Editor's Note: Welcome to SmartAdvice, a weekly column by The Advisory Council (TAC), an advisory service firm. The feature answers three questions of core interest to you, ranging from career advice to enterprise strategies to how to deal with vendors. Submit questions directly to [email protected]
Topic A: Senior management feels that we haven't gained any strategic advantage from the enterprise-application packages we purchased for Y2K. How do I overcome the Y2K spending hangover?
Our advice: There's good reason for senior management's skepticism about the return on their enterprise resource planning investments. ERP has caused grief to many organizations, including some that went bankrupt as a result. However, many organizations have benefited from its reduced costs, shortened cycle time, and increased revenue.
Why has ERP's promise not always been realized? Here are some reasons:
Ways To Avoid Mistakes
Here are some ways to avoid these mistakes:
In short, to regain senior management's trust in ERP: under-promise and over-deliver!
-- Sourabh Hajela
Topic B: What are the pros and cons of software packages versus hosted-service CRM solutions?
Our advice: As usual, the answer to which model is right for your situation is, "it all depends." There's no doubt CRM has the potential to transform your business, with proper planning and careful execution. However, like all transformative business technologies, CRM also can be an expensive morass of good intentions and hidden costs, if you don't pay attention to business fundamentals. With CRM implementation costs typically starting in the six figures, deciding whether to use an application service provider solution or rely on in-house IT resources is only one of the many major assessments you will have to make.
Indicators that favor the ASP model option include:
Look at an in-house deployment if you have:
The bottom line is that the right CRM solution for your business is going to depend on your specific situation and industry vertical. The ASP or hosted-services approach potentially minimizes your business risks while giving you the advantage of business knowledge and industry best practices. It also minimizes your initial expenditures by allowing you to expense your costs, as your business needs change. On the other hand, choosing an in-house software deployment means that you can customize a package to meet your specific needs. The tradeoffs are higher initial start-up expenses and the overhead of in-house support.
-- Beth Cohen
Topic C: What are the critical success factors to achieve and maintain strategic alignment?
Our advice: Aim for quality, think globally, act locally.
Now, more than ever, IT organizations must be able to drive value for stakeholders. You need to identify ways in which value can be demonstrated.
First, IT must take the lead in developing metrics that measure success both against its own goals--the local imperatives--and against larger strategic business objectives--the global imperatives. The problem is that these two sets of imperatives, while sometimes complementary, can conflict.
Change-management perspectives offer examples of how the local interests of functional groups can degrade the quality of global output. While business analysts would have IT groups believe that all requested functions are 'must-haves,' the IT group invariably tries to minimize the implementation and workload, suspecting this isn't so. What gets compromised is an accurate assessment of the financial impact of the various decisions. The solution is to have as precise a justification for project initiation as possible, so that the financial impact of every function and feature is transparent.
Historically, despite all the investment, IT has produced less-than-satisfying results. Today, most companies are scaling back on IT expenditures to reduce operating costs. This move toward outsourcing is a result of IT's low ROI. But is outsourcing the answer?
What losses will there be in quality, customer satisfaction, brand equity, public relations, and employee morale in such a move? And can current processes be optimized at the local level to cut costs further than would be realized by outsourcing?
By unifying your efforts to produce products of the highest quality allowed by operational and financial constraints, the issue shifts from how much money can be saved by outsourcing to how much can be saved by doing what's necessary to optimize mission-critical processes.
To make this happen, however, managers need the courage and understanding to do what's right as opposed to what's politically expedient.
Finally, it's important to leverage each and every individual within the organization. Managers often prefer to rely on several overachievers who will solve a problem quickly without addressing its root causes. By understanding where the talent is, and how it can best work together to deliver high quality at low cost, companies will see greater returns on their people and a minimization of the global-local conflict.
-- Vladimir Tsivkin
Sourabh Hajela, TAC Expert, has more than 15 years of experience in strategy, planning, and delivery of IT capability to maximize shareholder value for corporations in major industries across North America, Europe, and Asia. He is a member of the faculty at the University of Phoenix, where he teaches courses in strategy, marketing, E-business and leadership. Most recently, he was VP and the head of E-business with Prudential Financial.
Beth Cohen, TAC Thought Leader, has more than 20 years of experience building strong IT delivery organizations from both user and vendor perspectives. Having worked as a technologist for BBN, the company that literally invented the Internet, she not only knows where technology is today but where it's heading in the future.
Vladimir Tsivkin, TAC Expert, has more than 20 years of experience in advanced software development, with the last five-plus years in senior project-management roles at major financial-services institutions. His primary specialty is software quality engineering, including Six Sigma and the Capability Maturity Model. He has published a number of papers in operations research, management-science applications, and quality management.