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Value Migration: From Enterprise Applications to Service Platforms

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Most companies have implemented enterprise applications such as CRM and ERP. The best-practice companies are moving beyond enterprise applications into service platforms. This article illustrates why this trend is occurring.
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Only a few years ago, these challenges faced IT management:

  • What enterprise applications—ERP, CRM, SCM, HRMS—do we invest in?

  • How can we better implement our enterprise applications?

Today, the questions confronting IT management have morphed into these:

  • Now that I have multiple enterprise applications, how can I leverage the company's investment in them?

  • What do I need to integrate to gain flexibility and yet differentiate in terms of services that come closer to customer needs?

Clearly, the game is changing. The focus of IT management is migrating from a technology perspective centered on enterprise applications to a services perspective centered on process digitization, integration, and management. This IT value migration, which actually began a couple of years ago, is gathering momentum and becoming mainstream.

The Value Migration Toward Services

The migration from technology to services is a natural evolution in maturing industries. It's well known that technology innovation proceeds in disruptive bursts that dramatically advance some performance frontier. Periods of upheaval ensue, in which innovation dominates over process. In time, the focus shifts toward processes and new services, until a technological innovation renders the existing ways of doing things uneconomical. Figure 1 captures this industry evolution.

Figure 1Figure 1 The migration toward services.

The IT industry is currently experiencing this trend. Interestingly, the vendors are responding not with new products or innovative technology, but with frameworks and toolkits to build service platforms.

To explain the shift toward services, consider the fairly common business goal of "Easy To Do Business With" (ETDBW). It's not hard to see that in a competitive environment every company wants to be ETDBW and ease the burden on the customer. In fact, we'd be hard-pressed to name a medium to large-sized business that doesn't want to be ETDBW.

To make this vision a reality, companies spend billions of dollars on e-commerce portals that are essentially windows into a set of services. What does this mean? When a customer visits an e-commerce portal, she expects integrated services that deliver on the ETDBW objective. In a typical portal, these services include processes for account login, catalog search and select, ordering, payment, and account management. The portal acts as the hub that integrates the many services and provides a consistent experience for the customer.

Despite investing billions on portal technology, the ETDBW goal has been elusive. The reason for this dismal state of affairs? In a nutshell, process fragmentation and poor integration. Many companies lose sight of the fact that customers don't care what behind-the-scenes applications are providing these services; they simply want a smooth and seamless user experience.

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