Current practice for IT strategy consulting

Enterprise applications are in great demand and stores like WALMART use these applications for proper functioning of their stores, and  it firms want to sell their application to as many customers as possible, competing aggressively in delivering new features and functions to attract these customers.

Wal-Mart now finds itself in the interesting position that the data warehouse it invested so heavily in can be bought today for 10% of the original cost, with operational costs and maintenance dropping by a similar amount. A number of early adopters—like Wal-Mart—are finding that these bespoke applications have become an albatross; providing a similar level of functionality to the best of breed solutions from vendors, but at a much higher cost.

So where can we find differentiation? I don’t see much point in ripping out large swaths of our current IT estate, replacing it with solutions from another vendor, as this will provide only a marginal improvement at best. Even if we’re migrating to a de facto standard in the industry—selecting the vendor that our industry seems to have consolidated around over the last decade—we’re likely to only see a marginal improvement at best. 

If applications are so cheap and plentiful that we can expect our competitors to have a similar capability to ourselves, then differentiation has moved from the application and into the gaps between them. The exceptions in a business process, the disruptions and how we manage them, will now determine how competitive we are. If we can deal with stock-outs more efficiently then we can keep less stock on hand and operate a leaner supply chain.

Improving how we determine financial adequacy allows us to hold lower capital reserves, freeing up cash that we can put to other more productive uses. Extending our value-chain beyond the confines of our organisation to include partners, suppliers and channels, allows us to optimize end-to-end processes. Providing joined-up support for our mortgage product model allows us to put the model directly in the hands of our clients, letting them configure their own, personal, home loan.

Marco Iansiti brought this into sharp relief through his work at Harvard Business Review when he measured the efficiency of deployment of IT, and not cost, and correlated upper quartile efficiency with upper quartile sales revenue growth. Efficiently dealing with business exceptions, optimizing key decisions and ensuring end-to-end consistency and efficiency will have a greater impact than replacing an existing application.

Large scale business process and SOA efforts have a tendency to deliver enterprise IT blancmange. All process and/or service are considered equal in our great designs, and we tend to spread our investment evenly like thin cream over the pudding.