54867 SG KE SAP Enterprise Applications Best of Breed Versus Best of Suite

8/9/2019 54867 SG KE SAP Enterprise Applications Best of Breed Versus Best of Suite

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ENTERPRISEAPPLICATIONS:BEST OF BREED VERSUS

BEST OF SUITE

SAP INSIGHT


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Table of Contents

Executive Agenda 1

Best-of-Breed Versus Best-of-Suite Applications: Decision Criteria 3

The Road Ahead: Service-Oriented Architecture 10

Conclusion 13


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ENTERPRISE

APPLICATIONS:BEST OF BREED VERSUS

BEST OF SUITE

by Shashi Rao


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EXECUTIVE AGENDA

In making any major enterprise application deci-

sion, most organizations carefully weigh a number

of factors some soft and some hard before com-

mitting investment and resources to moving the

project forward.

In a few cases, the decision-making process is fairly

straightforward in that the circumstances dictate

the obvious choice. For instance, IT projects

undertaken for strategic reasons, such as migrating

the company to a standard platform, reinventing IT

to drive competitive advantage, or changing the

game are typically decided in favor of a best-of-suite

offering from a major enterprise software provider.Such projects are usually all-encompassing, and the

risk of going with anything less would likely be too

high.

At the other end of the spectrum are very targeted

IT investments that address a niche need with prod-

ucts that are not available from the major players.

Specific requirements for product design software or

advanced financial modeling, for example, usually

favor the vendor that best provides the targeted

requirement.A vast majority of major new enterprise IT projects

are undertaken to support a specific business initia-

tive or set of initiatives. These projects typically go

beyond departmental or geographical boundaries,

affect multiple functional areas, and are global in

nature. Business initiatives that streamline the sup-

ply chain, enable organizations to improve customer

relationships, or manage the new-product pipeline

typically fall into this category.

In these cases, organizations frequently face multi-

ple options that fall largely into two separate camps,

as follows:

Best-of-breed applications. This term refers to

applications considered to offer the best function-

al depth for a single area or a group of related

application categories. Offered by smaller inde-pendent vendors (as opposed to large enterprise

software providers), these applications typically

offer depth of functionality across a specific area.

Best-of-suite applications. This term refers to

applications offered by the large enterprise

providers as part of an integrated suite. These

applications are sometimes not as rich in func-

tionality as the best-of-breed options, but they are

viable contenders on the strength of their integra-

tion with the enterprise footprint.

Making the decision between a best-of-breed versus

best-of-suite approach to enterprise software can be

a challenging proposition. This is true in large part

because organizations must balance one set of

Enterprise

Applications

Decision-Making

Criteria

BusinessCase

Product

Capability

PoliticalConsiderations

Executive alignment

Prior experience with vendor

Internal support/bias

Partnership opportunity

Soft and hard benefits

ROI, total cost of ownership, netpresent value, internal rate of return

Risk considerations

Strategic considerations (burningplatform, mergers and acquisitions,

and so on)

Features/functionscapability to meet

business requirements

Industry specificity

Technical architecture

Services and support

Figure 1

Balancing

Disparate

Considerations

Most enterprise applications decisions are based on a combination of easily quantifiedfactors with strategic and emotional factors.


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2

factors that are easily quantified with other equally

relevant considerations that are difficult or impossi-

ble to measure.

In SAPs point of view, a fact-based economic analy-

sis and the relevant metrics associated with such

an analysis should form the basis of such deci-

sions. Organizations that perform total economic

analysis while making the best-of-breed versus best-

of-suite decision are able to project the total eco-

nomic value under both scenarios and compare the

two approaches, considering differences in capital

expenditures, project plans, and investment time

horizons.

In truth, there is no one-size-fits-all strategy. The

best-of-suite argument will continue to prevail as

suite solutions expand their application footprint,

while best-of-breed solutions with clearly differenti-

ated offerings can add demonstrable value.

Looking forward, organizations will continue to face

the challenge of choosing between these two

approaches placing increased demands on IT flexi-

bility and ability to support change. Leading-edge

companies are already beginning to realize the limi-

tations introduced by tightly integrated applications

limitations that are hindering them from making

near-term innovations in business practices and

processes. Many of these same companies are begin-

ning a shift to a new generation of service-

oriented architectures, or SOAs, that promise to go

a long way toward reducing if not removing current

obstacles to new initiatives. Organizations need to

take a close look at the opportunities presented by

SOA and plan an IT strategy that enables them to

define a cost-effective yet flexible approach to

addressing the realities of business transformation.

CIOs who manage this change well can usher in a

new era of IT management and true flexibility for

the business.


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BEST-OF-BREED VERSUS BEST-OF-SUITE

APPLICATIONS: DECISION CRITERIA

What factors, then, should your organization con-

sider in making a decision between best of breed and

best of suite? A sound economic analysis is the start-

ing point. Economic analysis, including internal

rate of return, net present value, return on invest-

ment, and so forth, should be the ultimate measure

of investment success. ROI is the ultimate financial

measure because it comprehensively factors in costs,

benefits, risk, and the time value of money. Organ-

izations that perform total economic analysis dur-

ing the decision-making phase can compare the two

approaches in terms of capital expenditures, project

plans, and investment time horizons. SAPs experi-

ence has shown that total cost of ownership (TCO),

incremental benefits and the timing of these bene-

fits, and project risk are the three most critical fac-

tors that drive the economic analysis.

TOTAL COST OF OWNERSHIP

The first element to consider is TCO. TCO analysis

enables organizations to identify, project, measure,

and track direct and indirect costs of an IT project.

The following are some key considerations that

account for TCO differences between the twoapproaches.

Direct Cost Considerations

Direct costs measure direct expenditures incurred

by the project, including project capital, internal

labor, and consulting fees. These costs can be bud-

geted beforehand.

Integration Costs

Integration costs often represent a significant por-

tion of a major IT project. The percentage of enter-

prise IT budget committed to ongoing application

integration averages 40% and may rise to as much as

70% in certain situations. Typically, a best-of-suite

approach requires minimal interfacing. Internal

interfaces between modules of the package are

maintained by the vendor and require minimal sup-

port. (If these interfaces need to be customized,

however, the degree of customization and upgrade

support will also factor into long-term costs.) A

best-of-breed approach, on the other hand, can sig-

nificantly increase the direct costs of a project

because the enterprise backbone and other ancillary

applications must be integrated.

SAP estimates the costs of implementing a best-of-

breed application at 20% to 30% higher than imple-

menting a like application resident in an enterprise

resource planning (ERP) system. The largest cost

drivers include initial implementation plus ongoing

expenses related to supporting a fragmented appli-

cation portfolio.

The costs of developing and maintaining additional

applications to an existing portfolio are not trivial.

At an estimated $16,000 to $32,000 for development

and $4,000 to $8,0001 for support per interface, these

costs can add up quickly as the numbers of required

interfaces increase. For instance, integrating a

Figure 2

Integration

costs are

nontrivial

and add up

quickly as

the number

and com-

plexity of

integration

points

increase.

1. All dollar amounts in this SAP Insight refer to U.S. currency.

Integration Complexity Low Moderate High

Number of interfaces designed 50 75 100Labor (in hours per interface)

Design 133 179 312

Development 102 134 308

Testing 60 83 202

Implementation 54 75 175

Total labor per interface 349 471 997

Total labor in hours 17,450 35,325 99,700

Initial deployment @ $80/hour ($M) $1.4 $2.8 $8.0

Ongoing support and maintenance ($M) $0.3 $0.6 $1.6


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4

best-of-breed service management solution to the

core ERP, supply chain, and engineering applica-

tions can easily add 300 interfaces ranging from

simple batch interfaces to complex real-time inter-

faces resulting in significant additional costs to the

project.

In addition to the development and maintenance

cost of integrations, additional investments in infra-

structure are required typically in middleware and

additional hardware. Further, these interfaces and

the middleware infrastructure need to be revisited at

each upgrade cycle, potentially requiring further

upgrades and adding to the cost.

Given the significance of the integration issues,

organizations should pay particularly close atten-

tion to the number of interfaces required, the com-

plexity of these interfaces, and the need for ongoing

upkeep of the integration points and data fields as

the products change over time. For example, data

interfaces batched once a day in a standard format

are less complex than a connection that must oper-

ate in real time in varying formats.

Support Costs

Support costs typically encompass the IT and busi-

ness staff required to support the project post-

deployment ongoing development, upgrades, test-

ing, training, help desk, and so forth. Increases in

direct support costs are largely a function of the

extent of portfolio fragmentation within an organi-

zation. The most obvious reasons include the need

to maintain multiple skill sets, inability to consoli-

date support through centers of excellence, hiringconsultants for applications where internal skills do

not exist, and multiple training regimens.

An ASUG/SAP Benchmarking study confirms that

companies that maximize the value of internal IT

resources via a shared-services operation a center

of excellence achieve superior TCO results. Survey

Companies are willing and continue to spend on inte-gration. According to a recent AMR Research study,Typical IT budget is about 3% of revenue, and inte-gration technology/software infrastructure spend rep-resents 8% of that overall budget.*

In a survey conducted by AMR Research in 2002, theaverage in-house integration project cost $2.1 million,

while projects using an integration product rangedfrom $50,000 to $5.25 million, with an average of$1.4 million per project across the 27 projects sur-

veyed. Several projects with application vendorsreached the $10 million mark.

*AMR Research, The Manufacturing IT Spending Profile,20052006


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Costs

Optimized

Solution &

Best-of-BreedImplementationCosts

Cost of

Implementation

Savings

Cost of Operations

Best-of-SuiteImplementationCosts

Integration planning, development,testing, migration costs

Integration infrastructure

(hardware, middleware licensing)

Integration maintenance andupgrades

Redevelopment/test of integration

points upon application upgrade

Additional training and support

costs

Best-of-SuiteOperatingCosts

Best-of-BreedOperatingCosts

Figure 3

Incremental

Costs of Adding

a Best-of-Breed

Application into

an Existing Best-

of-Suite

Environment

data showed that companies maintaining a center of

excellence experience 17% lower costs per concur-

rent user and 47% lower costs per active user than

companies without a center of excellence.2

Best-practice companies pay close attention to the

impact of portfolio fragmentation as they weigh

their best-of-breed versus best-of-suite decisions.

The cost advantages of a best-of-suite approach are

often dramatically greater if the best-of-breed deci-

sion is likely to increase the fragmentation of the

existing IT portfolio significantly in other words, if

the organizations IT portfolio already consists of

multiple best-of-breed applications and a move toan integrated portfolio is not planned. In this case,

organizations should consider a standard platform,

since the incremental cost to support another best-

of-breed application is likely to be lower than for a

standardized best-of-suite footprint.

Indirect Cost Considerations

Indirect or unbudgeted costs are those incurred by

lost opportunities for example, operational com-

plexity and organizational inefficiencies. These costs

are reflected in IT capital and overall managementefficiency over a period of time. While indirect costs

are not normally included in project TCO calcula-

tions, a proper estimate of their implications should

be included in any economic analysis model.

Opportunity Costs

A fragmented IT portfolio is an obstacle to agile

business strategies in part because its so deeply

embedded in operations and organization, in part

because information systems are rigid and the inter-

connections between different applications are com-

plex. Introducing a new product or service, adding a

new channel partner, or targeting a new customer

segment: any of these can present unforeseen costs,

complexities, and delays. The expense and difficultycan be so great that some companies abandon new

business initiatives rather than attempt one more

change to their enterprise applications.

A leading consumer electronics manufacturing

company, for example, found that rolling out key

new functionality for the front office of each of its

three divisions to drive new business was simply too

cost-prohibitive to justify the expected returns. The

company chose to standardize its front office on an

SAP customer relationship management (CRM)application, not because the individual divisions

2. Best Practices in Managing the Total Cost of Ownership: ASUG/SAP Benchmarking Study, SAP Insight (May 2006)

Given an optimized ERP environment, the incremental TCO of add-onnon-ERP-provided functional solutions is usually 20%30%.


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were dissatisfied with their front-office applications,

but because IT could not support their critical busi-

ness initiatives at a fast enough pace. Standardizing

on a common CRM platform well integrated with

the back office enabled IT to build once and deploy

everywhere, rapidly improving the time to market.

Portfolio fragmentation has even bigger effects if the

companys operations span multiple divisions,

plants, and geographies. In such cases cross-division

initiatives can rarely be undertaken without consid-

erable risk. The opportunity cost of relinquishing

the associated benefits should form an important

part of the overall TCO analysis.

Master Data and Business Process

Fragmentation

IT systems in many cases enforce the rules and codi-

fy business processes across divisions and geogra-

phies, and sometimes even within a single division.

IT portfolio fragmentation results in increased oper-

ational costs from attendant fragmentation of busi-

ness processes. These costs are usually difficult to

isolate and quantify, but the drawbacks are usually

quite evident to company managers, suppliers, andcustomers alike.

For example, customers get different price quotes

for the same product across geographical bound-

aries. Divisions procure the same material from

multiple vendors and are unable to leverage volume

discounts. Resources for routine transactional activ-

ities cannot be easily shared. Consolidated reporting

and visibility becomes a nightmare resulting in

many hours expended in reconciliations and the

list goes on. The tangible operational costs that arise

make a significant impact and should be considered

in the overall economic analysis.

Organizational Costs

In short, adding a bolt-on solution typically resultsin duplication of support resources, multiple train-

ing regimens, multiple sources for problem resolu-

tion, and the challenges of software upgrades across

many vendors products.

BUSINESS BENEFITS

The second critical factor that drives the economic

impact of the decision relates to the benefits derived

from application functionality and capability.

Indeed, these are the benefits that offset and exceed

TCO, produce return on the investment, and

improve an organizations bottom line. Given the

An ASUG/SAP TCO Benchmarking study confirmsthat companies maintaining a center of excellenceexperience 17% lower costs per concurrent user and47% lower costs per active user than companieswithout a center of excellence.


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higher costs and business risks of a best-of-breed

approach, companies need to weigh the incremental

benefits in detail.

Incremental Benefits

Both the best-of-breed and best-of-suite approaches

are likely to provide basic benefits by improving

business processes and efficiencies. When it comes to

delivering advanced benefits, however, the two

alternatives diverge sharply.

When evaluating incremental functionality provid-

ed by a best-of-breed application such as CRM, sup-

ply chain management (SCM), or product life-cyclemanagement, your organization should identify the

specific business processes that the advanced func-

tionality will enable. To use this functionality as a

justification for going with a best-of-breed approach,

you should first verify that the single-vendor solu-

tion will not enable an equally effective process and

then quantify the benefit of the advanced process in

financial terms such as increased revenue, decreased

cost, or more efficient use of capital.

An example of this reasoning in action is a manufac-

turing firm using an SAP application as its ERPbackbone that analyzes the impact of bringing in a

best-of-breed solution for better quality manage-

ment. After reviewing competing products, the

company may find the best-of-breed quality man-

agement packages to be slightly more feature-rich.

But if the company cannot identify a business

process that would lead to better yields and lower

defects, and consequently lower warranty and

returns, there would be no reason to include any

incremental benefits. However, the same customer

might look at some specific capability that the SAP

application might not provide currently and con-

clude that it may be able to reduce its defect rate by

a higher percentage than with the SAP approach.

Time Value of Benefits

While they vary in their functionality and effective-ness, either the best-of-breed or best-of-suite appli-

cations deliver financial benefits in terms of revenue

enhancements and cost savings once they are opera-

tional. It follows, however, that each day spent

deploying, integrating, testing, and rolling out the

application beyond the optimal implementation

period represents a loss of potential benefits. The

time value of benefits therefore becomes an impor-

tant factor in the best-of-breed versus best-of-suite

solution evaluation.

Evaluating the incremental benefits from a net pres-

ent value (NPV) perspective becomes even more

critical if the best-of-suite provider does not provide

the requisite capability at the time of evaluation, but

Process Efficiency Process/Business

Model Innovation

Automate/

Integrate

Componentization

ofObjects(SO

A)

Busines

Composi

Process Flexibility

Increase automation

and transparency

StagesofITArchitectureEvol

Enable flexibledefinition of new

products and

partner model

Enable extensionof the process

to extended ecosystem

Figure 4

Time Value

of Benefits

as Related to

Integration

Delays

Lower time value of benefits are due to delays in integration.


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has concrete plans to provide functionality in the

near term. Although the initial releases from suite

vendors may be less mature than those of the point-

solution vendors, the applications of the integrated

solution vendor, when they finally arrive, typical-

ly offer higher levels of business process integration.

As a result, they provide a higher potential benefit

stream. Looking at the NPV, accounting for the tim-

ing of benefit accrual from a point solution in addi-

tion to its incremental benefits, provides a clearer

analysis than pure incremental benefits alone.

PROJECT RISKS

The third major factor that drives the analysis is

project risk. Internal CRM projects are fraught with

business and technology risks, each of which can

translate into project delays, cost overruns, and

unanticipated development and maintenance.

These risks can directly reduce a projects ROI

because, when the risks materialize, they can

increase the TCO, reduce the financial benefits, or

both.

Moreover, the risks are highly relevant while pro-

jecting ROI during project planning. The rate used

to discount the expected project cash flows (costs as

well as financial benefits) measures project risk and

increases or decreases proportionately with that

risk.

Vendor-Specific Risks

Perhaps the greatest vendor-specific risk is vendor

viability. A number of smaller niche players, on the

other hand, have been acquired by larger players

that may not consider every application particularly

relevant. Betting a critical piece of operations on a

platform that is unlikely to be supported in thefuture greatly increases the risks of realizing any

benefits from the resulting improvements.

Project-Specific Risks

The other risks are more specific and need to be

evaluated when relevant to the project at hand.

Specific risk items include the following:

Taking on the integration challenge in-house effec-tively transfers the risks from the vendor to yourorganization itself. Holding the vendor accountablefor failure scenarios is more difficult and only exacer-bates the problem and delays the resolution.


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User adoption risks A significant risk to any

enterprise application project is that the users will

not embrace the system. The result: business as

usual. Getting user acceptance of a single system

with a common look and feel is less problematic

than getting users to learn multiple systems with

inconsistent procedures and terminology. However,

for system users that spend much of their time in a

single application, a unified interface that lacks criti-

cal capabilities (for example, sales and marketing)

delivers little value. Consequently, the impact of

user adoption risk diminishes.

Integration risks Integration problems arealways a possibility with a best-of-breed approach.

Potential problems include longer-than-expected

time to benefit and degraded system performance

due to interface conflicts. The risk is dependent on

the extent and complexity of the interfaces in ques-

tion. In any case, taking on the integration chal-

lenge in-house effectively transfers the risks from

the vendor to your organization itself. Holding the

vendor accountable for failure scenarios is more dif-

ficult and only exacerbates the problem and delays

the resolution.

Ongoing support risks In cases where the

investment needs to be supported for long periods,

there is more risk associated with supporting multi-

ple systems from a mix of vendors than in support-

ing a single system from one vendor. In the firstcase, the burden of support shifts to the customer

rather than the single vendor.


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As the pace of business continues to quicken, busi-

ness executives demand differentiation and business

innovation for top-line growth combined with pro-ductivity and efficiency for bottom-line growth. IT

needs the flexibility to support change at a much

faster pace than before. Even if sound economic

analysis suggests best of suite as the right approach,

it is unlikely the leading vendors can keep up with

the demands in every functional area at the pace

demanded by the business.

The focus shifts from feature and capability to the

IT platform, which needs to provide the capability

to compose custom business processes quickly while

maintaining master data integrity and businessprocess standardization. In essence, the argument

between best of breed and best of suite becomes less

relevant and the issue of flexibility and speed of

response to changing business demands becomes

paramount.

Leading-edge companies are already beginning to

realize the limitations introduced by tightly inte-

grated applications limitations that are hindering

them from making near-term innovations in busi-

ness practices and processes. In optimizing their IT

architectures, consolidating interfaces, and applying

rigid criteria for introducing new capabilities, many

companies have effectively limited the freedom of

launching new business initiatives in fear of theexpense and difficulty of attempting a change in

their enterprise applications. Many of these same

companies are beginning a process to shift to a new

generation of SOAs that promise to go a long way

toward reducing if not removing current obstacles

to new initiatives.

THE PROMISE OF SOA

SOAs enable companies to introduce new business

processes and practices at a faster pace and lower

cost. Instead of the traditional approach of connect-ing disparate applications using customized and

thereby expensive interfaces, SOAs rely on loosely

coupled connections. Applications can be joined

together easily without much customization and

just as easily taken apart and reassembled even if

they use incompatible operating systems or different

semantics in their local operations. All the informa-

tion required to make such an exchange possible is

described and contained in the interface. The infor-

mation is presented in a way that is broadly under-

stood through the use of standards and protocols.

THE ROAD AHEAD: SERVICE-ORIENTED

ARCHITECTURE

Process Efficiency Process/Business

Model Innovation

Automate/

Integrate

Componentization

ofObjects(SOA)

Busin

essProcess

Composition

Process Flexibility

Increase automation

and transparency

Value

StagesofITArchitectureEvolution

Enable flexibledefinition of new

products and

partner model

Enable extensionof the process

to extended ecosystem

Benefits of

Service-

Oriented

Architecture

Stages of Value Creation

Figure 5

0


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WHY SOA? THE BUSINESS BENEFITS

To understand the full benefits of SOAs, lets consid-

er the case of a quote-to-cash scenario for a make-

to-order manufacturing company. How would such

an architecture help achieve the near-term operat-

ing f lexibility required for competitive differentia-

tion and long-term transformation to support the

business strategy?

Today, the business processes involved in this sce-

nario span multiple organizational silos from the

end customer to the internal team to external sup-

pliers. Several internal and external systems are in

place, including ERP, CRM, HR, SCM, supplier rela-

tionship management, and financials, as well ashomegrown, legacy, and third-party solutions.

The process starts with the receipt of a request for

quotation (RFQ) from the end customer. The

account manager enters the information into the

CRM system and then assesses the opportunity. The

internal team is notified of the opportunity and

assembles pricing and material information from

multiple internal and external sources. Depending

on the sourcing needs, the internal team may pro-

duce an RFQ to source more competitive quotations

from suppliers; this typically happens when insuffi-cient manufacturing capacity exists or where prices

that are more competitive can be obtained.

Today, the manufacturer must rely on its internal

team as human integrators to bridge the flow of

information between multiple systems and parties.

The extended quotation management process

requires extensive offline communication, paper-

work processing, data reentry, and other adminis-trative tasks. This practice is clearly ineffective, reac-

tive, unreliable, time-consuming, and difficult to

manage for all parties involved and the result is

poor process governance and fragmented data. Any

changes to the RFQ require a wave of updates to the

existing applications, thus compromising data accu-

racy and responsiveness. Parts of this flow could fea-

sibly be automated through hard-wired integrations

between internal ERP systems and the suppliers sys-

tems, but this is difficult and worse, it increases

TCO by making the IT landscape yet more complex.

With SOA, the architecture would expose, or make

visible to other applications, the features and capa-

bilities of each of the contract manufacturers SCM

applications. The companys IT department would

accomplish this by creating a standardized interface

allowing, say, an orders status to be available as a

Web service that any application could share using

the same standards and protocols. Some examples of

these applications include purchase order and con-

tract status tracking, costing updates, sourcing, and

purchase order creation.

This new approach enables different systems to

communicate using a common language and

reduces the need for data reentry and offline com-

munication. For example, the document controller

receives supplier quotation information through


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enterprise service vendors developed for a third-

party CRM solution. As a result, errors in transmis-

sion of information are reduced and, with fewer

people involved in swivel chair integration, effi-

ciency improves.

From a cost perspective, SOA requires a one-time

investment to write code, making the service acces-

sible by any application with an interface adhering

to the same standards and protocols. In contrast,

hard-wired connections have less reusable code, so

each new connection represents a substantial pro-

gramming effort. The initial investment in an SOA

is amortized further each time a new connection is

created.

As more functionality becomes exposed in the

architectures, customers can use this functionality

to orchestrate business processes in a much more

sophisticated way. The architectures create the

foundation for loosely coupled business processes

delivering even more flexibility. Loose coupling can

accelerate a more fundamental unbundling of the

enterprise, allowing companies to focus more tight-

ly on core competencies and source capabilities

from a broader range of partners. The make-to-

order manufacturer, for instance, could use SOA to

focus on its core strength: customer relationships.

With automated connections enabling more visible

and coordinated communications with contract

manufacturers, the company can off-load more of

its product-manufacturing activities to specialized

companies, and logistics and warehouse operations

to a third-party provider with specialized expertise

in transportation and planning. The manufacturer

can then focus its energies on initiatives that drive

value for end customers shorter lead times orvalue-added service bundling, for example to out-

distance the competition.

2

In essence, the argument between best of breed andbest of suite becomes less relevant and the issue offlexibility and speed of response to changing businessdemands becomes paramount.


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CONCLUSION

Most organizations will find that no single applica-

tion strategy is best for every enterprise. While the

best-of-suite solution often delivers the highest ROI

when all factors are considered, best-of-breed appli-

cations will continue to be preferable when a fea-

ture- and functionality-rich solution is called for.

SAP has determined that best practice is to set up a

process that continually evaluates IT investments

using a sound economic framework. Companies

exemplifying best practices usually set up an IT gov-

ernance structure comprised of IT and business

managers and executives that enables them to reach

sound decisions collaboratively and quickly. Basedon SAP research, companies that do a good job of

managing the best-of-breed versus best-of-suite

dilemma share some common elements, as follows:

They have established strict guidelines for priori-

tizing IT investments within governance

structure.

They closely align IT with the business and ensure

that business and IT are jointly responsible for pri-

ority and delivery.

They focus on the business impact of every IT

solution.

They measure benchmarks against key metrics.

They treat master data standards as sacred. As a

result, product, vendor, customer master records,

and the like are unified.

They have a strong preference for a single plat-

form with limited exceptions for nonconforming

strategies. Should a best-of-breed solution prove

necessary, they establish a transition plan when

similar capability becomes available from the best-

of-suite vendor.

They implement only the necessary components

needed to drive value.

They pursue development plans with the best-of-

suite vendor either through established channels

(such as user groups) or custom development.

They collaborate on a product road map either

developed in-house or provided through a certi-

fied partner.


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IT best practitioners, however, will continue to look

at innovative ways of simplifying their IT landscape

and lowering TCO while delivering the highest

value to their customers the business users and

supporting their initiatives. SOAs offer a promising

alternative to achieving the balance between best-of-

breed capability to enable business initiatives at the

lowest total cost of ownership, and more important-

ly, IT agility and flexibility. CIOs who manage this

change well can usher in a new era of IT manage-

ment and true flexibility for the business.

4


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ABOUT THE AUTHOR

Shashi Rao, senior principal of value engineeringwith SAP America, has been involved in developing

customer strategy and business cases in the software

industry for over 10 years. With SAP, he has led

more than 40 customer engagements in various

industry verticals. He holds a masters degree in

computer engineering from Rensselaer Polytechnic

Institute and a masters in business administration

from the Kellogg School of Management at

Northwestern University.

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