Does IT itself need its own customised ERP system?
Citing issues organisations have with assessing the cost-effectiveness of IT and in managing IT, panellists at the recent Dow Jones Enterprise Ventures 2006 conference debated the merits of developing ERP for IT.
Unlike current ERP systems, which help automate processes associated with manufacturing or services, ERP for IT would provide visibility into IT operations.
In a panel session entitled, “Big Governance: Expanding IT Management”, representatives from companies including CA and AMR Research discussed issues regarding visibility into IT.
“Speaking with a lot of senior IT executives in businesses, it’s amazing to me how little visibility they have [into services being providing, how much they cost and how value can be measured]”, AMR Research Director Dennis Gaughan says.
Opportunities exist for software companies to develop technology that would uncover the information needed to make better business decisions pertaining to technology, Gaughan says.
Within organisations, questions are often raised about the value of investing in technology, which could comprise 50% of a company’s capital budget, he says. “The scary thing is, the CIOs just can’t answer that question.”
A more linear and smooth approach is needed to categorise assets, says Alan Nugent, CA’s senior vice president and general manager for Enterprise Systems management.
“At the core of the frustration that a lot customers and people have, relative to managing infrastructure and all the relative pieces of it, is we always take an asset-centric approach,” he says.
The industry hasn’t matured enough to look at the entire management stack, translate data about assets, correlate that and pick out pieces of relevant information relevant to specific business problems, he says.
An actual ERP for IT system might be difficult for a single provider to offer but is possible, according to panellist Gary Oliver, president and chief executive of Blazent, which offers business intelligence solutions for IT.
“I think it’s very difficult for one company to be the provider of that whole capability,” Oliver says.
But he too concurred that the situation presents opportunities for smaller companies.
“I think there’s a real opportunity for earlier-stage companies to do a piece of that and do it really, really well,” he says.
In pursuing this vision, companies would need to think about exactly what an ERP system is, Gaughan says. Existing major vendors, such as IBM, CA, Hewlett-Packard and Mercury Interactive, are saddled by already having a slew of products they need to sell, he says.
“[These companies’] visions are much coloured by the portfolio of products that they already have.”
Users, however, will not rip out what they already have but are looking for a system for better visibility and forecasting, Gaughan says.
IT departments haven’t focused on the issue of gauging the value of IT investments because they have other tasks to tackle, says Tom Cole, general partner with venture capitalist firm Trinity Ventures.
“I think the real [reason] the cobbler’s children have no shoes is [that] it’s a question of priorities,” Cole says. Issues such as worms, hackers and regulatory compliance have taken precedence, he says.
“The value of keeping your CEO out of jail completely outweighs the need to keep your IT system running more smoothly,” he says.
One type of business that has been gauging IT investments is the outsourcing business, Cole says. An outsourcer’s entire business is predicated on providing IT services, as opposed to the role of IT within organisations, he says.
“At the end of the day, even if it’s strategic, IT is still going to be a cost centre [rather than a revenue generator],” he says.
Nugent says he doesn’t think it was possible for a single vendor to provide an SAP-like offering for IT infrastructure. A lack of standards is one issue, he says.
A lack of business-related skills among IT professionals was also cited as an obstacle in assessing the business value of technology. Finding someone with an MBA or business degree who can understand technology is a problem, Gaughan says. “That’s a huge issue with a lot of companies,” he says.