By Sanjeev Sharma on Jan 12, 2012
"Stuck in Cement: When Packaged Apps Create Barriers to Innovation", reads the title of a recent Forresterresearch paper. The author, Craig Le Clair, laments that packaged applications create inertia that makes it harder for organizations to embrace change from an execution perspective. As per the report, there is widespread frustration with regards to ability to packaged applications to allow businesses to break free from operational silos and embrace change. So does that mean packaged applications are the root of all organizational inertia and should be dispensed with? Certainly not!
Vertical or horizontal applications packaged applications were intended to provide scale to business operations in terms of Capacity (i.e. volume), Performance (i.e. Straight Through Processing (STP)) and Compliance (with standards and /or regulation) while mitigating time, effort and comprehensive skills set requirements, both technical and functional, of developing custom applications. The same rationale and value of packaged applications holds true, even more so today, when time-to-value (lead-to-cash and trouble-to-resolve) and time-to-market (concept-to-market and time-to-compliance) pressures are greater than ever. While technology innovations such as Cloud accelerate initial set-up time and effort, to a large extent, cloud based applications apportion up-front and on-going costs of packaged applications over their life-time. It would be sacrilegious to claim that cloud based applications will solve the agility issues faced with on-premise applications. In fact the integration challenge would remain largely the same, if not get more complicated especially given the security, privacy and data synchronization concerns.
The problem of responding to change from an packaged applications perspective has been incorrectly associated with the eradication of business silos. Organizational and IT systems stove-pipes have been berated as being the cause of dysfunction in responding to change. But are organizational silos really bad? If so, why do they develop in the first place? Organization and IT system silos are a consequence and concomitance of natural evolution as the organization grows in the depth and breadth of its offerings, geographic reach, vertical specialization and market (i.e. customer segments). To respond to business priorities, that is revenue growth, margins, profitability or market share, organization will continue to become more complicated.. Matrix organizational structures are giving way to mesh (i.e. network) like organizational structure where the boundaries between internal lines of business and the external stakeholders (including customers, partners and suppliers) is blurring. Shouldn't businesses then be making more investments in packaged applications that are purpose-fit for specific customer niches, geographies and industries? Clearly, the flexibility of changing existing packaged-applications to meet new business needs is overrated in today's business environment.
The solution lies in providing a consistent experience across external interfaces while continuing to make investments in internal applications (packaged or custom). After all specialized, purpose-fit, applications will deliver a competitive advantage. This is where edge applications built on BPM shine in overcoming the change inertia plaguing businesses. For instance, let's consider a local retailer contemplating entry in an overseas market. What if the retailer's existing CRM system does not fit the requirements of rapid-entry into the target market? What choices does the retailer have?
One choice, could be to customize the existing CRM system through customized development effort. Another choice, could be rip-and-replace the existing CRM system with a new on-premise or cloud based CRM system. The latter approach may appear tempting in vendor pitches but is not for the faint-hearted in practice. To quote Carl Von Clausewitz, "Everything in strategy is very simple, but that does not mean that everything is easy!" In reality neither of the above approaches scale in the long-term.
Yet another alternative, one that businesses typically resort to, is to deploy a new CRM system that is purpose-fit for the requirements of the overseas market. In this case, the business is faced with the time and effort of re-coding business rules and compliance policies in the new CRM system. Though this approach makes sense it becomes harder to scale when future needs complicate integration effort and consistent enforcement of business rules and compliance policies across the stove-pipe CRM systems. However businesses can circumvent these issues if they build an intermediate layer that interfaces with the customer channels and orchestrates the orders across the different front-end CRM systems. In this manner, businesses get the performance and capability benefits of purpose-fit packaged-applications and while being able to apply business rules and compliance policies consistently across them thereby providing a uniform customer experience across the external channels.The future is here today and BPM addresses the long-standing challenge of strategy-execution gap by serving as a platform for building edge applications.