Integrating and Automating Next Generation Business Processes
by Roy Hunter and Brian Rasmussen
Part of the Oracle Experiences in Enterprise Architecture article series
Published March 2012
The introduction of mobile applications, social networking, Web 2.0, knowledge sharing, predictive analytics and other new technologies is beginning to make applications architecture seem outdated and antiquated. That trend, along with the elastic nature and economics of cloud computing, is driving CIOs to question how applications should be deployed and causing some business leaders to ask some tough questions...
"Do we need IT at all?"
"Is ERP the new legacy system?"
In truth, most business leaders still see their ERP systems as a means to improve customer intimacy, increase business agility, and provide real-time decision-making capabilities. But they need a solid applications architecture to marry these stalwart information systems with the new technologies on the horizon.
The challenges of marrying new technologies with applications architecture while progressing down the path to cloud computing and Software as a Service (SaaS) are not new. Business processes are often fragmented. Information silos lead to poor data quality and no single version of the truth. Applications are often heavily customized, making it difficult to integrate them with heterogeneous IT environments. Affecting change within these environments isn't easy. Cloud computing introduces new rules, organizational structure, processes, and tools that didn't exist before.
Enterprise architects can help companies marry new technologies with existing applications and establish a roadmap for embracing cloud computing and Software as a Service. It starts with a change in mindset: the primary value comes through business processes, not through the applications themselves. The applications and technology are enablers of those business processes.
The good news is that the ERP technologies have evolved and matured significantly. Today's software vendors design and build applications that conform to open standards and design principles. Many applications are service-oriented and designed to run in the cloud. Deploying them effectively and integrating them with new technology must be a top-down endeavor that begins with the business architecture and systematically addresses all of the other relevant architectural domains. These large-scale transformations don't happen overnight. Yet with effective, practical governance, organizations can stay on track and effectively adjust the vision, strategy, and roadmap in the advent of change.
In this article we review three organizations that shared their stories at the 2011 Oracle Enterprise Architecture Summit, with attention to the challenges they faced and the strategies they used to modernize their application architectures.
Established in 1940, Lee County Electric Cooperative (LCEC) is an electric utility that serves 200,000 customers in southwest Florida. The organization's EA practice has achieved a high degree of maturity, guiding the company from disparate business silos to a standardized applications platform. LCEC is accomplishing this transition by building competency in key business and technology areas and establishing governance processes to not only measure the benefits but also ensure they stay on track with their overall vision, strategy, and roadmap.
"We worked toward alignment of IT strategy with the business and where the company wants to go," said Frederic Kunzi, Chief Information Officer at LCEC. "Our strategic intent is to get our company to become more process oriented and more web-centric. We have an increasing number of applications that are SOA-ready. They expose services that can be consumed and orchestrated."
LCEC is pushing actionable data to its customers via both mobile and stationary devices. For example, customers can use smart phones to set thresholds for energy consumptions and receive alerts in text, email or automated voice message formats. Customers can monitor their daily usage online and see how consumption fluctuates with local temperatures. This creates customer awareness and prevents unnecessary and costly calls to contact centers. Customers can adjust their home thermostats, saving energy when nobody is at home. "Going forward, we want to be more proactive about the information we extend to our customers and give them the ability to make educated and real-time decisions," Kunzi explained.
LCEC took a two-directional approach to attain process orientation: top-down and bottom-up. The bottom-up strategy is guided by technology professionals who are helping to evolve the company's application infrastructure to accommodate SOA. "We are changing the infrastructure from a very standard and horizontal interconnection within applications, and moving to a middleware concept," Kunzi explained. "We integrated our major applications around Oracle SOA Suite."
The top-down strategy is driven by the business. LCEC is operating with an Integrated Business Planning process (IBP) calling for senior management to meet four times a year in strategic planning sessions. Also, LCEC has its Smart Grid Strategic Team that provides direct input to the IBP process. The IBP process enables the selection and prioritization of initiatives for the coming years, and establishes the required budgets. One of the first tasks LCEC embarked on was to produce a Business Process Architecture (BPA). All of LCEC's processes have been mapped, using different mapping stages, from the "As-Is" process to the "To Be" process. Process stakeholders are encouraged to offer input about how a process can be improved and to identify potential bottlenecks using BPM simulation tools. Potential improvements are tested to see how they will work.
"We work with business analysts and process practitioners to enrich the To-Be process," Kunzi explained. "This way, when we pass the process over to the engineering team to integrate existing or develop new services (composite services), we have the information that is required to enable development and process automation initiatives."
Next Kunzi addressed the governance model his team used, saying they strove to simplify the approach. "The governance model is really about people and responsibilities," he said. "Who owns and manages the tools? Who owns and manages the databases where processes and services are stored? What Enterprise process is required to enable seamless integration and process improvement initiatives across the organization? How do we best enable an Enterprise SOA Steering committee to govern business and technical decisions? These are some of the critical pieces to align the organization behind a new transformation."
The big question for the IT team was how to justify a multi-million dollar deployment and investment. LCEC answered this question by having IT working closely with business partners in the various divisions of the organization. Kunzi and his team met with executives and stakeholders such as the CFO and Directors of Customer Care Operations, Engineering, and HR. They examined their major business processes and discussed likely paybacks in time, efficiency, and dollars. Today, LCEC is able to measure the return on investment each process improvement initiative contributes and issues quarterly reports on progress. "The payback is impressive and above initial estimates!" Kunzi says.
"This is a major transformation, not just for IT but for the entire organization," Kunzi summarized. "It goes to the heart of how a company operates, and eventually how a company stays competitive. As we go forward and mature into a service-oriented mindset, we become more flexible. We can build our own services, or serve them from an application or the internet. If you have a strong team with good development skills, you can become very agile and efficient as an organization."
Cummins, a global power leader with over $18 billion in annual revenue, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Cummins serves customers in approximately 190 countries and territories through a network of more than 500 company-owned and independent distributors and approximately 5,200 dealers.
Eric Christian, Executive Director of Technology and Innovation at Cummins, began his presentation at the 2011 Oracle Enterprise Architecture Summit with a quote from Stewart Brand, founder of the Whole Earth Catalog: "Once a new technology rolls over you, if you're not a part of the steam roller, you're part of the road." Christian added, "Technology moves rapidly. Our transition to and from various technologies happens at a rapid pace. It is a challenge to stay out in front of the trends."
Since August 2011 when Christian took on this role, he has worked to define a strategic vision and framework for IT and to ensure it is closely aligned with the Cummins business strategy. He collaborates closely with Cummins' senior business leaders to understand their priorities, and then proactively determines how technology can best be applied and leveraged to enable new business models and lines that increase revenue, accelerate growth and create competitive advantage for their businesses and the Cummins enterprise.
Christian believes that business capabilities drive transformation. More specifically, he said the path forward lies in determining capability needs, translating those into business processes and the business applications that will satisfy those capabilities, determining where the major gaps are within the organization, and creating a roadmap based on quantifiable objectives. The key to getting to the future state is mapping business capability. "You need a definitive set of steps," he explained. "You need a clear understanding of the capability-a process that understands the functions and sub functions, and the gaps in those functions-before you can begin a planning effort that puts the capabilities in place."
For Cummins, the evolution of business architecture begins with business-driven concepts. As the company becomes more mature, it gets better at creating comprehensive business applications and rationalizing consistent business architectures. Then it will move to data integration and integrated applications with a true solution architecture through the layers.
However, Christian notes that along with the top-down focus, there must also be an orientation to implementing ERP systems and core functionalities from the ground-up. "Before you can achieve business modularity, you must have standardized technology and applications," he explained. "And you must have an optimized core. You can't skip steps to get to business modularity. In order to achieve modularity in your business processes, you need to abstract those business processes from the underlying application layer."
For example, Cummins Power Generation is immersed in a program called "Frontier" that leverages Oracle E-Business Suite to automate everything from accepting orders to configuring, building and tracking products, all the way through the shipping process. [Click here to read an article about this transformative endeavor in Profit Magazine.]
In summary, Christian explained that Cummins ERP systems are becoming the foundation for new and integrated business processes. The focus is on application rationalization and consolidation in an effort to achieve business process transformation and optimization. Cummins has created centers of excellence to optimize business processes and optimize its applications portfolio.
Another company that shared its story at the EA Summit is a large telecommunications company that offers voice, data and video products and services over intelligent wireless, broadband and global IP networks. An essential part of this company's IT environment are the analytic applications that help managers in financial services, supply chain, sales and other business domains to make speedy decisions.
The company is utilizing EA concepts to make the transition from departmental to enterprise BI. Achieving this transition involves surmounting some familiar roadblocks including "silo-ed" analytic applications, a high cost of ownership, high data latencies, point-to-point integration, lack of master data management, and disparate toolsets from multiple vendors.
"To take BI to an enterprise level, you must have a standard toolset and standardized data marts with conformed dimensions," said the firm's director of enterprise performance management, who preferred to remain anonymous for competitive reasons. "In this case, these standards include a centralized data distribution hub and enterprise gateway, master data governance procedures, and a consistent presentation platform for performance management and data mining."
With help from Oracle, the telecommunications giant has been streamlining its business intelligence (BI) ecosystem to achieve this level of standardization. Its basic BI architecture is as follows: Oracle Data Integrator moves information into a data warehouse, while Oracle Business Intelligence Enterprise Edition and Oracle Hyperion applications provide management reporting and dashboard views of operations. Monitoring has been an important element of that effort.
"Data comes from various sources and moves to an interface gateway," the EPM director explained. "You need to ensure that you have end-to-end monitoring in that interface gateway, so as data moves from one system to another, you have visibility of the data. You also need data error handling, so any data that falls out can be corrected."
He also said that it is important to let data flow in "the path of least resistance." For example, don't try to push data back upstream from an ERP platform to a CRM system. "As you model your business, you need to make sure that you look at the granularity of data that will exist in each of your systems," he added. "A conscious effort should be made to decide what level of data will reside in billing systems, ERP systems, and EPM systems. You need to sit down as enterprise architects and rationalize that."
Enterprise architects at this telecommunications firm identified four key aspects of integration infrastructure:
Creating an enterprise-scale BI environment requires EAs to think globally as they establish a single version of the truth for common analytic functions. "While domain-specific data marts tend to be built one department at a time, an enterprise platform will reduce reconciliations and ensure that data is not divided among different departments," the EPM director said. "The trick is to be sure you manage your dimensions in a way that data conforms, so you can leverage it between different data marts. Hopefully, you are building an environment where if you need to run analytics across multiple data marts, it can be done without worrying about geographical distances between data centers."
This company follows the Kimball method of storing data in a data warehouse, using a Dimensional Model/star schema. Other best practices include data quality and governance, interactive dashboards that allow reports to be built once and consumed in multiple formats, change data capture technology with the lowest possible data latency, and solid performance management practices that consider the entire cycle of planning, monitoring, action, and strategy. The director also stressed the importance of high performance and scalability saying, "Make sure you know up front how much scalability and performance you need and build according to that. If you hit the upper ceiling of what your system can handle, you'll need to retool the entire environment."
In summary, with enterprise BI environments, enterprise architects should strive to deploy self-service applications. "IT should not be in the business of business," the telco director said. "We give them the data and the tools and let them work with it."
All three of the panelists agreed on a few closing points. Executive sponsorship, buy-in and participation are essential for these types of transformative projects. Whether you are marrying new technologies with your existing architecture or modernizing your applications architecture to make more information available across the enterprise, driving the transformation from the top-down is essential.
In addition, in order to develop and deliver a long-term vision, strategy, and roadmap, you must think holistically, starting with the business architecture and driving down through all of the other relevant architectural domains. You can't depend on your ERP system to define and standardize business processes. Business processes are distinct from application processes and the functionality that support them. In order to promote real-time decision-making, those business processes must utilize open standards and leverage the right information.