Maintaining competitive differentiation is the key to creating attractive investor returns. But in a global economy, when you’re spotting an offshore competitor a huge wage advantage, how do you maintain high margins? There are a variety of ways to co-opt the global economy and make it work for you. The key is to have increasingly precise long-distance information and communication systems. What shape are your systems in today?
Most corporations deploy their IT systems atop an Internet-enabled client-server enterprise architecture anchored by a relatively monolithic ERP system, around which are clustered applications for customer relationship, produce life-cycle and supply chain partner management. Add in your homegrown applications and bolt the whole thing to a legacy mainframe system, and your flexibility quotient declines to zero.
More than anything, you need flexibility to compete in the global economy. We’re all making this global stuff up as we go along, so we have to be able to experiment, attach, detach and reattach along the way. This implies a kind of modularity not present in most corporate IT systems today.
The vision for this modularity is in place, however. It has many names, and service-oriented architecture might be the most common. Virtually all of your vendors have spent the past five years reshaping their products to this new standard, but you have not. Until you do, you are going to be living in maintenance hell, paying a huge complexity tax every day in terms of the payroll you devote to keeping your client-server legacy patched together, and shuddering every time some manager suggests adding a new application for competitive advantage.
It is time to bite this bullet. Every major systems vendor has a plan. SAP, Cisco, IBM, EMC, Microsoft, HP, Sun – all are promoting a platform vision in which they can help you transition to the new architecture. The problem is, there is no short-term ROI for implementing any of them, so you don’t know how to justify the cost of the effort to your colleagues. But there is certainly a negative ROI for not adapting. We call it “dealing with Darwin.” When the forces of natural selection are knocking at the door, “We’ll get back to you” doesn’t cut it. Failure to act now commits your company to an increasingly marginalized future.
At Vortex 2005, to be held Oct. 24-26 in San Francisco, we’ll discuss a framework for navigating these treacherous waters. It is called core/context analysis, and it prioritizes commitments based on two dimensions – contribution to strategic differentiation and management of mission-critical risk. The problem with our legacy architectures is that they no longer support differentiation, although they do contain mission-critical risk. The new architectures, on the other hand, support strategic differentiation, but are unproven in mission-critical deployments and any transition to them also must cope with the risk of migration. How do you do that? That’s the question that 300 CIOs and vendor executives plan to tackle at Vortex. To register, click here .
Moore, a consultant and author, is co-executive producer of Vortex 2005. He can be reached at gmoore@tcg-advisors.com.
