2005, Volume 08, Issue 2
Connecting Enterprise Information and People in a Web World
Before investing in complex IT initiatives, the company should be aware of the potential pitfalls.
The value propositions for enterprise information technologies (IT) are often complex and difficult to achieve. Yet many firms continue to invest heavily in enterprise IT initiatives aimed at improving efficiencies, winning new customers, and gaining competitive advantage. Not all IT initiatives accomplish their objectives. In fact, some end up being completely off target. A Standish Group International study indicated that only 28 percent of IT projects are completed successfully.[1] The other 72 percent fail for one reason or another.
Photo: Andrew King
Before your company takes on the challenge of investing in enterprise IT initiatives, it is important that you are familiar with the potential pitfalls. One common pitfall that undermines the value proposition of enterprise IT systems is that they are often resisted by end users. Research indicates that end user acceptance and use is a key determinant in the success of 75 percent of IT projects. However, business managers often devote 90 percent of their time and attention to IT investments and deployment without regard for their actual use.[2]
Based on our research and consulting with over a dozen firms, we believe that firms who devote sustained energy to motivating user involvement in IT initiatives are much more likely to succeed than firms who do not. In other words—to avoid a failed IT project, end users (managers, employees, partners, suppliers, or customers) simply must use the technologies to get the expected business value.
While this observation may sound simplistic, firms nevertheless continue to struggle with the connection between enterprise technology initiatives and end users. For instance, in 2002 and 2003, both Disney and Warner Brothers invested heavily in their Enterprise Resource Planning (ERP) systems, but usage continues to be a constant battle. User resistance to enterprise systems is a result of several factors. Enterprise systems usually require substantive business process change, which users may find difficult. In addition, the constant pressure to cut costs leads many firms to limit end user training, which in turn leads to a lack of understanding about how to use the system to accomplish familiar business processes. These and other factors create a disconnection between the users and enterprise systems and reduce end users’ perceived usefulness of the system.
In this article we ask, “Why is the connection between enterprise information technology initiatives and users so difficult to establish in many companies today?” We offer several reasons that explain why the connection has become tenuous and what can be done to reconnect information and people.
Enterprise Information Systems and Web Applications
A range of technologies is available today to provide people with access and use of information to meet stated business objectives. Two such technologies are Enterprise Resource Planning (ERP) systems and Application Service Provider (ASP) Web applications. Both offer interesting and relevant dilemmas.
The business value propositions for ERP systems are internally oriented and include a wide range of features and objectives focused on centralizing relational corporate data, standardizing best practices, connecting employees to one data source, sharing data among corporate entities, and communicating consistent information. Many ERP systems operate on a “need to know” basis. Access to information is restricted to employees in selected job groups or organizational units.
ASP Web applications are often functionally specific and externally oriented, thereby allowing firms to share and gather data with non-traditional parties. An example ASP Web application is an external credit agency sharing information with sales and marketing. (To review a variety of ASP Web applications, see http://www.fuzzysoftware.com).
Unfortunately, a perfect business software solution does not exist. Both ERP and ASP system solutions have important strengths and weaknesses. Because of limited resources and the long lead times required for ERP implementations and enhancements, strategic business units (SBUs) such as functional units or subsidiaries with localized, short-term information requirements may find themselves relying on ASP Web applications and resistant to enterprise systems. This circumstance is often at odds with the IT strategy in place at corporate headquarters. For example, in one Fortune 100 company, SBU managers were told that they would have to wait up to three years for the core global ERP system to be installed before they could consider using enhanced Web applications to support their information needs. In such a scenario, SBU managers find themselves trapped between the competing demands of the market and enterprise IT initiatives. The market demands the agility afforded by ASP Web applications, while corporate headquarters seeks to produce efficiencies through rigid, “one-size-fits-all,” enterprise IT initiatives. When market innovation and short-term gains are sacrificed for long-term enterprise objectives, people and information become disconnected.
To better understand this ongoing battle between the SBU’s desire for agile systems and corporate desire for the efficiency of enterprise systems, we turn our attention to a brief review of both enterprise systems and ASP Web applications.
Enterprise Systems—Advantages and Challenges
The separation of people and systems was, in some ways, caused by a fundamental shift in organizational structure. In the early 1980s, companies wanted flatter and more cost effective structures to better compete in international markets. In many large firms, matrix organizations replaced more traditional hierarchical organization structures as information technology made distributed network communications possible and cost-effective.
Enterprise systems—such as ERP—aligned well with the formation and use of matrix structures. ERP systems supported matrix organizations by providing information to authorized users anywhere in the organization as well as by connecting local business units with centralized corporate functions such as accounting and customer support. The costs of such projects were often so large that only the largest companies could afford ERP solutions. Therefore, almost every firm in the Fortune 1000 ultimately adopted some form of enterprise system.
While the information and communication efficiencies realized by enterprise systems were sizable, they also introduced a set of unique challenges. Among these were the following:
- ERP systems rarely captured all of the information that SBUs need. Desktop work files, emails, contact information, paper documents and legacy system history were frequently outside the scope of the ERP data depositories.
- ERP systems required disciplined standards that are difficult to implement. For example, product and customer identifiers—which often differ across SBUs—must be standardized to consolidate reporting across the enterprise. The costs of implementing ERP standards were often transferred to SBUs, while the values tended to go to centralized corporate units.
- ERP systems often embedded radical changes to end users’ work processes. However, end users were often not engaged in the design process to achieve the value propositions of enterprise systems. Promoting what users have to gain from using ERP systems is an ongoing challenge. Otherwise, end users may focus exclusively on the information needed to do their individual work tasks, and then overall information capture rates for ERP information will actually decline.
- The transition to ERP systems involved a series of trade-offs. Transitions from legacy systems to ERP systems usually followed one of two strategies: a big-bang implementation, or a gradual rollout. Both of these implementation strategies further disconnected people from information. In the former case, historical data migration had to be kept to a minimum to simplify the implementation and to reduce costs. On the other hand, the gradual rollout meant that some SBUs were working with different information systems during the rollout period (which could last from 9 to 48 months).
- The escalating costs of ERP projects were often overlooked, or worse—hidden from executives. As financial, human, and coordination costs rose, such factors were hidden from key decision makers. Subjective status reports, reward systems that valued compliance (e.g., the appearance of being on schedule), and basic fear of looking bad or losing one’s job contributed to project demise.[3]
Each of these challenges presented new opportunities for technology suppliers and vendors. While enterprise systems such as ERP were often sold to corporate headquarters by large, international IT vendors, many smaller, local IT service providers saw the challenges that SBUs were facing with ERP implementations and responded with a flurry of Web applications designed to increase agility and meet the information needs of local operating units.
ASP Web Applications and Marketplace Dynamics
In the 1990s, many companies began to wrestle with the increasing globalization of markets. Domestic markets were reaching saturation levels for many products, and international competition was increasing. Innovation was required to address such market changes. One such innovation was spurred by the World Wide Web—immediate access to a broad range of information. Intranets provided connectivity to SBUs and ERP systems, while multinational market information resources were increasingly and predominantly available on the Internet.
In this context, centralized IT organizations and SBUs viewed the value of Web applications differently. SBU views were often based on the value of flexible systems to engage workers and improve efficiencies in specific work areas, while corporate IT organizations were more concerned about cost management, information security, and data integrity within their enterprise information systems.
ASP Web applications addressed many of the challenges cited above. They expanded the usefulness of the data in the ERP depositories, had less stringent standards for implementation, and featured transitions/conversions that were generally less expensive and quicker than were ERP efforts. However, ASP Web applications introduced their own challenges to firms trying to gain efficiencies through IT.
- ASP Web applications extended the time required to complete the ERP sequence, faced resource limitations, and further changed the path to the promised pattern of productivity increases from the original ERP investment.
- Web application solutions provided common, global processes, but some such practices were inefficient and created redundancies.
- User requirements changed rapidly because evolving market conditions required new ways of working that were not in place. Altering Web applications to accommodate changing user needs increased IT budgets.
- While ERP solutions often were focused on internal information, Web applications expanded the organization’s network to include outsourcing partners, Internet Service Providers (ISPs), Web application vendors, third party suppliers, and international government organizations. This expansion increased the complexity and coordination costs of ASP Web application projects.
Just as ASP Web applications were in some ways a response to the challenges of enterprise systems, we now expect a response process in which new options and choices will emerge based on these challenges. The question is what can business managers expect in the next round?
Photo: Joao Estevao A. de Freitas
Reconnecting People and Information Systems
As we previously pointed out, many firms are struggling with a broad disconnect between their enterprise information systems and their most strategic asset—their people. From our work with over a dozen firms who are wrestling with these issues we have found the following responses to be the most promising:
- Allow SBUs to experiment before defining global solutions. This usually means running a series of Web pilot projects to learn how to promote usage prior to specifying a global solution. Pilot projects are effective ways to determine if new ways of working envisioned by SBUs are practical and effective before they are automated. Changing “information is power” thinking to a “sharing information” environment is being viewed as a requirement rather than an outcome.
- Spend as much time, effort, and resources on the people side as the technology side. In one Fortune 500 company, this dual focus means letting users identify the “pains” with their current jobs, noting those things that Web applications can improve, and working with a vendor to incorporate those opportunities. Reducing stress and improving day-to-day work processes motivate workers and connect them to information. Implementation of user governance councils and feedback surveys is providing new opportunities to connect information and people.
- Focus on metrics. Nothing is more important than metrics to provide satisfying justification of IT’s business value. Both activity-based metrics to insure that users are engaged and value-based measurement and tracking are needed. Connecting value-based measurements with information usage is the ultimate goal.
- Keep people involved through performance, recognition and reward programs, and reduction of usage cost problems. Providing performance targets, recognition points and reward program options (especially money-based rewards) should ideally be part of future responses.
- Create middleware through which ASP Web applications and enterprise systems can communicate securely. Such a new layer can reduce enterprise data corruption, yet allow data sharing and report consolidation.
Today’s business responses to the challenges presented here will inevitably lead to future successes as well as problems. It is uncertain how much more flexible ERP systems will become and how much more integrated ASP Web applications and ERP systems can become. What is certain is the importance of focusing on how to better connect people and information during enterprise information system changes. In the end, any enterprise-wide project will cause work disruption, confusion, and resistance. However, the ability of managers and IT to reconnect information and people can potentially turn mediocre project results into true corporate success stories and thereby produce for firms the ultimate business value.
[1] Westcott, Gina, “How to Avoid IT Project Failure,” MassHighTech.com, 26 April 2004.
[2] Marchand, David, "Extracting the Business Value of IT: It is Usage, Not Just Deployment that Counts!" CAPCO—Journal of Financial Transformation, August (11) 2004.
[3] http://www.computerworld.com/managementtopics/management/project/ story/0,10801,84266,00.html.
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