Many organizations are finding themselves with an enterprise application strategy that no longer satisfies the needs and desires of the business community, and this often leads to poor decisions and bad investments, according to Gartner.
“There is a gap developing between the business users of enterprise applications and the IT professionals charged with providing these applications,” said Yvonne Genovese, vice president and distinguished analyst at Gartner. “The business leaders are looking for modern, easy-to-use applications that can be quickly deployed to solve a specific problem or respond to a market opportunity. The IT organization is typically working toward a strategic goal of standardizing on a limited set of comprehensive application suites in order to minimize integration issues, maximize security and reduce IT costs. These competing goals often lead to strategic misalignment.”
In the past, many companies had a single strategy for selecting, deploying and managing applications. They may have had methodologies for classifying applications by value or technological viability, but they did not recognize that applications are fundamentally different based on how they are used by the organization.
Gartner believes the idea of pace layers can be used to build a business application strategy that delivers a faster response and a better ROI, without sacrificing integration, integrity and/or governance.
Similar to the concepts in building architecture, Gartner has defined three application categories, or “layers,” to distinguish application types and help organizations develop more appropriate strategies for each:
- Systems of Record — Established packaged applications or legacy homegrown systems that support core transaction processing and manage the organization’s critical master data. The rate of change is low, because the processes are well-established and common to most organizations, and often are subject to regulatory requirements.
- Systems of Differentiation — Applications that enable unique company processes or industry-specific capabilities. They have a medium life cycle (one to three years), but need to be reconfigured frequently to accommodate changing business practices or customer requirements.
- Systems of Innovation — New applications that are built on an ad hoc basis to address new business requirements or opportunities. These are typically short life cycle projects (zero to 12 months) using departmental or outside resources and consumer-grade technologies.
“These layers correspond to the notion of business leaders having common ideas, different ideas and new ideas,” said Dennis Gaughan, managing vice president at Gartner. “The same application may be classified differently in one company than in another, based on its usage and relationship to the business model. We expect to see applications move among layers as they mature, or as the business process shifts from experimental to well-established to industry standard.”
Gartner analysts said that one of the keys to developing this strategy is listening carefully to the way business people describe their vision for particular parts of the business. These categories of ideas include:
- Common ideas — aspects of the business in which leaders are happy to follow commonly accepted ways of doing things that change fairly slowly.
- Different ideas — aspects of the business in which leaders not only want to do things differently from comparable organizations, but also can specify the details of how the different approach should be taken, and can expect these details to change on a regular basis.
- New ideas — aspects of the business in which leaders are thinking of an early stage concept, and are not at the point where they can be specific regarding the details of how things should work.
Organizations must establish a new strategy for business applications that responds to the desire of the business to use technology to establish sustainable differentiation and drive innovative new processes, while providing a secure and cost-effective environment to support core business processes.
One of the keys to using pace layering is to take a more granular approach to thinking about applications. Organizations are accustomed to using common, three-letter acronym application categories (such as ERP and CRM) but, when classifying applications in pace layers, they must be broken down into individual processes or functions. For example, financial accounting, order entry and collaborative demand planning are often part of a single ERP package, but are separate application modules that belong in three different layers in the Pace-Layered Application Strategy.
This approach should also be used to classify individually packaged or custom-developed applications. It is important to determine whether they support a common requirement, a unique business methodology or an innovative new business process. This allows the organization to apply the appropriate governance, funding and data models, based on the characteristics of each application.
“As organizations look to pace layers to help their application portfolios evolve from the rigid nature of current monolithic application strategy, it will be important to establish process and data integrity requirements within and between each,” Mr. Gaughan said. “The pace-layered approach acknowledges that process and data integrity requirements will be different within each layer, and defines a set of architectural standards at each level to accelerate an organization’s ability to adapt.”
“For each layer of the portfolio to be managed effectively, a strong governance structure must unite all stakeholders,” Ms. Genovese said. “The challenge for IT management teams is to develop a culture of governance that encourages consistent and persistent participation. This means that governance cannot be about IT telling the business stakeholders what needs to be funded — rather; there must be a true partnership that includes respect.”