IT Modernization in an Economic Downturn!
Over the past 18 months, the global economic malaise has presented huge challenges for many businesses. Revenue challenges are driving a tremendous level of corporate introspection. Much of what was taken for granted, or assumed to be untouchable, is now coming under the corporate eye for review and justification. What should be kept, what should be changed, what can be changed, and what should be shut down or sold off are serious questions being faced by nearly all businesses that I talk with.
This corporate introspection results in serious discussions and tough decisions, of which “reducing costs” in IT is a common thread.
Reducing Cost
IT organizations are under tremendous pressure to do more with less. While the focus of doing more with less isn’t a new topic, the intensity and detail of scrutiny is. In my 23 years at Oracle, I’ve experienced many downturns. This one is different, at least for the Oracle Modernization business that I lead. How? This time there are many options for solving the challenges presented by legacy software and infrastructure.
• How is money being spent?
• What is money being spent on?
• Does the expenditure make sense?
• Can costs be reduced?
Reducing cost is an imperative, an important tactical discussion focused on keeping a company alive and operational today. However, what about tomorrow? Considering the future expands the focus from tactical survival to include strategic direction and drive – introducing the concept "spend wisely." Combining the tactical and strategic discussions, results in a focus on economic efficiency – getting the most business value from the investment while also reducing costs.
Example
Let’s look at an example. For the case of discussion, we’ll assume a customer is running a mission critical application system built with COBOL and using some legacy data store (e.g. VSAM, IMS/DB, IDMS, Adabas). And… since this is Oracle, we will look at the target environment being based upon Oracle software.
The example customer runs a global manufacturing business. As a direct result of the current economic situation, they have an immediate need to reduce cost, thus IT is pushing hard to find technology solutions that will reduce costs.
Rehosting
Rehosting is a logical approach - an approach where the data is migrated from the legacy datastore(s) to an Oracle Database, while the application is also rehosted, but kept in COBOL. While this relatively simple solution can result in significant cost reduction, the resulting system is still legacy, with all the challenges and limitations remaining unchanged, delivering limited business value/benefit.
Often, this is the end of any modernization discussion/focus, and the legacy systems remain, preventing the company from growing into the future. While this provides a solid solution to a tactical pain point, it begs the question, “What next?"
Enhancing value
With the cost savings in place, the company in question might look at where to go from here: build new systems; implement packaged applications; re-architect the old ones; integrate with SOA; etc… This is a multiphase approach that uses rehosting to “find” funding from within existing budget to drive a more strategic modernization project that delivers increased business benefit/value.
Changing the Game
What if we reorder the discussion, rather than immediately stepping into a rehost project, the discussion is altered to include two key questions:
• What is the 5 year goal for your business?
• What limits/prevents you from achieving your 5 year goal/objectives?
The answers to these questions can deliver surprising results. Going back to the global manufacturing company that we mentioned above, we find that while they need to reduce costs, they want to become a more dynamic, competitive manufacturer that can react/respond more readily to changes in the global economy, their customer needs, etc… and one of the key factors limiting their growth/transformation is their legacy systems. This is a common response, and a very typical situation.
Solving their key challenge means solving the legacy challenge, begging the question:
• What do these legacy systems do?
Now we find a very interesting fact… the existing legacy systems provide business functionality that is basically GL (general ledger) and SCM (Supply Chain).
Let’s consider the business factors: limitations in the legacy GL and SCM systems, prevent the manufacturing company from seeing their business real time, thus, to keep the assembly line moving, they must ensure they never run out of inventory in the supply chain, therefore, often, an excess inventory is required, and purchasing isn’t able to negotiate the best purchase prices.
New GL and SCM capability/functionality provided by a complete, open and integrated solution comprised of Oracle’s E-Business Suite, Fusion Middleware (including SOA) and Technology (database, etc…) that can provide real time visibility into the business. Visibility that enables the manufacturing company to adopt a just in time inventory process, resulting in a reduced inventory, and buy at better prices, both freeing up cash (frequently large amounts) that can be used to grow/transform the business.
Now, the manufacturing company is into a discussion of financing the immediate project from future cash savings. The result, they get the final solution that provides maximum business value/benefit more quickly, and at reduced cost.
Summary
We’ve discussed three different approaches to the same problem, all that use “found” funding. One solution helps reduce costs while the other two enable the company to:
• Reduce cost
• Build a system to supplies a solid foundation upon which to grow the business
• Deliver great business value/benefit
• Provide solutions tailored to that company
This is only a small example of how we can be of service to you. Engaging with Oracle, and our Oracle Modernization business ensures that all tactical and strategic challenges are well understood, and factored into a comprehensive modernization roadmap that drives near term gains and long term success.
