headaches.  If you go into your outsourcing arrangement with eyes wide open you are much more likely to get better results and you just might see some cost savings.

INTRODUCTION to OUTSOURCING RESULTS

In the spirit of full disclosure I’ll provide some insight on why I am doing these outsourcing posts.  The reality is I don’t like outsourcing, NOT because I’m threatened by it, and not because of any particular sense of betrayal by companies who take this path; my reason is simple, too often the outsourcing benefit claims are at best misleading and at worst blatant lies.

If you know what to look for and how to structure these arrangements you just might get apples to apples comparisons on real outsourcing costs.  If you know what you are getting into, and how to manage your outsourcing arrangement, you might benefit.  But that is up to you to construct your contracts, management structure, monitoring mechanisms, and QA processes to ensure those results.

EFFECTIVE MANAGEMENT OF IT OUTSOURCING VENDORS

It may seem obvious that you do NOT, NOT, NOT want to give up control of your business processes to an outsourced vendor but you would be surprised how often this happens.  And when it does you are the outsourcing vendor’s cash cow.  Someone will control the processes and if it isn’t you they will be controlled to favor the outsourcing vendor at your cost.

One of the first areas to contractually ensure some measure of control is in oversight.  You, as the client, must insist that you will have final say and control over all processes, standards, templates, and resources.  This should include but not be limited to:

  • QA reviews and internal audits
  • All Deliverables
  • Scope development and scope management
  • Change processes (or you WILL be change ordered to death!)
  • All code reviews
  • Adjustment and approval of all standards
  • Adjustment and approval of all processes
  • Adjustment and approval of escalation procedures
  • Project Management activities
  • How OCM (Organizational Change Management) will be handled
  • Data standards and processes
  • Testing requirements
  • Required documentation
  • Control of all resources the vendor might provide
  • Etc.

You get the picture.  The minute you give up management of any of these key areas you are headed for unanticipated consequences, change order costs, less than optimal results, etc.

CONCLUSION on IT OUTSOURCING

When you outsource your management requirements increase rather than decrease.  Because of the outsourcer’s profit motive you must be more diligent than ever to ensure you are getting results and getting what you pay for.  If you are not aggressive in managing these areas you will likely experience some nasty financial surprises.

My opinion is to do an honest assessment of your internal capabilities for more aggressive management of outside resources.  Strong management must be a key competence of any company wanting a successful outsourcing arrangement.

This is the wrap up to the series on Outsourcing:

 

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Dear SAP — IT’s Past HANA TIME

June 16th, 2014 by
In-Memory DB

In-Memory DB

Recently there has been a lot of activity around in-memory database processing.  Oracle announced in-memory which it is positioning as a direct competitor to HANA [Fn1]; IBM, Microsoft, and others are getting on the “in-memory” bandwagon as well [FN2].  A quick check of Wikipedia indicates there are numerous companies claiming “in-memory” database processing as well [FN3]. Then there is the huge performance difference between Solid State Drives (SSD) and physical media Hard Drive Disks (HDD), being somewhere around 75 times or greater the Database I/O performance (from about a year ago) [Fn4].  The cost difference for SSD vs Memory is significant and SSD technology is still in its infancy but improving quickly.

This all creates a recipe for “in-memory” database processing becoming a commodity. SAP, there is a forward looking option where you can be strategic about increasing application sales, license revenue, and maintenance revenue.  You can do this while making customers happy.

Aren’t “win-win” situations great when they are available?

What Does Strategic Mean?

There is so much talk about “strategy” these days that it has become an overused word with little meaning.  Too many think strategy means “clever.”  While strategy is often “clever” in the business context it has a very specific meaning.  Over the years I’ve developed the following model to define the strategic journey for any area of business.  In this case, when I refer to strategic sales, I mean that you are creating real barriers to entry and real pressure for competitors.

Making IT and ERP Investments Strategic and Business Aligned

R3Now.com IT – ERP Strategy Model

Strategic Sales Thinking on Managing SAP HANA Competitors

SAP, you have certainly recovered any R&D or development costs invested in HANA.  Not only that, you’ve made some money along the way and will continue to leverage HANA as a revenue stream.  However, you have a unique, AND NARROW, window of opportunity.  As the dominant presence in the “in-memory” space, your opportunity is to limit Oracle’s new database sales growth while still growing your revenue and application footprint with customers. You can use a similar approach to the one I outlined for keeping customers happy and growing revenue in .  Basically, give customers something of meaningful value while growing your revenue and application footprint.  Fence out the competition.

Use HANA to get out in front of Oracle database sales by bundling HANA with certain application and license sales as a “free” application but with some ongoing maintenance fees.  You can limit the “amount” of HANA, for example make it the first 1, 2, or 3 64GB units as “free.”  For existing customers who may have purchased a promoted combination of application(s) and HANA, provide them some future discount for Net NEW application (or license) purchases.  You could also revive your old “safe passage” approach to get existing Oracle installed base customers OFF of the Oracle Database.  By giving existing Oracle Database customers an equivalent HANA value to replace their Oracle Databases, but charging maintenance, you create tremendous pressure on Oracle to “cannibalize” their own installed base. This approach does a LOT of things:

  1. Continued revenue generation by promoting the sale and license growth of existing applications.
  2. Some revenue generation from HANA maintenance for those customers who accept the bundled version.
  3. Targeted sale and promotion of the applications SAP as a company wants to more aggressively market such as mobility, CRM, or Business Objects.
  4. Net NEW database sales by Oracle, or other competitors, are more difficult to position against a MUCH higher performance “free” HANA database application option.
  5. Establishes a competitive environment where Oracle has to dilute its own sales and marketing efforts to pursue existing customer while competing against HANA adoption for new applications.
  6. It allows you (SAP) to continue to sell HANA into the existing database space.
  7. HANA is well positioned as the future defacto In-Memory database (similar to what IBM did with the PC in its early days).
  8. You create more “stickiness” with any customers using HANA over the rival database companies.

Conclusion for SAP HANA in the Future

HANA’s In-Memory dominance is challenged by numerous competitors entering (or already in) the marketplace.  When you combine improvements in SSD performance and cost the pressure grows stronger.  Oracle has just finished spending a significant amount of R&D on their In-Memory database product and is preparing to aggressively market it.  By providing HANA so that it promotes the sale of the SAP application portfolio, while undermining the viability of new Oracle Database sales, Oracle will struggle to recover R&D while you (SAP) raises their expense to acquire and retain customers.

Done properly Oracle would be placed in a position to cannibalize their own installed base to retain their customer base, all while SAP is left focusing on selling solutions from the SAP application portfolio.

Don’t let this opportunity slip away.  You can gain additional application market share while placing your biggest competitor, Oracle, in a difficult competitive situation.

==============

[FN1]  Oracle’s In-Memory Option Aims To Beat The Rest Within 12 Months.  ZDNet, June 10, 2014.  http://www.zdnet.com/oracles-in-memory-option-aims-to-beat-the-rest-within-12-months-7000030382/

[FN2] In-Memory Databases: Do You Need The Speed?  Information Week, March 3, 2014.  http://www.informationweek.com/big-data/big-data-analytics/in-memory-databases-do-you-need-the-speed/d/d-id/1114076

[FN3] In-Memory Database.  Wikipedia, retrieved June 16,2014.  http://en.wikipedia.org/wiki/In-memory_database

[FN4] Tom’s Hardware, 2013 HDD Database I/O performance: http://www.tomshardware.com/charts/hdd-charts-2013/-20-IOMeter-2006.07.27-Database,2922.html; SSD Database I/O Performance: http://www.tomshardware.com/charts/ssd-charts-2013/IOMeter-Database-Benchmark,2817.html.  retrieved June 16,2014

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