The Seven Core Principles of Digital Transformation

Digital Transformation has become a hot buzzword recently, being adopted by Microsoft as the overarching theme for their cloud based business apps and the subject of many studies from McKinsey and company, Gartner and other research firms.

I wanted to share some of our approach and lessons learned working with companies in different industries such as Insurance and Manufacturing on their digital transformation initiatives.

A transformation does not happen overnight. It is a long and sometimes painful process that to be honest, never really ends. The rate of innovation and change is increasing and new business and customer needs will constantly emerge.

Therefore, our approach is very much grounded in the concepts of agility. The right foundation built with change in mind. In such an approach, it is not always beneficial to try and document every future requirement to see how to accommodate it but to have a very strong foundation and an agile, open framework that can be easily adapted.

A good way to judge your current agility level is to perform a Digital Agility Gap test. For small, medium size and large changes business has requested in the last year, what is the gap between when the business would like to see the change made to when your organization was able to deploy? The larger the gap, the more acute the need is for a comprehensive digital transformation.

The following 7 core principles should drive every digital transformation initiative, large or small:

• Business Driven. This may sound obvious but all digital initiatives need to have a business reasoning and business sponsor. Technology can be a game changer but very often, the digital channel needs to be part of an omni-channel approach. eCommerce can augment retails stores or distribution channels but will not replace them for a long while. Digital must be part of the overall business and market strategy. The new role of Chief Digital Officer is a great example for how organizations integrate the digital as a business channel with broad responsibilities and a chair at the executive table. The Digital aspect needs to be part of every major organizational strategy, not a separate one. For example: you are launching a new product, how will you design it, support the manufacturing/supply chain, market, sale and support the product using Digital means?
• Data is King. Having enterprise information available in digital format with a single source for the truth is the absolute foundation of a digital transformation. Without “Good data” the effect of garbage in, garbage out will produce inconsistent results and systems people can’t trust. This is usually the hardest part for many companies as organizational data may be residing in many legacy systems and too intimately tied to old business applications. It also is hard work. Hard to understand and hard to put a direct ROI on. It is not glamorous and will not be visible to most people. In lieu of complete data re-architecture, most organizations start with master data management and data warehouse / operational datamarts to get around the limitations of the various systems where data is actually stored. The imperative is to know what the single source of the truth is and abstract the details through data access layer and services. The emerging area of Big Data allows capturing and processing ever larger amounts of data, especially related to customer interactions. Data flows, validation and storage needs to be looked at again with new vision into what and how data is captured, stored, processed and managed.
• Actionable Analytics. Many organizations invested heavily in Business Intelligence and use decision support systems to run analysis and produce reports. The expanding scope of data capture and processing now allows analytics to serve as actionable triggers for real time decisions and other systems. For example, your website’s ability to make customer specific product recommendation can be a result of real time process that conducts a customer analysis and what similar customers have bought and can execute an RFM analysis to assign a tier to the customer and derive relevant offers. Marketing campaigns can target prospects based on predictive analytics etc. Closed loop analysis is critical for understanding the impact of decisions or campaigns. The ability to see the connection between an offer or search campaign and the revenue it generated is the foundation of future investment decisions.
• Customer Centricity. One of the main drivers and benefits of the digital transformation is the ability to meet the new world of customer expectations and needs. Customers want access to information and ability to take action and interact anytime, anyplace, from any device. The new Digital Experience maps to the customer lifecycle, journey or buying flow and data is collected at every point of interaction to feed personalization, targeting and marketing. When done correctly, an intelligent user experience will improve engagement, loyalty and conversion. In designing new digital user experience, we usually recommend mapping the user interactions across all touch points and focusing on finding common needs rather than a “Persona” driven approach. Those in our experience are too generic and lead to oversimplification of the model.
• Agility in Technology and Process. Agility is at the heart of our approach and without it you would go through a transformation every few years. It is broader than just IT and impacts many business and operational processes. Few key concepts of planning for agility:
  • De-coupling. A large part of what makes changes hard, is the intertwined nature of most IT environments. Proprietary databases, older applications without outside interfaces, hard coded database calls in code, heavily customized but dated applications, etc. The solution is to de-couple the elements and create a modular, service oriented architecture. Data should be separated from logic, services, and user interaction allowing each tier to grow and evolve without requiring complete system re-write. For example, the biggest driver of transformation in the last few years has been the user experience and the need to support users in various mobile devices. A de-coupled architecture would allow UX overhaul using the same services and backend.
  • Agile / Rapid application development. Application development needs to be able to create prototypes and test ideas on a regular basis. For that to happen, the process of definition, design, implementation and testing software has to be more responsive to business needs. Whether following Agile Methodology principles or just a more iterative version of traditional models, application development has to be able to quickly show business users what they would get, and adopt a minimal viable product approach to releasing software. An emerging model of continuous delivery allows faster, automated deployment of software when it is ready.
  • Cloud and Infrastructure agility. The emergence of cloud services is making agile environments so much easier to implement. From an infrastructure perspective, you no longer need to invest in hardware resources for your worst-case load scenario. The ability to get just as much computing resources as needed on demand and scale as needed in matter of minutes makes platforms like AWS and Azure very appealing. Many applications now offer only cloud based versions and even the large players like Microsoft and Oracle are now pressuring all customers to get on the cloud versions of their applications. The ability easily to plug a cloud application into the environment is the ideal of agility. With a common security and authentication layer, the modern corporate application landscape is comprised of many different cloud applications being available to each user based on their role and integrated to a degree that makes the user experience as seamless as possible.
  • In addition to the environment, software and infrastructure, organizational processes have to be more flexible too. Change management needs to become a process that enables change, not one the stops it.
• Process Automation: with the new landscape comprised of so many different and independent application, process automation and leverages the open interfaces of application is becoming critical. Traditional Business Process Management application are now morphing into cloud orchestration and an ability to allow processes to be created across multiple applications and managed / updated by business users without IT involvement.
• Security. Last but not least, the open, flexible nature of the future landscape we were describing here, requires new levels of security that should be an integral part of all facets of the environment. Data security and encryption. Services security, security in application design, all layers and components have to consider the rising threat of hacking, stealing data and denial of service that are more prevalent than ever. We see this as the primary concern for companies looking to adopt a more digital and agile environment and a large emphasis on risk management, security standards and audits should be a primary component of any digital transformation initiative.

Lean Manufacturing in Practice – Bittercube

In this blog series, I’m showcasing products manufactured in my home state of Wisconsin. In addition to sharing some fun facts about the various companies and their products, I’ll be highlighting the Lean Manufacturing Principles that are best exhibited at each respective organization. These principles are derived from the Japanese manufacturing industry and center on making obvious what adds value while reducing waste muda. The six Lean Manufacturing Principles are: 1) Workplace safety, order, and cleanliness 2) Just in Time (JIT) production 3) Six Sigma quality 4) Empowered Teams 5) Visual Management 6) Pursuit of Perfection.

A cocktail renaissance has swept across the country, inspiring a new fascination with the ingredients, techniques, and traditions that make the American cocktail so special. The use of bitters, liquor that is flavored with the pungent taste of plant extracts, has been gaining popularity over the past decade. Originally developed for medicinal and digestive purposes, bitters now serve mainly as cocktail flavorings. The alcohol functions as a solvent for botanical extracts as well as a preservative.

Milwaukee has contributed to this cocktail renaissance with the help of Bittercube. Founded by Nicholas Kosevich and Ira Koplowitz in 2009, Bittercube handcrafts eight varieties of artisanal bitters, using only naturally sourced ingredients. By happenstance, the operations are run from the location that Foamation once occupied. Milwaukee was perceived as an untapped market with room to grow. Also, the low cost of operating expenses allow for maximum revenue generation.

Henry Ford created the first all-inclusive manufacturing strategy. However, it was Eiji Toyoda, a Japanese engineer, who after analyzing Ford’s methods, improved upon them by keeping an eye out for waste. Waste (or muda in Japanese) refers to any kind of wasted motion, effort or materials in the manufacturing process. Toyoda popularized the concept of Reducing Waste, which has become a basic tenet of Lean Manufacturing and falls under the principle of Pursuit of Perfection.

The objective of Lean is that every step must add value and be waste-free. A non-value added, or wasteful activity is one that neither adds value to the customer nor provides a competitive advantage to the organization.  Some non-value added activities include waiting and inappropriate processing. Waste can also take a tangible form, such as idle raw material or defects. Although transportation is an important aspect of the manufacturing process, it is a non-value added activity, as it adds to cost but not to value. It should be noted that some non-value adding activities like accounting and regulations are important and cannot be avoided.

The continuous Pursuit of Perfection encompasses the idea that one must always strive to eliminate waste in the organization, while constantly making improvements, even if those improvements are small and incremental.  Improving processes results in reducing or eliminating variation, and improving the process flow or speed. Learning and consistent measures for improvement should be part of all processes if an organization intends on growing.

Bittercube has reduced waste by improving on their processes. In the past, they used a generic, high-density plastic container to process the bitters. There was no way to remove the botanical material after the batch was processed, other than to climb into the container and physically remove it by hand. Although this left the person who cleaned the container smelling of cinnamon, cloves, and vanilla, it wasted time and did not add value to the process. They have since updated to a custom-built processing/cooking tank with a bottom compartment where botanical material can easily be removed and cleaned.

Bittercube previously used generic boxes that weren’t cost efficient to ship. They have since opted for custom-made boxes with dimensions that maximize the number of bottles in each box, thus reducing wasted space and shipping costs.

Lean supports the notion that nothing should be wasted and a use must be found for everything. Bittercube has also reduced tangible/physical waste by reusing and recycling the processed materials. Instead of discarding the used botanicals, Bittercute has begun composting these materials. The finer botanical sediment will be reused in other products, such as an ingredient for Purple Door Ice Cream.

Autumn is upon us! Try this seasonal Maple Old Fashioned recipe!

2 oz. Johnny Drum Private Stock Bourbon, Fat .25oz. Maple Syrup, a dash of Jamaican #2 Bitters, a dash of Bittercube Bolivar Bitters, Garnish: Fat orange peel

To view other recipes and product offerings, visit Bittercube.

To read more about bitters, visit The History of Bitters

For more information on Lean Manufacturing see: Lean Waste Stream by Marc Jensen, Lean Enterprise: A Synergistic Approach to Minimizing Waste by William A. Levinson and Raymond A. Rerick, and Learning to See: Value Stream Mapping to Create Value and Eliminate MUDA by Mike Rother and John Shook

Technical How-to: Redirecting SSLv3 Users to a POODLE warning page using Apache2 mod_rewrite

The Padding Oracle On Downgraded Legacy Encryption (POODLE) vulnerability has been making headlines since September 2014. There are a few options for mitigating the risk, but our infrastructure team has found that not all organizations are able and willing to implement them. Disabling SSLv3 entirely can cut users off from secure websites they rely on, and Google’s TLS_FALLBACK_SCSV mechanism requires support from the web browser, and has not been implemented server-side by all distributions, especially on older and unsupported versions. Further, TLS_FALLBACK_SCSV does not address the issue of SSLv3 support itself, rather it prevents devices which support TLS from downgrading connections to SSLv3. It does not help in cases where the browser is Internet Explorer Versions 1 through 6 (although Internet Explorer versions 4 through 6 can be configured to enable TLS.)

A more elegant solution is not to block SSLv3, but to instead warn users that their current browser is vulnerable to known attacks and instruct them on how to upgrade. With Apache2 and mod_rewrite, it is possible to redirect SSLv3 connections to such a warning page and advise users of the issue and how to resolve it. Here are the steps to do so:

1. Prepare or find an explanation page you wish to redirect insecure SSL sessions to and note the URL.
2. If you run a reverse proxy, load balancer, or other session layer device between your apache server(s) and the Internet, please be aware that those devices may be vulnerable to POODLE even though they support TLS: http://www.computerworld.com.au/article/561828/poodle-flaw-returns-time-hitting-tls-security-protocol/
   To be sure that your entire chain of TLS implementations is secure, temporarily disable SSLv3 in apache2 and head over to SSL Labs to test your site. If your TLS chain is vulnerable you should receive a grade of “F” with a warning (emphasis ours:) “This server is vulnerable to the POODLE attack against TLS servers.” If you receive this warning, you should contact your vendors and request patches.
3. Make sure that Apache2’s mod_rewrite has been installed on your system. Apache2 runs on a variety of architectures and operating systems, so installing individual Apache2 modules is beyond the scope of this article.
4. Make sure that Apache2’s mod_rewrite is enabled. To do this, run the following as root/administrator:
   a2enmod rewrite
5. Add the following lines, without the line numbers, to your Apache2 HTTPS site configurations, changing http://yourwebsite.com/yourexplanationpage.html to the explanation page you wish to redirect users to:
   1. #POODLE REDIRECT CONFIG–
   2. SSLOptions +StdEnvVars
   3. RewriteEngine On
   4. RewriteCond %{ENV:SSL_PROTOCOL} ^SSLv[2-3]$ [NC]
   5. RewriteRule ^.*$                    http://yourwebsite.com/yourexplanationpage.html
   6. #END POODLE REDIRECT CONFIG–
6. If you have disabled SSLv3 already, undo the configuration disabling it.
7. Restart Apache2
8. Now test, test, and then test some more! You can use Firefox and enable/disable SSLv3. To force an SSLv3 connection set both security.tls.version.min & security.tls.version.max to 0. To disable SSLv3 in Firefox set security.tls.version.min to 1 or higher and set security.tls.version.max greater than or equal to security.tls.version.min

Why Office 365 over Google Apps?

Competitive companies have CIOs who are interested in solving business problems – not focused on day-to-day IT tasks. Technology is business and if you don’t master it, your competition will. In order to focus on the business as a CIO, you need to rely on products that will essentially take care of themselves. This is, I believe, the critical benefit of  Microsoft Office 365, and what is really clearly explained in Microsoft’s new white paper, Top 10 Reasons for Choosing Office 365 over Google Apps.

There are dozens of product comparisons out there, but the decision points in this white paper can really be boiled down to 3 reasons:

Privacy Matters

Microsoft hits this concern first. Why should we believe our information will be safe? Well, Microsoft touts its $9 billion network of data centers, which may or may not be impressive to you.

Google is an advertising company. Why would I trust a company whose business model relies on ad revenue? It creates a motive for selling personal information. While Microsoft’s Bing does sell ads, it is an ancillary rather than primary revenue generator for the Microsoft Corporation, representing less than 8% of Q4 FY2014 total revenue. Google on the other hand generated 91% of their revenue from advertising in 2013 according to their 10k. For more information on Google’s latest run-in with personal information privacy issues, here is a recent Reuters article.

Allow Users Access to their Content Anytime, Anywhere

Duh. This one is a no brainer. Employees have an increased desire to work from home, have flexible hours, work seamlessly while traveling, and be connected to everything they need 24/7. Because of this growing demand, mobile functionality is becoming more and more critical to today’s workforce.  Office 365 works well online and offline (even email), which is certainly important for business users who travel.

Google apps offer limited offline functionality for email. Google is “committed” to mobility, but what about when you don’t have internet? I find it useful to have access to my information whether I am connected to internet or not.

Less Training Required

Find me someone who has been in the workforce and hasn’t used the Microsoft Office applications. This means that training is minimal and your employees will likely feel relatively comfortable with the change. Microsoft worked hard to create an online platform that mirrors what employees are already doing with their on-premise versions. It could be a costly nightmare to switch to Google Apps and train employees on an enterprise level because the interface is completely different than Office. And, conversion of desktop versions of documents to Google Apps isn’t always accurate.

These are, as an end-user and mobile employee, the most important reasons that Microsoft cites in their recent white paper. Honestly though, I would pick Office 365 on the first point alone.

Have you had to make this choice? What was the tipping point for you?

Happy Birthday Office 365, what’s next?

It sure looks like it’s been around for a lot longer, but office 365 is officially celebrating its 1 year anniversary this week.

It’s true that some aspects of earlier MS cloud effort have been around for 4-5 years under different names like BPOS but the new branding and consumer side were introduced last year and SharePoint online took a huge step forward. So how is it doing?

Not bad according to different reports. 3.5 million Consumers have signed up and 15% of exchange users are in the cloud (6% increase over the last year). Microsoft is clearly betting the farm on cloud and the recent choice of its cloud chief Nadella to be the next CEO is a telling sign.

A recent technical summary at ZDNet and a financial analysis at Seeking Alpha both look very positively on the stability and profitability of this model.

We’ve been using the Microsoft office 365 email for a number of years and SharePoint for the last few months and our experience has been very positive. Our customers have been reporting similar satisfaction levels with the reliability and performance. The main advantages we see are:

• Reduced IT costs: No need to allocate server or VM’s. No need for redundancy and backups. No need for regular installation of patches and updates and all the testing involved.
• We invested in putting provisioning processes in place that dramatically reduced the timeframe for creating new sites and reduced administrative effort.
• Mobile and iPad access through Office Web Apps.
• Social: the new newsfeed, Yammer integration and Communities bring out of the box enhanced collaboration and social interaction.

Looking ahead, there are definitely some concerns and wish list items I’d like to see Microsoft address for office 365 and SharePoint online:

• Stronger security and privacy commitments. Not that the NSA would have a problem getting to most information anyway but knowing that all corporate secrets are basically available to them upon request is disquieting. Multinationals may not be willing or legally able to make the jump and trust Microsoft with their data. This can be the biggest obstacle for mass adoption for larger companies. Small to midsize companies may care less.
• More control. From an IT point of view this is scary. An inhouse server you can test, tweak, add memory to, reboot when needed, and install 3^rd party add-ons. You now, control. Giving away the ability to jump in and intervene is hard. Even when Microsoft does deliver reliability and reasonable performance our natural impulse is to try and make it better, tweak, optimize. Not much you can do here. I do hope that Microsoft expands the controls given to customers. It will get a lot of untrusting IT guys a level of comfort that is not there now.
• Support for Web Content Management. If we are giving up a local SharePoint environment, why force users to have one if they want to take full advantage of SharePoint as a content management tool for public website?
• Add native migration tools. Not that I have anything against our partners the migration tool makers but releasing a platform with no out of the box method of upgrading to it was very odd and the fact no support has been offered since is disappointing. Makes the natural audience of smaller to mid-size businesses with an additional expense to migrate.
• Cleaner social toolset. I wrote about it earlier in the year, that the Yammer acquisition created some confusion among users. The promised SSO is still outstanding and the small incremental steps like the one released this week are a little confusing.

The Invincible Adolescent Corporation

In my last post, I talked about the importance of being prepared for potential product recall disasters. With recalls so much in the news, I can’t stop thinking about it. Today’s question is:

Who is most at risk for failing to prepare a rapid recall response plan?

It’s the adolescent companies! They are like teenagers who think an auto accident can never happen to them. You can neither sell them prudence and preparation, nor can you convince them that they are at risk–Because their brand has become the brand of the cool kids (social media savvy hipsters) they believe nothing bad can happen to their company, their product or their relationship with their consumer fanbase.

Take a look at two popular brands that have suffered recalls , and how vastly different the responses have been:

• Lululemon is now reselling refurbished not so sheer yoga pants at a generous 6% off their original price! Seriously?
• Earthbound Farms never thought their healthy spinach would actually sicken people, yet it was linked to an E. coli outbreak that sickened 200 people and three people died. Unlike Lululemon’s attempt to minimize their losses by re-imaging their refurbished see through pants, Earthbound made a significant effort to reduce risk.

This type of risk reduction is of course the first and best line of defense.  But  recalls still abound. Of course, there are now recall watching apps available, such as:

• Consumer Recalls
• Recalls
• US Government Product Recalls

but the producers should be responsible from preventing dangerous products from reaching the marketplace.

I don’t know about you, but I am hesitant to resume purchasing after a recall, because so many companies seem to handle them so badly.  It doesn’t have to be this way.

So kids, listen up.  Yes, I mean you, the well loved brands of the cool crowd.

Planning is mandatory. A comprehensive approach needs to include well planned recall incident response, and this plan must be exercised with mock drills periodically.

Are you ready? Take the first step and find out. Take a short self-assessment, and see how you score across the key readiness categories.

The Lake of Unclear Benefits

Source: harrypotter.wikia.com

So the decision comes down, your company is moving forward with new ERP. Congratulations on your decision; just remember, a year or so from now, that ERP implementations are potentially the next great, bloody spectator sport. They are not for the weak or those lacking determination. Decision made, presumably based upon a business case that documented the expected benefits and how you are going to get there. If so, continue. If not, then you’d probably better back up a bit and get all of your bunnies in a row because, in either case, now you have to communicate why you are doing this project.

So whom do you have to communicate with? How about: anyone who will be impacted by this project. Certainly that includes directly impacted end-users and their supervision and management. It also includes people in other organizations that may not be included in the initial project, this might be HR or some other organizaton. Why communicate with them? Because they will hear about the project and will naturally have questions about it, including why they are being included in the scope of the change, especially if they are unhappy with current systems and processes.

What needs to be communicated at this early stage? Frankly, it does not have to be complicated. It almost always begins with “We are moving to new ERP because…” and then you simply fill in the blank. This is also a good time to develop a good 15-20 second answer. Why? To get the key points across quickly. That said, you absolutely MUST be ready to provide details regarding what specific goals exist, by area/location, and how you expect to get there. Elevator speeches can only go so far – it takes details to calm people who are fearful of change.

We actually get asked frequently, “why do we have to communicate so early about the reasons for our new ERP project?” Our answer is pretty simple: because if you don’t, people will fill in the blank themselves. And you won’t believe what they will come up with, most of it from the depths of fear, distrust, or native suspicion. Here’s what we’ve heard people come up with:

So, why are they doing this to us (again)?

To get the company ready to sell (and all of us are going to lose our jobs)

To increase automation and efficiency (and all of us are going to lose our jobs)

Here we go again, more churn, churn, churn and someone else gets the butter (and we are all going to lose our jobs)

Get the point? If you don’t provide a good answer in advance, people will answer their own questions in the most negative possible way.

Your communication of the reasons or rationale for moving to new ERP is merely the start of a good communication strategy and plan – not the end of it. Oh, yeah, if you don’t have a comprehensive communication strategy and plan, it is most definitely time to get one. And for pity’s sake, if you don’t know how to do this, call someone who does. Everyone who depends on the future ERP system will eventually be grateful.

Lack of concerted communication to end-users about the reasons behind the implementation, the anticipated benefits stemming from successful adoption and the ways in which each individual end-user and executive are impacted will affect project success or failure.

Mitigation Step: Create and follow a comprehensive organizational change management plan – at the very least, get an expert involved to do an assessment of readiness and challenges.

Redefining Success in People Terms

I suggested in my previous post that unmet business benefits, make ERP initiatives fail even when they are on-time, on-budget, and on-scope. If we spoke previously about failure, then let’s start here talking about success.

According to my dictionary, success is a noun with multiple meanings, yet the primary one is “the favorable or prosperous termination of attempts or endeavors; the accomplishment of one’s goals.” It’s not about the scope, timeline or budget, it’s all about the business GOALS.

So when we talk about redefining success – hitting your goals – in people terms, what does that mean? Defining where you intend to end is important, but so is defining how you expect to get there. Defining success in people terms means we also have to define how something will be made successful and who will do it.

Here are some of the “goals” customers have given us for implementing ERP:

• To improve business performance and automation
• To replace an old or legacy system
• To better support the business across multiple locations
• To better serve customers
• To position the company for growth

Admirable reasons; terrible goals.

Why?

They can’t be measured and they give no clue how they could be achieved. They look good, but are sort of neutral and unobjectionable, actually saying very little.

When a client tells us they want to move to new ERP to improve business performance, it is the beginning of what becomes a very long – and critically important – discussion that looks like this:

What areas need improvement? Why? What would the improvements, by area, look like? What changes (people/org, role, process, system, or data) are required to achieve it? How will ERP enable this? How can we state this in measurable terms? What about timeframes for realization?

Starting with “improve business performance,” we can end with goals like this:

Through updated standards for purchase orders enforced in the Purchasing module at the field level, and through improved training of Buyers and weekly monitoring of conformance with these standards, we will eliminate 90% of incomplete purchase orders from flowing through the supply chain within three months of go-live.

By eliminating non-conforming purchase orders, we will reduce the effort of Accounts Payable clerks matching POs to vendor invoices which will be sufficient to eliminate three temporary clerk positions.

Granted, this would be but one of many, many goals that would be documented to achieve “improved business performance.” But that is what it means to truly document goals within a business case and to define success in people terms.

Arriving on-time, on-budget, and on-scope are valid goals on any ERP implementation project. Anyone working in this business knows those goals are themselves hard enough to achieve. While they may be necessary when viewing ERP through the lens of an enterprise software implementation project, they are woefully inadequate when viewing ERP as a business transformation initiative.

If you want to really get your hands around how to make ERP successful, you have to spend the time, energy, and effort defining your goals more completely and concretely. They should enable and guide your implementation. If they don’t, head back to the whiteboard and lock the right people in the room until you get what you need. And if you don’t know what you need, get help defining it.

The Cloud Has No Clothes!

Everybody remembers the classic fairy tale where an emperor and his people are conned in to believing he was attired in a fantastically beautiful set of clothes, when in fact he was in the buff.  No one was willing to admit they did not have the refined taste and intelligence to see the spectacular cloth and splendid robes. It took the strength of innocence in a child to point out the truth. I am about as far from an innocent child as one can get, but it appears to me the cloud is parading about naked.

Every vendor has a cloud offering, every pundit “agrees” the cloud is the future, investors value every cloud company with a premium, every data center operator is “born again” as a cloud player. Every CIO has a cloud initiative and budget line. Really, I have seen this movie plot before, and it does not end well, especially for the Emperor (and the con-men vendors too).

We have worked internally on projects as well as externally with clients to implement aspects of the “cloud”. Results have been mixed and in the process gathered some hard won experience which I will condense here (while protecting both the clothed and the naked).

First, Software as a Service (SaaS) will work if adopted with minimal software modification and maximum adoption of it’s native business process. It is very cost effective if it precludes investment in internal IT infrastructure and personnel, not bad if it slows the growth of same. Outsourcing well-defined rote functions to the SaaS route works well (such as Email).  Adopting SaaS for new non-strategic functions tends to be successful where there are few users and a high degree of specialization. Data backup into the cloud is an excellent example regarding highly specialized solutions that take advantage of economies of scale provided in hardware.

SaaS fails in terms of cost or functionality when it is subject to customization and extension. Service costs tend to swamp the effort from initial modification through long-term maintenance (humans=$$$$). Costs will especially spiral when you combine many users and many customizations.  Remember the “Keep It Simple, Stupid” (KISS) principle saves money and points to success.

Buying virtual machines in the cloud works well if the configuration is simple; few software products, few users, straightforward integration. Development and early deployment is particularly attractive, as is usage by start-up companies and software proofs, tests, and trials. Again, the KISS principle reigns supreme. Remember hardware continues to drop in price and increase in capacity.  Package software costs are stable. Understand the billing algorithms of the key “clouds”. Each has its cost advantages and drawbacks, and they change rapidly under increasing competition and hype. Always benchmark medium to long-term cloud virtual machines against native hardware virtual machine implementations, the results may surprise you (I have been surprised over and over).

The Emperor’s story is an old one and so is the cloud concept in principle; remember its first turn on the karmic wheel of optimizing the highest cost component was time-sharing. This strategy optimized the high cost of proprietary hardware/software (remember IBM and the Seven Dwarfs, but I digress into another fairy tale). As minicomputers (Digital, Data General, Wang) dropped the price of hardware through competition with IBM, software packages became the gating factor. Workstations continued the trend by another factor of 10 reduction in cost of hardware and package software (human service costs are rising).  Wintel and the Internet have driven the marginal cost of raw computing to almost zero compared to the service component. As hardware has followed Moore’s law and software package economies of scale moved to millions of copies, the human costs have skyrocketed in both relational and absolute terms.

If we can keep history as our lens and focus on our cost pressure points, we can maintain our child-like innocence and see others prancing naked while we keep our kilts and heads about us.

Is ERP Success Really Such a Secret?

ERP isn’t just big business, it’s huge business, projected by those who know to break $50 billion yearly by 2015 in software sales, maintenance, development, and services. Thousands and thousands of companies undertake ERP investment and implementations yearly. There are millions of pages on the Internet about how to make ERP projects successful. And hundreds of firms and thousands of people exist whose life-blood is implementing ERP solutions.

So why does ERP so often fail to deliver? According to some, you’ve got a fifty-fifty chance to satisfy half of your goals for the investment. So, if I plan to drive to Dallas and only get half way there, is that a successful trip or a failure? I may have enjoyed the journey while it lasted, but then I ended it in Abilene, not Dallas. That is not a successful trip. It is a sure ride to the Desert of Disillusionment.

Failing to deliver the desired business value means the project was a failure regardless of whether it was on-time, on-budget, or on-scope. It failed. Let’s hear that again. It failed. Sure, everyone got to keep their jobs because the project concluded reasonably close to the schedule and within some allowable contingency of the targeted budget. Success, right? Well, not if you wanted to get further it isn’t. It failed.

How can that possibly continue to happen? The ERP landscape is enormous. Almost every business – particularly those involved in manufacturing or distribution – use or want to use ERP software. Certainly people know better. There are thousands of really experienced, smart people guiding and informing these projects, yet they continue to fail to deliver fully against expectation and goals.

Is the problem that goals are too high? I sincerely doubt it, as companies engaging in ERP projects rarely agree to document their goals in writing or in measurable ways, paying only lip service to “productivity gains” or “improved efficiency”. So if the goals aren’t the problem, what is? You can read for years about better project management, better leadership, a better implementation process and still miss the boat.

The bottom line is simply this: software does not drive a business. People do. And if you don’t empower and support people, all the technology in the world won’t move your business forward. This is something we’ll explore further in subsequent posts. But stay tuned as we drill into how to turn the discussion on ERP success on its head.