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Enterprise Solution

Sub Code - 434

Developed by
Prof.Unni Krishnan

On behalf of
Prin. L.N. Welingkar Institute of Management Development & Research
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CONTENTS

Contents

Chapter No. Chapter Name Page No.

1 Overview - Enterprise Solution 3-20

2 Enterprise Resource Planning (ERP) 21-127

3 Supply Chain Management (SCM) 128-160

4 Supplier Relationship Management (SRM) 161-180

5 Customer Relationship Management (CRM) 181-232

6 Enterprise Content Management 233-260

7 SOA, Middleware and Workflow 261-299

8 Data Warehouse and Business Intelligence 300-333

9 Cloud Computing and SaaS 334-363

10 Enterprise IT Infrastructure 364-404

11 Encapsulating Enterprise IT Solutions 405-418

12 Epilogue IT Outsourcing 419-436

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OVERVIEW - ENTERPRISE SOLUTION

Chapter 1
OVERVIEW - ENTERPRISE SOLUTION
Objectives

After completing the chapter, you will understand:

The Concepts of an Enterprise and Business Solutions requirements and


its evolution.

An understanding of what comprises Enterprise Solutions and some


examples.

Corporate Information Technology Governance.

Structure:

1.1 Introduction

1.2 History of Enterprise Solutions

1.3 Concepts of Enterprise Solutions

1.4 Summary

1.5 Self Assessment Questions

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1.1 INTRODUCTION

What is an Enterprise Solution?

Per Gartner Glossary, Enterprise Solutions are ones designed to integrate


multiple facets of a companys business, through the interchange of
information from various business process areas and related databases.
These solutions enable companies to retrieve and disseminate mission-
critical data throughout the organization, providing managers with real-
time operating information.

Its the overall combination of computer hardware, networks and


application software packages that a business uses to organize and run its
operations they support all business processes, information flows, and
reporting in a complex organizational setup. They are not monolithic
systems, but comprise of many modules, or independent custom-built
software or packaged applications, all integrated to ensure smooth
workflows and information exchange within and outside the organization.
For example, an integrated enterprise system will generally handle, all
operations for a company, to facilitate its business and management
reporting needs.

Having put down a reasonable definition of Enterprise Solutions, its


imperative to understand the implementation arena that is, the
Enterprise. Why so, because there is no one size that fits all, so with
Enterprise Solutions. Therefore, what is an enterprise? Any organization
that engages in business be they for profit trade or services or provision
of goods and/or services to customers can be categorized as an
enterprise.

The solutions that Enterprises require depend primarily on:

The types of business


The scale or size of the enterprise

As such, from the point of view of understanding Enterprise Solutions and


their implementation, it is essential to understand not just the line of
business but equally, their scale or size or volume of business. Enterprises
are classified by Governments worldwide by similar standards, as given
below:

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Micro Entities
2Small Enterprises
Medium Enterprises
Large Enterprises
Fortune-500/Global-500 Organizations

USA European Union


Enterprise
Categorization #Emplo- #
$ Revenue $ Revenue
yees Employees

Micro Entities < 10 < 10 < Euro2.00 million


< $7.0 million
Small < 250 < 50 < Euro10.00 million

Medium < 500 < $15-20million < 250 < Euro50.00 million

Large < 1000 > $100+ million < 1000 > Euro50.00 million

Enterprise > 1000 Fortune-500 > 1000 Global-500

In India, as per guidelines the Reserve Bank of India Guidelines dated


26/09/2013, SME classification of companies is based only on Rupee
Investment and not on the basis of the number of employees or revenue
turnover as in the US or Europe. These are typically:

Manufacturing, Service Industry


Enterprise
Industry Investment Investment in
Categorization
in Plant/Machinery Equipment

Micro Entities < Rs. 25.00 lakhs < Rs. 10.00 lakhs

< Rs. 25.00 lakhs to Rs. < Rs. 10.00 lakhs to Rs.
Small
5.00 crores 2.00 crores

Rs. 5.00 crores to Rs. Rs. 2.00 crores to Rs.


Medium
10.00 crores 5.00 crores

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Different countries have their own norms for classification of companies,


however, the five categories as listed in the Table above remain.

In general, SMBs (Small and Medium Business) or SMEs (Small and


Medium Enterprises) are the general acronyms used to denote the smaller
companies.

Right here, I would like to address a general colloquial error with respect to
Enterprise Solutions and ERP. Enterprise Solution comprises of all IT assets
(software, hardware, network, etc.) that go to meet the business
requirements of an enterprise. They comprise of many software products
or applications that support various business functions and also such IT
assets as Networks, Data Centers, Storage Devices, etc. which are
generally invisible to the users. ERP the most visible and most discussed
is just one element, but the centerpiece of the enterprise solution set.
ERPs typically support the core business function, but many current ERPs
also build-in all other functions such as document management, supply
chain to a minimal extent. Optionally, ERP vendors provide products for
each of the other critical business functions. Some functions like Corporate
Treasury are always separate products, though SAP also has its own
Treasury product. So, why do we mix up and tend to term the ERP to an
Enterprise Solution? In the 70s and 80s, the businesses requirements and
expectations of IT were much simpler and the MRP and MRP-II served the
complete business functions of an enterprise. The initial advent of the ERP
also promised an Enterprise Solution (though found inadequate) hence,
the tendency to identify an ERP with Enterprise Solution.

As no one size fits all, Enterprise Solutions are generally built and
packaged for the type of business (example, manufacturing, banking,
retail, etc.) and the scale, for example,

Manufacturing discrete or process,


Utilities generation, T&D, etc.
Retail single/multi-brand wholesale
Services

Enterprise Solutions and ERP rollouts involve not only huge capital outlays,
but also long implementation times, significant IT resources and intense
cultural change.

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Large enterprises with enormous financial clout handle these over time-
frames of 3+ years, with large budget outlays. However, even these large
enterprises are stretched to their limits and many company-wide roll-outs
are at times aborted before the entire objectives are fulfilled. General
Electric Corporations roll-out Oracle ERPs across their North America
divisions lasted over 5 years with major customization.

The decision of Enterprise Solutions itself poses major challenges to SMBs


that are growing and feel the imperative to get out of Excel Workbook
based management. They are caught between the need and the cost and
impact of organizational changes and time overruns. The early Enterprise
Solutions were always designed for the large enterprises. However, with
the growth of the SMBs, software vendors recognized the business
opportunities and Enterprise Solutions are now packaged differently for
large enterprises and SMB/SMEs and based on their varying needs. While
the large organization, implementations and integration is extensive in
terms of coverage and timelines and costs. The SMB needs are thin
software, low-cost and quick implementation timelines without major
integration hassles.

I would like to touch upon another point here the term enterprise refers
to a network of business functions. Therefore, the phrase enterprise
solutions refers to an integrated IT solution for various functions in a
corporation, be they large or SMB. They provide enhanced scalability and
efficiency of the systems. Therefore, the term Enterprise Solutions
encompass all aspects of computer technology and business solutions
including hardware, software and the employees required, to implement
and maintain these. This does not make it insignificant. However, in this
book, we will deal with only the software solutions.

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1.2 HISTORY OF ENTERPRISE SOLUTIONS

Where did the business solutions begin? The initial computers were built for
providing scientific solution during war and the technology was
subsequently adopted for business computing. IBM, Data General,
Burroughs, Sperry-Univac and several other computer manufacturers
created their own business computers with proprietary operating systems,
development tools, and applications built over these development tools.
They were in the initial days mid-range computers and then the
mainframes came. Businesses built custom developed applications tailored,
to suit their business requirements.

The first packaged softwares came in the latter half of the 1960s and
developed into MRPs and MRP-II and subsequently into ERPs. The primary
functions delivered by these software products were for the manufacturing
organizations and some Financial Accounting. There were also Core
Banking applications to meet the needs of Retail and Corporate Banking.
Airline Industry had its most popular product on Sperry-Univac systems.
These systems were entirely on green-screens prior to the advent of the
GUI.

The late 1980s saw the Enterprise Solutions moving to open architecture
as promoted by OSI (Open System Interface), to support desktops and
multi-servers across. The dependence on proprietary and stove pipe
systems got reduced. The use of homogeneous technology moved to
heterogeneous business computing systems. Establishing compatibility of
data between two systems was always a challenge. They were addressed
by the specifications created by independent bodies represented by
different manufacturers under the umbrella of International Organization
for Standards (ISO). The necessary internal modifications within the
development tools were made. The database structuring and interfaces
were defined. This helped the subsequent interfaces to work seamlessly,
and thus evolved the open system architecture. When the system performs
is slow due to larger volume or complex processing algorithms, an
enterprise could switch over from system with low availability to the one
with high availability. The business centric or organization centric
computing was working successfully.

This era brought the Management Information System (MIS) and Executive
Information System (EIS). Soon, the executive management and

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operational management discovered another issue. The statements and


reports generated by different departments within the enterprises were
different. Each one of them was correct with respect to their area of
working. The inventory from Material Planning department never matched
that from stores, purchase, finance, and sales. Order booked is not money
collected, goods dispatched are not necessarily reorder quantity, or goods
returned, or paid for. The order raised by the purchase department is not
goods in stock for sales and inventory, etc. In order to have currency of
information at each of these functional areas, the use of spreadsheet, word
processor and database became common within each department. This led
to the need for systematic end-user computing. The advent of internet led
to net centric computing which provided high availability of system across
the enterprise. The volume of data crunching became larger. The business
system became more complex at both organization centric managed by the
IS department and end-user computing supported by the IT department.

The turn of the century, along with Y2K fix, brought in the ERPs such as
SAP, Oracle. What are ERPs? They are software systems for business
management, that comprise of integrated modules supporting functional
areas such as planning, manufacturing, sales, marketing, distribution,
accounting, financial accounting, human resource management, project
management, inventory management, service and maintenance,
transportation. The current ERPs incorporate SOA and middleware that
architectures which can integrate with the companys multitude legacy
applications, e-business and self-service delivery channels.

ERPs in their initial avatar mainly targeted the manufacturing industry


because they grew out of MRPs. However, with the DOT COM and boom of
the internet, Enterprise Solutions that encompassed multiple packaged
products, custom-built systems integrated in 3-tier architecture and riding
on LAN/WAN networks across continents truly opened up the business to
the world.

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1.3 CONCEPTS OF ENTERPRISE SOLUTIONS

Enterprise Solutions have progressed much since first ERP systems were
deployed and today they are a well architected and integrated systems of
various software, middleware, presentation layers that work over seamless
networks with Data Centers and Disaster Recovery and security systems.

In this section, we will present to you a view of some typical Enterprise


Solutions, which will set the picture for you to understand the details
covered in subsequent chapters.

Enterprise Solutions deal with the problem of providing information to


clients both externally and internally. It deals with programming and
databases. The main problem being how to most efficiently get our data
accessible to those we want to access it. The solutions have the following
characteristics and more:

Well architected systems that accommodate business and technology


change and integration with other newer systems internal and external.

Security ability to ensure information is not being stolen by those we


dont want to have access to it.

Scalability Should be able to accommodate an increase in clients.

Cost Should be easy to program.

Management Should provide ability to manage the implementation


including version control software and software that helps manage team
effort with regard to providing the solution.

Portable Should be able to accommodate changes in technology.

Integration with other platforms or business solutions (programming


languages).

Transaction management, not just for financial transactions but for


communications between various objects and methods on various
platforms.

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Load balancing Balancing the load in various areas of functionality


among several servers.

Failure and recovery management.

Therefore, in order for a business to properly choose a suite of enterprise


solutions, a proper requirements definition must be completed. All desired
features along with priorities for each feature, must be assigned in order to
make a suitable decision.

Together with Enterprise Solutions, is Enterprise Information Architecture,


a well-defined practice for conducting enterprise analysis, design, planning,
and implementation, using a holistic approach at all times, for the
successful development and execution of strategy. Enterprise architecture
applies architectural principles and practices to guide organizations through
the business, information, process, and technology changes necessary to
execute their strategies. These practices utilize the various aspects of an
enterprise to identify and guide the transformation of strategy into reality,
from small projects and large programs through to complete business
change.

The MIT Center for Information Systems Research (MIT CISR) defined
enterprise architecture as the specific aspects of a business that are under
examination.

Enterprise architecture is the organizing logic for business processes and IT


infrastructure reflecting the integration and standardization requirements
of the companys operating model. The operating model is the desired state
of business process integration and business process standardization for
delivering goods and services to customers.

Gartner, a leading IT analysis firm, defines the term as a discipline where


an enterprise is led through change. According to their glossary, Enterprise
Architecture (EA) is a discipline for proactively and holistically leading
enterprise responses to disruptive forces by identifying and analyzing the
execution of change toward desired business vision and outcomes. EA
delivers value by presenting business and IT leaders with signature-ready
recommendations for adjusting policies and projects to achieve target
business outcomes that capitalize on relevant business disruptions. EA is

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used to steer decision making toward the evolution of the future state
architecture.

There are three key aspects to Enterprise Solutions

Enterprise IT Architecting.
Enterprise Integration
Enterprise Ecological Adaptation

The purpose of Enterprise IT architecting is a greater alignment between IT


and business concerns; to guide the process of planning and design the IT/
IS capabilities of an enterprise in order to meet desired organizational
objectives.

Enterprise Integration is the primary tool to achieve greater coherency


between the various functions of an enterprise (Core Banking, Financial
Accounting, CRM, HR, IT, etc.) implemented in software, including the
linking between strategy formulation and execution.

Enterprise Ecological Adaptation primarily fosters and maintains the


learning capabilities of enterprise so that they are sustainable over
enterprises life cycle to improve its capabilities, to innovate and to co-
evolve with its environment.

As discussed previously, Enterprise Solutions cover the entire business


functions of an enterprise they are a suite of application softwares
integrated through Middleware and workflow systems.

Further, in this subsection, we will attempt to briefly identify and describe


these multiple softwares or packaged applications and the functions they
map into, so as to provide a birds eyeview of an enterprise solution. This
will set the trend for the subsequent chapters, where each of these
functions and the softwares available and how they integrate will be dealt
with.

The core of any Enterprise Solution is an ERP or better stated as the Core
Business Function Software. The examples below adds clarity:

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A Manufacturing organization, for example, a large Machine Tools


manufacturing factory. The core business function software would be a
Manufacturing ERP Oracle Manufacturing or SAP R/3. These
Manufacturing ERPs would cover the essential manufacturing functions of
Bill-of-Material, Material Planning, Shop Floor Control, Inventory
Management, and Scheduling.

For Bank, it would be a Core Banking software package which would have
the basic functions of CIF, Loans and Deposits. This Core Banking
software provides for minimal functions of Credit/Debit Cards, Corporate
Lending, Multi-channel Banking, etc. However, due to the complexity of
the banking business, these functions are supported by specialized
softwares.

For an Insurance company, it would be a Core Insurance Product Life or


General Insurance or both, is the Insurance company deals with both
types of businesses. Again, the products are segregated by Life or
General Insurance and by Policy Administration (PAS) and Claims
Processing.

A Retailer chain such as Star Bazar, would have a Retail ERP that runs its
core business.

So, there is nothing like a single ERP that fits all businesses or even the
complete core functions of a one type of industry. Further, softwares that
support other business functions Document Management, Supply Chain,
CRM are independent software products built around these core business
function software and integrated.

Some of the other business functions and covered in an Enterprise Solution


are bulleted below. I have added in some popular sample packaged
software products for each of these business functions

HRMS example, PeopleSoft

Financial Accounting example, PeopleSoft/Oracle Financials

CRM example, Siebel (Operational and Analytical)

Supply Chain Management example, Oracle Suite.

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Supplier Relations Management (primarily required in large


Manufacturing or retail businesses) example, Oracle Suite

Enterprise Content Management for example, Documentum and


Filenet.
Middleware and the Enterprise Service Bus example, Oracle and IBMs
SOA Suite, JBoss.

Enterprise Workflow example, Oracle Solutions, many Fortune-500


organizations use custom-built workflow systems.

Master Data Management example, there are multiple products.

Data Warehouse example, Teradata, IBM, Oracle, Sybase (SAP) and


EMC-Greenplum.

Analytics, BI and Reports example, multiple products such as


Informatica, Cognos and Crystal Reports (still a very effective and widely
used tool).

Corporate Treasury example, SUNGARD, HANSE ORGA, SWIFT, FTI,


BELLIN

These apart, there are multiple other applications that go to complete an


enterprises business needs:

Portals Intranet, Extranet

Self-service delivery channels that integrated through the ESB

Gateways for SMS Payment (SMTP)

Partner applications for example, an Insurance company will have


integration with car manufacturers, rental companies and automobile
databases such as Chrome Carbook, etc.

There will also be multiple small applications that are custom-built and
cannot be replaced these enhance the functionalities of many of the
packaged products and cannot be discarded.

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Major software vendors such as SAP, Oracle and IBM provide multiple
products for all the enterprise business functions. SAP provides integrated
suite of ERP modules for all functions its a one-stop shop including
Retail and Corporate Banking, Core Insurance and Treasury products. SAP
integrates the various modules through its own ESB and Workflow systems.
However, Oracle and IBM provide very unbundled solutions which can be
integrated with products from various other vendors. Most Fortune-500
organizations and large corporates tend to deploy a mix of products from
various vendors best of breed solutions as such implementations are
known.

It is important to understand that the world of business does not consider


legacy as untouchable and to be thrown away. On the contrary, legacy
systems written in old time 3GLs such as COBOL, PL/1, ASSEMBLER
continue to be in use; not likely to sunset. The trend is to have the Data
layer and Business layers on a Mainframe with Java based Presentation
services integrated by workflow and SOA/ESB middleware. Databases the
most popular and most implemented is IBM/DB2.

Fortune-500 organizations also tend to have multiple softwares servicing


the same business function for example, in Insurance companies, it is
common to have closed-book policies on systems of the 1980 with more
than two or more Policy Administration Systems (PAS) integrated. A
manufacturing organization would have two sets of ERP systems (or the
Shop Floor Control Modules) for their new-parts shops and services shops.

Indian companies new-age or older tend to go in for packaged


application softwares integrated into enterprise solutions. The philosophy is
one of no custom-built applications.

So far in this chapter, we have always discussed only software systems as


components of Enterprise Solutions. How would all these software
components that meet your business needs function without a Network?
So, there many other components that go to complete an Enterprise
Solution for small, medium or large enterprise to name a few:

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Networks Wide Area and LANs

Mass Storage Devices

Data Centers Primary and multiple sites of Disaster Recovery centers

Unified Communication an essential feature of making your office work


smooth

And many others that are invisible to the user, but are vital cogs in the
Enterprise IT Solution framework.

Below is a typical Enterprise Solutions Architecture for a typical Indian


Financial Services corporation. It is said that the best way to learn
swimming is to be thrown into the deep of the pool so to with all
learning. Therefore, I have exposed you to the magnitude and complexity
of an Enterprise Solution even in this Chapter 1. Let us discuss this briefly.

You will notice most components of an Enterprise Solution that have been
discussed above. Note, there are two applications that support the core
business function of this company has been denoted as Core FS ERP
essentially an ERP. In this case, it would be a Financial Services product.
For example, if this company were to be a Bank, these ERPS would be Core
Banking Products one for Retail Banking and another for Corporate
Banking.

In the subsequent chapters of this book, we will cover all aspects of IT that
go to make an Enterprise Solutions. This book will deal with IT from a
managers point of view dealing with technology without immersing in it.
We will discuss software products from a functional point of view, selection
criteria for products, vendors and their relative strengths, analysts views
on products and the industry.

This completes an introduction to the complexity and vastness of


Enterprise Solutions.

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1.4 SUMMARY

In this chapter, you have been introduced to the basic concepts of an


enterprise solution commencing from the enterprise and types of
enterprises, a brief background, its evolution and ending an idea of what is
a simple example of an enterprise solution.

You have been initiated into details of what comprise the components of an
Enterprise Solution, briefly ERP, HRMS, Financial Accounting, CRM, Data
and Analytics and the all important integrator the Middleware and some
of the popular products.

We have also introduced you to the concept of Corporate Information


Technology Governance, its significance and the models for IT Governance
and the regulatory frameworks for IT Governance.

Both creation and establishment of an enterprise comes from leadership


vision, such as leading a particular line of business of being recognized by
the community or society at large. A creation of an enterprise depends on
the human necessity and the level of urgency.

Below are the key takeaways:

Introduction:

Enterprise solutions designed to integrate multiple facets of a


companys business through the interchange of information from various
business process areas and related databases combination of computer
hardware, networks and application software packages.

Classification of an enterprise based on lines-of-business and their size


and scale. Defining large, medium, small and micro enterprises.

Need to tailor Enterprise Solutions to the type of the corporation no


one size fits all.

Requirements of the SMBs.

Challenges of Enterprise Solution implementation for large enterprises


and SMBs.

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History:

Early computers mid-range and mainframes.

Legacy applications and 3GL Languages.

Packaged solutions of the 1980s MRPs, Core Banking, etc. Evolution of


Open Source architectures.

The era of MIS and the lacunae is the systems of those days.

Concept of Business Solutions:

Concept well architected, integrated, secure, cost effective, portable,


and scalable.

ERPs.

Enterprise Architecture, Enterprise Integration and Enterprise Ecological


Adaptation.

Examples of ERPs for various Industries popular products for various


industry verticals.

Systems that support various non-core business functions and popular


products in the market.

Middleware and Integration.

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1.5 SELF ASSESSMENT QUESTIONS

1. What do you mean by an Enterprise Solution? Discuss its importance.

2. Discuss on the emergence of business solutions.

3. What is the concept of Business Solution?

4. How do core business solutions differ from industry-to-industry?

5. Discuss in one paragraph the concept of ERP vis--vis MRP.

6. Name some of the popular products that go to service and enterprise IT


requirements.

7. What is the role of Enterprise Architecting and Integration in enterprise


solutions.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture

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ENTERPRISE RESOURCE PLANNING (ERP)

Chapter 2
ENTERPRISE RESOURCE PLANNING (ERP)
Objectives

After completing the chapter, you will understand:

Concept of Enterprise Resource Planning, Benefits and its Evolution.

Classifications of ERP.

Evaluating ERPs.

ERP softwares Tier-1, Tier-2 and Tier-3.

A few of the well-known ERPs such as SAP, Oracle, Microsoft Dynamics


and Infor.

ERPs for the SMB segment.

Technological evolutions in ERP softwares.

ERP Implementation Roadmaps, Critical Success Factors and


Challenges.

ERP Market trends.

Structure:

2.1 Enterprise Resource Planning Introduction and Concept

2.2 The Need

2.3 ERP Evolution

2.4 Scope of ERP Applications

2.5 Benefits of ERPs Systems

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ENTERPRISE RESOURCE PLANNING (ERP)

2.6 ERP Classification Tiered and Lob Wise

2.7 ERP Architectures

2.8 Evaluating ERPs

2.9 Tier-1 ERPs SAP, Oracle


2.9.1 - SAP
2.9.2 - Oracle

2.10 Tier-2 ERPs


2.10.1 - Microsoft ERP
2.10.2 - Infor ERP

2.11 Tier-3 ERPs

2.12 ERPs for SMB Segment

2.13 Technology Evolutions IN ERP

2.14 ERP Implementation


2.14.1 - Generic Framework for ERP Implementation
2.14.2 - SAP R/3 Implementation
2.14.3 - Oracle e-Business Suite Implementation
2.14.4 - Critical Success Factors in ERP Implementation
2.14.5 - Implementation Challenges for SMBs

2.15 Self-service Technologies

2.16 Summary

2.17 Self Assessment Questions

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ENTERPRISE RESOURCE PLANNING (ERP)

2.1 ENTERPRISE RESOURCE PLANNING INTRODUCTION


and CONCEPT

Information in large organizations is often spread across numerous


homegrown computer systems, housed in different functions or
organizational units. While each of these information islands can ably
support a specific business activity, enterprise-wide performance is
hampered by the lack of integrated information. Further, the maintenance
of these systems can result in substantial costs. For example, the famous
Y2K due to the older programs inability to properly handle dates beyond
the year 2000 and to be fixed at a huge cost.

With the advent of E-Business and the need to leverage multiple sources of
information within the enterprise, ERP software has emerged as a major
area of interest for many businesses. Back-office enterprise software has
its roots in the 1960s and 1970s, as computing power became affordable
enough for companies to automate materials planning through MRP and
financial processing, through payroll and general ledger software. MRP,
short for Material Requirements Planning, was developed in the early 1960s
at IBM and had become the principal production control paradigm in the
US. MRP consists of a set of procedures that convert forecasted demand for
a manufactured product into a requirements schedule for the components,
subassemblies and raw materials comprising that product MRP is limited to
controlling the flow of components and materials, and does not lend itself
to more complete production control and coordination.

The next generation of manufacturing software, known as MRP II, was


developed to address this shortcoming and to further integrate business
activities into a common framework. MRP II divides the production control
problem into a hierarchy based on time scale and product aggregation. It
coordinates the manufacturing process, allowing a variety of tasks such as
capacity planning, demand management, production scheduling and
distribution to be linked together.

However, even MRP II is primarily a specialized tool designed to serve the


needs of the manufacturing function within a company. Its data and
processes are not integrated with those in the rest of the enterprise, such
as marketing, finance and human resources.

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ENTERPRISE RESOURCE PLANNING (ERP)

ERP entered the scene to facilitate information sharing and integration


across these different functions and to operate the enterprise more
efficiently and effectively, using a unified data store and consistent
processes.

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ENTERPRISE RESOURCE PLANNING (ERP)

ERP is a software architecture that facilitates the flow of information among


the different functions within an enterprise. Similarly, ERP facilitates
information sharing across organizational units and geographical locations.
The ERP enables decision-makers to have an enterprise-wide view of the
information they need in a timely, reliable and consistent fashion.

ERP provides the backbone for an enterprise-wide information system. At


the core of this enterprise software is a central database, which draws data
from and feeds data into modular applications that operate on a common
computing platform, thus standardizing business processes and data
definitions into a unified environment. With an ERP system, data needs to
be entered only once. The system provides consistency and visibility or
transparency across the entire enterprise. A primary benefit of ERP is
easier access to reliable, integrated information. A related benefit is the
elimination of redundant data and the rationalization of processes, which
result in substantial cost savings.

Enterprise Resource Planning or ERP is in itself only a subset of the


Enterprise Solutions. Primarily, ERPs is a combination of business practices
and technology, where Information Technology integrates with the
companys core business processes to enablement the achievement of
specific company business goals.

Key characteristics of an ERP, they are:

Flexible and modular


Comprehensive in functionalities provided.
Incorporate Industry Best Practices worldwide.
Bring the best of breed and state-of-the-art technologies.

The diagram below gives you an understanding of the key difference


between a Legacy Solution and an ERP.

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ENTERPRISE RESOURCE PLANNING (ERP)

!
The diagram above gives you the business architecture of an ERP.

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ENTERPRISE RESOURCE PLANNING (ERP)

The key dimensions of ERPs are:

Masters unique, one-time entry at source, the essential difference


with legacy.

Transactions refers masters, contains only transactional data.

Queries key-based search and retrieval, increased speed.

Processing standardized procedures to convert from one form to


another.

Reports exception reporting based on business requirements.

Document Management scanned documents stored and all outputs


system generated.

A typical 1st Generation ERP comprised of the following components:

Manufacturing:
Material Planning
Capacity Planning
Shop Floor Control
Quality Management

Distribution and Logistics:


Customer Information File (CIF)
Sales Order Processing
Inventory Management
Stores Management
Vendor Database
Procurement

Financials:
Bills Receivables
Bill Payables
General Ledger
Asset Management
Invoicing

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ENTERPRISE RESOURCE PLANNING (ERP)

HR Management:
Employee Database
Payrolls

ERPs were primarily developed for and targeted at the manufacturing


sector discrete and process with versions addressing other manufacturing
micro-verticals, such as:

Automobile
Aerospace
Chemicals
Pharmaceuticals
Semiconductors

Todays, ERPs have evolved to cover most Industry verticals such as:

Retail
Financial Services Core Banking and Insurance
Utilities

The deployment of an ERP system can involve considerable business


process analysis, employee retraining, and new work procedures.

ERP softwares are in sense semi-finished packages the user organization


must configure to their needs. This is also referred as parameterization,
enabling, or disabling certain ERP Business blueprint business process. This
configuration or initial setup procedure will allow user to use the package
as it is. An implementation that involves configuring but not customizing
the ERP is called a Vanilla implementation. Many SMBs prefer to get in
as-is as their existing business processes are fairly elementary and the ERP
offers a way to align with industry best practices.

In practice, it is observed that 80% to 90% procedures in an ERP are


standard and can be used as it is. About 10% to 20% procedures need to
be customized (changed) during the implementation. These changes (or
fine-tuning) will depend on many factors such as final product, current
legacy procedures, maturity level of senior executives, kind of customers,
etc.

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ENTERPRISE RESOURCE PLANNING (ERP)

2.2 THE NEED

In the era of MRPs and prior the information provided by IT department


was always specific to the department or mostly what the programmers
condescended to the EDP always provided Information Reports but never
the information requirement objectives at best, these were in silos.
Information Reports were always derived from the system requirement
specifications that were specific to each system and never cut across the
integrated business, pan organization.

Let us first state the need is definitive terms an organization had three
primary challenges:

1. Meet customers expectations and to be competitive in the business


world.

2. Business processes that support the objectives of the company.

3. IT Systems that support the business processes and provide the right
Information for decision making.

What does it take to meet the customers expectations and be


competitive in the business world?

Improved business performance


Improved organizational efficiencies
Standardized operations
Right information for timely and effective decision making, at all levels.

How can you have Business Processes that support the objectives of the
company?

Standardize business processes across the company


Incorporate industry best practices
Business processes that make employees jobs easier

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ENTERPRISE RESOURCE PLANNING (ERP)

How can you have IT Systems that support the business processes and
provide the right information for effective decision making? This is where
the ERPs come in, they are software products that have:

Well integrated functional modules

Centralized Databases unlike legacy systems, they are not islands of


data

Processes incorporated in ERPs are uniform, are industry best


practices, meet regulatory requirements and ensure compliance

Current technologies and architectures that make maintenance and


enhancements cost effective

ERPs manage complex business process and data and provide quick
and reliable information for decision making

ERPs are modular, yet have been architected and designed as one
system, hence communicate and share data and produce reports that
have integrity.

ERPs changed the paradigm by integrating information technology with the


organizations core business processes. All business functions are served by
the same integrated application through one point of entry and update and
query of one set of master data. Data needed to be entered only once
thereby reducing redundancy and errors. Information Reports can be
generated from across the enterprise not from one specific application.

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ENTERPRISE RESOURCE PLANNING (ERP)

Non-ERP Legacy Systems ERPs

Function specific application Function specific modules

Different technologies Architected under the same


technology framework

No integration Modules are fully integrated

Many Master Tables All modules use the same masters

Data redundancy, errors and out of sync Data synced one source for all
reports

The diagram below gives you a pictorial representation of the problems


with stand-alone software systems.

Traditionally, all departments had their own computer system optimized,


for the particular ways that the department does its work. But ERP
combines them all together into a single, integrated software program that
runs off a single database, so that the various departments can more easily

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ENTERPRISE RESOURCE PLANNING (ERP)

share information and communicate with each other. It is this integrated


approach that provides tremendous payback and gives ERP the edge.

Take a customer order, for example. Typically, when a customer places an


order, that order begins a (mostly paper-based) journey from one in-
basket to another in-basket around the company, often being keyed and
rekeyed into different departments computer systems along the way. All
that lounging around in the in-baskets causes delays and lost orders, and
all the keying into different computer systems generates errors.
Meanwhile, no one in the company truly knows what the status of the
order is at any given point because there is no way for the finance
department, for example, to get into the warehouses computer system to
see whether the item has been shipped. Youll have to call the warehouse
is the familiar refrain heard by frustrated customers.

ERP removed the old stand-alone computer systems in finance, HR,


manufacturing and the warehouse, and replaced them with a single unified
software program, divided into software modules, that roughly
approximate the old stand-alone systems. Finance, manufacturing and the
warehouse continue to get their own software (module) except, now the
software is integrated so that someone in the Finance department can look
into the warehouse software to see if an order has been shipped. ERP
software that most vendors provide is flexible enough that you can install
the modules required by you without having to buy the whole package. For
example, most manufacturing companies will just install the core
manufacturing m modules (Inventory, Material Planning, Shop Floor control
and Scheduling) of an ERP and leave out the Finance or HR modules; the
company then buys Financial ERP or HR ERP products from other sources
that provide strong functionalities in these respective areas. Needless to
say, no one ERP can satisfy the complete functionalities of all business
functions of a company.

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ENTERPRISE RESOURCE PLANNING (ERP)

2.3 ERP EVOLUTION

Evolution of ERPs closely parallel significant developments in computer


hardware and software technologies and networking.

In the 1960s, most organizations manufacturing factories deployed a


combination of custom-built and procured systems that automated
Inventory Control and Shop Floor Control, as these were always the areas
of challenge to meeting schedules and cost targets. The technologies used
then were entirely COBOL and FORTRAN. These systems evolved to cover
other aspects such as Capacity Planning, Stores Management and Cost
Accounting.

It was from these early systems that Material Requirements Planning


(MRP) Systems were developed. The concept of MRPs was of planning the
production through a Master Production Schedule. The next generation
systems Manufacturing Resources Planning (MRP-II) came into being in
the 1980s. MRP-II included integrated Shop Floor Control and Inventory
Management with Capacity Planning, Scheduling, Material Planning to
Stores, Procurement, Vendors and Distribution Management and onto
Financial Accounting and Human Resources Management.

The Tale below provides you a summary of the evolution of ERPs.

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ENTERPRISE RESOURCE PLANNING (ERP)

Year Product Functionalities Provided/Enhanced

1960s In-house custom-built Inventory Control and Shop Floor Control

1970s MRP Added Master Production Scheduling,


Material Planning, Stores and Procurement

1980s MRP-II Enhanced to include Sales Order Processing,


Capacity Planning, Vendors and Distribution
Management, Financial Accounting and
Human Resource Management

1990s ERP Integrated and Reengineered Business


Processes and included Service and
Maintenance Management.

2000s Extended ERP New generation ERPs are Micro-vertical


specific Aerospace (within Manufacturing)
or Semiconductors within Process
Manufacturing ERP

Componentized architecture

Internet enabled and support self-service


channels

Incorporate Workflow and Controls, Data


Analytics, Business Intelligence

Extended Enterprise Applications with E-


Business and CRM providing the competitive
edge

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ENTERPRISE RESOURCE PLANNING (ERP)

2.4 SCOPE OF ERP APPLICATIONS

Enterprise Resource Planning (ERP) is a planning philosophy, enabled with


software that attempts to integrate all the business processes, of different
departments and functions across a company onto a single computer
system that can serve particular needs of the different departments.
Therefore, its difficult to per se define the scope of an ERP product.

While the 1st Generation ERP products confined themselves to core


manufacturing functions, current generation ERP applications automate and
support a range of administrative and operational business processes
across multiple industries, including line of business, customer-facing,
administrative and the asset management aspects of an enterprise.

However, ERP deployments tend to come at a significant price, and the


business benefits are difficult to justify and understand. Hence, the
decisions to scope ERP roll-outs are very significant.

The boundary of an ERP system is usually smaller than the boundary of the
organization that implements the ERP system. In contrast, the boundary of
supply chain systems and e-commerce systems extends to the
organizations suppliers, distributors, partners and customers. In practice,
however, many ERP implementations involve the integration of ERP with
external information systems

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ENTERPRISE RESOURCE PLANNING (ERP)

2.5 BENEFITS OF ERP SYSTEMS

Essentially ERPs Integrate and Automate the majority of an


organizations business processes, common data and business practices are
shared across the modules and they access and produce information on a
real-time basis.

Summarizing the key benefits of ERPs would be:

Business Processes
Streamlined business processes and workflows the first step in ERP

roll-out involve streaming of business processes and subsequently the


framework of ERPs prevent these from breaking down
Cost rationalization direct costs reduction
Reduced cost of quality
Improved resource utilization and thereby significant productivity gains

Controls
Approval and authorization based on a whole system view
Greater accuracy of information
Thereby, controls are more effective

Senior Management Reporting


Cross-functional MIS and performance measurements information

flows are optimized and decision making is based on consolidated data


Planning and forecasting based on accurate and timely cross-functional

views

Data
Standardization of Masters ensure redundant entries are eliminated

and there is data sharing between modules


Faster availability of all data points for decision making

Time
Faster search and retrieval of data
Alerts, better response and follow-up actions

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ENTERPRISE RESOURCE PLANNING (ERP)

Intangibles
Improved customer responses enabled by a common CIF and Vendor

Data
Response to changing business needs in faster
Reduced paperwork

From an Operational Managers point of view, an ERP will help in:

Reduction of inventory
Productivity Improvements
Improved Order Management Cycle
Reduction of Financial Close/Cycle
IT Cost Reduction
Procurement Cost Reductions
Improvement in Cash Management
Transportation/Logistics Cost Reductions
Reduction in Cost of Hardware and Software and Maintenance
Improved On-time Delivery
Redeployment of personnel into more value-producing activities though
this is a touchy subject to discuss with the employees as, redeployment
is read as pink slips.

From a technical standpoint, ERPs are a complete suite of integrated


applications that ensures:

Single Master Databases for all modules example, the Customer DB is


common for all modules.
Data integrity
Data sharing
Modular structures and similar interfaces
Common architecture and technology ensuring reduced maintenance
costs.
Cross-functional workflows, tracking and reporting.

At the same time, some of the key disadvantages are:


ERPs are a costly solution, in terms of cost of the software, its ROI,
consulting and training
Implementation cycle times are long.

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ENTERPRISE RESOURCE PLANNING (ERP)

2.6 ERP CLASSIFICATION TIER-WISE and LOB-WISE

ERP systems have evolved over the past 15 years from those like SAP
and Oracle that were implementable only in large enterprises to ERPs for
all types of industry and for the small and medium sectors.

We may classify ERPs into three categories, on size/scale of the business


they are targeted as Tier-1, Tier-2, and Tier-3. Let us understand the
hows and whys of this categorization.

All ERP solutions are not created alike one might be too big, another too
small, but the third is just right. The just right for you, would not
necessarily be so for another company of even similar size. Though other
companies in your industry are adopting a particular solution, you need to
go with is right for your business process.

Many mid-size businesses think that Tiers equate with Good, Better,
Best. They believe that a Tier-1 brand name gives you the best of breed;
but at what cost? The more comprehensive the more expensive and it is
not necessarily the best. Total Cost of Ownership (TCO) is high for a Tier-1
ERPs. Its like owning house thats too big your utility bills are bigger,
when you have more rooms, Government taxes you pay would be higher,
and your maintenance bills would be higher. While you spend more, youre
not getting a lot more for the price. And do you require it? The same holds
true for ERP systems, in which TCO is dependent on complexity.

But choosing the least expensive system also might not be the most
economical particularly if you end up accessorizing the solution with a
multitude of spreadsheets. When you dont buy a powerful enough
solution, you may wind up unable to do what you need to run your
business, and inefficiency runs rampant. You may find yourself creating so
many spreadsheets outside the system, that you are essentially manually
tracking everything. We have heard of companies using 90 different
spreadsheets to run their business.

If Tier-1 ERP could equate to living in a 30 room palace, then Tier-3 is like,
squeezing your large 20-member family and furniture into a 1-BHK Mumbai
apartment. But, some families are small and need just a 1-Bedroom
apartment and there are other rich families that can afford to pay for the
30 room palaces and also utilize them. Therefore, selection of the ERP is

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ENTERPRISE RESOURCE PLANNING (ERP)

purely dependent on the organization its size and scale of business, IT


budget and its long-term business plans there is no one size that fits all.

Tier-1: Multinational, Multi-site, Multi-regional, Large enterprises with


complex business architecture and well established mature IT Systems in-
place since decades. The Tier-1 ERP solutions are basically SAP and Oracle.
They are designed to service the needs of Fortune-1000 companies, which
for the most part are complex, large businesses that have many
departments and global locations. Revenues are typically measured in
billions. A Tier-1 ERP solution is built with complexity of process in mind.

For example, a Tier-1 ERP allows for several people to be working on a


single function. The software can split out the task among multiple users.
Whereas this is necessary for a billion dollar company, a smaller company
would be overwhelmed by the number of steps and the general complexity.

Tier-1 ERP solutions generally take a long time to implement and are
equipped with a wealth of features at a pretty high price. Clearly, there are
only two vendors or ERP suites in this category. They are:

SAP
Oracle (JD Edwards and PeopleSoft)

Tier-2 ERPs, a step down in complexity and cost from Tier I, there are
several products on offer from a myriad of vendors or ISVs, some of which
are highly vertically focused and niche.

Tier-2: Large or Mid-sized companies, but with limited sites or group


companies and typically with operations only in one geography.

These ERP systems fit well with mid-size companies with mostly single
location and multiple divisions or multiple locations in the same
region. Generally, the needs are less complex of the Fortune-500
companies; however, the level of complexity does vary within this
group. Generally, Tier-2 ERP vendors are those focused specialized industry
verticals and choosing a highly virtualized solution generally works well for
the user.

However, Tier-2 are by no means a market for the taking all Tier-1
players have consistently tried to tailor their offerings to gain foothold in

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ENTERPRISE RESOURCE PLANNING (ERP)

this market space and Tier-3 ISVs have tried to gain upward mobility. This
is a big market.

The risks the more virtualized an ERP system, the smaller would be the
ISV, the greater the chances of financial instability and hence vulnerability
to mergers-acquisition and product support failures. Its absolutely
essential to check the long-standing and financial stability of Tier-2 ERP
vendors before making a buy decision.

Some examples of Tier-2 ERPs are:

Microsoft Dynamics
Infor previously BaaN
QAD
Orion
Microsoft NAV
Epicor Vantage
Marshall
IFS
MfgPro

Tier-3 and Tier-4: Small companies with single site operations, even
start-ups. There are many ERPs and so-called ERPs available.

At the lowest cost level, youve got Quickbooks and Sage 50, formerly
known as Peachtree. These products do not offer the functionality of Tier-1
and Tier-2 solutions, and may not even qualify as ERP systems. Youre
getting basic accounting abilities with these small business tools.

Small businesses or businesses running a vertical line of business (LOB)


application with weak accounting benefit from using a Tier III
solution. They have a low TCO and are easy to implement. There is risk
that a growing company will quickly outgrow this type of solution, but most
Tier-2 companies have some sort of data migration capabilities from these
systems.

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ENTERPRISE RESOURCE PLANNING (ERP)

To name a few well established Tier-3 ERP products:

Microsoft GP
AccPac
Sage formerly PeechTree
Syspro
Aptean formerly Consona
Acumatica
Exact Americas
Global Shop Solutions
HarrisData
OmegaCube Technologies
Smarter Manager
Solarsoft Business Systems
Visibility
xTuple

Another classification would be on the basis of Industry verticals or their


line-of-business. A snapshot of such industry vertical specific for which we
have ERP products are:

Discrete Manufacturing
Process Manufacturing
Chemical Products Industry
Electronics and High-tech Components such as Semi-conductors
Distribution Industry
Warehouses WMS
Manufacturing for SMBs
Pharmaceutical and Botanical Products
Oil and Gas Extraction
Food and Beverage Products
Computer, IT and Software Construction
Retail Wholesale and Retail Trade
Hospitality Sector Hotels and Restaurants
Transportation
Real Estate

Micro-vertical or industry specific ERPs typically have their main modules


covering the core industry functionality with other modules covering the
entire gamut of business functions that an enterprise will typically require.

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ENTERPRISE RESOURCE PLANNING (ERP)

Apart for the core business process, most functions of a company are also
addressed in the ERPs, in that ERPs particularly from the big players such
as SAP and Oracle have become complete Enterprise Solutions. However,
these solutions have been bundled, so as provide customers to take the
whole or selective modules. Below are some of the additional functions
covered in ERP bundling:

Manufacturing Execution systems (MES)/Plant Automation,


Manufacturing Management, Production Planning, Quality Management,
Reports, Risk Management, Scheduling and Shop Floor Control, Time and
Expense Management,

Inventory Management and Control, Item Configurator, Purchasing


Management,

Marketing Automation, Merchandising, Mobile Computing, Order


Management, POS/Counter Sales, Sales Force Automation and
Management,

E-commerce, Logistics and Distribution Management, Demand-based


Replenishment,

Maintenance Management,

Accounts Payable, Accounts Receivable, Activity Based Costing,


Administration, Analytics and Reporting, Auditing, Benefits Management,
Billing, Business Process Management, Cash Management, Change
Management, Collections Management, Compensation Management,
Compliance Reporting, Contact Management, Cost Accounting, Payrolls,

Portfolio Management,

Customer Service and Support Data Mining,

E-mail Manager, Electronic Records Management, Employee Self-service,


Personnel Management Portal, Learning Management, Training and
Development,

Fixed Assets, Fleet Management, Health and Safety,

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ENTERPRISE RESOURCE PLANNING (ERP)

Project Management,

Workflow Manager and Versioning Control.

2.7 ERP ARCHITECTURES

ERP applications are most commonly deployed in a distributed and often


widely dispersed manner. While the servers may be centralized, the clients
are usually spread to multiple locations throughout the enterprise.

Generally, there are three functional areas of responsibility, that is


distributed among the servers and the clients. First, there is the database
component the central repository for all of the data, that is transferred to
and from the clients. Then, of course, the clients here raw data gets
inputted, requests for information are submitted, and the data satisfying
these requests is presented. Lastly, we have the application component,
that acts as the intermediary between the client and the database. Where
these components physically reside and how the processes get distributed,
will vary somewhat from one implementation to the next. The two most
commonly implemented architectures are outlined below.

Two-tier Implementations
In typical two-tier architecture, the server handles both application and
database duties. The clients are responsible for presenting the data and
passing user input back to the server. While there may be multiple servers
and the clients may be distributed across several types of local and wide
area links, this distribution of processing responsibilities remains the same.

Three-tier Client/Server Implementations


In three-tier architectures, the database and application functions are
separated. This is very typical of large production ERP deployments. In this
scenario, satisfying client requests requires two or more network
connections. Initially, the client establishes communications with the
application server. The application server then creates a second connection
to the database server.

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ENTERPRISE RESOURCE PLANNING (ERP)

Typical current generation ERP is a n-Tier Architecture and would include:


Central relational database (e.g., Oracle and many others)
Client/Serverthree-tiered
GUI or Web Interface web server
Application server (one or many)
Database server (one single location)

ERP ComponentOriented towards common identifiable business


modules (PP, MM, SD, FI, CO and HR)
Add-ons/Integratable modules CRM, SCM, PLM
Relational Database Tables that defines and links multiple other tables,
providing consistent accurate data, common definitions and eliminating
redundancy.

2.8 EVALUATING ERPs

An Enterprise Resource Planning (ERP) system is a series of software


applications or modules that collects data from your sales, purchasing,
finance, inventory, supply chain, manufacturing and quality functions into a
common database so that your company can share the information,
coordinate activities and collaborate.

If youre looking for your first ERP system or looking to upgrade from an
existing system, the evaluation, selection and implementation process is a
long-term strategic decision for your organization.

To help you through this process, here are eight simple steps for a
successful ERP system selection.

Step 1: Evaluation
Form an evaluation committee that includes top management, functional
experts and end-users from the different departments within your
company. Consider hiring external consultants to assist. Throughout the
selection process, end each step with a consensus of all members to gain
enterprise-wide acceptance of the final ERP system.

Step 2: Make an Assessment


Assess your existing business processes and the scale of your operation, so
you can determine whats being done well. Identify the gaps or key
challenges that can be solved with the help of an ERP system.

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ENTERPRISE RESOURCE PLANNING (ERP)

Step 3: Establish Criteria


Develop your selection criteria to evaluate the available solutions. Criteria
can include features, price, platform, and anything else your committee
can think of. Group the criteria according to importance to your business,
i.e., very important, important, and less important. Assign a score to each
to make the evaluation easier. Here are some example criteria:

Industry Expertise. How well does the ERP vendor understand your
industry? Does the vendor offer industry best practices or pre-defined
processes that are generalized or horizontally focused? ERP solutions
should at the very least address your mission-critical business
requirements specific to your industry.

Total Cost of Ownership. Determine the long-term TCO for hardware,


software, and supportpre- and post-implementation.

Multi-site Operations Support. If you need to collaborate with multiple


operations, then ensure your ERP vendor can support multi-site
operations. Can your ERP vendor support all your locations with a small
centralized IT staff? Do they require complicated architectures?

Customer Support. Does the ERP vendor have its own in-house support
or does it outsource? Youll gain the most out of your investment if you
have access to a customer care center that can answer your key
application and technical questions, solve your complex technical or
software related issues, and advise on best industry practices.

Step 4: Schedule Consultations


Arrange a 10-minute phone consultation with both a sales representative
and product expert from as many different ERP vendors as possible. This
discovery call will provide you with better insight on the vendor and its
solution, than if you were to rely solely on brochures and sales literature.

Step 5: Create a Shortlist


You should ideally shortlist three to five ERP solutions that best meet your
business needs and rank them on three major parameters fit, cost and
post-sales service. Your discovery calls will have helped you eliminate the
solutions which are poor fits.

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ENTERPRISE RESOURCE PLANNING (ERP)

Step 6: Make Contact


Contact the vendors of your shortlisted ERP systems to arrange
presentations and product demonstrations.

Step 7: Prepare Questions that Address Your Concerns


How each vendor responds will help you determine the best fit for your
company.

Step 8: Check Vendor References


Visit and consult companies where the ERP system has been implemented.
Find out if the system is working as expected, and what the company likes
or dislikes. If there were issues, then determine how the vendor resolved
them.

2.9 TIER-1 ERPs SAP, ORACLE

2.9.1 SAP

SAP is the world leader in ERPs, with more than 40 years of experience and
nearly 50,000 customers. SAPs market-leading ERP software is a proven,
trusted foundation that comes with implementations amongst worlds
largest organizations as well as small- and mid-sized companies in 25
different industries.

SAP ERP leverages role-based access to critical data, applications, and


analytical tools and streamline your processes across procurement,
manufacturing, service, sales, finance, and HR.

SAP ERP claims to provide:

Integrated, fast, and flexible business processes and thereby increases


business competitiveness

Accelerates time-to-market with individualized products and services

Simplifies corporate structure, market channel, and business scenario


management

Provides improved corporate resource and asset utilization

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ENTERPRISE RESOURCE PLANNING (ERP)

Consolidates the foundation for the latest mobile, cloud, and in-memory
technologies

SAP ERPs support business processes in over 25 industries, 37 languages,


and 45 localizations.

Over the years, SAP has grown above being just an ERP product company
to provide the entire range of Enterprise Solutions. Their current products
suits is as below:

Business Applications Database and Technology


Business Suite Application Foundation, Security
CRM Enterprise Asset Business Process Management
Management and Integration
Enterprise Resource Planning Cloud Computing
Financial Management Content Management, and
Human Capital Management Collaboration
Procurement Database
Product Life Cycle Management Data Warehousing
Supply Chain Management Information Management
Sustainability In-memory Computing (SAP
HANA)
IT Management
Mobile
Real-time Data Platform (RTDP)

Mobile Analytics
Mobile Apps Applied Analytics
Mobile Apps Platform Business Intelligence
Mobile Commerce Solutions Data Warehousing
Mobile Device Management Enterprise Performance
Managed Mobility Management
Mobile Services Governance, Risk, Compliance

Cloud
Analytics
Business Applications
Collaboration
Platforms
Virtualization

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ENTERPRISE RESOURCE PLANNING (ERP)

SAP ERP today supports the following Industry verticals:

Industrial Machinery, Components Banking


Automotive Insurance
Engineering, Construction and
Operations
Aerospace and Defence
Healthcare High Tech
Life Sciences Media
Oil and Gas Professional Services
Chemicals Consumer Products
Mining Retail
Utilities Wholesale Distribution
Telecommunications Transportation and Logistics
Public Sector

SAP stands for Systems, Applications, and Products in Data Processing.


Headquartered in Walldorf, Germany, it was founded in Germany by Five
Former IBM Engineers in 1972. SAP went public in 1998 and became a
joint stock company, SAP AG. Today, SAP is the worlds largest inter-
enterprise software company.

SAP is a well-Integrated system. This means that all SAP modules are
designed to share information and automatically create transactions based
on various business processes.

Over the years, SAP has launched three major versions of its ERP:

SAP R/1 The first version of SAPs flagship enterprise software was a
Financial Accounting System named R/1.

SAP R/2 Replaced R/1 to the end of 1970s. R/2 was also a Mainframe
Based Software Package that was very successful in the 1980s and
1990s.

SAP R/3 A Client/ Server, 3-tier Architecture Based Software Package,


was launched in mid-1992. It was renamed SAP ERP and later as SAP
ECC ((Enterprise Core Component).

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ENTERPRISE RESOURCE PLANNING (ERP)

mySAP ERP (or SAP All-in-One) The most current generation from
its stables is SAPs business software brand for small- and medium-sized
enterprises (SMEs). It includes a range of products like SAP CRM, SAP
ERP, SAP PLM (Product Life Cycle Management), SAP SCM, SAP SRM, SAP
HR and SAP Financial Management.

R/2 System Components


RA Assets Accounting
RF Financial Accounting
RK Cost Accounting
RK-P Projects
RM-INST Plant Maintenance
RM-MAT Materials Management
RM-PPS Production Planning and Control
RM-QSS Quality Assurance
RP Human Resources

2.9.1.1 SAP R/3

R/3 Business Application Modules


FI Financial Accounting
IM Investment Management
CO Controlling
SD Sales
MM Materials Management
PP Production Planning
QM Quality Management
PM Plant Maintenance
PS - Project System
HR - Human Resources

Briefly, SAPs Architecture has consistently retained the following


characteristics:

Central Relational Database (e.g., Oracle and most other DBs)


3-tiered Client/Server architecture
ERP Components are oriented towards common identifiable business
modules PP, MM, SD, FI, CO and HR
Other Modules are Add-ons CRM, SCM and PLM

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ENTERPRISE RESOURCE PLANNING (ERP)

As you can notice, SAP is designed to run on almost any Hardware


Platform, any Operating System and can be hosted and type of Relational
Database.

Besides native language, ABAP languages such as C, C++, Java, HTML and
ActiveX-Controls can be used.

The Relational Database Tables defines and links many tables of


information. But uses a large number of database programs to store data.
The advantages are eliminated redundancy, common definition for terms,
consistent and accurate data, shared but restricted usages.

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R/3 System Configuration

In a central R/3 System configuration, one host is responsible for all


processing tasks.

In a three-tier configuration, you use your own host for the three tiers.
Using data from the database server, several different application servers
can operate at the same time. To ensure that the load on individual
servers is as even as possible and to achieve optimal performance, you
can use special application servers for individual application areas such
as sales planning, distribution or financial accounting.

To web-enable the SAP Applications, a Web Server and an ITS (Internet


Transaction Server) are needed. The web service and the services for the
ITS can run on one server or on two dedicated servers. The presentation
in this configuration is provided by an Internet Browser.

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SAP R/3 Modules and the functions they provide.

FI Finance CO Controlling PS Project System


General Ledger Cost Elements Make to Order
Book Close Cost Centers Plant Shut Downs
AR Profit Centers Third-party Billing
AP Internal Orders
Asset Management Activity Based Costing
Consolidation Product Costing
Special Ledger

HR Human PM Plant MM Materials


Resources Maintenance Management
Employee History Labour BOM
Payrolls Material Requisitions
Training Downtime and Outages Purchase Orders
Career Management Good Receipts
Succession Planning Accounts Payable
Inventory Management
Raw Materials Master
FG Master

QM Quality PP Production SD Sales and


Management Planning Distribution
Planning Capacity Planning RFQs
Execution Master Production Sales Orders
Inspection Scheduling Pricing
Certifications Material Requirements Warehouse Processes
Planning Packing
Shop Floor Scheduling Shipping
and Control

BW Data Warehouse ABAP


Data Extraction from ABAP is not exactly a
Source Systems Business Module, its a
Functional and programming language
Technical called Advanced
Transformation of Data Business Applications
Storage of Data in Info Programming and is a
Providers SAP Structured
Reporting using Info Programming Language
Providers for custom reporting

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2.9.1.2 mySAP.COM

This part covers the SAP business application components that are included
in the mySAP.com offering, including everything from the traditional SAP
R/3 to SAPs new Customer Relationship Management solutions. The
intention is to provide a brief overview of what these components are
meant for, their underlying technology, and their IT hardware infrastructure
requirements.

Also discussed below are the essential elements of SAPs software


architecture. SAP gives specific meanings to some widely known terms,
which is defined below. Multi-tier architectures are introduced, as well as
the SAP kernel and the concept of SAP Instances, Systems, and
Landscapes.

As with most ERPs, SAP too was always focused on modernizing the
customers their back-office operations by integrating business processes,
with its R/2 and R/3 versions of its software solutions.

SAP R/3 offers transaction processing and reporting in the areas of


manufacturing, financial, logistics, and human resources and enabling the
data interchange various business units of a company. As with all ERPs,
SAPs approach too was a standard-business-process-fits-all; however,
this approach most often required extensive and expensive BPR exercises
for the ERP to fit in the enterprise this became an expensive proposition
for even Fortune-500 companies and hence the markets began to view
ERPs with trepidation. Moreover, the ERPs could only address a limited
portion of the markets needs.

Hence, SAP began offering industry-specific solutions and extended ERP


solutions, including managing SCM solutions, distributors, resellers, CRM
solutions and managing of knowledge-assets with BI solutions.

In the traditional ERP world, companies first focused on getting their own
in-house business processes under control and integrated. Data exchange
or communication such as placing orders or transferring financial data
within a company, usually happened with SAPs Application Link Enabling
(ALE) protocol. Inter-company data exchange and communication was
usually through EDI. ALE or EDI required being set up for each channel.

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However, with the evolution of Internet, HTTP and XML, SAP opened up its
new version to meet the requirements of doing business 24 7 real-time
with the introduction of mySAP.com. Its main elements ar:

mySAP.com Marketplace
mySAP.com Workplace
mySAP.com Business Scenarios
mySAP.com Application Hosting

Put down briefly, mySAP.com is an equation for the delivery of collaborative


business processes that can span enterprise boundaries. It is designed to
enable collaborative forecasting or engineering activities being performed
by two companies that leverage software services made available through
an electronic marketplace. Or software of both companies integrated at the
back-end systems. In both scenarios, collaborative business processes
enhance service while offering new opportunities, lower costs, and real-
time satisfaction for all concerned.

Below, we will very briefly discuss the components of mySAP.com.

mySAP.com Marketplaces are Internet hubs that enable bilateral and


multilateral collaboration between and among enterprises. Marketplaces
provide services ranging from stock quotes and news to discussion forums,
business directories, and hosted applications for example, e-commerce,
collaborative forecasting, collaborative engineering, etc. mySAP.com
Marketplaces enables organizations build and operate marketplaces either
their own or as joint ventures with SAP and/or other companies. SAP also
offers mySAP.com Marketplaces in a service-model used by participating
organizations on a transaction fee basis. Examples of such marketplaces
are available at http://marketplace.mysap.com, which went live in October
1999 with marketplaces for Chemicals, Pharmaceuticals and for Oil and
Gas.

mySAP.com Workplaces are enterprise portals for empowering all the


employees, customers, suppliers, and partners of a company. It provides
role-based, personalized, single point of Web access to everything an
employee needs.

mySAP.com Business Scenarios combine intra- and inter-enterprise


services, information and application components to form collaborative

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business scenarios in the areas of e-commerce, CRM, SCM, BI, and


Enterprise Resource Management. A few details on mySAP.com business
applications:

The ERP backboneSAP Financials (FI), Logistics (LO), Human Resources


Management (HR), and Industry Solutions (IS)the traditional SAP R /3;

Business Intelligence solutions, such as Business Information Warehouse


(BW), Knowledge Warehouse Management, Strategic Enterprise
Management (SEM), and Corporate Finance Management (CFM);

Supply Chain Management solutions, such as SAP Advanced Planner and


Optimizer (APO), Logistics Execution System (LES), Business-to-business
Procurement (BBP), and Environment, Health and Safety (EHS);

Customer Relationship Management solutions, such as Internet Sales


Scenarios, Mobile and Field Sales and Service, the Customer Interaction
Center, Employee Self-service (ESS), and others.

mySAP.com Application Hosting reduces the time, cost and risk


required to participate in collaborative business processes. In an ASP
model, SAP provides the whole software solution or part-functionality as
required.

mySAP.com Implementation: Requires Release 3.1H (or higher) and the


company just needs to do an upgrade. SAP provides an e-Commerce
Starter Pack, gets you started with the Workplace, which provides
immediate browser-based access to your existing R/3 and non-R/3
systems, Business-to-business Procurement, and an Online Store.

2.9.1.2 Critical Success Factors of SAP ERP

To complete this section of SAP, I will discuss briefly, the reasons why SAP
has been so successful in the ERP market space and is today the clear
market leader:

SAP was the first to recognize the fallacy of one-size-fits-all approach


of ERP vendors and create micro-vertical specific, geographic specific
versions for large and small businesses with Cloud based SaaS offerings.

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SAP was the first ERP to offer fully localized versions of its ERP that
incorporated country specific taxation and regulatory requirements. So
(for example) companies in India, did not have to spend huge amounts
of money and time to customize a European version it became the
pioneers of Custom off-the-shelf or COTS products.

SAP runs on virtually any kind of hardware, OS, Database and browser.
SAP has grown out of the ERP to become one-source Enterprise Solution.
Continuous evolution to meet not just its immediate pain-points, but the
futuristic market needs but so as to make ERP acceptable at all levels.
SAP largely grew organically thereby did not have to contend with
diverse architectures of acquired products and the challenges of
integrating these with its core product.
The largely organic product growth strategy ensured that there was
always only one SAP product stream in the market. Customer always saw
only one brand old and new that was SAP R/*.

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2.9.2 Oracle

In this section, we will cover details of Enterprise Resource Planning


Products from Oracle Corporation. Since Oracle Corporation was a
Database and Tools company for a very long period of its history, its foray
into application business started in a small way with introduction of basic
Manufacturing ERP and a Financial Accounting systems. Through a slew of
acquisitions, Oracle brought into its stable the most popular brands in ERP,
Financial Accounting and other enterprise solution products. However, its
ability to consolidate these products and offer to the market a well-defined
and bundled suite of solution has not been effective due to the pressures of
retaining the acquired products. As such, Oracle Suite has always remained
a loosely bundled range of products that meet all requirements of
enterprise solution needs.

In subsequent sub-sections, we will go through the history and evolution of


Oracle products and their bundling offerings in recent times and its current
state. This section on Oracle come with a caveat that you will not get the
same clarity of product life cycle and roadmap as you have with SAP that
is because SAP has largely been a organic growth company.

2.9.2.1 Overview, Evolution and History of Oracle Applications

For those new to Oracle or Oracle Suite of Enterprise Solutions, the array
of products and their evolution and the future roadmap will be very
confusing. Under the umbrella of Oracle Applications, there are a number
of other proprietary labelled products mostly legacy suites that offer very
similar or redundant functionality, and then there is this a new application
suite called Oracle Fusion Applications that also offers much the same
functionality.

While making procurement decisions, it becomes imperative to have a


good understanding of the entire Oracle world so as to make the best
judged decision and not be saddled with redundancy right at start. Hence,
it would be useful to gain a historical perspective of how Oracle
Applications started, its organic and inorganic growth and a roadmap for
the future.

This will not be a straightforward bulleted executive summary, but will give
you a high level perspective to start with.

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Oracle started as a OEM of database and related products such as Forms,


Developer-2000 GUI and remained so through the 1980s. By the late
1980s, Oracle created an Applications division to build a suite of business
applications that leveraged its database offering.

The first application was Oracle Financials and immediately following was
Oracle Manufacturing followed by Logistics, SCM, Product Life Cycle
Management and CRM. Oracle subsequently added or customized Industry
specific modules for Healthcare, Aerospace, Life Science and High-tech
industries.

In the 1990s, Oracle Apps as these were called, found a major buyer in
General Electric Corporation who implemented Oracle Apps Financials
and Manufacturing as their ERP of choice in all their US Divisions. In the
course of implementation, these products underwent considerable changes
and matured as strong ERP products.

This suite of ERP originally labelled as Oracle Applications, has since grown
and today contains the following business functionality focused modules:

Manufacturing
Order Management
Procurement Management
Marketing and Sales
SCM and Logistics
Service Management
Projects Portfolio Management
Product Life Cycle Management
Financial Management
Human Resource Management
Learning Management
Customer Data Management
Value Chain Planning and Execution
Product Information Management
Real Estate Management
Financial Services
Communication and Utilities
Public Sector and Universities
High-tech Industries
Aerospace and Defense

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Transportation.

These apart they offer certain utility functions such as:


Interaction Center Technologies
Inbound/Outbound Telephony
Scripting
E-mail Center

Integration
E-commerce Gateway
Workflow
XML Gateway
Report Manager
Web Applications Desktop Integrator

Application Administration
iSetups
Alerts

To gain market dominance, Oracle Corporation went ahead with a spree of


inorganic growth through acquisition of a slew of well-known products such
as PeopleSoft Financials and HRMS in 2004 and Siebel Systems in 2005.
They also acquired JD Edwards another popular ERP.

These products brought about the much-needed flexibility and wide


customer acceptance to Oracles ERPs in fact, even today, these products
are known by their original names.

Thus, the applications suite that was originally called Oracle Applications
came to be renamed as E-Business Suite Oracles foray into
Business Applications. Currently, the term Oracle Applications refers to
the loose combination of: E-Business Suite, PeopleSoft, Siebel CRM, and JD
Edwards.

Despite these acquisitions and restructuring and bundling whether or not


Oracle will dominate in due course depends strongly on how successful it
would be with an Enterprise Solutions strategy and its realization.

Also coming up on the horizon are other operating models for application
software procurement and deployment, such as Open Source and SaaS.

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These modalities have made no inroads within the large corporate sector,
but SaaS has been doing well in the SME sector, rapidly displacing
Microsoft, who used to have a large share of this niche market.

Product Consolidation moving to Oracle Fusion Applications:


Although Oracle E-Business Suite provided all the applications from
traditional ERP to a range of products encompassing the Enterprise
Solutions most of the individual modules remained in their original
acquired form and multiple versions. The traditional user of PeopleSoft
HRMS did not see the Oracle E-Business Suite, but just PeopleSoft HRMS
12.0. The industry challenge has been, How does Oracle consolidate these
applications with duplicate functionality into a single product suite?
Towards this, Oracle had announced the solution as Oracle Fusion
Applications a combination of product consolidation and technology.

Oracle leveraged the Service Oriented Architecture (SOA), building Fusion


Applications around SOA and therefore offers next generation technology,
with the potential benefits to customers of lower licence costs, greater
robustness, and greater timely introduction of product enhancements.

However, over the past 5 years, with industry in recession, progress was
very slow, and Fusion Applications was first launched only in 2011
incorporating what Oracle calls, the best elements of its existing legacy
Oracle Applications products. Fusion Applications are, in keeping with the
times, available on the iPad and offer an extensibility layer to support
customizations using JDeveloper (2012).

To combat the rise of SaaS in the SME sector, Oracle also offers Fusion
Applications as a private/public/hybrid cloud deployment.

Migrating to Oracle Fusion Applications how strongly does Oracle intend


to push its user base in the direction of Fusion Applications? Oracle is not
aggressively pushing its customers to upgrade and suggests upgrade
only as a business value driven decision.

Oracle sees Fusion Applications are coexisting with its legacy Oracle
Applications suites, with customers slowly adopting SOA as a technology
and then mixing and matching individual Fusion Applications with legacy
Oracle Applications on an as needed basis. Realistically, it will probably be
several decades before the legacy applications disappear because of the

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ENTERPRISE RESOURCE PLANNING (ERP)

enormous value that exists in the current collection of legacy Oracle


Application brands. Oracle continues its commitment for support of their
legacy applications, like PeopleSoft and JD Edwards and included these in a
list of key brands as Applications Unlimited product lines.

Applications Unlimited is Oracles plan to continue enhancing our current


applications product lines while simultaneously developing our next-
generation Fusion Applications. These application product lines as in the
year 2012, currently listed as:

Oracle E-Business Suite


Oracle Fusion Applications
Primavera
JD Edwards EnterpriseOne
JD Edwards World
Knowledge Management
Oracle Crystal Ball
Oracle CRM On Demand
Agile
ATG
AutoVue-Cimmetry Systems acquisition
Documaker
Endeca Manufacturing ERP acquisition in 2011
Hyperion
Taleo.

Below, we will briefly discuss the contents of each of these Oracle Modules.

2.9.2.2 Oracle E-Business Suite

Oracle released in 2007, Oracle E-Business Suite Release 12 (EBS R/12) as


a bundling of several applications of its Oracle Applications suite. Along
with this release, Oracle also released other Oracle acquired products such
as JD Edwards EnterpriseOne, Siebel Systems and PeopleSoft Financials
and HRMS.

Oracles E-Business Suite consists of a collection of enterprise resource


planning (ERP), customer relationship management (CRM), and supply
chain management (SCM) computer applications either developed or
acquired by Oracle.

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Significant technologies incorporated into the applications include Oracle


RDBMS engine, PL/SQL, Java, .NET, HTML and XML, on the technology
stack Oracle Forms Server, Oracle Reports Server, Apache Web Server,
Oracle Discoverer, Jinitiator and Suns Java.

Oracle makes available, a fairly wide set of Business Applications, within its
bundled Oracle E-Business Suite listed as below:

Asset Life Cycle Management


Asset Tracking
Property Management
Customer Relationship Management
Enterprise Resource Planning
Financial Management
Human Capital Management
Project Portfolio Management
Procurement
Oracle Advanced Procurement
Oracle Sourcing
Product Life Cycle Management
Supply Chain Management
Supply Chain Planning
Logistics and Transportation Management
Order Management
Price Management
Manufacturing
Discrete Manufacturing
Process Manufacturing
Oracle Financial Applications

Oracle Financials refers to the standard financial functions, that are


available in the modules as below:

Oracle Assets
Oracle General Ledger
Oracle Payables
Oracle Receivables
Oracle Cash Management.

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The key business processes, enabled by the Financial Applications include


Procure-to-Pay business process flow involving activities such as
procurement, purchasing, making payment to Suppliers and subsequent
accounting; Order-to-Cash business process flow involves activities such as
customer orders, order fulfillment, receiving payment from customers and
subsequent accounting.

Oracle Project Portfolio Management Applications


Oracle Project Billing
Oracle Project Collaboration
Oracle Project Contracts
Oracle Project Costing
Oracle Daily Business Intelligence
Oracle Project Management
Oracle Project Portfolio Analysis
Oracle Project Resource
Oracle Project CRM.

Over and above, the following products are also included in the Oracle E-
Business Suite:

Oracle Bills of Material


Oracle Capacity
Oracle CRM
Oracle Advanced Planning and Scheduling
Oracle Business Intelligence
Oracle Order Entry
Oracle Order Fulfillment (order to cash process)
Oracle Payroll
Oracle Purchasing
Oracle Receivables
Oracle TMS (Transportation/G-Log)
Oracle Work in Process
Oracle Process Manufacturing
Oracle Federal Administration
Oracle Sales
Oracle MRP
Oracle Workflow
Oracle Accelerate.

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A small note on Oracle Accelerate it is a module/function that provides


access to Oracles ERP products through a local partner network and
packages the products to meet vertical industry requirements. Oracle
Accelerate was launched as a set of applications for mid-sized businesses.

Its good to mention here the Oracle User Productivity Kit (UKP)
application that provides a content development, deployment, and
maintenance platform.

2.9.2.3 Oracle Fusion

Oracle Fusion is composed of two parts: Fusion middleware and Fusion


applications.

Oracle Fusion Middleware (FMW) comprises of the Oracle Application


Server and other technology stack components that Oracle has acquired
in past few years.

Fusion Middleware is a family of middleware products, covering areas


like BI, Identity Management, Content Management and SOA.
Each of these areas has its own stack of products. Fusion Middleware
was previously called Oracle Application Server.

Oracle Fusion Applications you can called as ERP module for Fusion.
Oracle Fusion Applications is Oracles next generation suite of
applications, that eventually replace E-Business Suite. It will assimilate
best of breed features from:

E-Business Suite
JD Edwards
PeopleSoft
Siebel

Fusion Applications is a build on top of the Oracle Fusion Middleware


technology stack using Oracles Fusion Architecture as blueprint. Therefore,
the term Oracle Fusion, can refer to any of three things Middleware,
Application and Architecture.

With these releases, Oracle is not only moving to the next generation
technology stack like SOA, BPEL, BAM, JSF, Ajax, ESB, etc., but will also

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bring together the best-in-class underpinnings, of each of the incumbent


suites, like Business Structure, Security Model, Workflow Process, and
Event Models which you will find in later part of discussion. First, let us
have a quick look on Oracles Fusion Architecture.

Oracle Fusion Architecture (OFA) is a standards-based technology


reference architecture or blueprint for building applications. Note that
Oracle Fusion Architecture is not a product, and can be used without
licensing it from Oracle. Many organizations use it to write applications that
can run on Oracle Fusion Middleware or that compliment Oracle Fusion
Applications. Oracle Fusion Architecture is based on the following core
principles:

Model-driven: For applications, business processes and business


information

Service- and Event-enabled: For extensible, modular, flexible


applications and processes

Information Centric: For complete and consistent, actionable, real-time


intelligence

Grid-ready: Must be scalable, available, secure, manageable on low-cost


hardware

Standards-based: Must be open, pluggable in a heterogeneous


environment

The Oracle Fusion Architectures SOA and event-driven architecture (EDA)


technology consists of:

An integrated service environment (ISE) to develop services.


A multi-protocol enterprise service bus (ESB) to integrate applications.
A services registry for discovering and managing the life cycle of
services.
A BPEL-based orchestration engine to tie services into business
processes.
A business rules engine to enable business policies to be captured and
automated.

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A Web services management and security solution to enforce


authentication, and authorization policies on services, and to monitor
services and processes for compliance to SLAs.

The discussions above have been combined into the Architectural


presentation in the figure below:

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ENTERPRISE RESOURCE PLANNING (ERP)

Below are a list of components in the Fusion Middleware (FMW) for E-


Business Suite:

Application Server
BPA Suite (Business Process Analysis)
Business Integration
Business Intelligence
Identity Management
SOA Suite (Service Oriented Architecture)
WebCenter Suite

On the technology front, Fusion Applications is completely developed using


Fusion Middleware 11g on Oracle database 11g. Below are the lists of
technologies used in developing Fusion Applications:

SOA Suite (BPEL, BPM)


BI Publisher
Application Integration Architecture (AIA)
Applications Development Framework (ADF)
Applications Server
Business Intelligence Enterprise Edition (OBIEE)
Content Management
Database 11g
Enterprise Manager.

Fusion apps are metadata driven which is managed by the MDS framework.
Let summarize these all in various components and products and tools.

Oracle Fusion Applications offer a complete suite spanning seven critical


business areas consist of 100+ Oracle Fusion Applications modules. Fusion
V2 is likely to have greater focus on Manufacturing and Supply Chain with
greater localization features and capabilities and a focus on Public Sector.

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ENTERPRISE RESOURCE PLANNING (ERP)

2.9.2.4 Oracle Manufacturing

Oracle Manufacturing is very similar to any of the major Manufacturing


ERPs particularly with SAP in terms of functionalities covered. The key
functionalities of manufacturing in Oracle consist two parts as below:

Oracle Manufacturing (Discrete/Process/Flow)

1. Oracle Bill of Material


2. Oracle Work in Process
3. Oracle Cost Management
4. Oracle Quality
5. Oracle Manufacturing Execution System (MES)
6. Production Scheduling
7. Material Requisition Planning
8. Advance Supply Chain Planning
9. Oracle MPS/MRP/DRP Planning
10. Inventory (INV)
11. Order Management (OM)
12. Engineering (ENG)
13. Warehouse Management
14. Maintenance Repair Overhaul (MRO).

Oracle Discrete Manufacturing, in conjunction with several modules label of


Oracle Discrete Manufacturing, provides a complete production
management system that improves productivity, quality, and
responsiveness while maximizing throughput and production. It also
provides support for enterprise-wide quality management, lot and serial
genealogy and traceability and support for various methods of planning
and cost accounting, irrespective of whether your manufacturing is entirely
in-house or subcontracted wholly or in parts. Oracle Manufacturing ERP has
versions for all sizes of factories.

Discrete Manufacturing integrates seamlessly with other Oracle products


such as Supply Chain and other applications of Oracle and is bundled as E-
Business Suite (EBS).

Manufacturing Execution System (MES) is the key shop floor control and
execution module with capabilities, to deploy directly on the shop floor.
MES helps shop floor operators and supervisors to perform, record, and

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ENTERPRISE RESOURCE PLANNING (ERP)

monitor shop floor activities in a highly efficient and effective manner in


addition to providing key performance and status indicators for the shop
floor. MES also facilitates the removal of non-value-added activities on the
shop floor and thereby maximize shop floor productivity.

Oracle Discrete Manufacturing enables an organization:

Align Manufacturing with the Value Chain by integrating production


planning, scheduling and demand driven execution.

Achieve Operational Excellence by integrating the latest business


applications, directly to shop floor production and equipment status.

Improve productivity with flexible manufacturing concepts to optimize


operations.

Increase visibility into production with advanced analytics and role-based


dashboards to track status and lot/serial genealogy.

Provides critical production information for informed decisions making at


all levels.

Enforce quality in production control through documentation.

Oracle Advanced Supply Chain Planning enables responsive by performing


single-run, simultaneous material and capacity planning across multiple
facilities and time horizons, taking into consideration all the latest forecasts
of sales orders, production status, purchase orders, and inventory policy
recommendations.

Oracle also provides Manufacturing ERP for Flow-based and Process


Manufacturing setups. All the Oracle Manufacturing ERPs come bundled in
the same product labels as Oracle EBS, onto Oracle Fusion and Oracle
Unlimited.

Oracle Fusion V2 is likely to have greater focus on Manufacturing and


Supply Chain with greater localization features and capabilities and a focus
on Public Sector.

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2.9.2.5 Oracle Acquisitions JD Edwards

Having covered the whole and vast portfolio of Oracle Corporations


Enterprise Solutions suite bundled under different labels from time-to-
time, its desirable to provide a brief note on the two key sets of acquired
products that made Oracle a name to reckon with in the ERP segment
PeopleSoft and JD Edwards. I will cover Siebel and the others in later
chapters.

JD Edwards, was an Enterprise Resource Planning (ERP) product company


founded in late 1970s and based out of Denver Colorado with a fairly
popular set of Manufacturing ERP products. They included World ERP for
IBM AS/400 platforms, OneWorld ERP for thick-client architectures. The JD
Edwards was bought out by PeopleSoft, Inc. in 2003 and PeopleSofts
EnterpriseOne ERP as a web-based, thin-client solution was launched as a
new version, in continuation to the JD Edwards ERP. Subsequently,
PeopleSoft Inc. was bought by Oracle Corporation (in 2005) and all the JD
Edwards suite of ERPs are not part of the Oracle stable. Oracle continues to
sell and support all the three products; however, they have been loosely
integrated into Oracle EBS and Fusion.

JD Edwards EnterpriseOne software provides a flexible, configurable


solution in the face of constantly changing technology and enterprise
practices. JD Edwards EnterpriseOne software is the first network-centric
software, that separates business rules from the underlying technology. As
new technologies emerge, JD Edwards EnterpriseOne software enables you
to easily add them to the framework of your enterprise.

Oracle JD Edwards EnterpriseOne is comprised of an integrated applications


suite of comprehensive enterprise resource planning software. Oracle JD
Edwards EnterpriseOne bundled comprises of:

Cross-product Features and Functions


Asset Life Cycle Management (ALM)
Customer Relationship Management (CRM)
Financial Management Solutions (FMS)
Human Capital Management (HCM)
Health, Safety and Environment (HSE)
Project Management
Supply Chain Management and Manufacturing (SCM and MFG)

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Supply Management
One View Reporting (OVR)
In-memory
Localizations.

JD Edwards EnterpriseOne Software Features are as below:

Multiplatform computing: JD Edwards EnterpriseOne software has the


ability to run on different platforms. This versatility allows for easy
maintenance of information across a network.

Integrated supply chain: JD Edwards EnterpriseOne software provides


the ability to use the internet and an intranet to enable you to
communicate and share information with your employees, customers,
and suppliers.

Interoperability: JD Edwards EnterpriseOne software lets you leverage


your existing investments in hardware, databases, and software, and
integrate them with legacy and third-party products.

Adaptability: JD Edwards EnterpriseOne software adapts easily to


different languages, currencies, reporting provisions, and technology
standards.

Usability: JD Edwards EnterpriseOne software lets you point and click,


drag and drop, and use fill-in-the-blank forms to easily complete your
tasks.

Through the Oracle WebCenter and JD Edwards Collaborative Portal, users


access JD Edwards EnterpriseOne applications using links in the Portals
menus.

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2.9.2.6 Oracle Acquisitions PeopleSoft

PeopleSoft Inc.: PeopleSoft is a significant name in the ERP space


particularly in the Financial Management and HRMS. PeopleSoft was a
company that provided well-known solutions for HRMS and Financial
Management. It was founded in the 1980s and headquartered in California.
Its first product was the IBM Mainframe based HRMS released in the
1980s. It was followed by the client-server version of HRMS and then the
Financial Management, Distribution, SCM and CRM Modules in the 1990s.
PeopleSoft also released a Manufacturing ERP in 1996 through acquisition
of Red Pepper, thereby becoming an ERP Suite.

With the release of Version 8.0, the entire suite was refactored into a thin-
client, web based and n-tier architecture termed as the PeopleSoft Internet
Architecture (PIA).

With its entire suite of application, PeopleSoft can function as a full-fledged


integrated ERP, similar to SAP. Like SAP, it has its own set of tools and
scripting language PeopleTools and PeopleCode.

In early 2005 after a prolonged hostile acquisition bid, Oracle Corporation


entered into a merger agreement, which later became a full-fledged
acquisition. Subsequent to the acquisition, Oracle Corporation relabeled the
PeopleSoft products as:

PeopleSoft EnterpriseOne became JD Edwards EnterpriseOne.


PeopleSoft World became JD Edwards World.

At this point in time, Oracle maintains all versions of PeopleSoft and JD


Edwards within its loose bundling under Oracle EBS, planned to be
rebundled as Oracle Fusion.

It is important to note that the PeopleSoft product range is among the


most popular across industries and customers refuse to change or migrate
into Oracles newer versions. This is what has compelled Oracle to continue
to support them and the brand PeopleSoft has survived. In this context, it
might be useful to have a reasonable knowledge of the version history of
PeopleSoft products:

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Year Release and Details


1988 PeopleSoft HRMS released
1994 Distribution and Financials modules
1995 Student Administration System
1996 Releases Manufacturing and PeopleSoft 6 the first
PeopleSoft ERP
1998 PeopleSoft 7.5 with improved client/server technology
1999 Internet-enabled versions of all Products
2000 CRM with acquisition of Vantive Corporation
2000 PeopleSoft 8
2003 Acquisition of JD Edwards PeopleSoft becomes a complete
ERP
2005 Acquired by Oracle Corporation
2006 PeopleSoft FSCM 9.0 is released
2007 PeopleSoft HCM 9.0 is released
2009 PeopleSoft HCM 9.1 is released
2010 PeopleSoft FSCM 9.1 is released
2013 PeopleSoft 9.2 is released

2.9.2.7 Oracle Acquisitions AutoVue and Endeca

Oracle AutoVue: AutoVue is an Industry leading Enterprise Visualization


product. AutoVue is used for viewing, reviewing and collaborating on
product, asset and engineering documents and information across the
global enterprise. With over 10,000 customers worldwide, AutoVue is used
by customers in a broad range of industries, including Utilities, Engineering
and Construction, Oil and Gas, Industrial Manufacturing, Automotive,
Aerospace and Defense, and High Tech.

Oracle Endeca: In 2011, Oracle acquired Endeca, a leading provider of


unstructured data management, web commerce and business intelligence

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solutions. With Endeca, Oracle provides a comprehensive technology


platform to process, store, manage, search and analyse structured and
unstructured information together, enabling businesses to make stronger
and more profitable decisions.

2.9.2.8 Oracle E-Business Suite, R12 and Fusion

Oracle announced the availability of Oracle E-Business Suite Extensions for


Oracle Endeca. These extensions bring pertinent real-time operational
status data to users, via a user-friendly interface (UI) for monitoring and
making immediate course corrections.

E-Business Suite Applications


HRMS (Human Resource Management System including payroll and
Oracle Time and Labour).
Financials (Accounts Payable, Accounts Receivables, Fixed Assets and
General Ledger Oracle Projects).
Procurement (Purchasing, iProcurement, iSupplier).
Supply Chain (Order Entry, Inventory).
Oracle Projects (Project Costing, Project Billing, Project Management,
Resource Management and Project Collaboration).

E-Business Suite Technology


OAFramework
Oracle Workflow
BI Publisher
Oracle Forms and Oracle Reports
Oracle Discoverer.

R12 is the latest and most advanced version, of the E-Business Suite,
running on Fusion Middleware.

Many of the technology components and new features in R12 will carry
over to the Fusion Applications. For customers running earlier release of
11i, upgrading/Re-implementation to R12 will allow you to move to the
Fusion Architecture in an incremental manner.

Here are a few things to consider for R12.

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If you are moving from an existing release of Oracle E-Business Suite to


Release 12, you should consider, whether to perform a standard upgrade
versus a reimplementation.

Release 12, which became available in January 2007, included major


architectural improvements to the Financials products, to support global
and shared service operations, improve operational efficiencies, and reduce
risk. It also incorporated, the latest revisions to Oracles middleware and
database technologies.

Release 12.1, which became available in May 2009, rounds out Release 12,
with significant enhancements to the other product areas, including
Procurement, Supply Chain Management, Human Capital Management,
Customer Relationship Management and Master Data Management. It also
contains usability improvements and centralized life cycle management.

2.9.2.9 Migration to Oracle Fusion

Apart from greenfield Oracle Implementation as discussed above,


organizations that already have some Oracle Apps implementations, are
provided with a strategy to migrate to higher versions Oracle Fusion. The
Oracle Fusion Applications platform was built with flexibility in mind, so
companies can selectively add modules, if and when it makes business
sense.

With the initial release of Oracle Fusion Applications likely focused on point
solutions, most users will be concerned with how to integrate Oracle Fusion
Applications, into their core applications. This will be a substantially easier
effort than migrating the entire core functionality.

There are options/proposed path which can observed in various Oracle


papers. Heres a plan for IT side which may be considered to be crafted
roadmap for the future of enterprise applications.

1. Continue on Your Current Path: That mean you need to evaluate, the
latest Applications Unlimited releases Oracle Applications releases such
as Oracle E-Business Suite 12.1.3, PeopleSoft Enterprise 9.1, Siebel
Customer Relationship Management 8.2, and JD Edwards EnterpriseOne
9.1 for the additional value they bring to the businesses. In addition to

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gaining value today, you will be in a position to upgrade to Oracle Fusion


Applications in the future, if and when you choose.

EBS -> Fusion Apps


PeopleSoft Financials to Fusion Apps
PeopleSoft HRMS to Fusion Apps
Siebel CRM to Fusion Apps

2. Move to Fusion Step by Step: You need to adopt standards-based


technology first. Consider Oracle Fusion Middleware, as in-house new
initiative and developing skill sets in technologies such as Oracle
Application Development Framework, Oracle Content Management
Products, Oracle SOA Suite, and Oracle WebCenter. These tools will help
you integrate, extend, and manage your applications environment today
and prepare you to add Oracle Fusion Applications, if and when you
choose, by upgrading one environment and then reimplement rest
whatever/whenever.

3. Upgrade to Fusion Applications: Decide as and when appropriate. If


you need any functionality, that are not in your current suite and see
business value in going to Fusion Apps.

4. Adopt a coexistence strategy: Add Oracle Fusion Applications


modules, to your existing environment or implement pillars (human
capital management, sales, financials, or supply chain management
applications, whatever suits) to extend the power of Oracle Fusion
Applications into your applications portfolio.

There is no one right path Fortune-500 organizations live with a wide


variety of versions of Oracle products and only install the releases. This is
due to the fact, that they have customized the products so heavily, to meet
their specific processes, that it becomes very costly to upgrade and retrofit
the functional changes. Also, these issues are not Oracle specific, but
common to any software product.

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Product Supported Release for Fusion Upgrade:


E-Business Suite: Release 11.5.10, 12 or later.
PeopleSoft: Release 8.8, 8.0, 9.0 or later.
JD Edwards EnterpriseOne: Release 8.11, 8.12 or later 34.
JD Edwards World Release: A7.3, A8.1, A9.1 or later Siebel Release
7.9, 8.0 or later.

2.9.2.10 Summarizing Oracle Applications

Having discussed the evolution and the various product versions and
bundling of Oracle Applications, the best summarization for Oracle
Applications would be the following two figures that sums up its product
strategy and roadmap:

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2.10 TIER-2 ERPs

In this chapter, we will deal in considerable detail with Microsofts Dynamic


suite of products and also cover in some depth Infor (previously Baan
one of the oldest and most popular ERPs) and try to give you an overview
of the others.

2.10.1 Microsoft ERP

2.10.1.1 Overview of Microsoft ERPs

Microsoft ERPs though classified as Tier-1 are not yet known to be in the
same class as SAP and Oracle in the sense of having its footprint amongst
multi-regional, multi-division mega corporate implementations.

Microsoft Dynamics is the brand name of Microsofts suite of products for


financial management, customer relationship management and supply
chain management. This was the result of Microsofts acquisition of several
business application vendors in the early 21st century.

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Navision Financials was an accounting and Enterprise Resource Planning


solution developed and marketed by Copenhagen based company called
PC&C ApS. As Navision grew, it was renamed as Navision Software and the
company expanded worldwide.

In the 1990s, Navision Financials 1.0, an accounting and enterprise


resource planning solution, was offered for Microsofts Windows 2000
Professional operating system.

Microsoft acquired Navision in 2002 for $1.45 billion and created a division,
Microsoft Business Solutions, while continuing to use the Navision brand
name on the products. In 2006, the Navision products were rebranded, as
Microsoft Dynamics ERP in order to establish a stronger brand, for its
many product brands under Microsoft Business Solutions.

Microsoft has the following products in its fold of ERP Dynamics Products:

1. Microsoft Dynamics AX (formerly Axapta) is a comprehensive ERP


product, that helps mid-sized and larger organizations, operate across
multiple sites and countries. The last release of this product was in
2012.

2. Microsoft Dynamics GP (formerly Great Plains Software) is a scalable


ERP product, for growing and mid-sized organizations that can help
extend insight, productivity and collaboration, across the entire
business. The current version 11.0, was released in Microsoft Dynamics
GP 2010.

3. Microsoft Dynamics NAV (formerly Navision) is an ERP product, for mid-


sized organizations that provides proven industry-specific functionality,
relevant to the business needs it is available in more than 40 country
versions. Its latest release was 2013.

4. Microsoft Dynamics SL (formerly Solomon IV), is an ERP product,


specialized to help project-driven mid-sized organizations, manage
people, projects, and profitability; release 7.0 is the most current
version.

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5. Microsoft Dynamics C5 (formerly Concorde C5) meant primarily for


small and medium enterprises provides the functionalities of finance,
manufacturing, supply chains, analytics and E-commerce.

Microsoft Dynamics ERP Solutions current support the following Industry


verticals:

Financial Services
Manufacturing
Public Sector
Retail
Service Industry.

2.10.1.2 Microsoft Dynamics AX

Microsoft Dynamics is equipped with a wide range of functionality, with


core modules including Financial Management, Supply Chain Management
(Sales, Purchasing and Inventory), Manufacturing, Project Management,
Human Resources Management and Business Intelligence, as well as
vertical solutions for the retail and process manufacturing industries and
industry-specific solutions provided by partners.

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Key Functionalities Industry Focus


Manufacturing Professional Services
Financial Management GL, AR/AP Engineering
Fixed Assets, Project Management
and Accounting
Inventory and Warehousing Service Management
Project Accounting PSA Distribution
Service Management Contract Public Sector
Management, Repair Management
Supply Chain Management Manufacturing
Distribution Management Retail
HR and Payrolls
Expense Management
CRM
Fixed Assets
Workflow
Reporting and BI
Compliance Center
Integration to MS SharePoint
Integration to MS Project

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The Microsoft Dynamics AX software is composed of four major


components:

The Database Server, a database that stores the Microsoft Dynamics AX


data.

The File Server, a folder containing the Microsoft Dynamics AX application


files (in AX2012 application files are stored in the database).

The Application Object Server(s) (AOS), a service that controls, all


aspects of Microsoft Dynamics AXs operation.

The Client(s), the actual user interface, into Microsoft Dynamics AX.

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!
Apart from the common AX 2012 architecture, the following components of
Microsoft technology stack deployed are:

Reports delivered by SQL Reporting Services (SSRS) a component


included in SQL Server.

Business Intelligence (BI) components such as Key Performance


Indicators (KPIs) use OLAP cubes, which are delivered by SQL Analysis
Services (SSAS) a part of SQL Server.

The Enterprise Portal and Role Pages are hosted in SharePoint. Window
SharePoint Foundation 2010, is a free download or Microsoft SharePoint
Server 2010, may be purchased to provide extended collaboration and
content management tools.

Integration to third-party applications and other organizations would


require Web Services.

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These functionalities, included directly in the solution, offers customers a


greater deal of flexibility. It isnt something most ERP solutions can deliver.
Most ERPs have industry-specific, regional-specific versions of their
solutions, that cater to a specific industry-region combination and are not
configurable from a generic product.

Customers can combine these capabilities, to suit just about any unique
business structure. Microsoft Dynamics AX 2012 makes all of this
functionality available in a single solution.

This makes it easy to operate across locations and countries by


standardizing processes, providing visibility across your organization, and
helping to simplify compliance.

Below is a list of Microsoft Dynamics AX Modules and Features, though not


exhaustive:

Dynamics AX Financial Management


General Ledger and Chart of Accounts Setup
Financial Dimension with Dimensional Hierarchy
Multiple Companies
Inter-company Functionality
Bank Management and Setup
Bank Reconciliation
Accounts Payables
Vendor Check Runs and Electronic Payments
Accounts Receivables
Budgeting with Revisions and Approvals
Journal Approvals and Workflow

Dynamics AX Requisitions and Purchase Orders


Vendor Management
Purchasing
Purchase Requisitions
Vendor RFQ and Quotes
Workflow for Requisition and Purchase Approvals
Automated Purchase Orders
MRP and Master Planning
Vendor Managed Inventory
Automated Vendor Notifications for Drop Ship

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Automated 3-way Matching of PO, Invoice and Goods Receipt Note


Vendor Statistics and Performance Management.

Dynamics AX Expense Management


Business Policies and Expense Rules
Workflow for Multi-level Expense Approvals
Corporate Credit Card Processing
Employee Web Portal for Expense Entry
Ability to Attach and View Expense Receipts
Integration with General Ledger and Accounts Payable.

Dynamics AX Project Management and Project Accounting


Work Breakdown Structure
Tracks Time and Materials
Invoicing Management
Project Budgeting
Tracking of Project Costs such as Labour, Vendor Purchases
Time and Expense Tracking to Projects
Time Sheet
Web Portal for Project Management and Project Data Entry.

Dynamics AX Supply Chain Management


Automated Purchase Orders
MRP and Master Planning
Vendor Managed Inventory
Automated Vendor Notifications for Drop-ship
Automated 3-way Matching of PO, Invoice and Goods Receipt Note
Vendor Statistics and Performance Management.

Dynamics AX Inventory Management and Warehousing


Item Master Configuration with Attributes and SKUs
Item Dimensions including Lot Number, Batch, Serial Number and
Location Control
Bill of Materials (BOMs) and Formulas
Bar-coding Support in Microsoft Dynamics AX
Min-Max and Requirements Management.
UNSPSC and Other Commodity Classifications
Inventory Costing LIFO, FIFO, Standard Costing, Weighted Average
Costing, FEFO
Bin, Location, Aisle and Pallet Management

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Directed Pick and Directed Put-away


Yard Management and Cross-docking.

Dynamics AX Sales Orders


Customer Management
Credit Limits and Customer Profile Management
Sales Order Management with Notes for Customer Service
Order Fulfilment
Customer Rebate Management
Sales Commissions Setup and AUTOMATED Calculation
Multiple Deliveries Per Order.

Dynamics AX Service Management


Set up and Manage Services Agreements
Service Orders and Services Tasks
Repair Management.

Dynamics AX Production and Manufacturing


Production
Routes and Operations Configuration
Work Centers and Route Planning
Job Costing
Production Planning
Shop Floor Control.

Dynamics AX HR Management and Payroll


Balanced Scorecard
Business Process Management
Human Resource Management
Payroll.

Dynamics AX Fixed Assets


Track Fixed Asset
Multiple Depreciation Methods.

Dynamics AX CRM and Sales and Marketing


Marketing Automation
Sales Management
Track Activities
Telemarketing.

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Dynamics AX Web Portals


Enterprise Portal.

Dynamics AX Workflow and Alerts


Workflow Configuration and Management
Alerts
Dynamics AX Reporting and Business Intelligence
SQL Server Reporting Services for Dynamics AX
SQL Server Analysis Server and Data Cubes
Management Reporter for Microsoft Dynamics.

Microsoft Dynamics AX Development and Integration


NET Business Connector Based Integration
Dynamics AX AIF Integration
Application Object Tree and IntelliMorph
X++ Programming with MorphX IDE.

2.10.1.3 Microsoft Dynamics GP

Microsoft Dynamics GP is a product, for the SMB sector, that has fairly
comprehensive out-of-the-box capabilities, provides rapid and flexible
deployment options and helps a SMB get up and running quickly and
affordably.

It provides the following modules/business functionalities:

Financial Management
Manufacturing
Supply Chain Management
Reporting and BI
Service and Project Management
Risk Management
Human Resource Management.

Microsoft Dynamics GP, also has an IT Management module, that brings


functions such as built-in personalization and customization tools,
integration of data from external sources, manage product deployment and
future upgrades, connectivity to mobile and remote workers.

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Microsoft Dynamics GP, in a hosted setup, makes great sense for a growing
or mid-market company, looking to acquire a top-notch business system. It
offers a low cost of entry, with predictable IT costs.

The product is sold and serviced by a global Microsoft Partner network.

2.10.1.4 Microsoft Dynamics NAV

Microsoft Dynamics NAV the product through acquisition of Navision is


intended for small- and mid-sized businesses, to enable them gain
complete control over their core business processes, supply chain,
employee management. Relative to Microsoft's other 3 ERP products,
Dynamics NAVs sector, is for small distribution and manufacturing
companies, that want more than out-of-the-box functionality. However, in
reality, out-of-the-box implementations may be few, as the resellers
make their money through consulting, in other words customization.

Until Version NAV 2013, Microsoft Dynamics NAV gave users the option of
using either a native database server or Microsoft SQL Server, the
database. SQL Server, is now the only database option.

Microsoft Dynamics NAV is an extremely popular ERP among small


enterprises and start-ups and Microsoft has logged over 100,000
customers by end-2013.

There are two versions of this ERP:

1. Starter Pack:

Financial Management GL, AR/AP, Account Schedules, Cash Flows,


Fixed Assets, Bank Management, Reconciliations.

Project Management.

CRM Contacts Management, Task Management and Outlook Client


Integration.

Configuration and Development Reports Designer, Table Designer,


Query Designer, Page Designer, XML Port.

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Supply Chain Management A fairly extensive set of features are


available.

Human Resources Management Basic functions.

Other functionalities such as Time Sheets, Commerce Gateways,


Job Queues, Defining Companies and Subsidiaries and Multiple
Currencies.

2. Extended Pack

All functionalities of the Starter pack, plus the incremental.

Financial management Responsibility Centers, Inter-company


transfers, Cost Accounting.

Project Management Capacity Management, Multiple Costs, Budget


Estimates, Phases, Tasks, Job Suites.

CRM Contact Classification, Campaign and Opportunity Management,


I n t e ra c t i o n a n d D o c u m e n t M a n a g e m e n t , S e r v i c e / P r i c e / I t e m
Management, Contract Management, Planning and Dispatching.

SCM Order Processing, Calendars, Campaign Pricing, Warehouse


Receipts/ Shipments, Internal Picks and Put-aways, Bin Setup,
Automated Data Capture.

Manufacturing BOM, Production Orders, Version Management, Agile


Manufacturing, Demand Forecasting, Basic Supply Planning, Basic
Capacity Planning, Machine Centers, Finite Loading.

Others Unlimited Commerce Gateways Plus Enhanced Configuration


and Development.

Architecture - NAV 2009 and 2013: The Microsoft Dynamics NAV


software is composed of three major components, in three-tier
architecture:

Data Tier: The Database Server, a database that stores the Microsoft
Dynamics NAV data (as of NAV 2013 only Microsoft SQL Server).

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Middle or Server Tier: The Application Server (starting from NAV 2009
RTC), a service, that managing all business logic and communication of
Microsoft Dynamics NAV's operation a service that controls all aspects
of Microsoft Dynamics NAVs operation.

Client Tier: The client(s), the actual user interface into Microsoft
Dynamics NAV.

Microsoft Dynamics NAV 2009 has RTC (Role Tailored Client) and
Classic Client.

Microsoft Dynamics NAV 2013 has three types of Clients - Windows


Client (formerly named the RTC), Web Client, Web Service Client, a
SharePoint client through Microsoft Dynamics NAV Portal Framework,
and a NAS services client for programmatic access.

Some common configurations are:

All three components on the same computer. This is the configuration for
a demo install, and is also typical for a development environment, so that
a developer can work on Microsoft Dynamics NAV applications, without
worrying about network connections and inter-component security.

The Windows or Role Tailored client and Microsoft Dynamics NAV Server
are on the same computer and data tier on a separate computer.

Each of the three tiers on a separate computer

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Microsoft Dynamics NAV licensing is typically for the small enterprises.


Licensing terms are different for Starter Pack and Extended Pack. Since
2013, Microsoft Dynamics NAV is sold under a licensing model called
Perpetual Licensing. Under Perpetual Licensing, customers license the
Solution functionality and accesses are secured by licensing users. User
licenses are of two types:

Full User has access to the entire system.

Limited User has only read access to the system, except write access
key tables such as Time sheets, Warehouse Pick and Commenting plus
any three extra tables of choice. The Limited user is "concurrent" and
with 2013 is trust based, as of version 2013r2 the limited user licensing
is checked.

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2.10.1.5 Microsoft Dynamics SL

Microsoft Dynamics SL is one of the Microsoft Dynamics product family


designed for project-driven SMB enterprises.

It is a business management solution that aids project-driven, service-


driven, and distribution-driven businesses, with Project Management and
Project Accounting functionalities and helps manage projects effectively.
The functionalities provided in Microsoft Dynamics SL are:

Financial Management
Project Accounting
Manufacturing
Field Service
Supply Chain Management
Analytics and BI
E-Commerce.

Microsoft Dynamics SL is targeted at the following industry segments:

Construction
Government
Professional Services
Distribution.

2.10.1.6 Summary

In summary, while Microsoft has brought a whole suite of ERPs for various
segments and also provide tremendous flexibility in its offering, Microsoft
Dynamics suite are traditionally seen as ERP systems, primarily suitable for
the mid-sized and smaller organizations or the subsidiaries of larger
organizations.

One of the key disadvantages of Microsoft Dynamics is the database SQL


Server. All Fortune-500 organizations, have their core businesses on IBM
Mainframes running IBM DB2 or on Unix Servers running Oracle Databases.
Architectural frameworks are generally Java based. Microsoft fits in with
difficulty.

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2.10.2 Infor ERP (Previously Baan)

Infor is the third largest ISV in the ERP space, with a range of Resource
Planning systems Manufacturing, Financial systems and to supply chain
and CRM. Infor is a privately held New York based company whose primary
shareholding is with a private equity firm, Golden Gate Capital Partners.
Infor has about 70,000+ customers and supports customers in 194
countries, with a wide network of sales and service partners, offering
support and training in over 20 languages. Infor offers a complete array of
products to manage every part of a companys front office, back office, and
supply chain operations. The company was originally founded under the
name Agilisys and changed its name after the acquisition of the German
company Infor Business Solutions.

Infor grew through a spate of acquisitions 35 acquisitions spread


between 2002 and 2014, the most significant of these being Infor
Business Solutions, Lawson Software, Baan, SSA Global, Alpine Systems,
MAPICS and Orbis Global (a SaaS ERP provider).

Infor can today be classified, more as an ERP Systems consolidator rather


than a pure play ERP systems developer its growth has been much like
Oracle and quite unlike SAP.

Baan is one of its flagship products and hence market tends to label Infor
LN Manufacturing ERP as Baan. Similarly, most of the original product
brands continue to be sold and with some thread to their original branding.

In the paragraphs below, I will deal with an overview of the entire Infor
suite of products and focus a bit on Infor LN which is the original Baan
Manufacturing ERP, upgraded since acquisition.

While Infor has products to suit at least a dozen industry verticals, its
primary Industry focus are:

Aerospace and Defense


Automotive
Chemicals
Distribution
Dealership and Service
Healthcare Cloverleaf

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Hospitality
Public Sector.

Below is a list of Infor Products categorized by solution. You will notice, all
their solutions are a combination of multiple products, though well
integrated. This also gives the customer the ability to pick and choose the
products that they specifically require.

Enterprise Resource Planning Enterprise Financial


Rhythm Management LN

Infor LN Infor Lawson Enterprise Financial


Infor LX Management
Infor M3 Infor SunSystems
Infor SyteLine Infor Expense Management
Infor System21 Infor Approva Continuous
Infor VISUAL Monitoring
Infor XA Infor Core Billing and Banking
Infor Adage Infor Infinium
IBM and Infor (System x, iSeries, Infor SmartStream
etc.) Infor Masterpiece
Infor E Series
Infor M Series
Customer Relationship Human Capital Management
Management d/EPM SunSystems

Infor Epiphany PeopleAnswers Talent Science


Infor Orbis Marketing Resource Infor Enwisen HR Service Delivery
Management Infor Human Resource
Infor e-Commerce Management
Inforce Infor Certpoint Learning
Management
Infor Talent Management
Infor Workforce Management

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Supply Chain Management - Enterprise Asset Management -


VISUAL Lawson

Infor Sales and Operations Infor EAM Enterprise


Planning Infor EAM Energy Performance
Infor Supply Chain Planning Management
Infor Supply Chain Execution Infor MP2
Infor Supply Chain Execution for
Logistics Providers
Infor Lawson Supply Chain
Management
Product Lifecycle Management Dynamic Enterprise
SX.e Performance Management M3

Infor PLM Discrete Infor Corporate Performance


Infor Optiva Management
Infor PLM Fashion Infor Analytics
Infor Reporting
Infor Business Intelligence
Infor Analytics
Infor EPM
Infor Approva
Infor Financial Performance
Management
Product Configurators Syteline Technology Products

Infor Product Configurator The Infor 10x Technology


Infor Sales Portal Advantage
Infor 2D Design Automation The Infor User Experience
Infor 3D Design Automation Infor ION Standards-based
Infor Document Automation Middleware
Infor Ming.leTM Social Business
Infor Analytics Business
Intelligence
Infor CloudSuite Deployment
Platform
Infor Mongoose Application
Development

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Infors Cloud based offering is Infor CloudSuite.

Infor LN is the flagship ERP of Infor Business Solutions is a


comprehensive Manufacturing ERP System, available for managing the
demands of complex, global operations. It has proven itself in a wide
variety of engineering-based industries, that includes automotive,
equipment, high tech and electronics, and aerospace and defense and
supports all engineering processes, from engineer-to-order to repetitive.
Infor LN can run on any major database, hardware platform, or operating
system, Infor LN gives you maximum flexibility in how you choose to
deploy and implement.

Infor LN can support with multi-site, multi-company transaction


management, planning, and shared services support and provides
localizations for 48 countries with language support, for 21
languages.

The of the key features of Infor LN Manufacturing ERP are:

Sequenced assembly for suppliers


Production sequence scheduling
Line side labelling
Kanban calculations
Retro-billing and partial self-billed invoices to be matched
Direct deliveries
Packing information for ship notice
Master pack scan to receive
Rounding call-off quantities
Combining planned warehouse orders and shipment line items
Handling units reference number on single container level
US DD250 reporting
BOM costing breaks
Borrow/loan/payback
Supplier staged payments
Purchase schedule cost pegging
Purchase order price types
Program and project reporting
Multi-country e-Invoicing
LN Multi-books (GFC)
Multi-currency expansion in single logistic company

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Multi-site modelling workbench


Revenue vs. funding analysis
6 new Content Packs with alerts, workflows, in-context BI
Industry-specific labelling.

Infor LN Integrates with most well-known Enterprise Solutions:


SAP
Oracle EBS
Industry E-Commerce Solutions
Payment Gateways
DWH, Analytics and BI Products.

Infor LN has regional adaptations for most countries in:


America
Europe
Middle East and Africa
APAC.

Like all well-established ERPs, Infor LN helps you drive efficiency and
innovation, while improving visibility and control across your global
operations; as such the following (though ERP standard) features are
available:

Manufacturing Control to increase operational efficiency and respond to


market changes.

Enterprise and Supply Chain Planning to create lean, demand-driven


supply networks.

Global Financial Management to predict financial results with confidence.

Customer Relationship Management to maximize market opportunity.

Sales and Configuration Order Management to meet individual customer


demands.

Sourcing and Procurement to control Inventory and optimize resource


utilization.

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Project Management to provide powerful project and activity


management.

Quality Management to provide control, consistency, and predictability.

Service Management to facilitate a service-centric business.

Engineering Data Management to manage information from design


through manufacture.

Dynamic Enterprise Modelling to improve business productivity, customer


service, and manufacturing productivity.

Below is a chart giving the evolution of Infor LN Manufacturing ERP from


the days of Baan and subsequent to its acquisition.

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2.11 TIER-3 ERPs

Tier-3 ERPs are essentially, the smaller systems that are utilized by
medium and small businesses and start-ups. Typical features of such ERPs
are:

The products are designed for small companies, that range in annual
revenues from $10 million to $50 million. These SMBs have less complex
process needs and have limited locations.

Tier-3 ERP products have limited complexity and are often designed for a
specific vertical industry and have limited breadth in applications, though
with the necessary depth required of the niche vertical industry segment.

The Total Cost of Ownership is generally low and implementation cycles


smaller; of the order of a few months.

The risk is that a company may outgrow the product in a few years, and
the ERP Tier-3 vendor is a smaller company with limited size and
resources to keep up with technology.

At the lowest cost level, there is Quickbooks and Sage 50 (formerly


Peachtree). These products do not offer the functionality of Tier-1 and
Tier-2 solutions, and may not even qualify as an ERP system. However,

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small businesses get the basic accounting abilities with these small
business systems.

Small businesses with weak accounting systems benefit hugely from using
a Tier-3 solution, in that they can quickly implement an IT solution that
brings structure to their business processes and at a low TCO. There is the
small risk that, a fast growing company may outgrow this solution, but
most Tier-2 ERPs provide data migration capabilities and interfaces to the
big ERPs.

For completeness, I will restate the list of Tier-3 ERPs


Microsoft GP
AccPac
Sage formerly PeechTree
Syspro
Aptean formerly Consona
Acumatica
Exact Americas
Global Shop Solutions
HarrisData
OmegaCube Technologies
Smarter Manager
Solarsoft Business Systems
Visibility
xTuple.

2.12 ERPs FOR SMB SEGMENT

In this section, we will discuss not so much the ERP products available for
the SMB segment, but of the needs, pressures and pitfalls the SMBs face in
selecting and implementing ERP solutions.

The consideration for such a discussion is, SMBs by their very nature have
limited spend and ability to absorb financial losses. At the same time, the
need is high and deferment of ERP decision or delays in implementation
can be disastrous to the fortunes of the company.

The Graphs below from a Aberdeen Study on SMBs and the business
pressures they face due to not having an ERP implemented are:

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Managing growth expectations


Ease of doing business
Cost reduction
Innovation in products and services to add value to customers
Ability to react to market changes.

!
Source: Aberdeen Group, December 2011.
Fig. 2.1: Pressures Facing SMBs without ERP

Aberdeen study reveals that over 75% of the SMBs have implemented
some form of ERP solutions.

What are ERP benefits to the SMB? Aberdeens assessment came out with
the following key benefits:

The right information and data for decision making


Real-time visibility of status from quote to cash
Quick alerts and notifications to decision makers, when certain conditions
occur. Remember, the SMB has a very flat organization
Integrated view of customer information for sales and marketing
Ability to do demand planning and forecasting.

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While some of the above benefits may seem intangible to the operating
layers of a SMB organization, the absolutely Direct Benefits perceived at all
levels are:

Improvement in inventory turns


Reduction in operating costs
Reduction in administrative costs
Improvement in complete and on-time delivery
Reduction in inventory.

It is from the above perspectives, that ERPs for this segment, have been
designed vastly different, from those for the large enterprises. These ERP
products, are typically easy to install and need very little BPR or change to
the enterprises current ways of working. The licensing, as with Microsoft
Dynamic NAV or GP is typically 3-users and made available through a wide
network of dealers it is very similar to buying and installing MS Office.

In summing up, what are typical selection criteria for SMB ERPs?

Functionality the ERP should provide a max-fit with respect to the


companys existing business processes. There is little scope cost and
time for a BPR that a large organization would indulge in.
Total cost of ownership.
Ease of use must be usable with very little or no training.
Must be an integrated suite rather than a multiple-point solution unlike
an Oracle Apps, that provides the flexibility to choose and buy its various
modules.

A brief discussion on SAPs ERP product configurations, for the SMBs will
conclude this section appropriately. While SAPs original products were
typically used by Fortune-500 companies, SAP now actively targets small-
and medium-sized enterprises (SME) with its SAP Business One and SAP
Business All-in-One products.

These products aim to automate key business functions in financials,


operations, and human resources in the SMB enterprise and all essential
functions are provided out-of-the-box.

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Financial Management: Automates financial accounting processes


including budgeting, and bank reconciliation. It supports multiple
currencies.

Warehouse and Production Management: Manages inventory across


multiple warehouses, track stock and management of production orders,
based on material requirements planning.

CRM: Offers the Sales Department features of opportunity management


as well as standard after-sales support.

Purchasing: Automates the procurement process starting from Purchase


Orders to invoicing.

Mobility: For iOS and Android, SAP has free-downloadable app per user
licence that interfaces with SAP Business One.

Reporting and Business Intelligence: Provides Report creation and


customization, features in with integration with Crystal Reports, one of
the most versatile and popular and easy-to-use reporting tools.

Analytics Powered by SAP HANA: Uses In-memory Computing


Technology of SAP HANA database for real-time access and processing.

SAP Business One provides integration at multiple points and for multiple
purposes using built-in APIs available in the SDK component. Another
integration option is the use of SAP Business One integration framework,
that employs XML based simple definition of integration scenarios. SAP
Business One provides the following software components:

Business One Integration Framework


Inter-company Integration Solution for SAP Business One.
Business One Subsidiary Integration Solution.
Business One SDK.

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2.13 TECHNOLOGY EVOLUTIONS IN ERP

Information Technology is a continuously changing industry. Therefore,


investment decisions are evaluated for adaptability, change, risks and ROI
before commitment. The cost of maintenance and training is an added
dimension. The typical costs of ERP implementation range, from a few
hundred thousand dollars for SMBs, to a few million for large companies.

ERP vendors, other than SAP, have grown entirely through inorganic
acquisition and consolidation PeopleSoft Inc., Oracle Corporation and
Infor Software Solutions are classic cases. AMR Research of Boston says,
consolidation among the major players will continue and intensify. ERP
vendors are expected to put more effort into e-commerce, CRM and SCM
initiatives, with leaders redirecting between 50% and 75% of their R&D
budget to these projects.

According to the Gartner Research Group, the rapid evolution of ERP has
already led to a new corporate must-have, ERP II, which is supposed to
help businesses gain more competitive edge in the future. The major
difference is that ERP II involves collaborative commerce, which enables
business partners from multiple companies, to exchange information
posted on E-Commerce exchanges.

ERP customizations are now extensive and bring in even company-specific


feature that are later included in the main product thread.

Global operating models are showing signs of strain at many companies.


McKinsey Research suggests that globalization can take its toll on
organizational health: high-performing global companies often struggle to
set their direction or to coordinate and control operations effectively. One
part of the problem is, the fine line that organizations must toe between
driving common processes across regions, to promote efficiency and
allowing tailored offerings that match the needs of local business units and
functions. That push-pull can lead to unwieldy operating models as leaders
strive to manage diverse business interests and competing priorities.

It should help companies strike that balance, but the same tug of war
between standardization and customization often plagues IT leaders.
Organizations have lost hundreds of millions of dollars, for example, trying

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to build the right enterprise-resource-planning (ERP) model, to support


global operations.

While ERP has been used successfully to run management tasks, such as
finance and accounting, on a functional or regional basis, cross-functional
integration on a global scale, has proved far more elusive. Data from
Financial Executive International, an association of corporate finance
executives, show that more than 50% of ERP implementations do not
provide the expected benefits and that more than 80%, end up over
budget struggling to support the expanding demands of corporate global
operating models. However, this is a Finance/Cost Accountants view and
accountants are paid to highlight the negative financial impacts, as a
caution to the business that makes the decisions.

Contributing to the problem is the scale and inherent complexity of change.


ERP functions like an organizations circulatory system, connecting and
running core operations, such as finance, procurement, and supply chains.
Refining such deeply embedded technology, is a massive undertaking,
made all the more slippery, by the near-constant shifting of global business
conditions.

2.14 ERP IMPLEMENTATION

In this section, I will deal with two critical aspects of ERP:

Implementation of ERP a generic roadmap/planning framework.


The Critical Success Factors and potential failure points in
implementation of an ERP.

After covering a generic implementation plan, we will discuss


Implementation Plans of the two major ERP vendors SAP and Oracle
specific to their respective ERP products. ERP implementation planning is
so critical, that all major vendors have their own frameworks, which are
mandatory to use.

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2.14.1 Implementation of ERP A Generic Framework

I have covered under the section on SAP ERP and Oracle Applications,
specifics of a SAP and Oracle Application implementation. Other major and
smaller ERP ISVs have their own implementation/roll-out plans. However, it
is essential for an enterprises IT department and key business managers,
to have an independent understanding of what an ERP Implementation
plan should include. Below are the key phases of a generic ERP
Implementation plan.

1. Planning All aspects starting with the Sponsor, Program Charter,


Goals, Senior Management involvement with all plans signed-off by the
senior management team.

2. Business Process Reengineering that includes Identification of


the gaps between the companys business processes and workflows with
respect to the ERP and strategies to handle these.

3. Implement includes changes to the companys business process and


workflows as required and customization of the ERP product and testing
these.

4. Test includes various levels of testing of the product and data


migration.

5. Transition cut-over to the new ERP product, data migration and sign-
off.

The diagram below gives you a graphical view of the same:

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ERP Program Planning: Covers a set of key program plans. These plans
are essential to firstly, ensure proper control and delivery of the ERP
implementation, on-time and within budget and secondly, to define the
program activities, deliverables, timelines, budget, roles, responsibilities.

Program Charter defining, the Program Sponsor (should always be the


CEO), key objectives and KPIs, stakeholders, defining the intangible
objectives and review calendar
Scope Management
Schedule Management
Budget Management
Quality Management
Risk Management
HR Management
Procurement Management
Communications Management
Program Integration Management.

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The ERP Program Planning Phase also covers:


Set-up of the program
Staffing of the projects full-time staff and part-time staff with the
commitment.

Standard ERP Program team roles should include:


Program Director
Project Managers
Business Process and Solution SMEs
Technical SMEs and Architects
Change Management Team.

In closing, after all the language you have read, a diagram above would
best give you a clear perspective, of a generic ERP Implementation plan.

The subsections below, give you a view of Implementation Plans for the
ERP majors SAP, Oracle and Microsoft. These have developed their own
implementation frameworks and it would be useful for you to get a gist of
it.

2.14.2 SAP R/3 Implementation

In this subsection, we will briefly discuss the implementation aspects of


SAP R/3 system. Technical implementation of SAP R/3 depends on many
factors, probably the most important of which is the BPR gap assessment
determine to what extent the standard R/3 application software matches
the business process requirements. Other critical factors are, users and
management commitment, both for change and the overall success of the
system implementation.

The most commonly employed implementation model is the ASAP Model


(Accelerated SAP) Model.

Tool based implementation all tools and documentation are made


available by SAP.
5-Phased approach with a more detailed view of activities and tasks.
External Project Management is recommended in this approach.
Accelerators: documents, templates, tools, presentations, models,
databases.
Use of R/3 business engineer (includes reference model).

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This approach envisages very little reengineering.


These are quick projects completed in 9-10 months if well managed.

The ASAP Model of implementation is based on the following critical


success factors:

Clearly defining the mission and the scope of the project clearly Project
Scope is the key in scheduling and ensuring, that cost overruns are
minimal.
Realizing a detailed plan at the start of the project as close as possible.
Standardizing and establishing a single project or implementation
methodology, as defined by ASAP itself.
Creating a homogeneous project environment.

Some of the tools provided in ASAP Methodology are:


Implementation assistant
Question and answer database
Business engineer
SAP project team training
SAP support and services
Knowledge corner.

The Implementation Project typically consists of the following 5 phases:

Phase 1, the project preparation phase, includes a work package


consisting of the Technical Requirements Planning, mainly used to
perform an initial sizing and procure the initial hardware.

Phase 2, the business blueprint phase, includes the work package


Develop System Environment, which comprises the activities for
installing and configuring the development system, including the
definition of first system administration procedures.

Phase 3, the realization phase, is the longest phase and includes many
technical activities. Most importantly for technology- and infrastructure-
related tasks, it contains the work package System Management, which
is made up of a set of activities such as:

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Develop System Test Plans
Define Service Level Commitment
Establish System Administration Functions
Set up Quality Assurance Environment
Define Production System Design
Define Production System Management
Set up Production Environment

Phase 4, the final preparation phase, contains work packages for system
management, that target specific activities for the productive
environment, especially for conducting system tests. It is also important,
to perform a quality check on technical issues, in this phase

Phase 5, the go live and support phase, is an important overall phase for
the full project team, providing extensive support and guarantees that
the systems work as expected. This includes all infrastructure
components and support of the basis system.

SAP implementations have always been strongly supported and managed


by SAP Corporation and hence, customers have found it less painful.

2.14.3 Oracle E-Business Suite Implementation

Despite the high potential business benefits of the software, the flexibility
and broad scope of the Oracles ERP, makes an Oracle implementation
challenging and complex. Moreover, unlike SAP, Oracle does not provide its
custom implementation project plan, with attendant documentation and
tools.

However, Oracle Apps has a slew of well experienced Consulting and


Implementation companies, that have proven implementation roadmaps;
one typical roadmap is briefly dealt with below:

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!
The key elements of an Oracle Implementation are:

Oracle implementation Project Planning


System Design and Business Blueprint
Oracle Implementation Project Management and Program Management
Business Process Redesign and Definition
Gap Analysis w.r.t Client Business Requirements
Organizational Change Management
Employee Communications
End-user Training
Form and Report Definition
Data Migration Strategy and Mapping
Technical Infrastructure Upgrades
Business Processes and Systems Integration.

2.14.4 Critical Success Factors and Potential Failure Points

Different organizations face different types of challenges while


implementing an ERP System. These challenges are mainly due to size of
the system and its overall effect on the companys business operations.

Why do ERP Projects fail? In the world of Project Management, it is the


Software Projects that have the highest rate of failures or lack of success.
Even amongst the ERP successes, you will find a large number of deferred
items. So the term failure means, not achieving the project objectives in
full.

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To discuss this in a positive manner, I will label these as Critical Success


Factors for ERP Implementation below are a few though not entirely:

1. BPR, Requirements and GAP Analysis: While most ERP


implementations do cover these aspects, this continues to remain one of
the key failure points. Most ERP implementations are managed by the IT
department, who always thinks engineering. The IT department
typically focusses on the requirements of design, infrastructure, etc.
But, what matters is how your business wants and that is in the BPR.
The BPR brings out a Gap Analysis which can be addressed in two ways
changes to the companys business process to suit the ERP and
customization to the ERP itself. The first categories are those which are
desirable, because the changes bring the company business processes
in-line with industry standards the ERPs typically implements best-of-
breed industry practices. The second types of GAP are those business
processes, that cannot be changed as a being endemic to the companys
operations and product. Identification and sign-off of the approach and
empowered teams driving internal changes are essential to success of
implementation.

2. Defining ROI and Performance Measurements: The seniormost


management must lay down the ROI and approve key Performance
Measurements that the technical staff decides upon. Most failures are
due to unrealistic expectations which arise, because the expectations
have not been quantified and agreed upon, prior to start of
implementation. The objectives must be clearly documented in a Project
Charter, that includes the tangible and intangibles and the time frames
conveyed across the organization prior to start of the implementation.

3. Commitment of Senior Management: Any major change in a


company without support from its top management will fail. The ERP is
not just an IT initiative/project and hence it is not sufficient to have the
support of just the CIO or IT director. CxO involvement is required in
decision making at the right time, project oversight, risk assessment
and mitigation. Successful projects have a dedicated Senior Manager of
the CxO rank, who has the veto powers, direct report to the CEO and
regular, periodic reviews.

4. Strong Project Management: ERP Implementations are the biggest


decisions a company takes and the key to success of all software

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projects is, excellent Project Management. Get the best project


manager(s) even if it costs more than what you expected good project
managers are at premium.

5. Resource Commitment: The other key element is staffing the


project. Most ERP vendors, have their own implementation plans with
resource requirements do not contest the resource requirement. It
would be prudent to have a 15% provision for leave/vacation. And any
resource is not good enough the BPRs requires the best business
managers in your company. The normal Run-the-Business (RTB) will
always happen, but an ERP implementation, is a one-time affair and
cost of failure is huge.

6. Upfront Planning: Even before the ERP deal is signed off with the
potential vendor, its essential to have the vendor and the companys
team sit down and finalize and sign-off an initial Implementation Plan
complete with resource commitments, ROI and Performance
Measurement goals. While it is ERP vendors objective to close the deal
as soon as possible, the companys objective should be to make sure its
done right. Too often, companies jump right in to a project, without
validating the software vendors understanding of business
requirements, or its project plan. The more time you spend, ensuring
that these things are done right at the beginning of the project, the less
time youll spend fixing problems later on.

7. Organizational Change Management: ERP systems involve a major


change for people, the system and hence for the entire organizations.
Any major organizational change is always implemented through an
Organizational Change Management initiative and the same applies for
ERP implementation because in the life cycle of most organizations,
the ERP Implementation is a unique experience. This automatically
assumes multiple sessions of organization-wide communication.

8. Training: Not understanding what the new system is designed to


provide inhibits the roll-out and stabilization. It is advisable, to go with
the consultants training plan and add additional hours of training based
on employee feedback. If not properly trained, post-implementation
discard of the system has catastrophic impact on the business.

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9. Understanding of Why ERP?: Make sure you understand why


youre implementing ERP. This is arguably the most important one. Its
easy to see that many big companies are running SAP or Oracle and
maybe you should too, but its harder to consider that maybe you dont
need an ERP system at all. Perhaps process improvement,
organizational redesign, or targeted best-of-breed technology, will meet
your business objectives at a lower cost. By clearly understanding your
business objectives and what youre trying to accomplish with an ERP
system, you will be able to make a more appropriate decision on which
route to take, and that may or may not involve ERP.

10.Consideration of long-term business goals: This is one of the ERP


selection failures, but impacts the company post-implementation. The
ERP product selected failures to meet the company business needs as it
grows the time frame can range from 1 to 2 years. This is the result of
the senior management right up to the CEO not being involved in the
selection process.

It is absolutely essential to establish a clear set of ground rules, before


embarking on a ERP path. The IT Organization and the CIO play a major
role in this. The CIO of a global technology company, for instance, made a
point of establishing a clear agreement of objectives with the business
before beginning a global ERP reorganization. The main point was, letting
the business partners know that the IT team would not be able to satisfy
everybodys wish list. In a series of coordinated meetings and
communications, the CIO laid out the operating mandate, approved by the
companys senior leadership. The CIO emphasize, that the new ERP
systems primary purpose was to boost capabilities in highlighted areas,
such as order fulfilment and inventory turnover, to help the company
achieve its critical strategic goals. Only when these capabilities were in
place and the initial objectives had been met, would the ERP team consider
adding additional features.

The leadership of the CIO and the IT team cannot be over emphasized.

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2.14.5 Implementation Challenges for the SMBs

Prior planning for ERP Application development is very important to


overcome the challenges faced by this centralized application. ERP
implementation invites diverse issues and challenges, among which value
creation and economic returns, are some of the critical ones. In spite of
multiple potent benefits offered by the implementation of ERP System,
these issues and challenges assume particular importance within SME
organizations.

For the SMB, ERP benefits and challenges are more or less complimentary:

ERP Benefits ERP Challenges


Informed decision making and ERP Low expertise
selection
Improved on-time deliveries and Budgetary constraints
reduced costs
Improved controls through better Lack of project resources for BPR
processes decision
Improve customer satisfaction Incomplete Implementation goals
not fully met

Below is a discussion on some of the challenges that SMBs must factor for
and mitigate prior to ERP:

1. Full-Scope vis--vis Partial Scope ERP: To implement ERP full-


fledged or customized, an already existing one, is one of the biggest
challenges faced by many SMB organizations. The requirements of each
company are different. So, it is not advisable to go for full-fledged
implementation, unless it is absolutely necessary or in the best interest
of the organization and ERP is a flexible application.

2. ERP Integration: Another major challenge, though technical, that a


SMB faces with ERP Implementation is the integration of ERP with its
existing legacy systems or third-party softwares, that the company does
not or cannot afford throwaway. This requires an assessment of all
legacy or third-party softwares, by a senior management team on the

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basis of which a decision to retain or throw-out decision made. Data


migration plans are made for applications that will be discarded. For
such applications that will be retained, third-party interfaces for the
data interchange between ERP systems and these systems will have to
be developed. Another dimension is integration of ERP with other E-
Business software such as CRM, SCM and BI if the company does not
procure these other systems from the ERP vendor.

3. Fear of Past Implementations Experiences: Many small companies


run away from ERP only due to the failure stories that are many. Hence,
the decision of go for ERP should be taken together with choice of the
ERP, timelines, realistic assessment ROI to be expected and whether
organization can absorb it and serious senior management will.

4. Time-consuming and Expensive Implement: Time and effort cost is


inevitable with any ERP implementation it is proportionate with the
size of the product you are implementing. SMBs need to not only factor
these and not expect any concessions rather overruns, even in the best
managed projects. SMB have to make major changes to their ways of
working in order to be able to sustain an ERP implementation. Generally,
the implementation and support costs are not properly planned rather,
wished away.

5. Resistance to Change: All organizations, small and large, face


massive employee resistance to change which is naturally human.
Large organizations handle it through empowered task forces that
ensure that the people, who do not come on board are moved aside.
The challenge for small organizations is greater the staffing is low and
almost every employee performs an essential function and cannot be
bulldozed aside. Therefore, senior management intervention, by way of
communication of the benefits is essential the key question of What
is in it for me? needs to be addressed.

While SMBs do face considerable challenges in ERP implementation,


particularly due to their financial limitations, an ERP in-place does prepare
the SMB to better handle the vagaries of the economy and the competition
and provide them a springboard to success.

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In summing up, while ERP implementations often involve a wide array of


software, hardware, and databases, most failures tend to occur because of
management shortcomings, rather than technological ones.

2.15 SELF-SERVICE TECHNOLOGIES

The proliferation of technology has dramatically changed the way firms


interact with their customers and the offerings that are possible today. No
write-up on ERP and Enterprise Solutions in todays world is complete,
without a discussion on technologies that enable Customer Self-service.
While customer self-service and technologies that enable these functions
are at least a decade old, they are continuing to enhance and provide
capabilities that are yet unutilized by business and customers alike. The
potential is huge and untapped.

We book a movie ticket on our mobiles, make huge financial transactions


with Net banking, trading on the stock market has become impossible
without an online trading account and many more, we download and read
books on our electronic notepads and therefore a long-haul flight becomes
less monotonous and many more and even marriages are made on the
internet today.

Therefore, with a study of Enterprise Resource Planning, its also essential


to have a basic understanding of Self-service Technologies.

SSTs are technological interfaces allowing customers to produce services


independent of involvement of direct service employee. They are slowly
replacing many areas of face-to-face interactions altogether, resulting in
cost cutting at the same time predictable service quality.

Employees have traditionally played a major role in the customers service


experience. Yet self-service technology (SST), replaces the customer
service employee experience, with a customer technology experience.
Firms pursue SSTs for many reasons. Some of these are; customer
demand, cost reduction, to improve service levels, to improve customer
satisfaction, the firms need for new delivery channels (for both new and old
customers) and to gain competitive advantage.

Resources that are integrated when consumers use SSTs, their co-
production role and what might constitute value are:

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Customers to produce service entirely on their own.


Employees to work remotely, providing products and services from
anywhere in the world.
Companies to integrate technology into a total mix of remote and
personal services.

A few of the implementations of Self-service Technologies in business to


customer interfaces are:

ATM
Pay at the pump
Internet banking
Automated airline check-in
Automated hotel check-in/out
Automated car rental
MVD auto registration online
Online auctions
Home and car buying online
Automated car rental
Automated filing of legal claims
Automated drivers license testing
Automated betting machines
Automated investment transactions
Insurance online
Package tracking
Electronic blood pressure machines
Various vending services (food, drink, cameras etc.)
Internet shopping (Amazon.com, Gap, E-Stamps, etc.)
Internet information search
Tax preparation software
Self-scanning at retail stores
Various IVR phone systems (phone banking, prescription ordering, etc.)
Distance learning/training.

There are the following basic types of Self-service Technologies:

Telephone and interactive voice response (IVR) systems: Many


companies utilize this form of SST for customer orders, customer billing
inquiries, and customer surveys. Credit card companies, insurance
companies, pizza restaurants, and even universities have taken

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advantage of these. The flip side is that, customers can rarely get to a
representative to discuss a problem, that one finds difficult to sort out on
the IVR.

Interactive Freestanding Kiosks: You will find kiosks at most airports


and hotels that print airline tickets and allow for quick check-out and to
browse the Internet. In Mumbais suburban stations, Kiosks are available
to print tickets from Smart Cards. Many malls and retail outlets offer
these both, inside and outside their stores, as a way to search or browse
for products and their availability. In the US, discount chains use kiosks
in each store, to help you determine such details, as what size battery or
windshield wiper to put on your car.

Internet, Mobile or Other Online Connection Systems: ATMs and


pay-at-the-pump gas stations are two widely used examples of online
technologies. Internet banking and bill management services have
caught on widely both for checking your balances as well as for online
transactions. Couriers provide mobile based package delivery status that
allows you to track packages 24 hours a day on the go.

However, in the rush to implement self-service channels and reduce staff


and cut costs, firms often disregard technology failures and the associated
risk of losing customers because of technology related difficulties. Factors
that contribute to or detract from customer satisfaction are:

Quality of the products itself and cost bad products dont improve with
self-service however good they may be. In fact, if the products are not so
good, a personalized service would go much better with the customers.

The types of services that are put out for self-service can itself cause a
serious failure through lack of acceptance by the customer.

Presentation of the services provided through self-service channels


most badly designed IVRs put off customers more than anything else.
The IVRs of most Indian firms are laborious and need huge
improvement.

Design of the self-service channels with alternate choices for the same
service particularly when they take over from a long available human
voice or face. Ideally, it is essential to have multiple channels with some

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duplication of service IVR, Mobile, Internet and a CSR monitoring the


customer transaction in the background to come-in in real-time to
address the concerns of potential dissatisfied customers.

Managing and preventing failures and the SSTs ability for service
recovery (even if caused by the customer) are generally limited. CSRs
have to be continuously behind the Self-service channels and come in
expeditiously to engage with dissatisfied customers and make a recovery.
Therefore, self-service channels cannot stand alone by themselves.

The way a company promotes the self-channel service mode.

Alternate choices for the same service (offered by the firm or


competitors).

Continuous improvement in the service provided, the process, the


number of hierarchies that the customer faces (particularly on IVRs) and
the firms ability to keep the technology updated, are the key to
improving the quality of self-service for the customer and keep the
customer happy.

Customers are always in need of better purchasing opportunities. But very


often, firms fail to visualize the customers vision. What the customers
expects and what she/he perceives she/he gets, has a great impact on
their satisfaction or dissatisfaction and their propensity to return to your
service, or to seek alternatives from competitors.

The challenges in implementing and making a success out of Self-service


Technologies in business are:

How to control service quality.


How to motivate customers remotely to use these channels.
Trade-offs between technology and human touch.
Trade-offs between cost savings of technology delivered service and
personal relationships between seller and customer.

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2.16 SUMMARY

In summarization, let us first revisit the definition of ERP that we discussed


in the first section.

While the term ERP has widened and is now an industry term for the broad
set of activities, supported by multi-module application software, that helps
a manufacturer or any other business, manage the core parts of its
business, including product planning, parts purchasing, maintaining
inventories, interacting with suppliers, providing customer service, and
tracking orders.

Though the ERP having its origins in MRP-II, was originally (and is
currently) a term denoting a packaged software for the manufacturing
industry, ERP vendors and many niche ISVs have ERPs for industries
other than manufacturing. So, today we have ERPs for Hospitality
Industry, Health Care, Utilities, Telecom, Construction, Projects
Organizations, Retail and Services Organization and many more and as
ludicrous as it may sound for Furniture Industry!

SAP the ERP major has developed Core Banking and Core Insurance
products these meet the core businesses of a bank and the insurance
companies. So, ERPs today, are all the more focussed on meeting the core
business functions. While other functions are services by software products
such as CRM, SCM, etc. all from the same stable. The ERP vendors have
also developed SOA Services and Middlewares and Workflow products so as
to provide customers the flexibility to pick and choose a range of products
(not necessary from the same vendor) and integrate all using a middleware
of choice. Data Warehousing, BI and Analytics are always sourced from
niche vendors, though all ERP boast of a BI module.

The Industry has matured enormously and provides tremendous flexibility;


enterprises have a choice of products for each of the business functions
not inhibited by the ERP vendor.

Below is Gartners Magic Quadrant for Product-centric Mid-market ERPs.


This is most current dated Sep 2013. Gartner Magic Quadrant gives you
an indication of where different ERP vendors stand; this is one of the
factors that helps make the right decision.

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What are the trends that you may expect in the ERP space?

There will be a steady growth of ERP implementations in the SMB


segment. This will be driven by a growth of the SMB sector.

There will be greater rationalization of costs because the industry has


understood ERPs and matured in its choice and demands. This trend is
very similar to the growth of Indian IT companies in the 1990s Indian

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IT companies grew at over 100% p.a., and anything less was considered
as Hindu rate of growth. Today, Indian companies have stabilized to the
international norms, customers have become more demanding, annual
rate increases have become difficult to negotiate and competition is
fierce. Similar reasons have made ERP pricing more reasonable and ISVs
are willing to cut margins to get a deal.

There will be fewer replacements and CIOs are focusing on leveraging


their existing assets better for measurable benefits. However, upgrades
will continue to generate revenues for the ERP ISVs.

There will be greater adaption of SaaS particularly amongst the SMBs.


The SMBs have become more realistic and are willing to make trade-offs
on flexibility for better ROI. It also enables them to standardize their
business processes and improve compliance.

There will be adoption by ERP ISVs of newer industry verticals such as


renewable energy sector and legal services.

All said, ERPs have come to stay and business cannot anymore do with a
multitude of badly written in-house application systems and third-party
softwares with disparate architectures and communication protocols.
Therefore, ERP vendors continue to have a healthy business growth.
However, the buy-side focus should be on not just right selection, rather
on setting the right goals for the ERP this ensures success and prevents
retributions and post-mortems.

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2.17 SELF ASSESSMENT QUESTIONS

Some of the following questions would require you to use your industry
experience and some additional reading. The Exercises are meant to
enable you understand ERP as manager would need to:

1. Define ERP.

2. Explain ERP within the Enterprise Solutions Architecture.

3. How did the concept of ERP evolve?

4. What are the functional modules in a Manufacturing ERP?

5. Explain the extent of change or customization required to implement


an ERP, with examples.

6. Explain the concept of Tiered classification of ERP? Name a few Tier-2


ERPs.

7. Explain at least three business benefits of an ERP implementation in a


large multi-brand retail store.

8. Explain the concept of an n-Tier Architecture.

9. What is one stand-out difference between SAP and Oracle ERPs?

10. Describe briefly mySAP.com and its modules.

11. What are the two major acquired components of Oracle Applications?

12. Compare mySAP.com with Microsoft Dynamics AX.

13. Compare Microsoft Dynamics NAV with Infor LN.

14. You are the CEO of a Small-scale Manufacturing Company based out of
Chennai and your primary customer is Hyundai Motors. To mitigate the
risk of most of your business being with one customer, bring at least 6
more steady customers that involves creating additional capacity. Write

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a brief note on how you would select an ERP that suits your
organization.

15. With respect to Question 14 above, having selected an ERP for your
organization, describe with a detailed plan how you would go about
implementing the ERP. Please provide an initial write-up of your
company and its operations, the selection criteria and a justification of
the ERP selection and finally, how would you handle your CRM, SCM
and Reports requirements. What short-term changes, you would have
to make in your organizations workings and how would you handle the
BPR exercise within constraints of staffing?

EXERCISE 1: Read one book on ERP, for example, a detailed book on any
one of the Tier-1 ERPs.

EXERCISE 2: Ramco Systems is one of Indias oldest and probably the


most well-known ERP product developer and vendor. Study Ramco Systems
and its product and write a 5-page treatise on the company and its
products. Cover the following aspects company history, its evolution and
market challenges, the products and their target vertical and markets and
customer base, a brief on any one of Ramcos best known products, and
compare Ramco the product with respect to Microsoft Dynamics and Infor
LN.

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ENTERPRISE RESOURCE PLANNING (ERP)

REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3

Video Lecture - Part 4

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SUPPLY CHAIN MANAGEMENT (SCM)

Chapter 3
SUPPLY CHAIN MANAGEMENT (SCM)
Objectives

After completing the chapter, you will understand:

Concept of Supply Chain Management.


Concepts of Order Fulfillment in SCM.
Key Benefits of SCM and its challenges.
Software Products available in the Market for SCM functions.
SCM Product Market Leaders SAP and Oracle.
Trends in Supply Chain Management.

Structure:

3.1 Introduction

3.2 Order Fulfilment

3.3 SCM Benefits and Challenges

3.4 SCM Software Frameworks

3.5 SCM Software Products

3.6 SCM SAP and Oracle

3.9 Summary

3.10 Self Assessment Questions

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3.1 INTRODUCTION

If your company makes a product, that requires all or some parts


purchased from suppliers, and your products are sold to customers, then
you have a supply chain.

The Supply Chain are those functions primarily concerned with the efficient
integration of suppliers, factories, warehouses and store so that
merchandise is produced and distributed in the right quantities, to the right
locations at the right time, so as to minimize the total system cost subject
to satisfying service requirements.

A Supply Chain is a network of supplier, manufacturing, assembly,


distribution, and logistics facilities that perform the functions of
procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these products
to customers. Supply chains arise in both manufacturing and service
organizations.

So, what is Supply Chain Management? SCM is a systems approach to


managing the entire flow of information, materials, and services from raw
materials suppliers through factories and warehouses to the end customer.
Supply chain management has emerged as the new key to productivity and
competitiveness of manufacturing and service enterprises. The importance
of this area is the business world has gone past the era when a company
manufactured and assembled everything its products required under one
roof. Todays businesses sources whatever item that adds to profitability
and quicker turnaround. The importance of SCM has been highlighted by
many industry success stories Wal-Mart being the most notable.

Like all complex systems, Supply Chain systems too comprise of several
elements closely linked and interlinked to the movement of products along
the chain.

As with all business systems, Supply Chain Management too, starts and
ends with the customer. SCM is different from Supply Management which
emphasizes only the buyer-supplier relationship, whereas SCM begins and
ends with the Customer the functions briefly dealt with below, gives you
a perspective as to how Supply Chain is quite different from Supply
Management.

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Customer: The entire chain starts at this point, with a decision to


purchase your product sales order, quantity, deadline for delivery. The
end-point of the chain is the point of on-time delivery to the customer.
The functions in the bullets below are the intermediate business
functions, meant to realize the customer order to the best customer
satisfaction.

Planning: The manufacturing plans or service fulfill plans to meet the


customers orders, that will include details of the raw materials required
and the internal deadlines by cost center.

Purchasing: The procurement cycle of all raw materials or finished or


semi-finished materials with details of suppliers, deadlines.

Inventory and Stores: Planning and stocking of raw materials, WIP and
finished goods and managing reorder levels and generating procurement
requests.

Production: Based on a production plan, the raw materials are moved


from the inventory to the production area and WIP and finished goods to
warehouses for shipment to the customer.

Warehousing: After the items have been completed and tested, they
are stored back in the warehouse prior to delivery to the customer. At the
other end of the cycle, the suppliers materials are stocked in various
warehouses for shipment and delivery.

Transportation (Logistics): When the finished product arrives in the


warehouse, the shipping department determines the most efficient
method to ship the products to ensure on-time delivery.

Some supply chains are simple, while others are rather complicated. The
complexity of the supply chain will vary with the size of the business,
global or local, the intricacies and type of manufacture or services.

Supply Chain Management has three levels of activities that different parts
of the company will focus on:

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Strategic: High level strategic decisions that the senior management


takes concerning the whole organization, such as the size and location
of manufacturing sites, products to be manufactured and sales markets.

Tactical: Decisions that focus on adopting measures that produce direct


cost-benefits implementing industry best practices, developing long-
term purchase strategy with key vendors, working cost-effective
transportation contracts with logistics companies and warehouse
contracts to reduce holding costs.

Operational: These are day-to-day decisions that affect product


movement along the supply chain. Typical ones are production
schedule changes, purchasing agreements with suppliers, customer
orders and movements to-from warehouses.

Supply Chain Management strategies have moved far from the traditional
and, some of the newer concepts are:

Push-pull Strategies
Direct-to-Customer
Strategic Alliances
Manufacturing Postponement
Mass Customization
Dynamic Pricing
E-Procurement.

To ensure that the supply chain is operating efficiently and meeting


customer satisfaction at the lowest cost, companies have adopted
technology enabled Supply Chain Management processes SCM Softwares.

All major ERP companies now offer Supply Chain solutions as an extension
of their ERP packages. SCM products and technologies have also
considerably grown with the growth of Internet Technologies and E-
Commerce.

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3.2 ORDER FULFILMENT

Order Fulfilment is the key process chain in the Sales Order to Delivery
cycle of any product, retail or services company and hence is the key
element in the SCM process.

Order Fulfilment comprises of all activities between the placement of an


Order by a Customer and to the delivery of the Order to the Customer.

The order fulfillment process can be viewed from two perspectives


Strategic and Operational.

The Order Fulfillment Process involves:

Strategic Order Fulfillment Processes.


Tactical Order Fulfillment Process.
Operational Order Fulfilment processes such as:
Order Generation
Order Processing
Order Preparation Order Shipment
Post-delivery Activities

The operational order fulfilment process deals with the activities that have
to be performed to fill the order.

Today, there are e-fulfilment processes that are different from the physical
order fulfilment process. Most E-Commerce organizations use one or more
of the following order fulfilment strategies:

Distributed Delivery Centers


Partner Fulfilment Operations
Dedicated Fulfilment Centers
Third-party Fulfilment Centers
Build-to-order.

The key factors that influence the responsiveness of the order fulfilment
process are the nature of the product, the nature of product demand,
production triggering, and meeting customer demand.

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Four components are involved in the responsive order fulfilment process:


stimuli, awareness, capabilities, and goals.

Technologically advanced order management systems can help firms


develop an accurate and efficient order fulfilment process.

The Order Fulfilment Systems also determine the decoupling point in the
process, where the Forecast Driven (also called the Push), and the
Demand Driven (also called the Pull), activities meet. The Inventory
Buffer manages this point that is the gap between Sales Forecasts and
actual demand and organizations strive to move this to the point of JIT a
concept first initiated in the Automobile Industry in the 1970s.

Whether the economy is thriving or in a recessionary mode, customers will


continue to purchase products the rate of outflow may change. In a
recession, customers cut-back or reduce the standard off-takes, and
exactly the reverse when the economy is booming. However, in both
situations, having control of inventory poses the biggest challenge of the
Fulfilment System.

Discussing Just-in-Time Systems, Wal-Marts Fulfilment Systems mainly


focused on:

Lowering the Holding Costs. In handling massive quantities of


products, the cost of space is immense if the products just occupy the
shelf-space. There are product families such Chocolates where the
sales strategy itself is capture of shelf-space catering to customers
psychology. So how do you satisfy the supplier and customer? There is
always limited shelf-space in the retail stores and warehouses fill up fast
and excess inventory makes organizing and finding items difficult. Wal-
Mart identified the concept of Fulfilment Center a fulfillment center can
move products only when they need to be moved, and only to where
they need to go costs are reduced. The key to high performance in this
arena is a highly developed software system along with managers
conscientious enough to exploit it fully. Wal-Mart went on to start SAMs
backward integration with wholesale thereby reducing costs further.

Lowering the Ordering Costs. The key to selling at the lowest price, is
lowering the ordering costs. Retailers in particular cannot have bulk
discounts as most retail customers dont want to buy in bulk. Wal-Marts

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backward integration into wholesale and its technology driven SCM made
the difference. The other factor was employee motivation.

Partner (Supplier) Relationship Management: Another key to W-


Marts success story. Its a win-win and your partners need to get their
share of the pie. Most successful multinationals treat the vendors as
partners in a true sense. General Electric Corporation when it spun off
the concept of India ODCs for IT Outsourcing consciously and insistently
changed the paradigm from vendor to partner, so much so that all GE
processes and systems were shared with the Indian IT vendors.

To bring about improvements in any systems, it is essential to define the


key performance parameters (metrics) and analyze the data to measure
the system performance on the metrics defined. Many metrics can be used
to analyze and optimize an Order Fulfilment System; some of these are
Order Fill Rate, Order Accuracy, Line Accuracy, Order Cycle Time, Inventory
Days-on-hand, Storage Usage, On-time Delivery, Cost per Order,
Productivity and System Utilization. The three metrics highlighted, seem
most effective to improve an Order Fulfilment process.

Order Accuracy: This is the ratio of the number of error-free orders


over the total orders shipped, including factoring in the number of
shorts.

Production Pick Rate: This is the ratio of the volume of picking over
the hours worked. The calculation is complicated by the fact that the
total hours paid are rarely the total hours worked, introducing the need
to assess productive time versus paid time.

Order Cycle Times: What we refer to when we look at the actual ship
date versus the customer order date.

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3.3 SCM BENEFITS and CHALLENGES

Supply Chain Management in the current real-time, seamlessly integrated,


cross-border procurement scenario is extremely complex. SCM can help
you transform a traditional linear supply chain into an adaptive network
with the huge benefits.

However, its benefits are not insignificant as discussed in Section 5.1. To


summarize the benefits of SCM:

1. Improved visibility
2. Adaptive supply chain network reduces uncertainty along the chain
3. Quick response to changes and capitalize on opportunities
4. Proper Inventory levels in the chain
5. Minimize delays
6. Eliminate rush unplanned activities
7. Provide the best customer service
8. Major contributor to success of the business
9. Better compliance.

With SCM, you can lower operational expenses with timely planning for
procurement, manufacturing and transportation. You have a better order,
product and execution tracking systems that can lead to improvements in
performance and quality and lower costs. You can also improve margins
through better coordination with your business partners. Real-time
business intelligence can lead to shorter cash-to-cash cycle times.

While there are significant benefits from SCM, its not achieved without
overcoming significant challenges. Some of the issues that global
companies face with Supply Chain management and their approaches to
resolving them are:

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Supply Chain Issues Solution Approaches

Distribution network failures Network Flow Optimization

Forecasting, Inventory Control and


Inventory optimization issues
Order Levels

Supply contracts Optimization across multiple vendors

Distribution strategies WMS and TMS

Integration of Supply Chain with


Collaborative Planning
Strategic Vendor Partnerships

Outsourcing and/or Procurement Vendor classifications and risk


Strategies mitigation plans, make-buy decisions

Implement and integrate SCM and ERP


Technology support
solutions

Customer value Service level maximization

In todays business scenarios, it is not just the Fortune-500 companies that


are multinational and have cross-border operations. A large number of SMB
leverage the cost advantage of cross-border sourcing and E-procurement
to reduce costs. Inter-government dialogues have tied exports to imports.
In such scenarios, international collaboration has become the order of the
day. The challenges of companies like Levis sourcing in Bangladesh are
only some of the examples. We now have a new dimension, that is Global
Supply Chain and its challenges to name a few are:

Can be very long to establish

Potential cross-border problems due to government regulatory


differences

Requires IT support for:


Communication
Collaboration

Possible delays due to customs clearances, tax, translation, foreign


Government regulations.

To sum up, the challenges of Supply Chain:

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SUPPLY CHAIN MANAGEMENT (SCM)

Achieving Global Optimization


Conflicting objectives
Complex network of facilities
System variations over time

Managing Uncertainty
Matching supply and demand
Demand is not the only source of uncertainty

3.4 SCM SOFTWARE FRAMEWORKS

In this section, we will very briefly deal with software frameworks and
components of a generic SCM product. In subsequent sections on the
products itself, you will get a view of the architectures and designs of some
of the most popular software products for SCM realization.

The fundamentals of a Systems Architecture for a Supply Chain


Management system are basically constituted by ERP systems, WMS and
TMS (refer Figure below).

These information systems can be either standard software packages with


configurable parameters or custom-built software programs tailor made to
a companys specific needs. The basic systems for a generic SCM provides
to the user:

ERP (Enterprise Resource Planning): Functions are purchase,


materials management and sales. Its users are manufacturers and
trading companies.

WMS (Warehouse Management Systems): Functions are receipts


put-away, bin management and order picking. Its users are logistics
service providers and wholesalers.

TMS (Transportation Management Systems): Functions are


transport booking, planning and monitoring. Its users are freight
forwarders and transporters.

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Needless to mention, the software systems provide consistent


management of elementary business data and processes compliance and
common user interfaces.

Each of the systems ERP, WMS, TMS have their own databases and
softwares that handle the transformation of the stored data during the
course of the business process. The ERP, WMS and TMS ensure uniform
processes and transaction interfaces within the organization.

However, Supply Chain Management and SCM Products have moved far
since the Dot Com and have become supplier-buyer integrated, inter-
organization, cross-boundary e-commerce products. As such,
organizational requirements to be able to even implement SCM softwares,
have to be looked into, prior to a decision making. The following
c h a ra c t e r i s t i c s t h a t e n h a n c e e f f e c t i v e n e s s o f S C M S o f t w a r e
implementation:

Top level key processes unencumbered by department and


organizational boundaries

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SUPPLY CHAIN MANAGEMENT (SCM)

Integrated planning, forecasting and scheduling

Collaboration across organizations, disciplines and reporting levels

System generated transactions

Automated data collection devices

Better visibility to information.

3.5 SCM SOFTWARE PRODUCTS

Supply chain software refers to the range of tools, that are designed to
control business processes, execute value chain transactions and manage
supplier relationships. While functionality in these systems varies
tremendously, common features include purchase order fulfilment,
shipping, inventory and warehouse management, and supplier sourcing.

Per Gartner, the market for SCM software procurement, maintenance and
services (that included Supply Chain Planning (SCP), Supply Chain
Execution (SCE), WMS and TMS) had substantial growth in the year 2013
with revenues of approximately $8.944 billion in 2013 which was nearly
7.4% growth over 2012 revenues.

Gartner predicts a 9.9% CAGR for SCM software excluding procurement for
the next 5 years, reaching $9.8 billion in 2018. Gartner sees the biggest to
be the way processes that once operated in their own silos converging into
the broader supply chain management space.

The top five market leaders are SAP with $2.138 billion, Oracle $1.455
billion, JDA Software $445 million, Manhattan Associates 167 million and
Epicor $159 million. The ERP vendors take the top eight spots with an all-
from-the-same-stable perception advantage. The top three ISVs SAP,
Oracle and JDA accounted for 45% of the total SCM software market.
JDA grew with the acquisition of RedPrairie.

The Table below gives Gartners List of Top-20 SCM Vendors with their
rank, Revenue in Year 2013 and the functional areas where they have
product coverage. Starting No. 7, the products address the mid-market

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SUPPLY CHAIN MANAGEMENT (SCM)

and the small enterprises requirements you will notice that the coverage
is confined to the essential functional areas.

Sl. Supplier Revenue in Functionality Coverage


No. Year 2013
SCP WMS MES/ TMS
($)
MRP

1 SAP $2.138 billion x x x x

2 Oracle $1.455 billion x x x x

3 JDA Software $445 million x x x

4 Manhattan Associates $167 million x x x

5 Epicor $159 million x x x

6 IBM $154 million x

7 Descartes Systems Group $121 million x

8 Infor $90 million x x x x

9 GT Nexus $80 million x x

10 Kewill Systems $71 million x

11 HighJump Software $70 million x

12 PTC $69 million x

13 Quintiq $65 million x x x

14 Unit4 $65 million x x

15 IBS $55 million x x x x

16 TOTVS $51 million x x x

17 IFS $49 million x x x x

18 Inspur Genersoft $49 million x

19 Logility $48 million x x x

20 Kinaxis $45 million x x

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In evaluating SCM products and vendors, it is essential that buyers focus


on all four areas that impact a complete global SCM, that is SCP, MES/
MRP and TMS. The choice can be between getting an integrated solution
versus buying the best of breed for each area and integrating into their
manufacturing, distribution and transportation strategies. Today, all ERP
vendors also provide SCM solutions and there is a thin line between supply
chain planning and supply chain execution providers.

2013 Top 5 SCP suppliers

No. Supplier 2013 SCP Revenue

1 SAP $1.005 billion

2 Oracle $581 million

3 JDA $318 million


Software

4 Quintiq $65 million

5 Epicor $56 million

Source: Gartner

2013 Top 5 SCE suppliers

No. Supplier 2013 SCE Revenue

1 Oracle $476 million

2 SAP $342 million

3 Manhattan Associates $157 million

4 Descartes Systems Group $121 million

5 JDA Software $111 million

Source: Gartner

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3.5.1 SCM Software Components

The discussion below focusses on the software component/functions


provided by SCM product vendors apart from SAP and Oracle, Most
vendors do not provide all the SCM requirements. The major SCM systems
include forecasting, which helps companies manage the fluctuations in
supply and demand by using complex algorithms and consumption analysis
to evaluate buyer histories. This discussion is intended to give you a
perspective of what to expect from various products/modules and the best
choice of vendors.

Supply Chain Planning (SCP): Planning systems are used to forecast


customer demands and adjust the speed and flow of production
accordingly. SCP systems run simulated demand estimates using historical
data and planned promotion schedules to determine how changes in
market awareness will affect your organizations inventory requirements in
the future. Vendors providing SCP Softwares are SAP APO, InStyle ERP,
SCP 4.0, VISION SCM, and Clever.

Demand Planning (DP): Demand planning software improves the


accuracy of potential demand forecasts by reducing biases in the data in
real-time. Multi-dimensional forecasting allows users to view information
through different filters by market, by time, by customer and run a
series of what if simulations to project future demand. Vendors providing
Demand Planning Softwares are Microsoft Dynamics, Geneva BMS,
Fishbowl Inventory and SAP.

Vendor-Managed Inventory (VMI): VMI systems give suppliers the


ability to proactively monitor and replenish the buyers inventory by
themselves. Various communication optionssuch as XML, web portals and
e-mailhelp multiple business partners increase visibility. Other features
include automated buy-side reporting and shipment notifications and
invoices from suppliers. Vendors providing SCP Softwares are SAP,
RedPrairie, Datalliance and Aravo.

Supplier Management: This is essentially a Supplier Relationship


solution, to monitor the performance of suppliers. Buy-side can input KPI
definitions for suppliers and user-defined Risk categorization and the
system provides supplier Risk reporting, Performance Analyses and audit
trails to monitor spend and supplier performance. It also tracks Regulatory

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Compliance of suppliers. Example vendors include SAP SRM, R.Portal,


Geneva BMS, Fishbowl Inventory and S2K.

Procurement: Procurement softwares carry out standard functions of


purchase orders and payments. The approval of contractual terms goes
through an automated workflow and expenses are automatically logged for
subsequent referencing. The system ensures process compliance. Example
vendors include SAP, Coupa, SphereWMS, Microsoft Dynamics and WISE.

Strategic Sourcing: The increased emphasis on cost control, that came


out of the most recent US recession has accelerated the growing trend
toward centralized sourcing processes to achieve cost rationalization and
improve sourcing beyond the low-hanging fruits. Companies are seeking to
consolidate spend for better visibility, while tracking the savings all the way
to the bottom line savings remains the top priority for chief procurement
officers. Therefore, the significance of sourcing software, is in establishing
cost-cutting goals and pre-screening potential vendors prior to the
procurement process. Spend analysis pinpoints costly supplier
relationships, by comparing current spend to other market options. Buyers
can submit e-RFx, electronic requests for quotes, proposals and other
information to potential vendors to gather data for making informed
purchases. Example vendors include SAP Sourcing & SAP Sourcing
OnDemand, ShippersEdge, Aravo, Epicor and Lawson.

Warehouse Management (WMS): WMS monitors and controls intra-


warehouse movements of materials. With advanced notifications, WMS also
controls Shipping and Receiving events and tracking of picking and put-
away. Tools used are Auto-ID Data Capture (AIDC) and Radio Frequency
Identification (RFID). SAP WMS software goes beyond the standard
warehouse management to the sphere of assisting with design of
warehouse infrastructure. Other vendors of WMS include SphereWMS,
WISE, HighJump Warehouse Advantage, Manhattan Associates and
RedPrairie.

Transportation Management: TMS is another critical element of SCM


softwares and provides management of material movement to-from
warehouses. They identify the most efficient delivery modalities air, land,
sea and manage multiple delivery variations, like heterogeneous vehicle
fleets and load splitting scenarios. Deliveries are monitored using Sat-com
and other communication devices. SAP TM 9.1 provides for Capacity and

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Demand Planning, Freight Planning and Tendering, Order and Booking


Management, Freight Execute and Monitoring and Freight Shipment
functions. Example other vendors include TMW, Retalix and
FreightMaster.

Order Fulfilment: A vital component of SCM products assist supply chain


managers and reduce/optimize production orders lead times resulting in
smooth quote to cash processes. Mature products in this domain can
provide decision support in build-to-order (BTO) or engineer-to-order (ETO)
calls. Order fulfillment software also tracks unpaid orders through revenue
recognition processes. Example vendors include SAP, SphereWMS,
ShipppersEdge and ShipSoft.

3.6 MAJOR SCM VENDORS SAP and ORACLE

3.6.1 Major SCM Vendors SAP

3.6.1.1 Overview of SAP SCM

SAP Business Suite based on SAPs Technology platform NetWeaver is a


bundle of business applications that provide integration of information and
processes, collaboration, industry-specific functionality, and scalability. SAP
Business Suite has five components of which SAP SCM 7.0 is the Supply
Chain Management suite. SAP Solutions for Supply Chain Management
includes the following functions:

Sales and Operations Planning (S&OP): Improve accuracy of sales and


operations planning, by integrating your enterprise master data, planning,
and reporting processes on an SAP platform. Synchronize supply and
demand planning and integrates supply planning network from purchasing
to distribution

Demand and Supply Planning: Balance supply and demand and run
your business based on actual-versus-forecasted demand with supply
planning software from SAP. Creates supply allocations for customers and
channels, plans and balances production runs with inventory costs,
replenish inventory with time-phased order logic, sourcing decisions in real
time, optimizes the supply path by using a multistage production
environment.

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Demand Management: Improved forecasting of demand and achieves


optimal demand to supply ratio, and targets prediction of customer to
pricing, markdowns and promotions.

Collaborative Response Management: Improves communication and


streamline collaboration with suppliers and customers to cut processing
costs. Provides enhanced visibility and reduces inventory levels while
managing variations in supply and demand. Significantly decreases
procurement, sales, and inventory costs.

Manufacturing and Supply Planning: Boosts supply chain profitability


with greater control over supply and demand, stronger supplier
relationships, and real-time visibility into factory production. Operates the
supply chain on actual versus forecasted demand, manages outsourced
manufacturing, with automatic order creation and publishing and
accelerates production planning and detailed scheduling processes

Service Parts Management: In an Extended service parts network, SPM


ensures that the right parts are in the right place at the right time. Helps
selling the most profitable service parts, manages reverse logistics, and
extract more value from returned parts. Accelerates the supply chain with
RFID support and advanced strategies for picking and receiving.

Transportation Management: Manages information about real-world


constraints, costs, and penalties while planning and consolidating inbound
and outbound shipments. Automates transportation tendering, execution,
tracking, and settlement processes and creates flexible transportation
plans that can adapt to process or condition changes. Leverages ERP
financials for freight settlement and customer billing and ensures
compliance with international and regulatory norms.

Warehouse Management: Improves warehouse efficiency, optimize


operations with end-to-end extended warehouse management tools. WMS
provides real-time visibility and control of warehouse operations. The
enterprise benefit from advanced slotting, labour management, and
automation capabilities, streamlined inbound and outbound warehouse
processes.

Supply Chain Analytics: The strategic tools available including


department-relevant metrics and benchmarking data provides

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empowerment and accountability and improved performance. You can


achieve distinct improvements in performance, by tracking and diagnosing
bottlenecks and delivery commitments and measuring key metrics, against
operational goals and leading-edge forecasts.

Track and Trace: Improves the visibility and traceability of raw materials
and products across your supply network and meet regulatory and
compliance requirements. It is possible to detect counterfeits and
diversions by closely monitoring genuine product flow and expedite
execution of recalls and reverse logistics. It provides traceability to
material components, plants, and suppliers.

3.6.1.2 Product Family

Below is SAPs Solution Map for its SCM Product Family, graphically
depicted

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!
Figure 3.1: SAP* Supply Chain Management Solution Map

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3.6.1.3 SAP SCM Roadmap

This discussion on Product Roadmap is intended to give you a perspective


on the evolution of the product and various points of inflection in its life
cycle where major strategic changes have been infused by the ISV. Supply
Chain Management solutions have grown and morphed enormously over
the past 3-4 years primarily due to customer needs for procurement cost
rationalization in a recessionary economy. This discussion will give you an
understanding of the product enough to enable you conduct meaningful
discussions, with the product vendors either for new procurement or
enhancement of your SAP implementation.

SAPs Roadmap for its Supply Chain products in 2011 were based on the
following global trends increased demand and supply volatility, global
pressure on margins, increased risk and compliance requirements and
the need of Supply Chain Management was to rectify issues with respect
to:
Unprofitable Demand-Supply Synchronization
Inefficient and inflexible execution
Increasing number of supply chain disruptions.

The SAP Roadmap below, is a bit dated, yet it will give you an good idea of
how the SCM vertical has progressed/progressing.

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SAPs 2012 Roadmap map planned and achieved were:

2012-Q1: SAP SCM 7.2 General Availability.


2012-Q2: SAP Sales and Operations Planning (S&OP) powered by SAP-
HANA.
2012-Q3: Supply Chain Execution Release TM 9.0 & EM 9.0.
2012-Q4: SAP Demand Signal Management powered by SAP-HANA.

The above included the following Rapid Deployment Solutions:

SAP Business Objects Supply Chain Performance Management


Advanced Production Scheduling
Migration from Warehouse Management to SAP Extended Warehouse
Management
Order Tracking and Exception Management with SAP Event Management
Ocean Carrier Booking.

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On 1 April 2014, SAP announced its new supply chain solutions strategy at
a SAP event in Las Vegas. Though no official SAP press release has been
done yet, Gartner analysts at the meet, have already put out an analysis
for customers. Below paragraphs is a brief of Gartners analysis.

SAPs solution strategy is a positive step toward realizing the goal of a


more integrated, technologically powerful and user-centric solution set for
Global Supply Chains.

The challenge for SAP will be in its execution and communication of


roadmap details to its customers particularly to the SAP Advanced
Planning and Optimization (APO) installed base, which will stop receiving
standard SAP support in 2020.

It is expected that, over the next couple of years, the majority of supply
chain planning capabilities will be built into the Hana native solutions,
though SAP APO will continue a few operational and optimization features
and others will be merged with the ERP.

The new strategy is centered on supporting more global, complex and


volatile supply chains, merges cloud, in-memory computing, mobile, scale,
speed, multi-enterprise networks, and new integrated planning and
execution paradigms.

If fully realized, this strategy will deliver a granular, real-time, horizontally


and vertically integrated capability that converges planning and execution.
Additionally, the strategy would enable full visibility across many disparate
supply chains.

SAP also plans to add new capabilities including integrated business


planning, supply chain visibility and respond planning.

Presently, most systems cannot offer or even visualize this kind of holistic
view. However, SAP needs to have a roadmap to address the limitations of
its existing applications.

SAP HANA, short for High-performance Analytic Appliance is an in-


memory, column-oriented, RDBMS developed and marketed by SAP AG. It
runs massively parallel, thus exploiting the maximum out of multicore
processors and subsequently enabling very fast query execution.

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SAP HANA originates from developed or acquired technologies, including


TREX Search Engine, an in-memory, column-oriented Search Engine,
P*TIME, an in-memory OLTP database acquired by SAP in 2005, and
MaxDB with its in-memory live Cache engine.

The product was officially announced in May 2010 and shipped in


November 2010, SAP AG announced the release of SAP HANA 1.0, an in-
memory appliance for Business Applications and Business Intelligence
allowing real-time response.

In January 2013, SAP Enterprise Resource Planning software from its


Business Suite was announced for HANA, and became available by May. In
May 2013, a SaaS offering called the HANA Enterprise Cloud service was
announced

The SAP HANA platform is a flexible, data source-agnostic, in-memory data


platform that allows customers to analyze large volumes of data in real
time and a development platform with infrastructure and tools.

SAP released Business Suite i2013 Innovation 2013 which include new
enhancement packages for all SAP Business Suite core applications: SAP
ERP 6.0 EHP7, SAP CRM 7.0 EHP3, SAP SCM 7.0 EHP3 and SAP SRM 7.0
EHP3. All these innovations are available with the SAP HANA database and
the traditional certified databases, thus giving more choice to customers to
continue to innovate without disruption.

The technical components that make up HANA are The core of SAP HANA
Enterprise 1.0 is the SAP In-memory Database 1.0, a massively parallel-
processing data-store that blends row-based, column-based, and object-
based storage techniques. Other components of SAP HANA Enterprise 1.0
include:

SAP In-Memory Computing Studio


SAP Host Agent 7.2
SAPCAR 7.10
Sybase Replication Server 15
SAP HANA Load Controller 1.00, and
SAP Landscape Transformation 1 - SHC for ABA.

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SAP HANA runs the SUSE Linux Enterprise Server 11 SP1 operating system
and generally delivered as an on-premise appliance and is available now.

SAP HANA has been designed to replicate and ingest structured data from
SAP and non-SAP relational databases, applications, and other systems
quickly. One of the three styles of data replication trigger-based, ETL-
based, or log-based is used depending on the source system and desired
use-case. The replicated data is then stored in RAM rather than loaded
onto disk, the traditional form of application data storage. Because the
data is stored in-memory, it can be accessed in near real-time by analytic
and transactional applications that sit on top of HANA.

3.6.1 MAJOR SCM VENDORS ORACLE

Oracle Supply Chain Management software applications transform supply


chains from a functional necessity to a competitive advantage. Oracle SCM
has the following Products Suite in its suite that help modernize your
operations across the demand, supply and product pillars to deliver
operational and innovation excellence.

1. Oracle Sustainability Solutions.


2. Oracle Supply Chain Management Cloud Solutions.
3. Oracle Fusion Supply Chain Applications.
4. Oracle JDE EnterpriseOne SCM.
5. Oracle JDE World Manufacturing Management.
6. Oracle E-Business Suite SCM.
7. Oracle PeopleSoft Enterprise SCM.

The various Modules of Oracle SCM are:

1. Oracle Product Value Chain: Establishes a comprehensive product


record, with centralized product information and automated processes.
Oracle Product Value Chain product solutions, include Agile Product Life
Cycle Management and Product Information Management.

2. Oracle Value Chain Planning: Helps to make timely, informed and


correct decisions and monitor the impact of those decisions on corporate
goals. It helps to gain the insight needed to accurately predict demand
and supply.

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3. Oracle Procurement: Enables to reduce spend, streamline procure-to-


pay processes and drive compliance. They provide complete Source-to-
Settle process, connectivity to the back-office and complementary
applications.

4. Oracle Manufacturing: Provides flexible production capabilities that


encompass all manufacturing modes. Oracles comprehensive
manufacturing product solutions streamline your entire production cycle,
from R&D to cost and quality management.

5. Oracle Asset Life Cycle Maintenance: Integrates maintenance


management with financials and coordinated with operations
scheduling. Oracle Maintenance solutions helps to improve reliability and
utilization of assets with predictive and condition-based maintenance
programs and real-time equipment analytics.

6. Oracle Value Chain Execution (VCE): Provides anywhere-to-


everywhere logistics and fulfilment capabilities. Oracles VCE solution
has innovative processes in logistics and fulfilment from streamlining
transport networks and global trade management, to optimizing
everyday warehouse operations.

In below sections, we will discuss briefly the key Product Configurations of


Oracles next generation product Oracle Fusion Supply Chain
Management.

Fusion SCM applications are next generation applications from Oracle. A


few of the capabilities of Fusion SCM applications that Oracle provides are
a single view for order, supply and fulfillment plans across the entire
enterprise, an embedded Global Order Promising solution, to normalize
supply and demand information across disparate fulfillment systems, a
unified and accurate product definition, that is harmonized within and
across the enterprise value chain, as well as comprehensive inventory and
cost management capabilities. Oracle Fusion SCM has the following
Modules:

1. Oracle Fusion Distributed Order Orchestration: This is designed to


improve order orchestration across diverse order capture and fulfillment
environments. It has centrally-managed orchestration policies, global
availability, and fulfillment monitoring, order profitability and customer

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satisfaction are increased and fulfillment costs and order errors are
drastically reduced.

2. Oracle Fusion Product Hub: This is Oracles Master Data Management


strategy. Fusion Product Hub provides a unified and accurate product
definition that is harmonized within and across the value chain, offers
flexible and robust data governance workflows and policies, as well as
supports product dashboard and embedded analytics these enable
users to make faster, more informed product decisions.

3. Oracle Fusion Inventory and Cost Management: This is a complete


materials management solution that enables companies to successfully
manage inbound logistics and outbound logistics and inventory,
optimizing the flow of material and costs. Fusion Cost Management
provides all cost accounting functions for companies to manage product
costing and inventory accounting business flows.

4. Oracle Fusion Procurement: Provides negotiation and all buying


functions and collaboration and is an integrated suite of applications
across procurement process to improve procurement functions.

5. Oracle Fusion Product Innovation Management: Systematically


links ideas to project execution. It enables the users to gather, select,
convert and invest in product ideas with the most profit potential, with a
bottom-up innovation and top-down visibility, into financial impact and
strategic fit.

When you choose Oracle Supply Chain Management Products, it would be


good to keep in mind the following strengths and weakness of Oracle
product family:

Oracle through many acquisition and in-house development has created


a viable solution set for all the key SCM functions without need for third
party plug-ins. A number of SCP and SCE areas such as S&OP,
Inventory Optimization, WMS and TMS are on the cutting-edge of
innovative supply chain planning best practices. Oracles EBS Supply
Chain Planning software and Oracle Transportation Management (OTM)
are in the top tier SCM market solutions.

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Oracle solutions have their weakness, some of them typical to any Oracle
solution - Oracle applications portfolios is extremely large size and range
and the fluidity of new product acquisitions and resultant architectural
changes and retirement of old ones and the bundling/re-bundling makes
product selection and particularly upgrades a major challenge.
Understanding the many Oracle applications configurations of ERO and
supply chain software products to determine whether Fusion, EBS,
PeopleSoft or JD Edwards deliver the optimal enterprise software for
particular business requirements can be extremely confusing and many
times leads to wrong BOMs. Lastly, Oracle Fusion Applications future
direction for Supply Chain Management is still not quite clear.

3.9 SUMMARY

From a SCM Product angle both SAP and Oracle, as well as some of the
other major SCM software vendors offer a wide choice in customer delivery
be it in-premise, public cloud, ISV-cloud, private cloud, or a hybrid
combination of any of these. They also provide lean solutions for SMBs with
SaaS offerings. All major solutions are integrable with existing ERPs, with
options of selectively implementations of any specific modules.

Below are a few Supply Chain trends that would be good to gain and
understand of:

Online Purchases: Over the last decade, online retail sales have
exploded, and with them the need for effective warehousing, inventory
and transportation control. Suppliers, more often than not, are taking a
product from manufacturing not to a FG store, but to a warehouse for
direct dispatch to the consumer. Ensuring an effective inventory control
path is absolutely critical throughout this process.

Software as a Service (SaaS): Cloud-based software that is,


software thats hosted by the vendor and accessed through a web
browser, rather than being installed on a local computer has been
adopted by most industries to a large extent. SCM technology has been a
little slower to adopt this trend, with major players like Microsoft, Geneva
Systems, WISE and Fishbowl yet to develop web-based systems. But as
the technology improves, more and more supply chain management
software providers will offer web-based applications, with its benefits of

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collaborative networks and online purchasing integration. Currently S2K


and SAP are the biggest SaaS contenders.

Eco-friendly Logistics: With environmental consciousness at an all-


time high, consumers are beginning to think about logistics when it
comes to purchasing their products. This trend is most noticeable in the
food industry, where grocery stores and restaurants are beginning to
brand and market products under a banner of being locally sourced. As
transportation from suppliers is the easiest place for a manufacturer to
cut its carbon footprint, buyers may want to look out for a programs
ability to identify suppliers based on proximity or other green factors.

Improving Business Intelligence: More and more companies want to


know how their business spends money, so sophistication of planning,
demand planning and strategic sourcing capabilities will only grow in an
effort to meet the demand.

Increased Demand for Labour Management: Companies using SCM


software to track their inventory are now turning their attention toward
labour optimization and the ability to manage each worker more
efficiently. These systems can create a list of tasks for a worker so he can
complete multiple types of work in one trip

Gartners Supply Chain Top-25 for Year 2014 Report has the
following key observations:

Key Findings

The top five include Apple, McDonalds, Amazon, Unilever and P&G.

Three key trends emerged among the leaders: deeper contextual


understanding of customers, leveraging digital business as part of
broader customer solutions and supply chain leading balanced growth.

Recommendations

Partner with sales and marketing, to observe customers and understand


their supply chain requirements in the context of the environments,
where they buy and use your products and solutions.

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Establish and expand supply chains influence in cross-organizational


governance bodies steering product life cycle management (PLM),
integrated business planning and corporate social responsibility (CSR).

Help guide your customers toward a subscription/replenishment model


for your product and supply chain solutions to lock in demand and
streamline value chains.

So, while in this section we have largely focused on the softwares as


enablers in your Supply Chain success, the readers of this book as future
managers, need to appreciate that software and tools do not create
success by themselves, but it is in the management foresight, strategy,
processes, controls and versatility. The above analysis from Gartner is only
to re-emphasize that point managerial actions are the key business
success.

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3.10 SELF ASSESSMENT QUESTIONS

1. Give the meaning of Supply Chain Management.

2. How SCM can be divided into main flows? Which are they? Explain each
one of them.

3. Which are the main types of SCM software? Explain each one of them.

4. Explain the term Supply Chain Event Management.

5. What do you mean by fulfillment of customer deliverables?

6. List down the supply chain management problems. Explain each one of
them.

7. Describe the SCM activities and the functions within. Explain each one of
them.

8. Explain the supply chain business process integration. Which are the key
critical supply business processes combining these processes? Explain
them.

9. Explain the management components of SCM.

EXERCISE 1: Read the book The Wal-Mart Way: The Inside Story of the
Success of the worlds largest company, by Don Soderquist. Write a 10-
page synopsis of what you have learnt of Wal-Marts Supply Chain
Management success.

EXERCISE 2: Research the Supply Chain Management Systems of


Flipkart.com and write a 5-page synopsis on the same.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture

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Chapter 4
SUPPLIER RELATIONSHIP MANAGEMENT
(SRM)
Objectives

After completing the chapter, you will understand:

Software Solutions like mySAP SRM.


Common Problems.
Oracle PeopleSoft Enterprise SRM.

Structure:

4.1 Introduction

4.2 SRM Business Processes

4.3 The Need

4.4 SRM Products and Vendors

4.5 SRM Products Major Vendors mySAP SRM, Oracle PeopleSoft

4.6 Evaluating and Selection Guidelines for SRM

4.7 Summary

4.8 Self Assessment Questions

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4.1 INTRODUCTION

A contract between a supplier and its customer goes through many stages
through its life cycle. In order to remain competitive, organizations have to
take special care in maintaining efficient and cost-effective partnerships
with their partners. The only way to be certain, that suppliers are holding
up their end of the bargain is to consistently evaluate their performance, a
difficult task made easier by SRM software. SRM systems help users keep
suppliers on their toes by monitoring their operations and revealing poor
performance.

Supplier relationship management is a comprehensive approach to


managing an enterprises interactions with the organizations that supply
the goods and services it uses. The goal of supplier relationship
management (SRM) is to streamline and make more effective the
processes between an enterprise and its suppliers, just as CRM is intended
to streamline and make more effective the processes between an
enterprise and its customers. And like CRM, SRM is also designed to
manage relationships, from initial contact and throughout ongoing
purchasing cycles. However, since SRM is about the supplier and managing
supplier information, the data focus will include material databases, ratings
etc.

Supplier relationships also vary based on the organizations need and the
business scenarios. There are the following four types of supplier
relationships:

Arms-length relationship at the lowest level


Product or service provider
Solution provider
Partnership.

The relationship and needs vary from complexity of the procurement and
strategic value to level of specification.

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4.2 SRM BUSINESS PROCESSES

The success of Supplier Relationship Management depends on collaboration


amongst the enterprises internal and external suppliers active
collaboration across the areas of sourcing strategies, management and
governance.

SRM includes both business practices and software and is part of the
information flow component of Supply Chain Management (SCM). SRM
practices create a common frame of reference, to enable effective
communication between an enterprise and suppliers, who may use quite
different business practices and terminology. As a result, SRM increases
the efficiency of processes, associated with acquiring goods and services,
managing inventory, and processing materials.

While there are different forms of formal and informal relationship links
between buyers and suppliers, the key or most rewarding areas that SRM
comes into play in vendor relationships are:

Price relationship informal cooperation at operating level for efficiencies


Price relationship long-term, formal relationships for efficiency
improvements
Total Cost Relationship

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Opportunity Sourcing discovery initiative for the future.

SRM process can be categorized into nine sub-categories:

Procurement Intelligence
Project Management
Sourcing
Electronic Tendering
Auctioning

Supplier Management
Contract Management
Catalogue Management
Operational Procurement
External Resources
BPO Procurement.

SRM features generally include:

Performance assessments SRM programs will allow the user to utilize key
performance indicators (KPIs) to perform
quality assessments and a thorough
awareness of deviations.
Risk assessments Scorecards enable supplier segmentation by
user-defined risk variables, helping determine
which partners present the least risk, in the
most important areas.
Centralized sourcing and SRMs use a centralized information database,
collaboration to streamline bidding, consolidate and
distribute contracts, track compliance and
improve collaboration.
Regulation compliance High quality SRMs use rules engines and
compliance scorecards, to reduce the burden
and improve the success of compliance
management protocols.

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4.3 SRM THE NEED

This section briefly discusses the Whys? of SRM Why is it required and
Is it useful?

What are the sourcing needs?

Quality level and/or consistency


Delivery consistency and predictability
Price or Total Cost of Procurement
Transaction efficiency speed, ease-of-transaction, transparency
Value adds
Innovation
Logistics, manufacturing and service needs
Scale of procurement
Assurance of supply.

The need and thrust of interaction with suppliers can and does change a
once strategic supplier may fall off the radar or moved on to others in
layered progression. Many times, the flux in markets and among suppliers
requires a shift in focus or emphases.

To Whom is SRM focus required? A relationship is typically required to be


built with strategic suppliers for example, those providing high volumes
of a product/service or lesser quantities of critical type. Its essential not to
loose focus and with the C-Class products and vendors essentially the
typically ABC classification of inventory management should guide SRM
focus.

SRM focus also comes in, in event of a looming sourcing opportunity . In


recent times, we have seen supply price inflation, arising out of an
economic boom in India. In the reverse, SRM focus is also required, when
there is a manufacturing down- turn; when vendors and capacity-base
weaken and shrinks in a manner that can affect continuity of supply.

From a strategic point of view, SRMs primary role is in the initiatives for
projected requirements and leveraging market conditions so as to reap the
best benefits and avoid risks.

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4.4 SRM PRODUCTS AND VENDORS

Just as with all Enterprise Software Solutions, there are multiple software
vendors mega, large, medium and small ISVs. There are the SAPs and
the Oracle and then the Microsoft and a host of mid-sized companies that
have very good products and products that fit the budget of SMBs and
start-up.

The market leaders in SRM are clearly the big names, as listed below;
these products will be discussed in detailed in later sections:

SAP SRM.
Ariba.
PeopleSoft.
JD Edwards.

In the items below, is a brief discussion on the mid-market section of SRM


products:

1. Fishbowl Inventory: Is a good product for any company looking for a


best-of-breed supplier management system, that easily integrates with
buyers existing QuickBooks accounting software. This system is
deployed in-premise with full support.

2. Proactis: Provides end-to-end e-procurement and Spend Control


solutions. Its solutions focus on procurement Finance with a Spend-
Control module.

3. EeeBID: is another Spend Management Suite that also has e-


Procurement solutions.

4. Snapfulfil: Provides good Warehouse Management System with


advanced Supplier Management functionalities should evaluate
Snapfulfil. The WMS solution includes billing automation and
standardization.

5. eBig exchange: Has a platform that supports multi-format bid


documents, that can help users successfully implement e-
procurement. This is a web-based Vendor Management System and
strong in the Procurement processes.

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6. 3PL Warehouse Manager from 3PL Central provides Supplier


Management functionalities within its WMS product. In addition to SRM
features, the web-based system also offers integration with leading
logistics companies such as FedEx and UPS.

7. Procurify offers a complete end-to-end Procurement Solution, with a


whole range of features for every step in the process, from Request to
the final approval. This product also has strong features that help
manage relationships with the companys important suppliers.

8. FlexRFP: Offers core e-Sourcing functionality and an optional Contract


Management and Supplier Management Modules. It is a web-based
application, that is also available both on Mac and Windows. FlexRFP
can integrate with the companys existing MRP/ERP solutions.

9. QStrat QLM Sourcing offers a product that is compatible with many


ERPs. QStrat is a comprehensive, scalable solution providing a way for
supply chain managers to reduce operational costs while enhancing
customer communication and streamlining supplier management
processes.

10. ShippersEdge is an excellent Logistics product that also provides


Supplier Relationship Management features. It provides function, that
help gain greater visibility into shipping activities with extensive
reporting capabilities.

11. Contract Life Cycle Management (CLM) from Novatus is a browser-


based CLM for managing the contract process end-to-end from initial
creation to final negotiations and approval. Offers customizable
templates and automated alerts.

12. AMT: AMT is a product, focused at the Apparel and Retail industry
segments to assist Supplier Relationship Management. Orion has
redesigned this offering and the current version works under
Microsofts .NET framework, SQL Server and Sharepoint.

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4.5 SRM PRODUCTS MAJOR VENDORS - MYSAP SRM,


ORACLE PeopleSoft

4.5.1 mySAP SRM

SAP Supplier Relationship Management (SAP SRM), provides innovative


methods to coordinate a companys business processes, with your key
suppliers for a more effective procurement. SAP SRM helps in optimizing
the companys procurement strategy, to work more effectively with its
supplier pool, and thus to gain long-term benefits from supplier
relationships. SAP SRM assists an enterprise evaluate, enable, and engage
their suppliers more effectively. The results are lower costs, increased
profits, and a better-run business.

SAP SRM features include examine and forecast purchasing behaviour,


shorten procurement cycles, and work with partners in real time. Processes
in SAP SRM enable cutting down the procurement expenses. SAPs SRM is
one of a bundle of enterprise softwares under the Business Suite under the
NetWeaver Platform. The diagram below depicts SAP SRMs functional
features and how they function within the Business Suite bundled offering

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mySAP.com SRM solution consists of the following top-level modules or


business functions:

Self-service Procurement: Enables employees to create and manage


their own requests and reduces administrative overheads.

Service Procurement: Though E-Procurement has stabilized, most


companies still grapple with services procurement and services account
for nearly 50% of procurement. mySAP.com provides a wide range of
scenarios temporary contract labour, and contracts for consulting,
maintenance, facility management labour, etc.

Plan-driven Procurement: It automates and streamlines order


processing for regularly used materials. This module integrates
seamlessly with ERP, design and order processing systems and SCM to
ensure procurement of plan-driven is a routine.

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Spend Analysis: A decision support system, that enables a purchaser to


analyze the total spend across systems and organizational boundaries, in
terms of supplier, product and product category.

Strategic Sourcing: With interface to process and requirements,


Strategic Sourcing provides purchasers a wide range of actions that can
create a PO or a contract directly from the sourcing application or SAP
Bidding Engine.

Catalogue Management: mySAP.com provides for two business


scenarios Catalogue Content Management (CCM) and SRM-MDM
Catalogue.

Contract Management: Enables creation and modification of POs and


Global Online Agreements (GOA). It also supports renegotiations.

The diagram below shows how mySAP SRM fits in the SAP enterprise
Architecture.

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4.5.2 Oracle SRM

Oracles PeopleSoft Supplier Relationship Management, is an integrated


suite of procurement applications that assists in reducing supply
management costs, spend on goods and services, streamlines procure-to-
pay processes and drives policy compliance.

PeopleSoft SRM provides packaged integration, of procurement functions


with financial management, human capital management, and ERP suites. It
gives customers the flexibility to leverage applications on-demand, in-
premises, or in any combination needed to achieve procurement
objectives. PeopleSoft SRM also fully integrates, procurement with HR in
order to provide total workforce management, of both contingent and full-
time workers. The PeopleSoft SRM, like other Tier-1 vendor products
provides the following functional modules:

Catalogue Management
eProcurement
eSettlement.
eSupplier Connection
Financials
Procurement Spend Analysis
Purchasing
Services Procurement
Strategic Sourcing
Supplier Contract Management.

Catalogue Management simplifies content management for


procurement. It allows easy transformation of complicated and disparate
data, into good usable content to increase spend visibility and the
efficiency of procurement operations. Easily manage taxonomies,
transformations, and categorization.

e-Procurement enables customers to streamline employee ordering,


enforce spending policy, and reduce procurement costs; web-shopping
interface ensures rapid deployment and adoption; content control guides
user choice; approval and accounting enforcement ensure compliance;
special request feature puts purchasing in control of non-catalogue
requests; process automation lowers transaction costs; single-point-of-
purchase controls maverick spending.

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eSupplier provides supplier self-service through an internet-based portal,


that provides suppliers access to critical information, improving their
service and reducing the time employees spend researching and
responding to status inquiries. Some of the features and benefits are
improves supplier collaboration, give suppliers an insight into the procuring
organizations requirements, and improves employee productivity,
maximizes supply chain value, creates closed-loop purchase order
collaboration, simplifies fulfillment and payment, ramps-up supplier
participation.

Strategic Sourcing, enables customers to source for the lowest total cost
and create immediate and long-term savings. Improves sourcing results
with cross-functional collaboration, providing the ability to access a
contract clause library and includes clauses on sourcing events, and
carrying them forward onto the first draft of contracts once awarded.

Contract Management is the application that creates and enforces better


supplier contracts. The application manages the entire supplier contract life
cycle from authoring, collaboration, and negotiation to execution, status
tracking, and compliance. It reduces spend on goods and services by
enforcing contracted pricing with embedded terms and conditions. Contract
Management enables customers to standardize contract processes, reduce
time-to-contract, and drive contract compliance; centralized terms library
ensures consistent contract standards across the entire organization;
parallel negotiation of commercial and legal terms reduces redlining and
cycle time; flexible workflow expedites approval and signature; deliverable
tracking monitors supplier performance; centralized contract repository
provides full visibility. It also provides native integration with Microsoft
Word which enables the use of a common authoring tool.

Some of PeopleSoft SRMs benefits are:

Drives sourcing with online negotiation and collaboration


Enforces contracted pricing and embedded terms and conditions
Automation of planned sourcing, frees up staff for high-value
procurement activities
Automates and controls employee buying with web self-service
Reduces process errors and improves compliance
Identifies and rectifies policy violations with exception based enforcement
Aligns financial and procurement policies and KPIs.

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Oracle also provides a Supplier Life Cycle Management (SLM)


product that transforms qualification, administration and assessment
process and streamlines registration and review of prospective suppliers,
enable cross-functional performance evaluation, and assure effective
governance and risk mitigation.

Oracle SLM is a component of Oracle Advanced Procurement, the


integrated suite to focus on rationalization of supply management costs.

Oracle SLM works in conjunction with Oracle Supplier Hub to deliver


complete, accurate, and relevant information from across the supplier
network. Oracle Supplier Hub is the application that unifies and shares
critical information about an organizations supply base. Its key benefits
are:

Streamline registration and review of prospective supplierswith web-


based self-service registration, advanced evaluation and scoring, and
configurable approvals management.

Enable cross-functional performance evaluationby supporting


templatized questionnaires, flexible feedback mechanisms, and visibility
into archived supplier appraisals.

Assure effective governance and risk mitigationwith extensible profile


management, risk-driven supplier segmentation, and ability to integrate
with third-party supplier information services.

4.5.2 Ariba

Ariba is an ISV based out of Sunnyvale, California that was founded in


1996 and acquired by SAP in 2012 is now a subsidiary of SAP AG.

Ariba was founded on the then new business concept of on the idea of
using the Internet to enable companies improve their procurement
process. Ariba is extremely strong in the B2B segment and in the early
2000s the dot-com era was considered a trend setter in Supply Chain
products. However, with the bursting of the dot-com bubble, Aribas stock
price and its brand took considerable hit and revived with the growth of
Internet technologies essentially Ariba was company with a concept and
product that was ahead of its times.

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Even today, its Ariba Network is a B2B solution that is highly popular and
no discussion on Supply Chain would be complete without a brief on Ariba.

Aribas mainline solution is the Spend Management product; its main


features are Control the Spending, Collaborate with Suppliers and
Contribute to the Bottom Line.

Ariba analyses the companys procurement-spend trends and uses the data
to support stronger negotiation. Connection to a network of suppliers,
helps to quickly discover collaborative partners, who can lower your costs
for goods and services while minimizing your risks. As with all SRMs, Ariba
also ensures contracting and procuring compliance.

Supplier Discovery
Sourcing
Contract Management
Procurement
Supplier Management
Operational Procurement
Spend Analysis
Catalogue Management

Since Ariba is a SAP subsidiary, it would be worthwhile to make a brief


comparison between the two product lines Ariba SRM product-line and
SAP SRM product-line. While most core ISVs had brought out the best-of-
breed e-solutions for SRM and CRM as far back as the early 2000s, SAP
lagged and took some time to catch up. Ariba was the best-of-breed
solution in Supply Chain that included Supplier Relationships too and
customers choose Ariba. While Ariba is still a great solution, SAP SRM
solution is the current market leader with qualitatively similar
functionalities and user-interface with the edge of core integration to the
enterprise backend that it provides. SAP has also been flexible in providing
a Total Lower Cost of ownership, by reducing the amount of throwaway
customization, core integration into its Financials, HR, Supply Chain and
Technology platform that other products in the market are unable to easily
provide.

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4.6 EVALUATING and SELECTION GUIDELINES FOR SRM

Global economic trends have had a direct affect on the SRM software
market. Over the past few years, more organizations not just the
Fortune-500s have leveraged SRM softwares to reduce spending and
manage supply risk. SRM systems have been effectively leveraged to
maximize supplier performance with informed decisions in contract
evaluation and renegotiation. The necessity of going global has introduced
cross-border supply chains and many SRM vendors upgraded their system
to the requirements. In such scenarios that an enterprise faces, it would be
prudent to ask the following questions while selecting a SRM product:

Does your organization need an in-premise, client/server deployment or


a web-based or cloud deployment?

Do the products capabilities support the existing corporate frameworks


for managing supplier relationships?

Does the system offer the necessary functionality to meet the unique
needs of your organization monitor supplier compliance for specific
industry regulations?

Will the SRM system give comparisons of supplier performances using


the companys existing set of vendor evaluation variables or would you
have to change the entire vendor evaluation system?

Below is a graphic view of some of the SRM products/vendors and the


extent of coverage of SRM requirements. However, this is not the sole
criteria for evaluation.

Figure 4.1 gives an overview of the available functionally of each vendor


application. The Y-axis represents the vendors and the X-axis represents
the categories within the SRM suite.

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Just as other Enterprise Solutions, supplier management softwares are not


a single category of application. Nor are they a single-functional business
area, involving individual stakeholders or stewards for the types of
information, that supplier management tools provide. As such, line any
other Enterprise Software, it is always a challenge to select the right SCM
software the bundling, versions, components coverage and off-course

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the price. It is also a fact that unlike CRM or SCM, a whole lot of
information is not available on SRM products. So selection has challenged
and the objective is to select right definitely not buy a Mercedes when
your actual need is only a Maruti Alto. Below are some key points to
consider when choosing among options.

1. Understand the range of supplier management products in the


market: The first major point to work on is to get a good
understanding all supplier management products and also get
references on these. These should include SIM, data collection and
workflow, SPM, risk management, spend-management and the broader
suite of components that make up SRM, e-sourcing and contract
management.

2. Integration with Back-end Systems and other Decision Support


Softwares: Since SRM cannot be effective in a silo the purchase
decision must focus on the SRM can integrate with the large number
of back-end transactional systems such as shop-floor ERP/MRP and also
with other decision-support systems that are already in place in the
company. The SRM must take into account all of the internal and
external source systems that a company will need to pull/push data
from/to. The company should have the ability to act, on supplier
information, in the context of routine tasks and important decisions.

3. Analytics: While the enterprise may have a fairly good Analytics in


place, it may not always provide all the insights required for supplier
management. At the same time, it is essential to decide do we
actually need analytics based SRM at all? this is particularly true for
SMBs.

4. Unified view of Supplier: SRM is intended to take supplier


management beyond the vendor master just as CRM and customer
view. It is essential the company gets a true picture of its suppliers.

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4.7 SUMMARY

In the current business world, with pressures on top-line and margins and
a continued uncertainty remain competitive, the ever pressing
organizational need, is to reduce cost of procurement at the same time
ensure on-time, good quality in wards goods and services. Organizations
have found to their advantage that the strategy is to take special care in
maintaining efficient and cost-effective partnerships with their vendors/
suppliers and the only way to be certain, that suppliers are holding up their
end of the bargain, is to consistently evaluate their performance a
difficult task made easier by SRM software.

While Software systems for SRM have matured late, their importance has
been quickly realized and SRM softwares are now standard components, of
any enterprise solution for large and small companies. SRM softwares help
procurers keep suppliers on their toes by monitoring their operations and
revealing poor performance.

In the Indian domestic scenario, mind-set of senior management and


procurement departments are still vintage, in that they still work on a
bargain mode and saving by containing cash outflow. Indian corporates
can go a long way to imbibe professionalism by incorporating SRM
concepts.

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4.8 SELF ASSESSMENT QUESTIONS

1. Explain the boundaries and Interfaces of Supply Chain Management and


Supplier Relationship Management.

2. What are the integration points of SRM with other the ERP?

3. Write a brief comparison between SAP and Ariba.

4. Name 5 SRM vendors for SMB and write a few lines on their products.

5. What are the criteria on which you would evaluate a SRM product for
your organization?

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture

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Chapter 5
CUSTOMER RELATIONSHIP MANAGEMENT
(CRM)
Objectives

After completing the chapter, you will understand:

The Need of CRM.


The Benefit of CRM.
Implementing CRM
CRM Architecture.
Risk Assessment.
Uses of CRM.
Improving Customer Relationship.
Why do CRM Projects Fail?
CRM in Business Sector.

Structure:

5.1 Introduction
5.2 Need and Benefits of CRM
5.3 CRM Strategies
5.4 CRM Software Components
5.5 CRM Products Overview
5.5.1 CRM Product Criteria Large Companies
5.5.2 CRM Product Criteria SMBs
5.5.3 CRM Analytics Products
5.5.4 CRM Specialty Tools and Products
5.6 CRM Tier-1 Products
5.7 CRM Implementation Best Practices and Pitfalls
5.8 CRM Industry Trends
5.9 Summary
5.10 Self Assessment Questions

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5.1 INTRODUCTION

Customer Relationship Management is a system for managing a companys


interactions with current and future customers. CRM involves technology
to organize, automate and synchronize Sales, Marketing, Service and
Support. CRM looked at objectively is a business strategy to retain your
most valuable customers.

From a business perspective, CRM may be defined as a business strategy


to select and manage the most valuable customer relationships. CRM
requires a customer-centric business philosophy and culture to support
effective marketing, sales, and service processes.

However, if you look at it from an IT standpoint, CRM could be defined as


Methodologies, software and usually internet capabilities, that help an
organization manage customer relationships in an organized manner.

Essentially, CRM is:

An integrated sales, marketing and service strategy.


An approach that effectively enables, customer relationships to get
maximum value for the organization.
It employs softwares and tools as enablers.

Customer Relationship Management is an enterprise approach to


understanding and influencing customer behaviour, through meaningful
communications in order to improve customer acquisition, customer
retention and customer loyalty to maximize gains for the organization
Accelerating Customer Relationships by Ronald S. Swift, Prentice Hall,
2001. Towards this end, and to achieve the best results and efficiencies, we
utilize various softwares and tools.

Today, both the business process and the software tools have varyingly
been called CRM. In this section, we will primarily deal with the software
technologies in CRM, though briefly dealing with processes as softwares by
themselves do not achieve a business purpose.

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5.2 NEED and BENEFITS OF CRM

In the early days, CRM softwares were known as contact management


software; which is still one of the primary purposes of it use.

The primary need to CRM softwares is to enable organizations to


consolidate customer information into single repository that marketing
users can utilize to manage relationships. However, over the years, it has
been proved that customer dissatisfaction/frustration arises, more due to
information gaps they confront in the supplier organization. By
implementing CRM softwares, an organization, is able automate common
customer-related processes, have a common database, visibility across the
organization and track performance, effectiveness and productivity.

Consider the following use case scenario to help you understand the need
for CRM software:

In your organization, you store customer contact information in Excel


spreadsheets, meeting appointments in an Outlook Calendar, and
relevant customer information files, in an in-premise cloud Dropbox.

The contact center receives a customer call: The contact center rep
toggles between each of these tools to figure out whether the caller is a
prospect or an existing customer if the caller happens to be a high-
value customer, then she/he definitely gets annoyed by the delay and the
cold response. During the conversation, it may happen that the
representative miss out closing some pending order or fails to put across
a new sales opportunity.

The contact center rep has no information on the previous discussions,


leave alone start where the previous discussion was left off because
these are in a MOM in someone elses Inbox.

Such situations delay the time-to-productive-conversion, slow issue


resolution and has the potential to drive away a customer and potential
loss of business.

With a CRM Software in place: The contact center rep could simply pull
up that account, wish the customer a Happy Wedding Anniversary, and
go on to refer to every meeting, phone call, e-mail exchange the

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customer had with any member of the organization and all pending
issues both ways.

Post-conversation: The contact center rep would close certain tasks or


follow-up actions and set up the next steps for the concerned sales rep to
take forward.

I am a member of a fairly well-known Fitness center in my locality and


have been holding this membership since over 8 years. The only and most
irritating issue I have with this fitness center is, that someone or the other
frequently calls me canvassing for a new membership or a renewal. The
last time it happened, I told them that if this repeats, I will terminate my
membership. This would not have happened if that Fitness Center had low-
cost CRM software installed. In my last membership renewal, I negotiated
an annual fee that was well below the previous years fee, only because the
Fitness Center did not have any record of my previous transactions. So,
they manage to irritate a customer, who is otherwise happy with their
company and incurred a financial loss entirely due to total lack of data or
a single customer database and single customer view.

In the past one year or so, most of you must have been informed by your
banks that you need to come and update your KYC records from a
CRM point of view this is the biggest joke. KYC is at the upper end of
customer management process, that involves deep knowledge of the
customer and his/her financial status and investment patterns, whereas
what RBI and the Indian banks call as KYC, is very basic data on its
customers, such as Name, Address, Date of Birth, Proof of Identity and
Address and nominee the first thing that any bank captures and expected
to keep updated in real-time. This is a great example of the misuse of
CRM.

The benefits of CRM Software implementation can be perceived at two


levels transactional level and strategic level.

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Below are some of the transactional benefits that arise out of the
implementation of CRM softwares:

Sales and Marketing and all relevant sections of the organization gets
immediate insight into customer and prospect leads originating from any
channel.

CRM provides in-depth visibility into the opportunity pipeline.

CRM softwares enable personalized and consistent communication to the


customer. E-mail automation improves productivity and allows
sales to spend more time on the right customer.

Everyone in the company gains access to a consolidated view of the


customer thereby empowering each functionary, to take proactive
decisions, aimed at meeting customer requirements in totality; result a
happy customer.

CRM softwares implement, enforce and facilitate compliance to best


practices and regulatory requirements, in all customer related functions
be it sales or service or support and track closures. For example,
logging Lead Indicator Activities such as number of cross-sales made,
client meetings held, service calls, number of prospecting calls made,
post-sales calls, and tracking and analysis of complaints received.

While CRM softwares facilitate automated sales and marketing activities,


they dont stop there the softwares monitor and provide analysis, the
effectiveness of these automated S&M actions, so that the business
knows can continue, change or redirect its efforts.

CRM software analysis can automate routine customer service/request


activities, to successfully go online or a voice system. For example,
reconfigure IVR systems to handle calls that have become routine
actions, automating confirmation e-mails or confirmation voice calls on
actions completed.

Tracking and uniform reporting of projects and their status across


customer and the company.

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All CRM softwares integrate with the company websites, to track and
provide truly multi-channel coverage.

Standard support of frontline sales, lead management team with right


information for quick, efficient fulfilment of all daily requirements.

CRM softwares today have their own or integrate with third-party KM


systems and make available information at the point of action. This
keeps all vital customer data in the business and the company is not
vulnerable to staff attrition.

The key Strategic benefits out of CRM software implementation are:

Improved customer service from across the organization, thereby high


customer satisfaction, retention and growth of incremental business.

Increased revenue per customer through cross-sell, up-sell and by


knowing the customer.

Simplified marketing and sales, better control and information


availability, reduced costs and focus on the right customer.

The other perspective of CRM implementation is the benefits specific to


Industry Verticals -

Financial services risk analysis, portfolio analysis,fraud prediction and


detection, HNI services, mass-HNI services, cross-sell and up-sell.

Healthcare outcome analysis.

Supply Chain and Logistics demand planning and procurement


optimization.

Manufacturing defect and quality analysis and supply chain trend


analysis.

Retail merchandising planning and analysis and store location analysis.

The value of CRM softwares to an enterprise only begins with an improved


and more competitive customer experience. The big CRM payback comes,

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as customer information is captured and analyzed, to gain intelligence into


both individual customers and the market. When intelligently analyzed, this
information becomes the basis of future product development, targeted
marketing messages and enhanced services. Ultimately, CRM produces a
more competitive enterprise that is able to predict and act on market
trends rather than respond after the fact.

5.3 CRM STRATEGIES

Consider the following findings on customer retention. CRM strategies have


been based on the mitigating these issues and risks.

New customer acquisition is typically costs anywhere between 5 to 10


times that of retaining an existing customer.

Companies can boot their profits by as much as 100% by retaining just


5% of their existing customers Harvard Business Review by Reichheld
and Sasser.

On an average, an existing customer adds 100% more revenue than a


new customer.

Most companies lose 50% of their customers in 5 years (Harvard


University).

The typical statistical law of ABC classifications applies, also to customer


loyalty only 15% of customers are loyal and about 75% are indifferent
and can be influenced to dump you and the bottom 10% are waiting to
jump ship. This is true of all industries an IT major discovered this cold
statistics, through an independent Customer Satisfaction Survey.

The biggest reason for customers leaving is relationship it is


frequently said that customers dont leave because of bad products
they are driven out due to bad relationship management.

Buyers usually hesitate to switch the supplier because, it may cause costly
disruptions to their business and the risk of making another wrong choice
from the devil to the deep sea. The customers potential problem (with
existing supplier) must exceed the benefits they gain from the new supplier

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and this from the sales and marketing perspective, is the key aspect of a
CRM strategy.

!
The key strategy of CRM is to maximize customer loyalty through value and
relationship by integrating sales, marketing, delivery and service. To
achieve these objectives, the organization would need to:

Implement a strategy of one-on-one engagement and marketing treat


each customer specifically, rather than a generic one-size-fits-all
approach.

Redesign the business from the Outside-in.

Create unified Customer-centric Data and Databases.

Ensure an organization-wide single customer view.

Central to every relationship is an exchange process, where each side gives


something in return for a payoff of greater perceived value this is
termed a WIN-WIN (a much misused phrase) relationship.

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Relationship Marketing is based on establishing, developing, maintaining


and enhancing, successful exchanges with customers. Relationship
exchanges are typically of the following types:

Transactional Exchanges is centered on timely delivery of the basic


service or product at a reasonable price. They are independent
transactions with little intent to make the customer come back or fulfil
the needs of the customer. The best example is a small travel store
where the odd traveller purchases his essential requirements that he may
have forgotten to pack. Its a one-time sale an arms-length
relationship.

Collaborative Exchanges occurs in situations of complex purchases,


high priced products, of dynamic markets with few alternatives. Trust
both ability and integrity is the key relationship element between the
partners. Switching costs are high due to mutual commitments. Typically
in niche industry segment, products and services.

Value-added Exchanges are those where the selling company moves


from just meeting the customers requirement satisfactorily to retaining
them by throwing in or bundling additional services or developing
services that are customized to meet the buyers needs or incentives to
promote repeat buys. The Indian Kiranawalla is the best example.

CRM strategies are also based on customer segmenting such as suspects,


prospects, users, consumers, high-value customers and strategic partners.
Some of the following factors may be considered:

Determining the right customer balance of desired relationship with


profitability.

Nature of products and services rendered, industry best practices, value


proposition.

Alternatives available to the customer in the market.

Purchasing situations and supply chain conditions for each customer.

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Customer profitability the 20/80Rule (20% of customers contribute to


80% of revenue), big companies are usually the most profitable or the
least profitable.

Identifying and terminating unprofitable customer relationships.

Best Practices, employee motivations.

Good CRM softwares should measure well on the following five parameters:

Relationship Quality high-caliber relational bond characterized by


commitment and trust.

Relationship Breadth number of interpersonal ties that connect the


relationship.

Relationship Composition portfolio of contacts ranging from low-level


influencers to high-level decision makers.

Relationship Strength the ability of the buyer-seller relationship to


withstand stress and/or conflict.

Relationship Efficacy the ability of an inter-firm relationship to achieve


desired objectives.

Ultimately, it is not the software but the business management of customer


relationship that pays most dividends the software is only an enabler.

CRM software incorporate the above strategies for organizations to


leverage however, the basic relationship strategy needs to be in place to
take advantage of the software.

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5.4 CRM SOFTWARE COMPONENTS

Companies, small and large, rely on many different business software


solutions to support their operations. So, how does CRM software mesh
into such organizational technology picture?

One way to understand this is to separate the companys customer-facing


programs such as sales, marketing and customer service from its non-
customer facing departments such as finance and HR. Software
applications that deal with customer-facing activities are grouped together
as Front Office applications. Other technologies are Back Office
applications. Software that integrates the front and back office is known as
middleware.

Customer Relationship Management software is the core of the Front Office


solution package.

CRM software systems offer two value propositions. The first is cost
savings due to greater efficiency in business processes, known as
Operational CRM. The second, called Analytical CRM, is the gathering of
actionable customer data, that is analyzed for greater customization and
for predictive purposes. Hence, the discussion, Operational CRM versus
Analytical CRM.

Operational CRM
Operational CRM supports the front-end, customer-facing business
processes and includes all the products, services and operational
capabilities, that enable the company to service its customers. Examples
include contact centers, data aggregation tools, transactional/self-service
websites, customer-centric business processes and performance measures
(cost, cycle time, satisfaction). With operational CRM call center and self-
help, efficiency can be analyzed in great detail and improved upon
quantitatively and qualitatively.

Operational CRM is, in simplest terms, the business operations connected


to building and managing CRM in a company. It includes operation of such
functions as sales force automation and call centers.

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Analytical CRM
The value of CRM to the organization only begins with an improved and
more competitive customer experience. The real CRM payoff comes as
customer data is captured and analyzed to gain intelligence into both
individual customers and the marketplace. When analyzed intelligently, this
data becomes the basis of future product development, targeted marketing
campaigns and enhanced services. Ultimately, analytical CRM produces a
more competitive enterprise that is able to predict and act on market
trends rather than respond after the fact.

The analytical CRM umbrella encompasses customer analytics, business


intelligence (BI) and data mining, customer grouping strategies, incentive/
loyalty programs and triggers for cross-selling and up-selling.

Analytical CRM describes the component of CRM that relates to data mining
and interpretation of data collected about customers. Companies that use
CRM are usually trying to garner as much customer data and transaction
history as possible to make effective business and customer-centered
marketing decisions.

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Roles of Operational and Analytical CRMs:

Operational CRM Analytical CRM


Operational CRMs provide support Analytical CRM analyses customer
to front office business processes data for a variety of purposes
including sales, marketing and including:
service. Design and effectiveness of
targeted marketing campaigns, to
Each interaction with customer is optimize marketing effectiveness.
generally added to customers
contact history, and staff can Design and execution of specific
retrieve information on customers customer campaigns such as
from the database as needed. retention, cross-selling, up-selling
and customer acquisition.

Analysis of customer behaviour to


aid product and service decision
making.
Prediction of probability of customer
defection.

Management decisions (for


example, financial forecasting and
customer probability analysis).

Client-facing teams whether field based teams, support desks,


marketing, telemarketing teams or administration typically want
information that makes their lives easier. Trouble is, these are disparate
teams which often have their own databases, which can mean there is a
challenge getting the data into one place to do something useful with it.
Hence, the data is centralized in some way into a CRM system.

To keep this data meaningful, e-mail is linked into this centralized system,
data from websites can be linked automatically, and the whole accessed
and updated from mobiles So, every way of contacting the customer is
linked into CRM and we have Operational CRM.

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Day to day, it is the series of activities involved in every aspect of the


business, that affects creating a single unified view of the customer. It
provides the information which is used by Analytical CRM.

Effective operational CRM contributes to solid analytical CRM, which leads


to more targeted marketing and better customer experiences.

The third component of CRM is the Collaborative CRM that focuses on the
interaction with customers through personal interaction, letter, fax, phone,
Internet, e-mail etc. The final objective is to retain the customer
relationship. Collaborative CRM Includes:

Providing efficient communication with customers across a variety of


communications channels.

Providing online services to reduce customer service costs.

Providing access to customer information while interacting with


customers.

Collaborative CRM also seems to be the new paradigm to succeed the


leading Efficient Consumer Response and Category Management concept
in the industry/trade relationship.

All CRM software will at very least include the following four Core
Functions:

Workflow Automation: This standardizes business processes, usually


through a combination of task lists, calendars, alerts and templates.
Once a task is checked off as complete, for example, the system might
automatically set a task for the next step in the process.

Tracking of Customer Interactions: These systems document


conversations held by phone, in person, through e-mail or other
channels. These interactions can be logged manually, or automated with
phone and e-mail system integrations. Depending on the product, some
systems can also track interactions on Facebook, Twitter and other social
platforms.

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Customer Data Management: Most products provide a searchable


database to store customer information (such as contact information)
and relevant documents (such as sales proposals and contracts).

Management Reporting: Management can use these CRM tools to


track performance and productivity based on activities logged in the CRM
system for instance, how many new contacts were added to the
database that day, or how much revenue was generated. These tools can
also be used for forecasting, such as for the next-quarter sales pipeline.

CRM Software Components encompass the three customer-facing


functional areas, aligned with targeting, acquiring and supporting
customers.

1. Marketing Automation
2. Sales Force Automation
3. Customer Service.

Marketing Automation: Marketing Automation serves to seek out and


acquire new customers as well as grow existing customer share. Marketing
campaign management lets you to design, distribute and track campaign
performance across products, territories, salespeople and other variables,
so you know when to implement course corrections or where to increase
marketing spend. Common marketing automation features include brand
management, list management, real-time offer management, loyalty
management and marketing, and budget ROI analysis.

Sales Force Automation (SFA): Sales Force Automation software


solutions seek to automate the entire sales cycle from planning and
forecasting to negotiation and closure. Typical SFA functions include lead
management, sale opportunity management, communication management,
sales forecasting, product configuration, order processing, product
information, quota management and sales analysis.

Customer Service: The customer service component of CRM software


automates helpdesk, call center and field service management, providing
automated, end-to-end incident or case management resolution. Customer
service applications track and automate call routing, case management,
response methods such as FAQs or knowledge-base lookups, incident

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escalations, and the capture of customer data for performance


measurement, quality control and future product development.

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5.5 CRM PRODUCTS

CRM systems vary widely in capabilities, pricing and underlying technology,


from basic Contact Management to sophisticated Enterprise Suites for
sales, service and marketing. The market also has industry-specific CRM
solutions real estate, Pharma and some best-of-breed solutions, for
specific CRM functions like, Field Service and Helpdesk solutions.

This section and the subsequent ones on Tier-1 products, SMB specific
products and the penultimate section on CRM Trends may help the readers
who would be potential purchasers, in deciding the right CRM softwares
packages required for their business.

However, it is to be borne in mind that there is no silver bullet to CRM


product procurement decision. Below are a few key aspects to examine
when assessing CRM software:

Contact Management: A standard feature in all CRM software with


standard features such as create individual client accounts and track
interactions. However, the differentiators are ability to connect with
other company users and tech support or sales staff in real time to get
help resolving a clients question. Dial-out facilities to connect with
important contacts from within the CRM program. Licensing and Pricing
per user or one flat price prices tend to go up when you add more
users caps on number of users or unlimited threshold.

Sales and Marketing Features: Many of current CRM software includes


sales and marketing features bundled in the license fee, but many others
provide these at an additional fee. Features include essential
requirements such as ways to forecast marketing campaigns, generate
sales quotes, follow leads and track your competition.

Employee Tracking and Support: The best-of-breed CRM softwares


provide ability to track your employees interactions with your customers
helps in ensuring customers issues are resolved without delays. This
information is generally to task management and annual performance
reviews.

Ease of Use: In-premise or Cloud Data Stores decision is important as it


impacts the ease and speed of locating information. Online user guides

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and prompts and other embedded guides that help users learn faster are
essential. These are very important in first time implementations of CRM
software.

Social Media Networks: Some software provides the capability to


create a social media networks within the program, that employees can
collaborate and exchange information and knowledge.

Help and Support: Implementation and after-sales service and support


are absolutely important. Not many ISVs offer live chat or telephone
support. E-mails are always very tedious as they are always placed in a
queue. Look at a vendor who will commit 24 7 Telephone Helpdesk and
a 24-hour turnaround.

Some key aspects that you should look for when buying a CRM product are
how it handles all aspects of the customer interaction experience, data
sharing ability across between multiple user groups, and the ease of
installation and use. It is essential to examine case studies of
implementation in similar organization and feedbacks from existing
customers of the product.

As with all Enterprise Solutions today, CRM products provide a host of


business, usually modularized and bundled in different configurations. Most
CRM products at the very least offer following Application Categories in
their product bundling:

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Marketing Automation Lead management (generation, scoring and


nurturing), e-mail and event marketing, landing
pages, Web analytics, and campaign management.

Sales Force Automation Contact and opportunity management, workflow


automation, territory management, sales forecasting,
pipeline analysis, and reporting.

Customer Service and Trouble ticketing, knowledge management, self-


Support service, case management, live chat, and surveys.

Field Service Dispatching, scheduling, invoicing, inventory


Management management, and order management.

Call Center Automation Call routing, recording and monitoring; load


balancing, call list management, autodialing, scripting,
computer telephony integration (CTI) and interactive
voice response (IVR).

Helpdesk Automation Trouble ticketing, knowledge management, self-


service, IT asset management, network management,
service level agreement (SLA) management, and
remote control.

Channel Management Lead and contact management, partner portals,


partner relationship management, and market
development funds management.

Gartner Report of May 2014, in Table below gives you the top CRM
Software Spending by Vendors, Total Software Revenue Worldwide, 2013
(Millions of Dollars).

Company 2013 Revenue $ Millions 2013 Market Share (%)

Salesforce.com 3,290.3 16.1

SAP 2,621.5 12.8

Oracle 2,096.5 10.2

Microsoft 1,392.4 6.8

IBM 792.1 3.9

Others 10,283.5 50.2

Total 20,476.3 100.0

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5.5.1 CRM PRODUCT CRITERIA LARGE COMPANIES

In this section, we will discuss CRM products that are suitable for large
companies. The key criteria that large organizations apply in their selection
of CRM products typically include but not confined to the following:

Multifunctional CRM applications suites marketing, sales force


automation, customer service, field service and partner channel
management, e-Commerce, customer analytics and customer data
management.

Complex requirements, ability to scale on a global basis, manage end-to-


end business processes, integrate into complex legacy environments, and
manage large volumes of customer related data.

Solution should target multiple industries segments. Evaluated vendors


target buyers across a diverse range of industries and business models,
including: business to business (B2B), business to consumer (B2C), and
business to business to consumer (B2B2C). Amdocs is a great product
but exclusive to the Telecom Industry. When a General Electric purchases
a CRM, they look for a product, that can be implemented across their
various LOBs.

The product should have seen substantial implementations and been


industry tested with good references.

The following CRM products have been recommended in most recent


analyst reports as the best-of-breed for large corporations and also truly
dominate the large markets. The Industry Leaders in the large enterprise
CRM category are:

1. Oracle Siebel CRM


2. SAP CRM
3. Microsoft Dynamics CRM
4. Salesforce.com
5. Oracle CRM on Demand
6. Oracle RightNow CX Cloud Service
7. Pega CRM.

We will deal with each of these products in detail in the section.

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5.5.2 CRM Product Criteria SMBs

Mid-sized organizations and divisions of large enterprises are typically


more IT-oriented and have budget constraints. The mid-market solutions
should have quicker deployments and lower total cost of ownership as well
as greater out-of-the-box support.

For the mid-markets enterprises, there are a large number of ISVs,


many of whom have compact products that are easy to implement and
cost-effective they have limited breadth, but have capabilities in specific
areas. These solutions are less suitable for large-scale global deployments.
The vendors targeting this group offer a variety of deployment options,
including on-premises licensed, hosted, and SaaS. Some vendors
in this category have upgraded their solutions to be more suitable to
enterprise-class buyers and are gaining acceptance in that segment as
well.

CRM solutions for the small enterprises primarily target organizations with
up to 250 employees. Functionality is limited compared with what full CRM
suite solutions offer and typically focuses on basic contact management
including social channel interactions and e-mail marketing capabilities for
individuals or small teams. They offer a variety of deployment options,
including on-premises licensed and SaaS.

The Strong Performers in the mid-market and small enterprises segments


are:

1. Pivotal CRM from CDC Software


2. Sage CRM and Sage SalesLogix
3. NetSuite CRM
4. SugarCRM from Sugar Enterprise
5. Sword Ciboodle
6. MaximizerCRM
7. GoldMine Enterprise Edition (GMEE) from FrontRange Solutions
8. Microsoft Dynamics CRM
9. SAP Business All-in-One CRM
10. Oracle CRM on Demand.

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A few of the CRM products for mid-markets and small enterprises though
not with any consideration of their revenues or market rankings have
been discussed briefly below:

1. Sage Software Sage CRM and Sage SalesLogix is a SMB focused


CRM optimized specifically, for small and medium businesses. The
products has all features required by SMBs quick to deploy, easy to
use, cloud or in-premise options, and delivers quick ROI and positive
impact. The product can be easily adapted into a small organizations
way of work. It has over 12,000 million customers in over 70 countries.
Sage offers the following modules Sales Management that automates
the sales process and provides a 360 degree view; Social CRM that
offers integrated social media channels for customer communications;
E-mail Marketing to handle targeted email marketing campaigns;
Targeted Marketing that plans executes and evaluates the success of
your marketing campaigns.

2. NetSuite CRM features relationship management (CRM) capabilities,


including sales force automation (SFA), marketing automation, customer
support and service, and flexible customization, all in a web-based CRM
solution. And unlike typical CRM solutions, NetSuite CRM+ includes
powerful sales performance, order management and marketing
effectiveness capabilities as standard features. It is the only CRM
solution that is completely integrated with the back office order
management, fulfillment, and financials reducing manual entry and risk
of error, and accelerating processes. It includes Analytics. NetSuite
supports all data import formats, E-mail Marketing, Mobile Apps and E-
mail Integration.

3. Maximizer CRM is rated among the top-10 CRMs in the world


offers CRM Anywhere solutions for Maximizer SaaS in the cloud, on
your desktop, smartphone, iPad, WiFi, Internet explorer and others. The
product is available for Windows PCs with in-premise servers as well as
having a WiFi/web-user interface for cloud, and includes smartphone
access. Maximizers unique All Access licensing makes it very suitable
for SMBs.

4. C2 CRM Clear C2 Inc. offers the power and flexibility usually


reserved for custom CRM solutions, with the ease of use and
implementation, typically associated with contact managers. C2 CRM

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streamlines sales process, by providing real-time information on leads,


prospects and customers. It improves marketing efforts, by tracking
which marketing initiatives and streamlines customer service by
providing 360 degree view. Helps service customers faster and more
efficiently, which ultimately improves customer satisfaction and loyalty.
Provides Management Information, with real-time data such as sales
opportunities, marketing efficiency, customer retention.

5. Goldmine Enterprise Edition from FrontRange Solutions Inc.


FrontRange Solutions GoldMine contact management software is used
by organizations of all sizes to manage the sales pipeline, optimize
marketing programs and deliver customer support. Microsoft Outlook
integration and E-mail integration allows tracking interactions, with
prospects directly from e-mail with no data input. GoldMine database is
available at several tiered levels, to best fit the organizations size and
usage. The Enterprise edition provides robust sales, marketing and
customer support tools built on the stable .NET framework.

6. SugarCRM Has a few big names of the Fortune-500 in its list of


customers Avis, H&R Block, Coca-Cola Enterprise, AXA and BDO
Seidman.

Its key features are Opportunity management, Contact management,


Account management, Forecasting, Quotes and contracts, Dashboards,
Multi-channel campaigns, Campaign wizard, E-mail marketing, Web-to-lead
forms, Lead management, Case management, Inbound e-mail, Knowledge
base, Social media, E-mail integration, Online collaboration, Document
sharing, Sales trends, Case reports and Customer profiles.

SugarCRM also provides Mobile Apps, excellent e-mail marketing capability,


e-mail integration and very good analytics capabilities. It is available, both
in SaaS and in-premise installations.

7. SalesOutlook CRM build upon the Microsoft Outlook platform, the


system integrates easily with Constant Contact, for an efficient way to
create an e-mail campaign.

8. Powertrak from Axonom Inc. is a Microsoft Certified Partner for


Microsoft Dynamics extensions. Powertrak is the only system designed,
from the ground up to deliver a complete Microsoft Outlook and

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browser-based partner and customer interaction system through


certified modules for Microsoft Dynamics CRM. The entire system is built
in the award-winning Powertrak Application Builder toolkit. This
foundation provides flexible, low-cost extendibility and the safety and
scaling of Microsoft Servers and .Net technology.

9. InfusionSoft Intended for e-commerce companies. It offers a


complete CRM solution for multi-channel e-commerce processes.

10. Mothernode CRM Provides tools needed for end-to-end


management of all sales channels. Features include quote and order
management, invoicing, support and service tracker. Is a software for
all sizes of companies.

11. My eToolbox Features billing, marketing, and sales management, is


a versatile Field Service solution for SMBs specifically for managing
employees in the field.

12. Ardexus MODE from Ardexus, Inc its salesforce automation


applications are based on the companys patented sales methodology.
The recent releases have enhanced functionality in the sales,
marketing and service modules, plus an improved user interface.

CRM softwares are becoming increasingly popular with small and medium
enterprises, across industry segments and across the globe. Even the
smallest organizations recognize the value of a CRM solution, to manage
interfaces/interactions with customers and prospects.

Just as all small businesses are not similar, so too CRM solutions. CRM
solutions for the SMB can span from limited contact management features
to full-featured CRM, out-of-the-box implementations or customized to
meet specific business requirements. So also, CRMs provide deployment
options ranging from in-premise to SaaS-based though the SMB segment
generally opts for SaaS/Cloud solutions since they alleviate the issues
associated with installing and upgrading infrastructure.

As SMBs evaluate their options, they need to determine which solution best
meets their organizations marketing, sales and business needs best from
present and growth perspectives. Below are a few of the features and

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criteria that small and medium businesses should look at in deciding a CRM
technology for their needs.

1. Single centralized solution: The CRM should deliver everything the


business needs to track and manage its contacts and interactions and to
pursue and close deals and to cultivate and maintain existing customer
relationships. Needless to say, this eliminates duplication of data and
dependency on employees in event of attrition.

2. Should offer full Customer Life Cycle Management: A solution that


helps you manage relationships over the long term, stay in touch and
interact with customers at every stage of the process, capture prospects
and accompany them through the sales cycle to closure and track and
support them once they are customers.

3. Least disruption to existing ways-of-work: A solution that easily


integrates with the organizations existing applications and tools so as to
provide least disruption in the ways of working and can capture all
existing communications, associated with customers/ contacts so that
the context is not lost in transit. This is a very key aspect for SMBs, as
they usually dont have the staffing bandwidth of large organizations
and cannot afford massive data input operations, to bring data from
existing sources into the CRM databases.

4. Extensible and Customizable: Trend of customization, though limited,


is catching up with SMBs too. Customization decisions are mainly driven
by compulsions of pre-built third-party applications, such as those
supporting UPS delivery or marketing automation; custom application
development or integration to existing systems. While SMB CRMs should
be useable day-1, they should also allow for easy customization and
extensions.

5. Installation Options: SaaS and In-premise to reduce spend on


infrastructure and support growth and the headaches of software
version management.

6. Analytics and Reporting should be a product that provided


minimum analytics and reporting. No organization however small, can
afford to do without analytics, as that defeats the very purpose of CRM
just operational CRM will not do any more.

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7. Mobility to Sales: The objective of the CRM should be to facilitate sales


and keep them on the road. Most CRMs today support and have
excellent mobility functions.

8. Social CRM Succeeding today in business requires being relevant to


the target audience targeting the social media is now a common
practice to monitor, identify new market needs, listen and respond to
customers, uncover new accounts and contacts and get an edge on
competition. Many current solutions keep track of what prospects are
doing, speaking about and paying attention to in social media channels
such as LinkedIn, Facebook, Twitter and YouTube. The CRM should be
able to see, who and what influences them and who they influence.

5.5.3 CRM Analytics Products

While most Tier-1 CRM products provide extremely mature Analytic CRM, I
have discussed a couple of products which are exclusively known for the
Analytics. They are SAS and Teradata both are traditional Data
warehouse, BI and Analytics specialists and hence their CRM integrates
well into the Analytics architectures of most organization.

1. SAS Analytics CRM has been a mega player in the field of BI and
Analytics and by natural progression, built several high-end CRM
Analytics Products. SAS Customer Intelligence provides the vital
knowledge needed, to help organizations build a market-ready
enterprise and create a sustainable competitive advantage. SAS
Customer Intelligence can run campaigns and programs implemented
across channels effectively, targeting the right customers, with the right
offers. SAS predictive analytics, assists in assessing new campaign
spend. SAS Customer Intelligence is built on the SAS Enterprise
Intelligence Platform, which provides foundational components, that can
be used within the marketing department and across the organization.
The SAS Enterprise Intelligence Platform includes enterprise-level
reporting to explore customer data through a variety of standard
reports, ad hoc reports, OLAP drill-down analysis and parameter-driven
reports. The platform also provides comprehensive data management
capabilities that allow you to create a single view of the customer.

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SAS Customer Intelligence offers the following functional modules:

SAS Marketing Automation is a comprehensive campaign management


solution, that provides everything to turn raw, disparate customer data
into profitable marketing campaigns from inception to execution and
measurement

SAS Marketing Optimization incorporates sophisticated mathematical


approaches to optimize marketing campaign ROI, channel capacities and
other organizational constraints.

SAS E-Mail Marketing augments SAS Marketing Automation campaigns,


with permission-based e-mail marketing solution, thus enabling users to
create personalized and trackable e-mail messages.

SAS Interaction Management uses patented behaviour tracking


technologies, to enable real-time marketing conversations through
dialogues.

SAS Web Analytics helps customer learn how each customer navigates
the website and whether they are buying and whether or not they are
likely to come back.

2. Teradata Analytics CRM formerly a division of NCR Corporation,


incorporated 1979 is traditional ISV in the field of analytic data
platforms, applications and related services. It has a range of well-
known products for data consolidation and analysis. Teradata product
referred to as Data Warehouse employs a shared nothing architecture
which means that each server node has its own memory and processing
power. In 2010, Teradata added Text Analytics to track Unstructured
Data, such as word documents and semi-structured data, such as
spreadsheets. Teradatas Data warehouses can track all company data,
such as sales, customer preferences, product placement, etc.

Teradata Customer Management based on the robust Teradata Database


Engine, offers the following critical components of marketing effectiveness:

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Campaign Management
Marketing Resource Management
Offer Management
Active Analytics
Integrated Web Intelligence
Interaction Management
Communication Management.

Teradata product family for CRM is an extension of its DWH and BI Solution
suite. The CRM Analytics are essentially built on the same architecture and
databases; therefore, extending from an existing Teradata DWH to CRM is
fairly simple. Teradata offers the following CRM Analytics products:

Teradata Relationship Manager combines powerful analytics, with


automated customer communication capabilities, to drive relevant and
timely messages into operational systems, allowing you to interact
intelligently with your customers.

Teradata Integrated Web Intelligence collects and integrates web


behaviour into your data warehouse to provide access to a more
comprehensive customer view.

Teradata Database is the most scalable and easily managed relational


database on the market.

Teradata Platform Family provides end-to-end analytic needs with


platforms designed to serve entry- to enterprise-level requirement.

5.5.4 CRM Speciality Tools and Products

This category comprises vendors that offer solutions with narrow functional
breadth but deep specialty capabilities such as marketing automation
and customer service for both large and mid-market organizations. This
category also includes CRM vendors that specialize in specific industries
such as financial services, life sciences, telecommunications, and not-for-
profit. Some examples in this category are:

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Customer Service Solutions:


1. Astute Solutions Customer Service Software
2. Consona Customer Service CRM
3. eGain Software
4. Genesys CIM Platform Software
5. Kana Service Experience Management
6. Parature Customer Service Software
7. Spaces by Moxie.

Marketing Automation Solutions:


1. Aprimo Marketing Studio
2. Infor Epiphany Marketing
3. Neolane Campaign
4. SAS Customer Intelligence Platform
5. IBM Unica Suite.

Industry Specialist Solutions:


1. Amdocs CES Customer Management Telecommunications
2. Blackbaud Not-for-profit Organizations
3. Cegedim Dendrite Life Sciences
4. NexJ Systems Financial Services
5. StayinFront Life Sciences
6. Update Life Sciences
7. Veeva Life Sciences.

1. Amdocs is a provider of software and services to more than 250


communications, media and entertainment service providers in more
than 80 countries. Amdocs main products are centered around
Customer Experience Systems (CES), first introduced as CES 7.5 in
January 2008. CES previously known as Clarify is a product and
service suite that includes products for CRM, customer self-service, and
business and operations support systems, as well as a mobile
advertisement and digital commerce and entertainment platform. CES
spans Business Support Systems (BSS), Operational Support Systems
(OSS) and network control and optimization solutions for the telecom
segment. CES also enables management of media selling, fulfilment,
operations, consumer experiences and financial processes across digital
and print media.

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Amdocs offer an extensible CRM system to make the customer experience


personal, predictable and profitable. Its features are:

Customer Centric Service and Support Proactive, intelligent and


efficient support between support agents and your service staff.

Click to Order Takes only three steps to complete.

Smart Agent Desktop Enables efficient contact center operations, by


unifying agents desktops.

Convergent Order Hub Automated ordering solution which provides


superior customer experiences and reduces error rates and complexity.

Sales Quote Order Helps to prevent order errors by allowing sales data
to be transferred to the order handling engine as quotes.

Amdocs CRM software links together your company objectives and the
customer life cycle, in order to reduce the cost-to-serve process and
promote higher value customer interactions.

All products use standards based technology and open architecture to


facilitate integration into a wide range of applications.

2. Adobe offers a range of CRM products for manufacturers to maximize


their competitive advantage and customer base. They must manage
after-market customer relationships efficiently and effectively. Adobe
solutions help you manage customer interactions and service resources
by integrating people, processes, and information. So, customers
receive the highest quality of service and you build brand loyalty. Adobe
CRM has the following modules:

Field Service Management helps to increase service delivery


effectiveness, reduce field service costs, and maximize customer
satisfaction.

Flex for Guided Self-service gives customers anytime, anywhere


access. Flex 2 can simplify complex, multistep processes in a single,
dynamic interface that provides a higher level of service to customers
and end-users.

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Adobe Acrobat Solutions for Manufacturing Improves the flow of


information across all of manufacturing processes, and easily share 3D
designs with everyone on the team anywhere in the world.

Adobe LiveCycle improves the way organizations interacts with


customers, partners, constituents, and employees with interactive
process management.

Acrobat Connect Professional provides rich multimedia web


communications to reach audiences anytime with online meetings,
training courses, and on-demand presentations.

3. Infor Epiphany Easy-to-use interface for faster user adoption, Social


data advisor offers Multi-channel platforms, integrated reporting,
analytics, data mining, list management, segmentation, campaign
management, and closed-loop reporting, an excellent BI integration,
Infor e-commerce integration.

Infor Social Commerce integrates Facebook with your site for maximum
conversions, Targeted campaign executing and preference analysis,
Consumer Interaction Hub helps optimize interactions for stronger lead
cultivation and better customer insights.

Epiphany provides for e-mail marketing campaigns and e-mail integration,


multiple formats of data import/exports. Analytics is a key strength of Infor
Epiphany as the original product Epiphany first came into the market as a
Analytics CRM. Infor offers both SaaS and in-Premise options.

4. Physician Relationship Management System from MarketWares is a web-


based system that helps doctors manage physician relations, referral
opportunities and e-mail marketing.

In this section, I have not discussed Microsoft Dynamics CRM specifically.


However, there are a couple of products above, that are partners of
Microsoft Dynamics and co-sell with seamless integration to all Microsoft
platforms and softwares.

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5.6 CRM TIER-1 PRODUCTS

As introduced in the previous section the list of CRM products for Tier-1
companies the Fortune-500 companies are:

1. Oracle Siebel CRM


2. SAP CRM
3. Microsoft Dynamics CRM.
4. Salesforce.com
5. Oracle CRM on Demand
6. Oracle RightNow CX Cloud Service
7. Pega CRM.

5.6.1 Oracle Siebel CRM

Oracle Siebel CRM is an Oracle product through its acquisition of Siebel


CRM Systems, Inc. Siebel CRM Inc. was an ISV whose prime product was
CRM applications. The company founded in 1993 was known mainly for its
Sales Force Automation product later expanding into the broader CRM
market. By late 1990s, Siebel Systems was the dominant CRM vendor and
just prior to its acquisition held over 45% market share. Oracle Corporation
acquired Siebel Systems in September 2005 and Siebel became an Oracle
Corporation brand. Below is the Release history of Siebel CRM starting from
Siebel System to its current avatar under Oracle Corporation:

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Siebel 2.0 Release end of 1995


Siebel 3.0 Release Feb 1997
Siebel 98 The first GUI version
Siebel 99
Siebel 6 also known as Siebel 2000
Siebel 7.0 Released 2001 the first Web-enabled CRM
Product
Oracle Siebel 8.0 Release 2007
Oracle Siebel 8.2 Release 2011
Oracle Business Intelligence Formerly Siebel Analytics, Release 2007
Applications
Oracle Business Intelligence Release 2007
Enterprise Edition Plus
Oracle CRM on Demand
Oracle Fusion CRM

Though salesforce.com currently holds the largest market share, Oracle


Siebel is the most complete and comprehensive CRM product in the market
and offers proven across-the-board CRM functionality. Oracle Siebel CRM
still supports one of the largest user populations in the market about
80% of its customers have upgraded or looking to upgrade to an 8.x
platform. Of this 80%, about 60% are on a Siebel 8.1.1.x version. This
shows the stranglehold that Siebel product has on its customers entirely
through its product capabilities.

Siebel provides robust capabilities that empower businesses to better


address customer needs, respond more quickly to growth, and create a
strong ownership experience for the enterprise.

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As you can see from the above figure, Oracle Siebel CRM offers very strong
capabilities in the entire range of CRM functionalities marketing sales,
partner channel management, field service, customer data management,
architecture and platform, business intelligence. Siebel also supports global
businesses with cross-border and multi-language capabilities. Siebel also
has strong capabilities in customer service and its current versions offer
good usability features. Siebel is also at par or ahead of other CRM vendors
in mobile CRM.

Oracle Siebel CRM has industry specific solutions for life sciences, utilities,
telecommunications, and financial services industries.

Oracle Siebel CRM has the following applications:

1. Sales Application maximize sales effectiveness by improving quote-


to-cash process, aligning sales channels.

2. Quote and order capture helps tracking products across multiple


catalogues and systems, provides customer insight to enable businesses
dynamically present targeted product bundle and intelligent cross-sell/
up-sell. Empowers employees with information for decisive action and
intelligent interactions with customers.

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3. Enterprise Marketing a closed-loop solution that empowers B2B and


B2C organizations across industries to achieve excellence in marketing.
Designed for the business and consumer marketers covering over 20
industries. It delivers actionable insight the marketing department.

4. Contact Center and Service supports resource deployment, issue


resolution, one-and-done request handling and tracking and also
provides analytics capabilities. Helps businesses increase customer
satisfaction while cutting costs at all touch points.

5. Self-service and E-Billing solution that allows customers to do


business anytime, anywhere. It improves profitability and increased
customer loyalty.

6. Partner Relationship Management a comprehensive channel


management solution that allows brand owners to achieve their channel
business objectives.

7. CRM technology that provides the server framework to support


Siebel Applications. It delivers solutions for Development, Deployment,
Diagnostic, Integration, Productivity, and Mobile services.

Below is Oracle Corporations strategy for Siebel going right through to


2019.

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Continuing from the above, Siebel functionality Roadmap as in year


2012, release of Year 2013 and planned for Release 8.3 are shown in the
figure below.

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!
From a planning perspective, the above figures give you a picture of
Siebels strategy and what you may expect Oracle to roll-out in the coming
years.

5.6.2 Salesforce.Com CRM

Salesforce.com leads for organizations that aspire to become social


businesses. The Salesforce.com vision, is to help clients facilitate
interactions between customers and organizations to enable the concept of
the social enterprise. In the social enterprise, the customer is the center of
focus, surrounded by employee networks, customer social networks, and
product social networks.

The company has grown quickly as the leading pioneer of CRM with a SaaS
deployment model, which mitigates customers IT risks and implementation
challenges, compared with traditional in-premise solutions.
Salesforce.com offers strong usability, sales and partner channel
management functionality. It also has a strong architecture and platform as
well as strong customer service capabilities. The solution also has sound
customer data management and BI capabilities.

Compared with other CRM vendors, Salesforce.com offers very strong


support for mobile CRM.

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Salesforce.com falls short in marketing, field service, and e-Commerce.


With the exception of certain segments, Salesforce.coms industry-specific
processes are also not well developed.

5.6.3 SAP CRM

The SAP CRM solution has one of the largest user bases in the industry
SAP reports more than 7.5 million users.

SAP CRM is a great product in improving the customer experience SAPs


CRM strategy is to build a comprehensive portfolio, focused on customer
experience with operational, interaction and decision competencies.

SAP CRM also offers very strong functionality for sales, partner channel
management, platform and architecture, and the ability to support global
enterprises. Usability has been significantly improved in recent years and is
very strong. SAP CRM also has a good set of features in BI, marketing, and
field service and sound functionality, in customer data management and
customer service.

SAP has invested considerable in e-Commerce starting Release of April


2012 of a new integrated CRM e-Commerce solution called SAP Web
Channel Experience Management; however, it is yet too early to assess
customer adoption for this solution.

Compared with other CRM vendors, SAP CRM offers strong support for
mobile CRM. As with SAP ERP products, CRM too is strong in industry-
specific business processes utilities, financial services,
telecommunications, and manufacturing sectors.

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5.6.4 Microsoft Dynamics CRM

Microsoft Dynamics CRMs main USPs are strong usability and a


compelling value. Microsoft offers buyers a deployment choice on-
premises, on-demand, or partner-hosted payment options license,
subscription, or financing with options of Outlook client, browser,
SharePoint site, or other interfaces. These excellent options have boosted,
Microsoft Dynamics CRM sales and making it a very attractive buying
proposition.

Microsoft Dynamics CRM offers very strong capabilities for sales, usability
(based on the familiar Outlook UI look and feel), and the ability to support
organizations that operate across international boundaries and languages.
Microsoft Dynamics offers strong marketing, business intelligence, and
customer data management capabilities, as well as a strong architecture
and platform. It provides sound functionality for customer service and
partner channel management capabilities, but falls short for field service
and e-Commerce. As with leading CRM vendors, it offers strong support for
mobile CRM.

Microsoft Dynamics does not offer industry-specific solutions, though


industry enhancements are available through partner solutions.

5.6.5 Oracle on Demand CRM

Oracle CRM on Demand is another option from Oracle Corporation.


Oracles strategy for this CRM product, is to enable superior business
responsiveness, with a combination of industry specific solutions, business
intelligence, prebuilt integration with other Oracle product and business
process management solutions, to provide organizations with the agility to
to know and respond to their customers.

The product features a good architecture and platform and usability,


internationalization and sales force automation capabilities. The solution
also has sound capabilities to support marketing, customer service, partner
channel management, business intelligence, and customer data
management. Like major CRM products, it offers mobile CRM.

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Amongst SaaS CRM solutions, this product has depth of functionality for
the following industry verticals life sciences, high-tech manufacturing,
and financial services.

Its weak points are in field service and e-Commerce.

5.6.6 Oracle RightNow CX Cloud Service CRM

Oracle RightNow CX Cloud Service is a CRM SaaS solution that in early


2012 became part of Oracles cloud computing portfolio.

In recent years, RightNow has been targeted to help B2C enterprises to


deliver a differentiated customer experience. RightNow offers mobile CRM
and good marketing and business intelligence functionalities but falls short
in partner channel management, customer data management, e-
Commerce, and field service.

However, the RightNow code base is .NET-based, which is different from


other Oracle technologies.

5.6.7 Pega CRM

Pega CRM from Pega Systems (previously Chordiant) delivers process-


centric CRM to manage business processes. Pega Systems states that its
mission is to deliver software for customer centricity.

Buyers turn to Pega CRM to address their needs for transforming customer-
facing problems, especially for untamed processes in large, complex
organizations.

With its recent unification of predictive and adaptive analytics and new
support for social and mobile, the company has invested heavily to help
organizations, deliver uniquely differentiating customer experiences. Pega
CRM offers a strong architecture and platform as well as very strong
customer service functionality. It also offers strong marketing, sales, and
business intelligence functionality as well as strong usability and mobile
CRM. The solution has very strong business process and workflow
functionality.

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Pega CRM falls short in field service, partner channel management, e-


Commerce, and customer data management.

Pega CRM is best suited for buyers that want to strengthen their ability to
support, rules-based customer service, marketing, and sales processes.

5.7 CRM IMPLEMENTATION, BEST PRACTICES and


PITFALLS

CRM is a business strategy that is enabled by technology and hence


successful implementation of a CRM application goes far beyond, installing
software and training staff so much so that greenfield or even replacement
initiatives impacts the organizations customer-facing attitudes.

Rampant are the high failure rates of CRM implementations, but not any
greater than any enterprise software implementation. Organizations would
do well to study reports from analysts, such as Gartner, AMR and Forrester
Research on the failure rates and issues; a few data is reproduced below.

2001 Gartner Group: 50% Failure Rate.


2002 Butler Group: 70% Failure Rate.
2002 Selling Power, CSO Forum: 69.3% Failure Rate.
2005 AMR Research: 18% Failure Rate.
2006 AMR Research: 31% Failure Rate.
2007 AMR Research: 29% Failure Rate.
2007 Economist Intelligence Unit: 56% Failure Rate.
2009 Forrester Research: 47% Failure Rate.

What is a success and what a failure, also lacks clarity as most software
projects are difficult to evaluate objectively the irony being that even Six
Sigma evaluations have proved ineffective. An implementation may be
shown as successful in terms of numbers such as ROI or defects per
million parts or growing top line sales or improving the customer
experience, but a failure when viewed from the eyes of the business. It is
generally known that C-level executives take a long-term perspective,
while operational managers are quick to label failure. How do large
organizations fare vis--vis the smaller enterprises? This difference is only
that, the large corporates have deeper pockets to absorb financial impacts.

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I have known a Fortune-200 Organization implement a very popular CRM


and face basic operational instability with rolling outages. They engaged
the CRM vendors consultants at $1000+ hourly rate over many months
with no improvement.

CRM Implementation Best Practices

Senior Management Sponsorship: For such large implementations,


the CIO or the CIO and CxO S&M should be the sponsor. Review
commitments, must also be made prior to start of the project, as also
commitment of resources and a named Senior Management Team.

Program Charter: Outlining vision, strategy, purpose and goals and


signed-off by the SMT.

Implementation Project Management Plan: Should include


measurable objectives and intangible objectives, deliverables, resource
requirements and assignments, dependencies, critical paths, timelines
and review plans.

Communication Plan: communicated across the entire project staff and


the key stakeholders in all parts of the organization. Objective is to
ensure entire organization is trained on a new work culture and mindset
required for the success of a CRM.

Change Management Plans: Processes for this to be established with a


channel for employee feedback.

BPR: As with any major enterprise solution roll-out, current business


process will undergo major changes and the process of aligning business
processes is a major exercise, that starts well ahead of the software
customization. While this is on, sales, customer service and marketing
would operate to standardized practices and not cut-corners, plan a
tight ropewalk.

Employee Training: Must complete before deployment through


classroom sessions and live webinars for remote staff. These sessions
can help gauge employee acceptance levels and feedbacks.

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Integration of Customer Touch-points: All channels self-service and


staffed such as IVR, call center, e-mail, self-service website, IM and
social media.

Deployment: Incremental roll-out module-wise or department-wise,


rather than big-bang is always preferable. This will help clearing bugs
and adjust processes as needed and the later phases will work out
smooth.

Set incremental goals, create incentives and mark achievements.


Make your staff feel excited about and vested in the CRM project. Have
celebrations as each department comes online, followed by a company-
wide event when the deployment is complete.

Postimplementation Project Management: Planned collection of


data and metrics and evaluation against targets should begin immediate
after roll-out that should include ROI. The goals may be rationalized as
you go along.

Analytical CRM: This does not roll-out at the same pace as Operational
CRM as it requires substantial data clean-up and fine-tuning with new
data as it comes in.

Integration of Social CRM: Your customers are talking to other


customers on an array of social networks, making recommendations or
registering complaints about your products, as well as the service they
received.

CRM Implementation Mistakes and Pitfalls

Failure to follow through on any of the above best practices, can be costly
and may doom your project. In addition, the following list of
implementation pitfalls should be proactively avoided.

Failure to Get Buy-in of the Executive and Key Users: A sure cause
for failure. Since CRM (as with any enterprise implementation) is
organization-wide, senior leadership vacuum will definitely result in
disappointing results, if not a total failure. At the same time, buy-in of
the key user groups is equally important, in ensuring success of the

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implementation failure to involve your sales staff in the project, may


result in the final product becoming shelfware.

Approach to CRM Software: As emphasized many times earlier in this


chapter, CRM is more a business strategy aided by technology. This is
why most enterprise software implementations fail, even though from a
software point of view it was a measurable success. If the company
culture fails to orient itself to the customer's viewpoint, its as good as
having no CRM.

Information Silos: Despite the software solution providing for common


databases, business can still continue to live with their existing data silos
failure to enter data, enter discussion details into the system at
customer touchpoints. I have known an organization, where the CEO tied
reimbursement of travel expenses, to completion of proper data updates
in the system and review.

Measuring Customer Satisfaction and Other Metrics: Essential


because by the Six Sigma paradigm you dont know if you dont
measure.

Key Users are Not Trained Properly: Firms mistakenly believe, that
the CRM initiative is complete once the CRM infrastructure is in place.
Training of all users and their buy-in and satisfactorily answering their
question whats in it for us cannot be more stressed.

Failure to Properly Evaluate Project ROI: Firms begin a CRM


initiative before taking time to accurately assess both the ROI and TCO
of the project.

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5.8 CRM INDUSTRY TRENDS

In the study of CRM software, it is important to bear in mind some industry


trends. The following points have been extracted from reports of analysts
such as Gartner, Forrester, AMI Partners and Aberdeen. While most reports
are of 2012-13, the forecasts are for period upto 5-8 years and hence quite
relevant today.

!
Source: Gartner (July 2013).

Fig. 5.1: Hype Cycle for CRM Sales, 2013

Gartner one of the most well-known analysts publishes Hype Cycle every
year for almost all areas of business and technology. Above is reproduced
Gartners Hype Cycle for CRM Sales 2013. The CRM trends given below are
based on the Gartner Hype Cycle for 2013. Understanding the Gartner
Hype Cycle for 2013 the Peak of Inflated Expectations, is the phase in
the life cycle of technologies, that sees huge overenthusiasm and
unrealistic projections with a overpublicity by technology leaders and sees
limited successes but more failures as the technology is not yet mature;
the Plateau of Productivity, is that phase when actual benefits of

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technology start kicking-in demonstrably, with methodologies and tools


maturing to support.

So, if you map the CRM technologies that are being talked about in the
market by corporate IT leaders, product companies and consultants and
relate with the Gartner Hype Cycle analysis, we understand:

1. Plateau of Productivity
Here below are two areas of CRM, that corporates will focus their
implementations on, in the coming 2+ years, closely followed by those in
the Slope of Enlightenment. The technologies have matured and tested
and business processes have aligned well, to quickly implement and realize
immediate business benefits.

Proposal Generation
Mobile Sales Force Automation for Orders and Inventory

2. Slope of Enlightenment
These areas of technology are nearing maturity and becoming good
enough for industries to take them in with quick business benefits.

Sales Force Automation SaaS


Mobile Sales Force Automation for Opportunity Management
Sales Content Management
Sales Information Services
Territory Management
Lead management.

3. Peak of Inflated Expectations


This is the area to beware there has been overspending and has
reached a state where ROI is suspect. Areas like Social CRM, many of the
Mobile and handheld devices based see a big push by technology
companies and consultants, though industry is not yet ready and
technology not yet mature. Its desirable to stay away except for proof-of-
concept implementations. Below is a brief discussion on these areas.

Social CRM
Mobile CRM
Handheld devices
Sales Objective and Quota Management

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SaaS based Sales Performance Management


Price Optimization
iPad/Smart-Phone based SFA applications.

The biggest industry trend is the convergence of social networking


technologies, with customer relationship management, giving birth to a
much misused term Social CRM. Top-5 industry analysts have recently
predicted this trend having the biggest impact on how customer tracking
software programs evolves. This intersection of social and customer
management software may be as simple as adding Facebook data to
customer profiles. It can also be as complex and dubious as niche products
tapping into social APIs and to generate leads, mine for customer
sentiment or traffic and prioritize social customer service requests. It must
be warned that this trend may (and there are substantial allegations) lead
to misuse of personal data in social media.

Social-Internal Collaboration and Integration with Social Data will change


the behaviour of how sales teams work individually and together; however,
this will take time to mature, to a meaningful state for adoption.

Social CRM (SCRM) for Sales is at the Peak of Inflated Expectations, with
90% of spending for these applications being generated from B2C
companies. Gartner expects B2B companies to lead the growth of these
applications through 2015.

Mobile CRM applications for customer relationship management are


becoming an essential tool in business. Their value for example they
enable sales reps on the road to identify all other customers in the
location, that she or he is currently visiting so that they could cover these
customers too. The Mobile App dont just port functions to a mobile
interface, they leverage the unique capabilities of mobile devices, such as
GPS and voice, to make it most effective for the sales rep on the street.
Mobile-enabled support representative autonomous yet, fully supported
to solve customer problems, will directly and positively impact strategies,
in Service Life Cycle Management (SLM) and Maintenance, Repair and
Overhaul (MRO). Mobile-based platforms in the CPQ cycle (Configure,
Price, Quote) increases in the professional services, discrete and process
manufacturing companies. They can present a completed 3D model of the
proposed product, embed it in a quote and e-mail it to the prospect all
from an iPad.

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4. Trough of Disillusionment considerable investment has gone into


these areas and many companies have tried them out, but success has
been limited. They are of great business value, but the constraints are
high or wasted costs, management bandwidth, risk of loss of faith and
averseness to future moves into cutting edge. Companies that have
tried these without success, should analyze on the failures and study
those that succeeded and try to recoup their investment.

CPQ Application Suites have reached a state of disillusionment,


from overexpectations.

E-commerce SaaS is just maturing into the phase of slow


stabilization in the coming 2-3 years. Unfortunately, E-commerce using
the ASP model has been tried, from the days of dot com; there were
successes and failures not so much due to technology but that it was
ahead of time.

5. Innovation Triggers these are still in the stage of innovation; they


are good to be aware of these areas; Fortune-100 companies with deep
pockets and R&D strategies would certainly invest in; however, for
others, these may be early to invest.

Sales appraisals and incentives management.


Speech-driven SFA a convenience use is voice recognition to record
messages at points when typing is not easy.
Voice of Customer.

Web-based or Cloud-based CRM is here to stay due to the necessity


of the SMB sector. Salesforce.com was the first CRM to deploy SaaS in
1999 and since then a majority of CRM products, now have SaaS solutions
however, that has not diminished the need for in-premise licenses. To be
expected, pricing varies SaaS is typically priced on a subscription basis,
by the number of seats. This has become very popular with SMBs, who
do not want the additional spend on infrastructure.

Predictive Analytics and Big Data analytics and the big data has
seen many ups and downs and is still an area where companies tread with
caution that is not so much due to lack of technology, but more due to
the increasing complexity of business and data being dealt with. Given the
increasing complexity of marketing automation systems and the strategies

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they support, predictive analytics and big data are expected to accelerate
quickly over the next two-three years. However, given the history of
analytics, one should approach this with realism but not avoid.

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5.9 SUMMARY

The past decade and specifically the recent recessionary years, have
changed the way business operates. As never before, it is the customers
choice today that determines the fate companys brand and destiny. In a
global world with increasing mobility, dynamism where borders are no
longer relevant to business, customers are calling the shots and redefining
markets.

Today, customers have exceptionally flexibility of choice and can express


and share their opinions at lightning speed, directly influencing other
stakeholders and prospective buyers. Often, these opinions multiply and
magnify through social media, rapidly affecting a companys future.

Information Technology advances have been at the core of this


transformation, to support business and manage customer expectations.

Businesses are recognizing this shift in mindset from reactively transacting


with their customers to proactively earning customer loyalty. The next
challenge is, to leverage the proliferation of channels, social media and
data explosion.

While all large organizations have adopted CRM, it is the mid-sized and
small companies that find it difficult to catch up with the change. However,
despite these challenges of size and financial sustainability, the SMBs have
to embrace technology, that enables them to leverage our customer data,
into productive actions that result in increasing our customer value and
profitability.

SMBs have to become innovative in use of IT solutions by leveraging


emerging IT solutions in cloud, mobile, SaaS, etc.

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5.10 SELF ASSESSMENT QUESTIONS

1. Explain the importance of Customer relationship Management, in the


current business scenario.

2. Explain the advantages of leveraging Information Technology in


Customer Relationship Management.

3. What are the three types of CRM?

4. Explain briefly Analytical CRM and the challenges of Big Data.

5. What are the challenges of implementing CRM in the Indian small-scale


sector? Is Indian Small-scale Industry ready for CRM? Explain with five
reasons.

EXERCISE 1: For your organization (large or medium or small as the case


may be), make a case for CRM implementation. Select any one of the CRM
products discussed above that you think is best suited for your
organization. List the challenges specific to your organization in
implementing CRM. In completing this exercise, you should typically write
about 10 pages.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3

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Chapter 6
ENTERPRISE CONTENT MANAGEMENT
Objectives

After completing the chapter, you will understand:

Definition of Enterprise Content Management.


Adoption Drivers.
Characteristics.
Components.

Structure:

6.1 Introduction
6.2 Concepts and Benefits Of Content Management
6.3 Content Management Products An Overview
6.4 Tier-1 ECM Products
6.5 Tier-2 ECM Products
6.6 Summary
6.7 Self Assessment Questions

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6.1 INTRODUCTION

ECM is the strategies, methods and tools used to capture, manage, store,
preserve, and deliver structured and unstructured content and documents
related to organizational processes. The kind of content managed by ECM
today was traditionally managed by manual record management systems.
Needless to say, it includes the conversion of data, to and from digital and
traditional forms including paper and microfilm. ECM also manages Web
content and its key features are rapid search and retrieval and online
collaboration, digital asset management and workflow of document in an
organization. In doing so, ECM boosts effectiveness, encourages
collaboration and make information easier to share.

Another perspective of ECM is that of a software product or toolset


whereby ECM consists of a set of applications softwares, with capabilities
for managing the content life cycle management that interoperate, but that
can also be sold and used separately.

6.2 CONCEPTS and BENEFITS OF CONTENT MANAGEMENT

ECM of today started as EDMS (Electronic Document Management


Systems) in the late 1980s and early. The early versions of EDMS were
stand-alone products, providing functionality such as imaging, workflow,
document management or COLD/ERM. COLD/ERM (Computer Output to
Laser Disk/Electronic Report Management), originates back to document
management systems, that used large jukeboxes, full of optical disks that
were unreliable failure-prone. The term, COLD jukeboxes continue to live
on, and now to refer to the process of converting bulk mainframe reports,
into an indexed digital form directly searchable and retrievable by end-
users. The reports are now embodied in a newer acronym ERM (Electronic
Report Management), that is gaining popularity, but means the same thing.

Early leaders already offered multiple stand-alone EDMS technologies. The


first phase was to offer multiple systems as a single, packaged suite, with
little or no functional integration. Throughout the 1990s, integration
increased. Beginning in approximately 2001, the industry began to use the
term enterprise content management to refer to these integrated solutions.

There is an industry disagreement, on the use of content management in


ECM, encompassing all content including documents and that on the web

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as skill sets and techniques and resources needed to manage a website,


are substantially different from those for document management.

That said, content management would primarily concern website content


its presentation, graphics design, formatting, and wordsmithing. For
example, the corporate website of a company is the face of the company to
the world and its content and managing their versions, are closely followed
by the senior management is entirely strategic. In contrast, Document
Management is primarily concerned with organizing, processing, and
safeguarding large internal document sets. The toolsets required for the
two are entirely different while website design and maintenance, requires
standard skill sets of HTML/Java/.Net, document management involves
database design, business process analysis, and archival methodologies
and a whole set of specialized products, for reading and deciphering
unstructured documents.

However, in todays parlance, Enterprise Content Management, deals with


all documented properties of an organization, irrespective of what media
they reside.

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So what kind of documents or contents does Enterprise Content


Management deal with?

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Structured Data 20% of


Unstructured Data 80% of Total
Total Data

Rows and Columns E-mails and Attachments

Forms

Executables

Printed and Scanned Documents


Contracts, Manuals

Engineering Drawings and Blue Prints, CAD/


CAM Outputs

Office, Rich Text and PDF Documents such


as Claims and Invoices

XML Documents

COLD/ERM

OCR (Optical Character Recognition)


software converts scanned paper (images)
into text. The resulting text can be placed
into output documents

Patch Cards are bar-coded pages that are


inserted into stacks of paper to be scanned

Images and Thumbnail files

Audio and Video

Instant Messages

Cheques

Web Pages

X-Rays

Content files stored in repositories may be in any file format and created
by any application. The Document Management system must recognize all
file formats and store them appropriately and when the document is
accessed, the appropriate viewing or editing application is automatically
launched on the client computer.

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The ECM applications also manage versioning of all documents stored


original stored version, enhancing the versions as and when edited or
modified and will pull up the latest version by default or any specific older
version on request.

Content Management as stand-alone system has the following five


functionalities capture, manage, store, preserve and deliver. Capture
involves converting information from its source format, to a format that is
acceptable for the system to store and retrieve. Manage includes the
application areas of Document Management, Collaboration, Web Content
Management, Records Management, Workflow and Business Process
Management, that address the dynamic part of the informations life cycle.
Store or long-term archival of information including repositories and
library services. Preserve involves the long-term, safe storage and backup
of static, unchanging information. Preserve is typically accomplished by the
records management features of an ECM system for regulatory
requirements. The deliver components of ECM present information from
the Manage, Store, and Preserve components. The Deliver components
break down into three groups: transformation technologies, security
technologies, and distribution.

Typically, ECM Product suites incorporate the following core components:

Document management. Core capabilities include check-in/check-out,


version control, security and library services for business documents.
Advanced capabilities include compound document support and content
replication.

Image-processing applications. These applications enable users to


capture, transform and manage images of paper documents. We require
a vendor to offer: (1) document capture (scanning hardware and
software, optical and intelligent character recognition technologies, and
form-processing technology), using native capabilities or a formal
partnership, with a third-party solution provider, such as KnowledgeLake,
Kofax, EMC (Captiva) or IBM (Datacap); and (2) the ability to store
images of scanned documents, in the repository, as just another
content type in a folder, and to route them through an electronic process.

Workflow/business process management (BPM). This refers to


supporting business processes, routing content, assigning work tasks and

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states, and creating audit trails. The minimum requirement is simple


document review and approval workflow. More advanced functionality
includes, graphical process builders, and serial and parallel routing.

Records management. This allows for long-term retention of content,


through automation and policies, ensuring legal, regulatory and industry
compliance. The minimum requirement is for the software to enforce
retention of critical business documents, based on a records retention
schedule. Desired capabilities include certified compliance with standards
such as the Department of Defense (DoD) Directive 5015.2-STD, The
National Archives (TNA), the Victorian Electronic Records Strategy
(VERS) and Model Requirements for the Management of Electronic
Records (MoReq2).

Web content management (WCM). WCM controls the content and


influences the interactions of a Web experience, through the use of
specific management tools based on a core repository. This includes
content creation functions, such as templating, workflow and change
management, and content deployment functions that deliver
prepackaged or on-demand content to Web servers. The minimum
requirement is a formal partnership with a WCM provider. Native
capabilities score higher than partnerships. The relative complexities of
provisioning content to users across intranet, extranet and Internet
applications are also considered, as are the implications of analytics,
social content and delivery models. Several ECM vendors qualify for
independent analysis of their WCM functionality, (see Magic Quadrant for
Web Content Management).

Social content. This functionality allows for document sharing,


collaboration, knowledge management and project team support. Blogs,
wikis and support for other online interactions are important
components. Social content, including video, is the fastest-growing
category of new content in the enterprise. A valuable feature is
integrating applications, with social media, and managing content to post
to social media.

Extended components. These can include one or more of the following:


digital asset management, document composition, e-forms, search,
content and analytics, e-mail and information archiving, e-mail
management, and packaged application integration.

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What are the benefits of ECM? Compare the way a traditional file system
handles content vis--vis ECM Product:

File System ECM Product

Storage and Retrieval:

Cant be certain of the version of a Can always access the most current
document. document or any specific version.
Limited access rights settings. You can restrict who can read, edit or
Search for documents based on a delete a document.
limited set of properties. Search for documents based on
Different formats maintained as descriptive information.
separate files. Seamlessly maintains differently.
Workflow and routing not available at formats of the same document.
all. Routes documents for review and
app.

Content Distribution:

Reference documents via file system Reference documents via dynamic


paths that dont necessarily URL, therefore can always retrieve
reference the latest version or even if location is changed, version is
become invalid if the document is intact.
moved. Access rights once set are retained
Sending a document as an the URL cannot be accessed by those
attachment exacerbates version and who dont have rights
security issues and increases disk
usage.

All the content of an organization is business information that is to be


securely maintained and accessed only by authorized personnel within the
company. The major business benefits are:

Ease and reliability of storage and retrieval.


Distribution of content.
Enterprise Content Management through ECM Software, is a
comprehensive solution, that handles all types of content, in all formats
and stores in a single central location
Manages workflow and access based on authorizations.
Availability of previous versions of a document, provides a record of
changes including who made the change.

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The Content Server enforces configurable security policies and business


rules providing secure and controlled access to content.
Instant reliable access to archived documents.
Meeting regulatory and audit requirements.
Reduce the transaction cost by reducing self-service, resource
requirements, time-to-handle, number of touches, lost files, shipping and
courier costs.
A disaster recovery imperative.

6.3 CONTENT MANAGEMENT PRODUCTS An OVERVIEW

There are many excellent software products for Enterprise Content


Management. In this section, we will give you a coverage of most of the
vendors and details on the top 3 products.

Categorizing ECM Products, in the top tier, are the following seven
products:

1. IBM Filenet.
2. EMC Documentum.
3. Microsoft SharePoint.
4. Perceptive Software.
5. Hyland Software OnBase.
6. OpenText.

The above Top-tier products, provide the broadest functionality, that


business requires with vertical-process and horizontal-solution focus. All
the above vendors have broad-based platforms, are very strong in one or
more technologies and vertical segments and deliver a suite that addresses
market demand for direct delivery of the majority of core components.
They provide enterprise deployments, integration with other business
applications and content repositories, incorporation of social, cloud and
mobile capabilities.

You will notice that ECM is one enterprise solution, where Oracle
Corporation does not figure in Tier-1 quite so due to the fact that their
solution, does not yet compare with other Tier-1 products in the industry.
However Oracle WebCenter Content is fast catching up with new
releases.

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6.4 TIER-1 ECM PRODUCTS

6.4.1 Filenet IBM

IBM is the market leader in terms of ECM software revenue and its broad
portfolio of ECM tools under the brand Filenet supports, the upper end of
the value-chain, particularly for transactional content and social content
management. IBM Filenets product strategy is focused on embracing the
intersection of social, mobile and content management, as well as the role
of analytics and content management in industry solutions such as patient
care and fraud investigation.

IBM has reduced the complexity of Filenet and given it a more user-friendly
universal UI, Content Navigator, that gets the better of other ECM products
which have high complexity and long deployment cycles, with a Content
Foundation server, a streamlined FileNet P8 repository that combines three
engines process, content and app into one.

Filenet solution covers IBMs existing products Case Management, Patient


Care and Insights, and Defensible Disposal that build upon the core
content and case management foundations and leverage content and
predictive analytics, collaboration and social capabilities.

However, one key challenge, with Filenet is that it still has too many
content management and related repositories IBM Connections, Web
Content Manager, IBM Docs and the three ECM repositories. IBMs ECM
messaging concentrates too much on the core ECM tools as the system of
record.

Below are some details of the product, that helps you understand it better
from point of a buyer.

IBM ECM Filenet delivers high value solutions that can help companies
transform the way they do business, by providing the basic aspects of ECM
capturing, activating, socializing, analyzing and governing through the
business process life cycle. FileNet Content Manager is a document
management engine, that combines enterprise content, security and
storage features with ready-to-use workflow and process management
capabilities.

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A key aspect of IBM ECM, is that it provides a way to discover the content,
recognize its value and then act on it for better business insight and
outcomes:

Document Imaging and Capture captures content, automates


document imaging, leverages integrated, flexible content repositories for
content solutions.

Advanced Case Management activate the content; achieve a 360-


degree case-view with collaboration, content, process, analytics and
business rules.

FileNet Content Manager has document management and ready-to-use


workflow to capture, manage, and share content. FileNet Content Manager
includes the following components:

Content Navigator
Content Federation Services
FileNet Image Services
FileNet Rendition Engine
FileNet services for IBM Quickr
SharePoint Web Parts
Workplace XT.

Other Filenet products are:


FileNet Business Process Manager
FileNet Capture.
FileNet Collaboration Edition
FileNet eForms
FileNet image Manager Active Edition.

Some of the key features of IBM FileNet Content Manager include:

1. Centralized/single repository for Enterprise Content

Uses content federation services, to centralize access to content from


multiple IBM and third-party repositories, for improved tracking and
control of enterprise content in one location.

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Provides centralized access, through federation of metadata from host


repositories into FileNet Content Manager or by migrating content into
FileNet Content Manager from a legacy repository.

Offers a full-featured and streamlined search, repurposing and


application development environment, based on a unified repository
and metadata model.

2. Document management services to streamline content


management and delivery

Includes document versioning, content security and life cycle


management features.

Supports a wide range of content types, including XML documents,


Microsoft Office documents, web pages, photos, voice, images and
process definitions and templates

Supports Darwin Information Typing Architecture (DITA)-based XML.

Uses an extensible object model, to allow complex taxonomy


management, using extensive metadata and folder organization
capabilities.

Provide application development support through proprietary and


industry-standard APIs.

3. Delivery of active content in motion

Automated workflows to improve task completion rates and reduce


processing and research costs.
Uses event and subscription capabilities to deliver active content.
Utilizes business rules to drive automated actions triggered by active
content changes.
Automates processes triggered by customer events.

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4. Integration with Microsoft SharePoint and MS Office

Through SharePoint, users can author, browse and manage their FileNet
Content Manager content, access personal and public inboxes and initiate
FileNet Content Manager workflows.
Content Management Interoperability Services (CMIS), support for easier
integration with Microsoft SharePoint, SAP and other third-party
softwares.

5. Social collaboration and mobile computing support

Can add comments to documents or other objects managed by FileNet


Content Manager.
Enables audience analysis by tracking the number of document
downloaded.
Enables the streaming of large content files or enables large groups of
users, to retrieve the same file simultaneously.
Shows thumbnails alongside document properties in folders and search
results to help speed the discovery process.
Provides a look ahead count to specify the minimum number of rows,
that display when performing searches with very large result sets.
Offers iOS support for iPhones and iPads to browse, search and view
content and to take photos and add them to FileNet Content Manager.

6.4.2 Documentum EMC

EMC has revitalized its content management strategies and products with
Documentum Platform 7, and considerably improves usability, scalability
and a lower TCO. Documentum xCP provides the process management
capabilities to build transactional content management solutions and is
easier and less costly to deploy. EMC is also focusing on the mobile space
a frequent demand from customers.

Documentum content management stack is a set of full function, scalable


product suite that includes all ECM elements such as capture, core
repository, process management, archive and records management and
document composition capabilities.

Documentum is extremely strong in the following verticals life sciences,


energy, Financial Services and Engineering.

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EMC provides cloud content management with Documentum, Documentum


xCP, Captiva and Document Sciences products and EMC Documentum D2
all of which can be deployed on cloud and probably the most mature ECM
Cloud product in the market.

The high costs and complexities for Documentum software and services is
one of the biggest challenges that for customers face particularly the
mid-market.

EMCs strategy in social content management is primarily by way of


Syncplicity integration of SharePoint with Documentum if you need
SharePoint then why Documentum.

Below are details of EMCs products in terms of the functionalities and


products suites; you will notice that many of EMC products are from its
multiple acquisitions:

1. Content Management products of EMC are briefly dealt with below:

ApplicationXtender Integrate information and improve reports


management with instant document capture and information
management.

Digital Asset Management Streamline access and management of


digital media such as videos, images, PowerPoint, and Flash.

Documentum Connector for Microsoft SharePoint Integrate


enterprise content governance and process management into SharePoint
team collaboration.

Documentum D2 Simplify your document life cycle management and


enhance your user experience.

Documentum Interactive Delivery Services (IDS) Automatically


export content and metadata from EMC Documentum Content Server to
a cached repository and effectively manage the web cache environment.

Documentum Mobile Get mobile access to your enterprise content


management to browse rich media, participate in business processes,
and collaborate while on the go.

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Documentum Platform Organize, control, and access vital enterprise


content.

Documentum Services for SAP Archive SAP data and integrate


advanced content and process management into SAP business
applications.

EMC InfoArchive Preserve the value of enterprise data and content to


comply with retention requirements in an easily accessible unified
archive.

My Documentum Empower information access through familiar


applications to leverage enterprise content management services.

SDL Tridon Integrate content and metadata seamlessly with SDL


Tridion and EMC Documentum Content Server for efficient web content
publishing.

Webtop Gain quick access to information of all types and expose the
full range of Documentum services.

2. Process Management Documentum xCP Product that automates


information intensive business processes for better decision making.

3. Capture

Captiva Embeddable Capture Technologies Maximize performance


and ensure consistent functionality for scanners and imaging applications
with support for the Image and Scanner Interface Specification (ISIS)
standard.

Captiva Intelligent Enterprise Capture Solutions Transform paper


from a liability into business advantage by converting your paper, faxes,
and other content into application-ready information.

4. Customer Communications EMCs products suites that handle these


are:

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Document Sciences xPression Documentum Edition Automate the


generation of highly customized and personalized multichannel customer
correspondence within your Documentum environment.

Document Sciences xPression Enterprise Edition Generate highly


customized and personalized multichannel customer communications for
delivery via print, e-mail, web, fax, and mobile device.

Document Sciences xTest Automatically compare print streams to


identify changes and improve document testing saving time,
eliminating errors, and reducing costs.

5. Collaboration: The following products are offered by EMC.

CenterStage Use modern information management throughout the


extended enterprise.

Syncplicity Take advantage of an easy-to-use, cloud-based product for


secure file sync, sharing, and collaboration on any device, anytime,
anywhere.

6. Passive Governance has a whole series of products that provide


functions such as unified archive, compliance and information
governance, information rights management, RM, automatic retention
and disposition of records in compliance with regulations and best
practices, document security controls, with specialized encryption,
access control, and digital shredding.

6.4.3 SharePoint Microsoft

Microsoft established a leadership presence in the ECM market with


SharePoint 2007, that grew into 2010 and the 2013 release. In the past
year, Microsoft SharePoint has considerable market penetration, with
SharePoint Online as its cloud-based Office-365 offering.

Microsofts Key Strengths are Microsoft has built a strong ecosystem


position around SharePoint: many third-party software vendors offer
extensions for SharePoint a great plus for the SMB companies;
SharePoint 2013 has some good features in the areas of embedded

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search and social interactions; SharePoint also provides multiple


deployments options cloud, in-premises and hybrid.

While Microsoft is a great product for all size of users, some of the typical
challenges its users face are getting better usability/interfaces, more
flexible user experience capabilities and successful change management
are concerns of many SharePoint shops; lack of native functionality in
areas such as administration, backup and recovery, workflow, replication,
mobile support and broad usability.

6.4.4 Other Tier-1 ECM Products

1. Perceptive Software
Perceptive Software is a stand-alone software business unit of Lexmark
International, continues to show double-digit market growth organically
and via acquisitions.

The Perceptive Platform provides a foundation for process and content


management that is fast, open, reliable, scalable and secure. Perceptive
manages all forms of content through their entire life cycle, with a suite of
products that include Document management, Video and Rich Media
Management, Electronic Signatures, Records and Information Management,
Document Composition and Perceptive Secure Print with a vendor neutral
architecture. Perceptive also has a Publishing Platform for Retail. Perceptive
provides capabilities to capture and extract data through imaging, e-forms
and intelligent capture technologies and features to search, find, extract,
analyze and use the precise information needed. Discover, design, execute
and improve business processes.

It has augmented its core imaging document repository and workflow


capabilities with advanced recognition capabilities, search technology, BPM
and process analytics, and a cloud-based video content management
platform.

Customers have an array of deployment options to fit their needs:


traditional in-premise, managed, or true cloud.

Perceptive Software has a strong horizontal on accounts payable and


contracts management. At the same time, Perceptive also has excellent
vertical solutions for Education and Healthcare and has created depth

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through its acquisitions of Twistage and Acuo Technologies to bring


some unique assets to its solutions for healthcare and higher education.
The company has grown internationally and deepened its solution focus,
especially in healthcare. Perceptive is strong in the Asia/Pacific region a
note for India.

2. On Base ECM Hyland Software


On Base ECM from Hyland Software is a very good product, that has strong
focus on vertical and horizontal solutions. On Base Case Management
solution can model, design, develop and execute collaborative business
processes be it with documents, data or unstructured information. The
firm has augmented its core offering with the acquisitions of Sire
Technologies, a government-focused software vendor with an On Base
Agenda Management solution and Any Doc a document capture and
recognition technologies provider. On Base has a Mobile solution for those
on the road and without internet.

Unlike the other large Tier-1 products, On Base is very strong in the mid-
market customer segment. On Base has strong presence in large
healthcare enterprises and in higher education and Government. On Base
solutions capture medical records, transcript capture, and board and
committee agenda management as well as accounts payable. On Base
Cloud combines the full ECM functionality of On Base with flexible, scalable
and cost-effective aspects of Cloud deployment and there is functional
parity between Cloud/SaaS and in-premise implementations.

A key differentiator of Hyland is a strong record of application


integration, with its Application Enabler technology to integrate with a wide
variety of ERP and other line-of-business solutions. Hyland also provides
packaged API-level integration to healthcare-specific solutions, such as
Epic and Cerner, and leverages BizTalk to build connectors. With On Base
12 and the newly released OnBase 13, deep integration with Outlook is a
capability. Nearly 80% of On Base functionality can be handled through
Outlook. Several of these solutions are available as mobile applications.

The single major challenge with On Base is its Microsoft-centric solution


on .NET and ASP.NET. This is an inhibitor for non-Microsoft/Java shops.

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3. Open Text
Open Text headquartered in Waterloo, Ontario, Canada, is an enterprise
information management company, extending beyond ECM. Acquisitions
by Open Text have included a variety of companies, most recently Cordys,
a Dutch BPM vendor, and Resonate Knowledge Technologies, a provider of
user experience software.

Open Text ECM solutions has one of the broadest Content Management
features and functionalities within the standard modules Records
Management, Archiving, Capture, E-mail Solutions, Data and Content
Integration, They also have a BPM solution (Metastorm and Global 360 BPM
products) and excellent Discovery Module with Search, Content Analytics,
Open Text Semantic Navigation, Auto-Classification, e-Discovery and Info
Fusion the Discovery Platform for Unified Information Access.

Open Text has cloud implementation in Open Text Cloud with managed
hosted services and collaboration services, Tempo, and messaging services
through Easy Link and Right Fax.

Open Text also has very broad content management product portfolios.
Open Text Cloud and Tempo, its social collaboration and enterprise file sync
and share tools, represent important areas on which ECM customers are
focused today.

Open Text has a reseller partner agreement with SAP providing a strong
sales channel for Open Text. The level of integration and interoperability
between SAP and Open Text products provides a competitive advantage for
Open Text.

The one challenge with Open Text is its proliferation of acquisitions that
have resulted in many overlapping and similar products in areas such as
document management, records management, WCM and BPM. There are
customer issues and concerns over migration path, support and limited
product enhancements for some non-strategic products.

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6.5 TIER-2 ECM PRODUCTS

1. Oracle: Oracles WebCenter Content is the backbone of its ECM


strategy, supplemented by Oracle WebCenter Sites. These content
management tools are complemented by Oracles Portal offerings, as
well as the integration with the Oracle ERP tools. However, Oracle
WebCenter has many critical issues that do not make it extremely
popular with users.

Oracle WebCenter Content users often complain that the software has an
older UI, a lack of fresh enhancements. The UI version released in the July
2013 11.1.1.8 still does not offer Electronic File Sync and Share capabilities
to complement their ECM environment.

Integration of Oracle WebCenter with Oracles software stack including


the rest of the WebCenter portfolio and out-of-the-box integrations with
Oracle E-Business Suite, PeopleSoft, Siebel and Oracle Fusion Applications
provides substantial benefits to Oracle customers.

2. Laserfiche: Laserfiche provides a cost-effective and easy-to-deploy


ECM product suite, for the mid-market, with a focus on document
management, records management, imaging and workflow applications.
It has a fairly good installed base in the government, education and
healthcare markets. Laserfiche has two distinct products for different
markets; the Laserfiche Rio is the one for the large enterprises and
Laserfiche AvanteSMBs. The latest release of Laserfiche 9.0 has an
improved workflow and mobile capabilities.

The strengths of Laserfiche are segment-wise products Laserfiche Rio


and Laserfiche Avante with flexible licensing options. Another advantage
of Laserfiches products are easy to implement and upgrade, low
deployment costs.

The challenges that Laserfiche faces are it has found it difficult to shake
off its origins as a mid-markets product and limited relationship with large
Enterprise Solution providers and integrators.

3. HP: HP has an ECM product through acquisition of Tower Software and


Autonomy. The Autonomy product suite includes capture, process

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automation, records management and governance, documentation and


WCM.

The HP ECM portfolio has large breadth with strong enterprise search and
classification tools in the Intelligent Data Operating Layer (IDOL), WCM,
document management, imaging and workflow. A related product from
then HP stable is the HP Exstream for customer communications
management.

HP also has good offerings in information governance, e-discovery and


litigation support, leveraging the strong search capabilities of Autonomy.

Most of HPs ECM portfolio is acquired considerable effort on technology


refresh remains, simultaneously meeting new demands such as mobile and
cloud.

Many of HPs ECM Suite are loosely integrated today TeamSite and
MediaBin lack deep integration with the core document and records
management offerings and so also the BPM and document management
products. Records management has multiple offerings.

4. SunGard: SunGard is a major Financial Services ISV, provider of


software and technology services for financial services. SunGard iWorks
BPM has a range of content management capabilities, including
document management, imaging, records management and archiving.
It serves as a foundation for insurance solutions, and is used primarily
by financial services providers and health insurers.

SunGards iWorks BPM provides a process-centric platform, that serves as


the product backbone, with content management capabilities to build out
insurance applications.

SunGard also provides a content-centric application, with out-of-the-box


functionalities for financial services and insurance.

While SunGards iWorks BPM and content management products are of


BFSI focussed platform not so much suitable for other industries.
SunGards iWorks BPM does not support most content management
standards such as CMIS for content integration and DoD 5015.2 for records
management.

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5. Objective: Objective version 8.1.7, includes electronic document


management, records management and workflow capabilities with
additional functionalities such as for search and discovery (of Exalead
CloudView), correspondence management and application integration.
Objectives suite of SaaS-based offerings consists of Objective
Collaboration and Consultation, and Objective Connect.

Objective has a portfolio of government-focused applications that are


supported, tuned and deployed directly through its public sector
professional service engagements.

Objective Connect, is a SaaS offering for governments wanting to securely


share content across agencies and a hybrid deployment option facilitated
through Objective Connect Link to Objectives ECM platform and to
SharePoint or to HP Trim for records management.

Objectives core platform enables integration via Common Object Request


Broker Architecture (CORBA), Internet Inter-ORB Protocol (IIOP), Web
services and an application integration add-on called Applink Connector.
Objectives respective products are compliant with standards, such as ISO
15489.1, ISO 15489.2 and ISO 27001, TNA02 (UK) and Victorian
Electronic Records Strategy (VERS; Australia).

One challenge with Objectives ECM platform is high professional services


component required, dependence on implementation partners and difficulty
in upgrading to newer versions or products. For example, though Objective
has upgraded its usability, a disparity still exists between its older core ECM
platform and newer products, such as Connect, Executive or Discover.

The majority of Objectives deployments are in Australia, New Zealand and


the UK Enterprises and other regions require customization.

6. Systemware: Systemware has a product suite with a full complement


of ECM components, including output management, image and capture,
records management, archiving, and workflow. It has some vertical
specific content solutions including cloud-based applications for the
financial services, insurance and healthcare.

Systemware Content Cloud is a new delivery option for customers to


deploy their applications in the cloud. Systemwares Digital Delivery

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Gateway in partnership with Zumboxs Digital Postal Mail and Pitney Bowes
Volly has functionalities for the printed bills, statements and other
documents for distribution to digital mail providers.

Systemwares strength is the highly scalable and fully featured report


management and archiving platform. Systemware has strong industry
solutions in financial services, insurance and healthcare. It has started
providing Systemware Content Cloud, a cloud-based SaaS alternative for
deployment. Systemwares ECM products also have capabilities such as
imaging, workflow and DoD 5015.2-certified records management.

7. Unisys: Unisys with InfoImage v8.2 is amongst the earliest document


imaging and workflow provider. The company that was formerly a
Mainframes major (Univac, Burroughs and Unisys) and competitor to
IBM, is also one of the leading System Integrators.

Its ECM suite addresses the content life cycle from capture to archival. A
major focus for Unisys in recent years has been platform modernization
with the introduction of a mobile client, CMIS support, and most recently a
SaaS strategy and offering.

Unisys has a high level of penetration in the government and financial


services sectors for mission-critical, high-volume transactional content
applications, such as tax revenue processing, employment/unemployment
services and mortgage processing. In this market segment, it has a proven
track record and a loyal customer base.

The global reach and scale of Unisys enable it to support customers around
the globe, including in emerging markets.

Mobile Work Manager provides a fully functional mobile client for Apple
iPads and iPhones, as well as for Android devices. There are native
applications for document capture, process automation and document
access.

Unisys InfoImage focuses mainly on production imaging and workflow use


cases that involve capturing, storing and routing static image documents.
Thus, enterprises with needs beyond these capabilities, especially those
that involve dynamic content or publishing content to a website, will
require add-ons or install Unisys InfoImage SharePoint Connector.

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InfoImage is a Microsoft-centric solution; this may hamper its suitability for


Java shops and organizations with heterogeneous client/server
environments; CMIS support and Web services may be options. Customers
and prospects will need to ensure that they have the appropriate .NET skill
sets.

8. Xerox: Xerox has strengths in SaaS-based transactional content


management. Successful offerings are Xerox Transactional Content
Manager (XTCM), Xerox mortgage services/BlitzDocs and Xerox
litigation services (OmniX, CategoriX and Viewpoint). Xeroxs general
business document platform, Xerox DocuShare, continues to be used
often in departmental use cases. Xerox is building more solutions
leveraging DocuShare and using it as a leverage point in broader fleet
management and MFP contracts.

Xeroxs cloud-based ECM-based applications are widely available in the


mortgage and litigation services. Xeroxs general ECM offerings, DocuShare
and DocuShare CPX targets the mid-size ECM buyers who are looking for
moderately priced ECM capabilities.

Niche ECM Products: Below are a few ECM companies and products
one of which is an Indian company that may be considered as niche
products due to their capabilities and options.

1. Alfresco a niche product, Open Standards: Alfresco has a unique


open-source ECM since 2005. Alfresco remains a market leader in open
standards, including Content Management Interoperability Services
(CMIS) and DotCMIS, WCM, capture, as well as hybrid, cloud and mobile
solutions. Alfresco version 4.1 is available on-premises and in the cloud.
Its architecture offers interoperability with Liferay, Drupal, Joomla,
Google Docs, Jive, Salesforce.com and IBM Connections. Alfresco
supports standards such as CMIS and DotCMIS that allow CMIS-
compliant clients and repositories to access its repository.

Alfresco has been successful in hybrid cloud synchronization synchronize


content and metadata between subscription-based Alfresco Enterprise
deployments and cloud sites. However, its core strength continues to be
the openness of its platform.
Alfresco emphasizes unique value for the mid-size markets with Open
Source and hybrid deployments.

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2. Newgen Software Technologies niche product for Insurance Claims


Processing Newgen Software Technologies, is an Indian ISV,
headquartered in New Delhi, India, with offices in five other locations in
the US, Canada, UK, UAE and Singapore.

Newgen Omni Suite 8.0 has several components, including OmniDocs,


OmniScan, OmniFlow, Records Management System (RMS) and Zapln. It is
a niche product with solutions specifically for Insurance Claims Processing
and Finance and Accounting processes. Newgens middleware-based
product suite gives organizations the flexibility to integrate it with their
infrastructures and support coexistence of platforms.

In 2013, Newgen introduced its ECM and BPM suites as public cloud
offerings and through other business process outsourcing (BPO) data
center providers. Newgen has solution deployments on public cloud
Amazon Web Services (AWS) and private cloud and BPO deployments HP
Cloud Map. Newgen also offers a subset of its solution for the small
enterprises.

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6.6 SUMMARY

In todays business with emphasis on Information Security and


simultaneous need for seamless inter- and intra-company workflow, the
need of securing the company data, documents and all types of information
assets, become as vital and important as the business need of real-time
information sharing and collaboration. In such environment, the role of
Enterprise Content Management is central to the success of business.

A Gartner finding brings out the need for automated ECM solutions in the
following analysis of delays faced by businesses:

A knowledge worker spends anywhere from 15% to 35% of their time


looking for information.

About 25% of enterprise paper documents are misplaced and may never
be located.

After investing strategically in content management, enterprises usually


can save at least half of the time and money now spent on non-
automated document management.

However, as with all Enterprise solutions, right product choice is the key
and this Chapter has provided you with adequate information to get your
arms around selecting the right product for your companys needs.

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6.7 SELF ASSESSMENT QUESTIONS

1. What is Enterprise Content Management?

2. What are the features and components of a typical ECM product


available in the market today?

3. What factors would you have to bring into consideration in choosing an


ECM solution?

4. Summarize the best ECM Product that you think is best suited for your
company.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

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Chapter 7
SOA, MIDDLEWARE AND WORKFLOW
Objectives

After completing the chapter, you will understand:

Concepts of Service Oriented Architectures for a non-technical person.


Middleware and why they are the essential glue in current enterprise IT.
Workflow systems that enable for role based work in organizations.

Structure:

7.1 Introduction
7.2 Concepts of Software Architecture
7.3 Service Oriented Architectures
7.3.1 Key Components of SOA
7.3.2 Enterprise Service Bus
7.3.3 SOA Reference Architecture
7.3.4 SOA Governance
7.4 Middleware
7.5 Workflow Systems
7.6 Products
7.6.1 SOA and Middleware Products
7.6.2 Workflow Products
7.7 Summary
7.8 Self Assessment Questions

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7.1 INTRODUCTION

In this Chapter, we will cover three core components of any Enterprise IT


Systems Middleware, Workflow Systems and Service Oriented
Architectures. How are they important?

Middleware is the essential glue that knits the various components or


systems in an Enterprise IT solution.

Workflow Systems provide that essential process binding that enable an


orderly work environment in a network of systems.

Service Oriented Architecture is a very current concept of IT Architecture,


that enables organizations share business logic and data among multiple
applications and usage modes. SOA has made it possible for organizations
to change and respond quickly and cost-effectively to changing market
conditions.

Unlike the previous Enterprise Solutions described in the previous chapters,


all the three topics in this chapter are by nature very technical; however, I
have abridged these topics in a language that management students can
appreciate and utilize from a business point of view.

However, before we get into the SOA and Workflow, I will briefly introduce
you to concepts of Software Architecture.

7.2 CONCEPTS OF SOFTWARE ARCHITECTURE

Most of us have commonly heard of Architects and Architecture used in the


context of Civil Engineering; if you have a house to be built or the
apartment that you plan to buy from a builder, one of the key things that
you look at is who is the Architect? From common sense, you have come
to believe that the Architect is the key to giving you a good house or an
apartment or for that matter much larger things like the Worli Sea Link. By
an extension of that logic, we could very well assume that anything that is
being conceptualized, designed and built requires an Architect and
Architecture at the conceptual stage and so too in building of small and
large software applications.

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Software architecture is a high level structure of a software application.


And architecting a software system, involves creating such a high level
structure and the documentation of this structure. It is the process of
defining a structured solution that meets all the business and technical, at
the same time optimizing performance and security requirements.

Developing software architecture covers all major decisions about the


organization of the software, technology selection, interfaces, definitions
and the definition of the subsystems. The architect also ensures
functionality, usability, performance and reuse, and makes the decisions on
technology constraints and trade-offs. Essentially, the architect ensures the
implementation of a design that conforms to a pattern that has been
standardized by the company.

Why is software architecture essential? Like any building or large structure,


software must also be designed and developed on a solid foundation.
Failing to consider key scenarios, or to design for commonly known
problems, or the long-term requirements or of the software standards of
the company, will put the application at risk. While many available tools
assist simplifying the task of application development, they do not replace
the early conceptualization of design based on your standards and specific
requirements. The risks exposed by poor architecture include software that
is unstable or unable to support existing, or future business requirements,
or difficult to deploy or manage.

Following are a few principles good software architecture work:

The applications should be built for change rather than built to last.
Should build in adequate flexibility that enables the application to change
over time to address new requirements.

Formalize a model that has the capability to iterate and adapt the design
easily.

Identify key engineering decisions right and right in the beginning and
use the information to make the key engineering decisions so that the
design is more flexible and less likely to be broken by changes.

Use of models and visualizations as a communication and collaboration


tool. Use design tools, modelling systems such as Unified Modelling

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Language (UML), and visualizations where appropriate to help you


capture requirements and architectural and design decisions, and to
analyze their impact and to share your design efficiently with all the
stakeholders. Efficient communication of the design, the decisions you
make, and ongoing changes to the design, is critical to good architecture.

The objective of good application architecture is the bridge between


business requirements and technical requirements by understanding use
cases and finding ways to implement these use cases in the software. The
goal of architecture should be to identify the requirements that affect the
structure of the application. A good design is sufficiently flexible to be able
to handle the natural drift that will occur over time in hardware and
software technology and user requirements. An architect must consider the
overall effect of design decisions, the inherent trade-offs between quality
attributes (such as performance and security), and the trade-offs required
to address user, system, and business requirements. Good architecture
reduces the business risks associated with building a technical solution. So,
the objectives of a good architecture are:

Best-case requirements
Long-term organizational focus
Reuse considerations
Bring in as much of the business wish list as possible
Anticipate all scenarios and incorporate them.

How does Architecture differ from software design?

Architecture deals at the cross-domain, cross-technology level must


cover a wider scope and handle a significant amount of the uncertain.
Architecture sets a reference baseline for designers to work within.
Essential characteristics of architecture are its high-level (at a level
above HLD the HLD contains only the technology designers view),
architecture realizes all the use case scenarios, and architecture
presents a systemic view to all stakeholders.
Architectures can be generic and technology agnostic.

While Architecture faces towards strategy, structure and purpose the


abstract, the designer deals with the practice and implementation the
definitive.

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In spite of and despite architectures and architects, most mega


organizations have to deal with a proliferation of technologies that dont
co-exist. While an organization may declare itself a Java shop, it has to
face the challenge of having many of its business systems in Microsoft
technologies or vice versa. To overcome the complexities of decision
making in dealing with diverse technologies involved in buy-make of new
softwares, CIOs have started having reference architectures defined for
their organizations. A Reference Architecture, is a blueprint or set of
documents which the IT Managers and designers and the architects, may
refer for technology preferences, directions and best practices it is the
recommended architecture to be used for selecting the best
implementation.

7.3 SERVICE ORIENTED ARCHITECTURES

Service Oriented Architecture (SOA) is a way of designing a software


system and its surrounding environment to provide services either to end-
user applications, to executable business processes or to other services
through published and discoverable service interfaces. Another way of
stating Service Oriented Architecture (SOA), is a way of designing,
developing, deploying and managing systems, in which:

Services provide reusable business functionality via well-defined


interfaces.

There is a clear separation between service interface and service


implementation.

Service consumers are built using functionality from available services.

An SOA infrastructure enables discovery, composition, and invocation of


services.

Protocols are predominantly, but not exclusively, message-based


document exchanges.

From a purely technology perspective, SOA is just an architectural style or


a design paradigm; it is neither a System Architecture nor a complete
System by itself. Best described, Systems that are built, or based on the

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SOA characteristics as bulleted above may be called service oriented


systems.

What are the drivers for SOA? In large organizations, the following types of
organizational, business, and technology changes drive a desire to reap the
benefits of SOA:

Integration with legacy systems


Corporate mergers
Realignment of responsibilities through business reorganizations
Changing business partnerships (e.g., relationships with suppliers and
customers)
Modernization of obsolete systems for financial, functional, or technical
reasons
Acquisition or decommission of software products
Socio-political forces related to or independent of the drivers cited
above.

The situations lead to SOA because they involve significant application


integration efforts. When an integrated application changes, it frequently
leads to risky and costly modifications to other applications. As system
interconnections become more pervasive and the pace of business and
process changes increases, the inability to integrate efficiently can cause
the failure of a business. SOA is seemingly ideal for these situations.

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As with all IT implementations, SOA implementations too, require the


support of various key stakeholders in the organization. However, buy-in
and involvement of the following additional Stakeholders is required in SOA
Implementations:

Service usage regulators: Their main responsibilities include creating


policies for service usage, such as specifying that services must conform
to certain standards, and possibly placing constraints on the services that
can be used (e.g., specifying trusted sources for services). Another
responsibility might be crafting service level agreements between
organizations.

Developers of service users: If the system offers services to external


service user applications, the architects or developers who are
responsible for these external clients should also be invited. These
external developers may provide input on application program interface
(API) design and desired quality of service (e.g., availability).

External developers of service providers: If the system is going to


access external services, the architects or developers who are
responsible for those external services, should also participate in the
architecture evaluation. They may contribute requirements for interaction
with their services as well as knowledge of qualities and limitations of
their systems.

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Service Discovery
Service discovery is the mechanism by which service consumers become
aware of available services and their capabilities. Service discovery starts
with a one-time operation in which the service provider publishes its
service, in some form of service registry. The form of registry can range
from a simple web page, to a robust implementation with advanced query
capabilities. The service registry is then queried at design time by the
developers of service consumers, for services with desired capabilities.
Even though there is much discussion about runtime discovery of services,
the reality is that current technologies do not support runtime discovery.
The word dynamic is often used to describe the binding between service
consumers and services. There are various degrees of dynamism. At the
lower end of the spectrum, is late binding of a proxy service to a specific
service instance, that depends on user context or load balancing policies.
At the higher end of the spectrum is fully dynamic binding, in which service
consumers are capable of querying service registries at runtime, selecting
the best service from the list of returned services, and invoking the
selected serviceall at runtime, and without human intervention. Late

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binding is a common, out-of-the-box feature, of many commercial and


open-source SOA infrastructures. Fully dynamic binding, on the other
hand, requires semantically described services, that use an ontology that is
shared between service consumers and service providers. Semantic Web
Services represent an active area of research, as well as an unsolved
problem that is not yet ready for large-scale deployment.

Service Composition
Service composition is the mechanism, by which services are combined to
fulfill a business or operational process. Service composition can be done
fully within the service consumer, but there is also considerable support for
service composition within SOA infrastructures, specifically in Business
Process Modelling (BPM) infrastructure components. Typical BPM
components enable a service consumer developer, to graphically compose
services available in a registry and then generate the appropriate code for
the orchestration.

Service Endpoint
Service Endpoint is the URL where your service can be accessed by a client
application. The same web service can have multiple endpoints for
example, in order to make it available using different protocols. The
endpoint is a connection point where HTML files or active server pages are
exposed. Endpoints provide information needed to address a Web service
endpoint. The endpoint provides a reference or specification, that is used
to define a group or family of message, addressing properties and give
end-to-end message characteristics, such as references for the source and
destination of endpoints, and the identity of messages, to allow for uniform
addressing of independent messages. The endpoint can be a PC, PDA, or
point-of-sale terminal.

Service Invocation
Service invocation is the mechanism by which services are invoked by
service consumers at runtime. There are two basic invocation patterns:
point-to-point and mediated. In the point-to-point invocation pattern,
service consumers directly invoke services over a network. Point-to-point is
most acceptable in environments that are small in number of services and
consumers, homogeneous in implementation technologies, and have low
pace of change (business and technology). In the mediated pattern,
service consumers invoke services via a middleware component such as an
Enterprise Service Bus (ESB). The mediated pattern is most acceptable in

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environments that are large in number of services and consumers,


technologically diverse and rapidly changing.

Web Services
Web Services is any piece of software that uses standard Web interfaces to
communicate with other software containing Web service interfaces the
distinguishing feature is use of common interfaces. It is the standardization
of interfaces that enables Web services to talk to each other and provide a
framework for all people, anywhere to communicate with each other
through Web services.

While Web Services is just a technology pattern for implementing service


oriented systems, it is often confused with or equated to SOA as it is the
most common technology pattern.

Earlier, Web Services was implemented using the WS* stack. However, in
recent years, REST has emerged as an alternative and getting widely
adopted.

Just as to be aware of standard technology terminologies Service


interfaces are described, using Web Services Description Language
(WSDL); Data is transmitted using SOAP over HTTP; service consumers
discover services and information on how to bind to them through
technologies such as UDDI-based registries, database based service
registries, web pages, or wikis.

It is suffice to know that in a traditional request-response


implementation of WS* Web Services, a service request is formed as an
XML document according to the WSDL documentation of the service and
bundled in a SOAP message that is transported via HTTP.

Following are the Web Services standards; this is purely to get you familiar
with the names and its purposes:

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Transport: HTTP stable


Encoding: XML stable
Message Format: SOAP stable
Description: WSDL stable
Discovery: UDDI yet to stabilize
Orchestration and Choreography: WSCL, WSCI, BPEL, WS-Coordination,
BPML, BPSS all are yet to stabilize.

7.3.2 Enterprise Service Bus (ESB)

An Enterprise Service Bus (ESB) is a middleware product that connects


and mediates all communications and interactions between service
consumers and services, usually based on standards.

A technical definition of ESB is an ESB is a middleware solution, that


enables interoperability among heterogeneous environments using a
service-oriented model, and it represents the consolidation of the EAI and
application server product categories.

In the SOA space, this brokering software is usually called the ESB. The
more classical term is enterprise application integration (EAI) software.
Each application is designed to interact with the ESB, allowing it to manage
the routing and transformation of messages between applications.

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Though an ESB is strictly not required to implement a service-oriented


system, it is useful in large, heterogeneous service oriented environments,
because it reduces the complexity of connecting services with their
consumers, by implementing the VETRO pattern Validate, Enrich,
Transform, Route and Operate. Large corporations with complex IT
architecture have multiple ESBs connected to each other as a federation
and provide enterprise-wide services with each ESB having its own set of
rules and policies. ESB loosely connects different systems and enables
reuse of existing assets amongst each other.

The specific capabilities, features, and standards supported by ESBs, as


well as their product architectures, can vary significantly among product
implementations. Yet there is some commonality across ESB products.
Most ESBs exhibit the following features:

Service oriented middleware: ESBs model application endpoints as


services.

Standards compliance: ESBs are more standards compliant than


previous generations of EAI technology, and in particular, they all support
multi-vendor interoperability using the WSF.

Virtualization of service agents: ESBs provide service containers that


virtualize a service and insulate the application code from its protocols,
invocation methods, message exchange patterns (MEPs), quality of
service (QoS) requirements, and other infrastructure concerns.

The term ESB is used interchangeably to refer to an architectural pattern


and a product. While there is not an established industry standard that
defines what constitutes an ESB, vendors and implementers have tried to
identify some common capabilities that are outlined below:

ESBs provide fundamental support for Web services.

The ESB can route messages to one or more applications. Message


routing that the ESB controls may be fixed application-to-application,
dynamic based on system availability or load balancing, distribution from
publisher to subscribers and message aggregation.

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The ESB can transform data, including conversion of data format from
legacy application to specific, fixed field record file format to a predefined
XML schema business content for example, a part number in an ERP,
to a different number format in Web-based order entry system and
message multiplicity.

The ESB functionality can be distributed across multiple servers, which


are centrally managed. Hub-and-spoke solutions often mandate a single
server.

The ESB provides support for use of proprietary or custom adapters to


connect to legacy and commercial off-the-shelf (COTS) applications.

ESB products can support authentication, authorization, and encryption


using multiple security standards.

Primary architecture quality attributes that are addressed by an ESB


include interoperability, modifiability, extensibility.

Beyond the above, ESBs are vastly different and a diverse set of products.

Benefits of Service Oriented Architectures are:

Supports non-intrusive reuse of software components in ways not


specifically predicted at development time

Loose coupling among interacting software agents

A mechanism for integrating software components on dissimilar


platforms

Can enable easier insourced/outsourced development by breaking


systems down into smaller chunks.

SOA is the hottest technology topic in the IT industry, being discussed,


consulted and sold by outsourcers, vendors and OEMs and all this because,
SOA is the light at the end of the modernization tunnel, for all existing
heavy weight systems that have lived their use.

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7.3.3 SOA Reference Architecture

Why does an enterprise need an SOA or Architecture of any other kind?

The directing function of an enterprise the board of directors of a


commercial company, or the top-level management of a division or
government department, for example sets objectives for the enterprise,
and decides how it should operate in order to achieve them. A clearly
articulated architecture describes the desired enterprise organization and
manner of operation. By doing so, it provides:

A definition of the changes that should be implemented to achieve this


organization

A basis for control and governance of its ongoing operation.

An Enterprise Architecture also provides a third benefit. Enterprises change


over time; they combine and split, as in commercial mergers and spin-offs,
or government department reorganizations. It is easier to combine an
enterprise with another, or to split it into component parts, when it has a
clearly-defined architecture. This brings significant cost savings, and can
increase the value of a commercial enterprise.

Enterprise architecture, in its widest sense, includes much more than IT. It
covers business operations, finance, people, and buildings in addition to
technology, and it covers technologies other than IT, such as for
manufacturing or transport. The enterprise architect must understand
these areas, at least well enough to supervise architects that specialize in
them. The IT architect must be able to work in teams with such specialists.

A Service Oriented Architecture (SOA) facilitates the creation of flexible,


reusable assets for enabling end-to-end business solutions. Increasingly,
companies are adopting the principles and techniques associated with SOA
for different types of projects in different industries worldwide.

There are considerable benefits that SOA brings to business, such as cost
reduction, agility to change, increasing time-to-market and hence
competitive advantage, consolidation and alignment.

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At the same time, there are also considerable challenges and also
organizations cannot just strip off its existing IT systems and step into an
SOA overnight migration to SOA brings considerable risks too.

The significant challenges in creating an SOA solution need to be


recognized and addressed correct service identification, selection, design,
solution element selection and combination, modelling of services,
governance, interoperability, and the ability to identify different
components key to the effective design, usage, and evolution of SOA. For
example, from a technical perspective, the architect needs to answer
questions such as:

What are the considerations and criteria for producing an SOA solution?
How can an SOA solution be organized as an architectural framework
with interconnected architectures and transformation capabilities?
How can an SOA solution be designed in a manner that maximizes asset
reuse?
How can automated tools take the guesswork out of architecture
validation and capacity planning?

The usage of the SOA Reference Architecture (SOA RA) is a key enabler for
the achievement of the value propositions of an SOA. Additionally, it
provides insights, patterns, and the building blocks for integrating
fundamental elements of an SOA into a solution or enterprise architecture.

Informally, the aim of the SOA RA is to answer some of the key questions
and issues encountered by architects, including but not restricted to
common questions such as:

What are the aspects, building blocks, and layers of an SOA that I need
to consider in designing solutions, establishing enterprise architecture
guidelines, or assessing an architecture based on service oriented
principles?

What are the building blocks I need to include in each layer of my


solution or standardize as part of enterprise architecture?

What are some of the key architectural decisions I need to make when
designing a solution, or assessing an architecture that is based on service
oriented principles?

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How do I increase my chances of gaining benefit from using SOA by


taking into account key layers and building blocks with which I may
initially be unfamiliar as our company makes it journey through higher
levels of maturity?

Which roles in a project would benefit from using these principles and
guidelines?

The SOA RA is to be used as a blueprint and includes templates and


guidelines for enterprise and solution architects as well as software
engineering roles within the software development life cycle. These
facilitate and ultimately enable automation and streamlining the process of
modelling and documenting the architectural layers, the capabilities and
the Architecture Building Blocks (ABB) within them and architectural and
design decisions that contribute to the creation of an SOA. It is intended to
support an organization in making a success of adopting SOA.

7.3.4 SOA Governance

A MIT definition of IT Governance states as specifying the decision, rights


and accountability framework to encourage desirable behaviour in the use
of IT. In other words, IT managers must use decisions, processes, and
policies to encourage the behaviour that contributes to success. The IT
Governance Institute expands this definition to include leadership and
organizational structures and processes that ensure that the organizations
IT sustains and extends the organizations strategies and objectives.

What is Service Oriented Architecture Governance and what is the context


of SOA Governance? SOA governance is an often misunderstood term.
Some people use the term SOA Governance to mean service life cycle
governance that is, governing the life cycle of services from creation
through deployment. Others take it to mean applying runtime policies to
services.

Why is SOA Governance important? SOA is one philosophy or framework


within enterprise architecture (EA), the goals and objectives of which are
alignment with the business and business goals. Further, SOA is
increasingly a typically and a significant part of Enterprise Architecture and
has implications for key aspects of Enterprise Architecture Business

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Architecture, Application Architecture, Information Architecture and


Technical Architecture.

Like all governance models, Governance with SOA should also be about
delivering the objectives of your business and SOA. It must link SOA
investments to business goals and initiatives mitigate the risks associated
with SOA, and fit into the context of an organizations overall IT
Governance framework.

One thing is certain, that is the lack of working governance arrangements


will be the most common reason for the failure of SOA projects (0.8
probability). Conversely, companies that have established governance to
help individuals make good decisions within the context of the problem
space, have matured their SOAs successfully. These companies have also
achieved an effective layering of SOA capabilities in areas such as
architecture, technology infrastructure, operations, information,
governance, people and organizational structure, portfolios, project
execution, and finance.

Governance and a roadmap for SOA allow companies to begin the SOA
journey and manage the transformation to SOA by building on step-by-step
and finally delivering the benefits expected from SOA service reuse,
improved integration, interoperability and business agility. Governance is a
significant part of that journey.

In the case of SOA adoption, SOA Governance can be defined as the


interaction between policies (what), decision makers (who), and processes
(how) in order to ensure SOA success.

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SOA Governance simply implies that you need to have a SOA strategy,
ensure that its aligned with where your business is going and a concrete
objective of what you expect from your SOA investments. In order to
deliver on these expectations and as part of your SOA strategy, you need a
plan that is referred to as the SOA Roadmap, which outlines the projects to
be implemented with SOA and the capabilities that need to be put into
place over a period of time (for example, two to five years), to ensure that
you deliver on your business and SOA strategy.

By incrementally building the required capabilities over a period of time,


you can increase your SOA maturity thereby enabling you to deliver more
projects in a more efficient and change-resilient way.

To ensure SOA success, you should enact policies and supporting processes
that support the delivery of the SOA Roadmap. You should communicate
them widely, and then monitor their implementation and make
adjustments as you go. This is the essence of governance with SOA
enacting policies and procedures to ensure the timely and appropriate
execution of your SOA Roadmap.

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7.4 MIDDLEWARE

Middleware are systems that act as the software glue that helps
programs and databases running on different computers work together.

It is the software infrastructure that provides core services such as


concurrency, transactions, threading, messaging and also security.
Middleware is essential to the SOA concept and the prime mover behind
the high availability applications. Middleware includes Web servers,
application servers, content management systems, and similar tools that
support application development and delivery and integral to systems
based on XML (Extensible Markup Language), SOAP (Simple Object Access
Protocol), Web services, SOA, Web 2.0 infrastructure and LDAP.

Middleware are essential in logically distributed environments when


programs or databases are running on the same computer or in a
physically distributed environment. The physically distributed environments
are those where programs or databases are spread across two or more
computers.

In such large complex and distributed environments, the distributed


middleware may be categorized as the runtime system software that
directly enables application-level interactions among programs in a
distributed computing environment. By system software, it is meant that
the software that is positioned between an application program and lower-
level operating system, data management and networking services. The
middleware that we are dealing with are only those that work at
application-level interactions and transfer business data about real things
(not technical computer or computer housekeeping data) to or from the
application programs.

Middleware has emerged as a critical second level of the enterprise IT


infrastructure. The need for middleware stems from growth in the number
of applications, in the customizations within those applications and in the
number of locations in our environments. These and other factors now
require that a set of core data and services be moved from their multiple
instances into a centralized institutional offering. This central provision of
service eases application development, increases robustness, assists data
management, and provides overall operating efficiencies.

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A brief study of the taxonomy of middleware functionalities, how do


middleware programs perform their tasks and the functionality in the
middleware that enables application-level interactions among programs in
a distributed computing environment will complete this section.

Basic Middleware is one that operates within a single domain or a single


application system or a set of interrelated applications/systems where all
components have been developed under a common design guideline from a
single architecture. These are usually capable of meeting all of the
middleware requirements of that domain and its applications. The
applications may be spread across many different locations with
heterogeneous hardware and operating systems and running over the
Internet. The environment has a consistent information model the
message formats, method signatures, protocols and data semantics
generally agree. Basic middleware, are generally intra-enterprise in scope
with the exception of B2B applications.

Application Middlewares includes middleware that fit into specific types of


application functions such as Data Access, Web-based, Real-time,
Desktop, Specialty work specifically with an application.

Communication Middleware is computer software that enables two


separate software components, processes and/or applications to reliably
exchange information and messages between application systems and
trading partners. It is software that supports a protocol for transmitting
messages or data between two points as well as a System Programming
Interface (SPI) to invoke the communication service. More advanced
communication middleware such as MOM (message oriented middleware)
provides for the safe and reliable delivery of messages. The Protocols and
SPIs in communication middleware may be proprietary or industry
standard.

Communication middleware is available in the form of stand-alone


communication middleware products such as MOM, and also often bundled
within other middleware products such as application servers, integration
suites, enterprise service buses, application platform suites, Web services
management software and transaction delivery networks.

Below are a few important forms of communication middleware


functionality.

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Web-based Services are those communications where the interface proxy


for the Communication Middleware listens or speaks to the Internet using
a Uniform Resource Identifier (URI) and common Internet protocols such
as HTTP/SMTP and is structured as a service in line with SOA principles.
Typically, the message encoding in these transmissions is also based on
Internet standards, such as HTML or XML.

Web Services are Web-based services that use any one or more of three
related XML-based standards including SOAP, Web Services Description
Language (WSDL) or Universal Description, Discovery and Integration
(UDDI). The initial intent of Web Services was for HTTP-based access to
applications. However, Web services can be run over other, non-HTTP
transports, such as those implemented in MOM or e-mail systems (SMTP).
However, not all Web services (software using one or more of the Web
services standards) will use Internet protocols. However, well-designed
Web services should use either of SOA or event-driven architecture (EDA)
rather than being monolithic in design.

SOAP is a simple wire protocol for inter-program communication.


WSDL is an interface-definition syntax.
UDDI defines how a directory is used to register Web services.

Integration Middleware provides the connections between


independently developed application systems be they running on the
same hardware and using the same software technologies. Integration
middleware offers features that help reconcile the technical and application
design differences that inevitably occur in a heterogeneous environment.
Integration middleware may be intra-enterprise as in application-to-
application (A2A) integration or inter-enterprise for B2B. Each type of
integration middleware has different communication protocols or ways of
operating with other software. They are:

Procedure Oriented Middlewares


Object oriented Middlewares
Message Oriented Middlewares, and a few others.

Adapters are a combination of design tools and runtime software that act
as glue to link applications, which are considered sources or targets to
other applications or other integration middleware. When interfacing with a
source or target application, an adapter generally deals with a group of

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touchpoints one or more entry/exit points, collectively called an interface.


There are Technical and Application Adapters and Thick and Thin Adapters.
Thick Adapters can perform a variety of functions such as recognizing
events, collecting and transforming data, and exchanging data with
platform, integration suite or other middleware. Thin Adapters may only
wrap a native application interface. Adapters can also handle exception
conditions. Adapters are generally bundled with integration middleware
products such as ESBs, integration suites or portal servers or offered as a
stand-alone product such as an adapter suite.

Business Process Management (BPM) is a general term to describe


the set of services and tools that provide for explicit process management
process analysis, definition, execution, monitoring and administration
including support for human and application-level interaction. BPM has
emerged from many sources workflow, applications, collaborative tools,
integration suites, Web integration servers, application servers,
development tools, rule engines and commerce offerings.

BPM leverages tools to analyze and model processes, using a graphical


process designer targeted for business analysts who extract the process
flow and develop new business process flows. A runtime execution engine
executes the defined process flow. As the process flow is executed,
applications such as legacy, packaged, external B2B and Web services may
be invoked as also tasks that humans have to complete. The runtime
environment maintains the status of each process instance and monitored
and administered. Post-completion analysis is also possible, as the state
data is archived for business intelligence potential.

Business process managers track and direct each instance of a business


process, such as each individual order or medical insurance claim through
the life cycle. BPM maintains context information.

BPM may actually be part of workflow systems known as business-


ware, enterprise work management systems and business process
automation managers. BPM may be a feature in a larger product or it may
be the primary role of a particular product. Obvious product categories that
include business process managers include integration suites and business
process managers, but BPM is also found in other product categories such
as application platform suites, packaged integrating process offerings,
portal products and Web application servers.

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Business Rule Engines (BRE) in its simplest form, takes the essence
of business or technical rules and records them in an easy-to-understand
and easy-to-change format to allow for fast time to implement changes of
software behaviour that affect business and technical outcomes. The
complex forms can support goal-directed flows, point to probable outcomes
and suggest patterns in decision making.

Some form of BRE can be found in several product categories. BPM


products also leverage some form of rule engine to manage business
processes. General-purpose BREs that can implement a wide range of
business logic are also available as stand-alone products.

Business Activity Monitoring is a software product that aids in


monitoring of business activities implemented in a computer system. BAM
products provide information about activities of customers and partners in
real-time. The business activities monitored may be a business process
orchestrated by a BPM software or a process spanning multiple systems
and applications. BAM is an enterprise solution primarily intended to
provide a real-time summary of business activities to operations managers
and upper management.

The primary objective is to provide real-time information about the status


and results of various operations, processes, and transactions and helps
enterprises to make informed decisions and resolve issues.

A key feature of BAM solutions is Dashboards that present KPI information.


This can also be used to detect and act on impending problems. BAM
solutions also provide trouble notifications and limited automated issue
resolution and correct and restart failed processes.

Data and events collected, transformed, routed and transported by


integration middleware, MOM and other mechanisms can supply input to
BAM event management and presentation tools. Products that support
business event management include, of course, stand-alone business event
managers, but this functionality is also found in BAM tools and integration
suites.

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7.5 WORKFLOW SYSTEMS

Workflow can be described simply as the movement of documents and


tasks through a business process. Workflow can be a sequential
progression of work activities or a complex set of processes each taking
place concurrently, eventually impacting each other according to a set of
rules, routes, and roles.

What is a Process?

A process consists of a number of tasks that need to be carried out and a


set of conditions that determine the order of the task.

A task is a logical unit of work that is carried out as a single whole by one
resource.

Workflow Management is the automation of a business process, in whole or


part, during which documents, information or tasks are passed from one
participant to another for action or activities, according to a set of
procedural rules. A participant may be a person or an automated process
or a local or in a separate remote organization.

Its goal is to manage the flow of work such that the work is done at the
right time by the proper person. And, Workflow Management Systems are
software packages that can be used to support the definition, management
and execution of workflow processes.

A number of process modelling techniques are available to define the


detailed routing and processing requirements of a typical workflow.

Workflow Management Systems allow organizations to define and control


the various activities associated with a business process. In addition, many
management systems also allow a business the opportunity to measure
and analyze the execution of the process so that continuous improvements
can be made. Such improvements may be short-term (such as reallocation
of tasks to better balance the workload at any point in time) or long-term,
for example redefining portions of the workflow process to avoid
bottlenecks in the future. Most workflow systems also integrate with other
systems used by the organization document management systems,
databases, e-mail, office automation products, Geographic Information

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Systems, production applications, etc. This integration provides structure


to a process which employs a number of otherwise independent systems. It
can also provide a method such as a project folder, for organizing
documents from diverse sources.

!
Listed below are some typical features associated with many Workflow
Management Systems.

Process Definition Tool: A graphical or textual tool for defining the


business process. Each activity within the process is associated with a
person or a computer application. Rules are created to determine how
the activities progress across the workflow and which controls are in
place to govern each activity. Some workflow systems allow dynamic
changes to the business process by selected people with administrative
clearance.

Simulation, Prototyping and Piloting: Some systems allow workflow


simulation or create prototype and/or pilot versions of a particular
workflow so that it can be tried and tested on a limited basis before it
goes into production.

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Task Initiation and Control: The business process defined above is


initiated and the appropriate human and IT resources are scheduled and/
or engaged to complete each activity as the process progresses.

Rules-based Decision Making: Rules are created for each step to


determine how workflow-related data is to be processed, routed, tracked,
and controlled. As an example, one rule might generate e-mail
notifications when a condition has been met. Another rule might
implement conditional routing of documents and tasks based on the
content of fields. Still another might invoke a particular application to
view data.

Document Routing: In simple systems, this might be accomplished by


passing a file or folder from one recipient to another (e.g., an e-mail
attachment). In more sophisticated systems, it would be accomplished
by checking the documents in and out of a central repository. Both
systems might allow for redlining of the documents so that each person
in the process can add their own comments without affecting the original
document.

Invocation of Applications to View and Manipulate Data: Word


processors, spreadsheets, GIS systems, production applications, etc. can
be invoked to allow workers to create, update, and view data and
documents.

Worklists: These allow each worker to quickly identify their current


tasks along with such things as due date, goal date, priority, etc. In some
systems, anticipated workload can be displayed as well. These systems
analyze where jobs are in the workflow and how long each step should
take, and then estimate when various tasks will reach an individuals
desk.

Task Automation: Computerized tasks can be automatically invoked.


This might include such things as letter writing, email notices, or
execution of production applications. Task automation often requires
customization of the basic workflow product.

Event Notification: Staff and/or managers can be notified when certain


milestones occur, when workload increases, etc.

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Distribution (Routing) Lists for Messages/Mail: Distribution lists can


be created for sending ad-hoc messages among the staff.

Process Monitoring: The system can provide valuable information on


current workload, future workload, bottlenecks (current or potential),
turnaround time, missed deadlines, etc.

Access to Information over the World Wide Web: Some systems


provide Web interfacing modules in order to provide workflow information
to remote customers, suppliers, collaborators, or staff.

Tracking and Logging of Activities: Information about each step can


be logged.

Administration and Security: A number of functions are usually


provided to identify the participants and their respective privileges as
well as to administer routines associated with any application (e.g., file
back-ups, archiving of logs, etc.).

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What are the Benefits of Workflow Management Systems?

Workflow automation has many direct and tangible benefits to an


organization. They are always visible to the customer and to the internal
users and most often result from improvements to people efficiencies,
though it may be as a result of a process improvement. Below are bulleted
some of the benefits of WMS implementations:

Complex yet simple processes can be automatically coordinated


Avoidance of errors and missed deadlines
Accurate dispatches and billing
Task ownership is defined and fixed
Improved cycle time
Automatic archiving of all processes (documentation)
Increased transparency
Reduced communication costs
Improved management
Independence from employee absence
Increased flexibility (in/outsourcing)

Business Process Execution Language (BPEL)

BPEL is a standard used to describe workflow oriented business processes.


A BPEL orchestration flow defines a business process through rules for
coordinating the flow of data, interfaces to services (typically Web services)
that the process exposes and uses, and provisions for handling exception
conditions.

Around the BPEL standard, vendors have created BPEL tools that enable
non-technical business programmers to devise workflows visually. Once
interface descriptions for the participating services are in place, a BPEL tool
can create BPEL code that describes the workflow.

The BPEL language is XML-based and has primitives such as receive,


reply, throw, and wait. The BPEL code is then posted to a BPEL engine
(also called BPEL server) that runs on the application server. When the
event that triggers the workflow happens, the BPEL engine coordinates the
invocation of the services using the BPEL code as a script.

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Capabilities typically provided within a BPEL orchestration implementation


include the following types of processing:

Business Process flow patterns of documents and service interactions.


Operations that are part of a BPEL process flow may include:
Calling services in a serial sequence
Calling separate services in parallel and waiting for responses before

proceeding in a flow
Issuing asynchronous service call and correlating a separate service

call-back
Wait for a period of time for a service call response.

Human-workflow-specific and business-process-specific interaction


patterns. Examples include:
Work Queue Management job prioritization, load balancing,

automated reassignment
Dual control also known as double-check or four-eyes approval

workflow processes. For example, in a procurement system two levels


of management may be required for approval of Invoice payments over
a certain value.

Business process error handling, example scenarios include:


Message delivery expiration
Synchronous retry or abort upon failure
Asynchronous retry compensating transaction upon failure
Notification and heuristic resolution processes upon failure.

Currently, many SOA systems that implement business workflows are


custom applications or are based on proprietary products. Medium to large
SOA designs rely on a BPEL engine for synchronizing internally and
externally facing business processes and service connections.

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7.6 PRODUCTS

7.6.1 SOA and Middleware Products

As you will now have understood that both SOA and Middlewares are
basically application integration strategies the ESB can very easily fit into
either a SOA or a Middleware discussion.
So, we will discuss software products and vendors in space together as
they go together.

Generally, enterprises need application integration functionality that


supports a variety of integration patterns using a broad spectrum of
approaches from systematic to adaptive accordingly, this discussion will
look at vendors that address such a wide range of integration use cases.
However, we will only deal with in-premise integration technologies.

Selection of products has to be based on three Patterns of Application


Integration patterns:

Data consistency To make data across all applications consistent so


that different applications integrated can update their databases with the
new data

Multi-step process Multi-step process integration involves supporting


multiple styles of business integration, including system-to-system,
collaborative, document-centric and administrative

Composite application When examining the deployment of the


application, users will find components, both business logic and data,
that are part of existing production applications

Initially, these integration patterns were applied for application-to-


application (A2A) integration and with applications of trading partners
(B2B). However, today, we have to deal with a broader range of application
integration projects:

Synchronizing data in SaaS applications with in-premise applications


for example, synchronizing customer data in a cloud-based CRM
application with customer information in an in-premise ERP system

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Extending data in the in-premise applications with data obtained from


operational technologies and the Internet of Things (IoT) to meet a broad
range of objectives such as marketing to operational business intelligence

Supporting the incorporation of cloud service integration

Creating new compositions using mobile apps and in-premise back-end


services that enable new customer relationships and empowerment and
thereby new opportunities

Supporting the deployment of multi-enterprise processes for improving


efficiencies and cost savings upstream in SCM and downstream to
warehouse management.

Below is the Gartner Magic Quadrant for In-premise Application Integration


Suites.

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!
The leaders clearly are IBM, SAP, Oracle, Microsoft with TIBCO, Software
AG, Mulesoft, Axway. While IBM, SAP, Oracle, Microsoft are mega
Enterprise Solution OEMs, TIBCO has been one of oldest EAI specialist and
the others Software AG, Mulesoft and Axway are also in the integration
products space only.

Middleware products and vendors can also be broken down into major
typology categories for easier understanding and access, though some

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vendors have products in more than one technology and this is not a
complete list:

Database Access Middleware RDBMS Vendors


RPC-based Middleware
Message Oriented Middleware MOM
Distributed Transaction Monitors DTP or DOLTP
Object Request Brokers ORB
ODBC Software Development Kits
Application Development Tools with Middleware Components
Other Middleware Resources

7.6.2 Workflow Products

The BPM product market provides a range of options from products that
provide simple workflow engines (but dont address the full life cycle of
ongoing process improvement) and model driven tools that enable the
development of process applications as well as BPMS and iBPMS product
categories.

An intelligent Business Process Management Suite (iBPMS) is an advanced


category of BPM-enabling technologies. These put emphasis on support for
system and human intelligence within business processes. Capabilities such
as simulation, optimization and the ability to gain insight into process
performance are part of many BPMS products in the market and the more
current iBPMSs have added enhanced support for human collaboration,
integration with social media, mobile access to processes, more analytics
and real-time decision management.

Vendors that grew in the flat market tended to be those that offered iBPMS
products as well as those that were addressing the drivers for quicker
project starts by delivering on cloud infrastructure.

While todays iBPMSs supports all the traditional process management


needs, organizations involved targeting continuous process improvements
require an iBPMS that can help support process optimization by providing
insight from both inside and outside the process, supporting process
owners and process participants.

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Gartners iBPMS Magic Quadrant of March 2014, positions 14 vendors that


are focused on the maturing iBPMS market, where process participants,
including people and systems, are supported by greater intelligence to
ensure improved process outcomes.

!
As Evident from Gartners Magic Quadrant, the leading products are
from IBM, Pegasystems, Apian, Oracle, TIBCO.

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All vendors today provide fairly comprehensive iBPMS products and most of
these products have at minimum the following capabilities:

Added intelligence to many industry or company-specific processes

Support for a business transformation initiative supporting process


participants and adding intelligence by encouraging broader adoption
through the organization and helping people collaborate within individual
process instances (or cases)

Support a process-based, service-oriented architecture (SOA) redesign.

To support faster time-to-solution and subsequent rapid changes to


business processes, an iBPMS uses a metadata- and model-driven
approach. A graphical business process and rule modelling capability is
used to model the behaviour of the solution. An iBPMS has the following
elements s

Process Orchestration Engine coordinates the interactions of all


types of actors people, devices and computer systems for structured
and unstructured flows, and also supports case management and
dynamic processes with rule-driven workflow that can include
predetermined process snippets and ad hoc process flows and responds
to both human and system initiated events. It manages short and long
running processes, logs changes, adjusts priorities and the order of
execution of process instances, terminates updates or suspends in-flight
processes; and schedules future work.

Graphical Model-driven Composition Environment provides


authoring/development tools and runtime support for heterogeneous
composite applications. This supports UI composition for building
portlets, portal pages, and rich-client and mobile UIs.

Content Handling natively integrates with other ECM tools to manage


documents other types of content and create/maintain third-party
content repositories.

Human Interactions supports personalized role-based work benches


for participant, interactive access to tasks, content and other resources.
User experience with Web and multichannel support that can be tailored

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to organization unit, role, skills and/or the individual with native or


HTML5-based support for one or more mobile devices and collaboration
capabilities.

Process Intelligence and Business Activity Monitoring (BAM)


This provides active analytics via process intelligence and BAM to
facilitate Continuous Intelligence, Monitoring Metrics, Interactive
Monitoring Dashboards, Automatic Triggers, Process/ Event Logs, Data
Intelligence BAM and adapters to capture events from outside of the
iBPMS, On-demand analytic capabilities.

Business Rule Processing Software-based reasoning that infers


logical consequences from a set of facts or axioms; manages and
executes rules that represent business policies with deductive reasoning.

Connectivity Support for HTTP, REST, SOAP, WSDL, and ODBC or


JDBC and ability to connect to mainstream COTS applications.

Management and Administration That includes Configuration and


Management and Management and Monitoring with capability to start,
stop and manage the performance of processes and their associated
components and logging audit trails.

Registry/Repository Stores and manages process-related runtime


and design time metadata and artefacts with query/reporting capabilities
and version control.

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7.7 SUMMARY

Surveys of Fortune-500 companies have indicated that 80% have altered


their business model over a 5-year period while nearly 50% felt that
business change has been inhibited by inflexible IT systems currently in
place. Over 90% of the CEOs expect to transform their companies over the
next 5-year period, to make themselves more responsive to customer
demands in company-wide transformations.

A key part of these plans is that business expect IT resources to be


substantially independent, reusable services that create an inherently
adaptable IT environment. Technical independence allows services to be
more easily used in different contexts. This approach referred to as SOA
has become a vital cog in Information Systems architecture.

Another vital element in systems integration is a middleware solution that


enables interoperability among heterogeneous environments using a
service-oriented model an integration element that is a mediator and
provides a service platform with ability to virtualize services. This is the
ESB Middleware component.

Even with well integrated systems that are flexible to change, process
remains a major constraint for smooth business flow execution. If you look
at business processes from inquiry to final delivery, many intermediate
steps have to be coordinated by a company to get to the point of delivery.
The steps are different in each industry, depending on the processes.

Sometimes, there might only be four or five and sometimes hundreds of


work steps that are necessary to complete a job. If there are several
employees in multiple jobs, the coordination of information and tasks can
quickly become quite perplexing. The time required for the coordination of
a department or an entire company then increases disproportionately. It is
not unusual for more than 50% of available manpower to be used for
coordinating and exchanging of information using search, e-mail, Excel,
and tool use, as well as continuous meetings and telephone usage. In
addition, as part of everybodys work, the hidden costs involved are not at
all transparent, nor is value being added, and money and energy are
wasted in large quantities as a result. Other inefficiencies also arise from
the lack of transparency and lack of a single controller; avoidable errors
reduce quality and the speed of delivery sinks.

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The automation of a business process, in whole or part, during which


documents, information or tasks are passed from one participant to
another for action, according to a set of procedural rules has become vital
a good BPMS implemented.

7.8 SELF ASSESSMENT QUESTIONS

1. Write a most suitable definition of Service Oriented Architecture.

2. Explain the concept of Services and its Reuse.

3. Who are the key stakeholders in a SOA implementation and briefly


explain their roles?

4. What are the drivers for organizations moving into SOA?

5. Explain Web Services and the various protocols involved.

6. What are the key characteristics of an ESB?

7. What are the objectives of a SOA Reference Architecture?

8. Why Governance of SOA implementations?

9. What elements of Middleware deals with Business Processes? Briefly


explain these.

10. Explain BPEL in the context of iBPMS.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3

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Chapter 8
DATA WAREHOUSE AND BUSINESS
INTELLIGENCE
Objectives

After completing the chapter, you will understand:

Concepts of Data Warehousing.


Business Intelligence and Analytics concepts.
Tools used DWH, BI and Reporting.
An insight to what is today termed as Big Data.

Structure:

8.1 Introduction
8.2 Concepts of Data Warehouse
8.2.1 Data Warehouse Architecture
8.2.2 Components of Data Warehouse
8.2.3 Data Cleansing
8.3 Business Intelligence
8.3.1 The Big Data
8.4 DWH and BI Products
8.4.1 Data Modelling Tools
8.4.2 Data Mining Tools
8.4.3 OLAP Tools
8.4.4 ETL Tools
8.4.5 Business Intelligence Tools
8.4.6 Reporting Tools
8.5 Data Warehouse Implementations
8.6 Risks and Pitfalls of DWH Projects
8.7 Summary
8.8 Self Assessment Questions

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8.1 INTRODUCTION

This chapter aims to provide a high-level understanding of what is a Data


Warehouse, what is Business Intelligence and Analytics, how are these
important to your business, what are the technologies involved, what it
takes to implement a successful data warehouse project, its challenges and
risks.

This is an area that is absolutely business critical so much so that with


the best-of-breed well implemented Enterprise Solutions, a company may
still fail in its business without a good Data Warehouse and intelligent
reports that enable the business to meet and go ahead of market and
customer expectations. It is also, to state mildly, a highly technology
intensive segment of enterprise solutions, with myriad technologies. At the
same time, a successful Enterprise Data Warehouse requires key business
analysts who can accurately guide and leverage the technologists
capabilities to give business the right information at the right time
because a Data Warehouse in any form is just a large collection of data
that needs extensive cleansing and analysis to create the reports.

In the words of Bill Inmon widely considered the father of the concept of
Data Warehouse a Data Warehouse is a subject-oriented, integrated,
time-variant and non-volatile collection of data in support of managements
decision making process.

What is the meaning of Subject-oriented? Most Data Warehouses (DWH


is the industry short form) is built to analyze a particular subject area or
domain or a subject area within a domain for example, sales within
retail banking would be a particular subject area.

Data Warehouses integrates data from multiple data sources or collection


of data from various sources. For example, pending invoices would be seen
differently by Sales and Bills Receivables Department and Senior
Management or there are different cuts to resource utilization in IT
Services Industry.

Historical data is kept in a data warehouse is time variant. The DWH can
retrieve for you data from 3 months, 6 months, 12 months, or older
periods. In a transaction database, only the most recent data is kept. For
example, a transaction system for Cell Phone Billing will hold only the

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current months data whereas a DWH will hold upto 2 years or more or a
the past 12 months data and a summary of your billing from inception.

The data in a DWH is always permanent or non-volatile one fundamental


principle of DWH is that the historical data in a DWH should never be
altered.

Ralph Kimball, also considered to be amongst the original conceptualizers


of DWH, defines a Data Warehouse as a copy of transaction data
specifically structured for query and analysis. This is a functional view of a
Data Warehouse.

8.2 CONCEPTS OF DATA WAREHOUSE

8.2.1 Data Warehouse Architecture

Unlike many of the other Enterprise Solutions, it is not the easiest of tasks
to give the reader an idea of what is a generic DWH Architecture.
Architectures of DWH systems have differed widely with different structures
and Operational Data Stores (ODS); some have multiple Data Marts; while
some DWHs have fewer number of data sources and others may have
many dozens of data sources. Considering this, it may be prudent not to
spell out any generic architecture for DWH systems, but leave the reader
with an idea of the different layers of a DWH Architecture. The architecture
is always a function of the size of an organization, its various Lines-of-
Business, the IT architecture and complexity of its software systems. All
large organizations have multiple Data Warehouses there was an attempt
to have what was termed as Enterprise Data warehouse, but that also fell
by the wayside as it could not cater to the demands of various businesses
of the organizations. In general, all data warehouse systems have the
following layers:

1. Data Source Layer


2. Data Extraction Layer
3. Staging Area
4. ETL Layer
5. Data Storage Layer
6. Data Logic Layer
7. Data Presentation Layer
8. Metadata Layer

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9. System Operations Layer

The picture below shows the relationships among the different components
of the data warehouse architecture:

Data Source Layer obviously, represents the different data sources that
feed data into the DWH. These data sources may be of any types and
format. Data may come in formats such as RDBMS or other Databases,
MS Excel files or a plain text file. The data may be of different types which
itself constitutes different sources such as below and all these data sources
together form the Data Source Layer. Some types/sources are:

Market Research Data generated by the companys internal departments

Operations data from Sales Department, Inventory data, Marketing and


Product data, systems data, Web server logs with user browsing data and
HR data

Third-party data such as from surveys or demographics data

Data Extraction Layer is the layer where data gets pulled from the
data source into the DWH system with some data cleansing though without
any major Data Transformation.

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Staging Area is where the data sits prior to being cleansed and
transformed into a DWH or Data Mart quality. This common staging area
makes it easier for subsequent data processing and integration.

ETL Layer is where data gains its intelligence", as logic is applied to


transform the data from a transactional nature to an analytical nature. It is
also in this stage that the actual Data Cleansing and Transformation is
done. In a DWH Project, the ETL Design Phase is the most crucial and
time-consuming. There are many ETL Tools which will be discussed later in
this chapter.

Data Storage Layer is the final storage for the cleansed and
transformed data no data is erased or changed once it is moved into this
database. Typically, three types of entities may be found here Data
Warehouse, Data Mart and Operational Data Store (ODS). In EDWs, you
may have just of these or all three.

Data Logic Layer is where business rules are stored. The business rules
do not affect the underlying data transformation rules, but do affect what
the report looks like.

Data Presentation Layer and/or other Reporting Tools are used here
and this layer gives shape to the form in which information is presented to
the user such as a tabular or graphical report in a browser or e-mailed
report, alerts and their periodicity of generation.

Metadata Layer Metadata is data about information stored in the DWH


system. For example, the number of tables in the database is a type of
metadata. A logical data model would be an example of whats in the
metadata layer. There are many metadata tools used to manage metadata.
System Operations Layer includes information on how the DWH system
operates, such as ETL job status, access history, system performance,
etc.

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8.2.2 Components of Data Warehouse

Data Warehouse and Business Intelligence have grounding in very strong


technologies and most of these are very niche. DWH and BI is itself in a
niche space with most people having low knowledge of this space and its
techno-domain concepts.

One of the best ways to get into such a space at a high-level is to


understand the concepts and terminologies and technologies that drive it.
In this sub-section, we will deal with the entire gamut of DWH and BI
technology concepts, at the end of which you will be able to understand
discussions.

Data Integrity Data integrity refers to the validity of data data is


consistent and correct. One of the oldest adages of Information Technology
has been Garbage In, Garbage Out reports coming out of a DWH are
useless if the DWH data lacks data integrity. In a data warehouse or data
mart, there are three areas where data integrity needs to be enforced
Database level, ETL process and the Access process. At the ETL level, data
integrity checks should ensure that source and destination data are the
same. We also need to ensure that data is not altered by any unauthorized
means either during the ETL process or in the data warehouse access
level controls.

Conceptual Data Model identifies the highest-level relationships


between the different entities. Features of conceptual data model include
the important entities and the relationships among them. No attribute is
specified. No primary key is specified. The only information shown via the
conceptual data model is the entities that describe the data and the
relationships between those entities.

Logical Data Model A logical data model describes the data inasmuch
detail as possible, without regard to how they will be physically
implemented in the database. Features of a logical data model include all
entities and relationships among them; All attributes for each entity are
specified; The primary key for each entity is specified; Foreign keys (keys
identifying the relationship between different entities) are specified;
Normalization occurs at this level.

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Physical Data Model Physical data model represents how the model will
be built in the database. A physical database model shows all table
structures, including column name, column data type, column constraints,
primary key, foreign key, and relationships between tables. Features of a
physical data model include Specification all tables and columns, Foreign
keys are used to identify relationships between tables; Denormalization
may occur based on user requirements; Physical considerations may cause
the physical data model to be quite different from the logical data model,
physical data model will be different for different RDBMS. For example,
data type for a column may be different between MySQL and SQL Server.

Having defined the three data models, let us for a better understanding
compare how Conceptual, Logical and Physical Data Models differ from
each other. Conceptual by its very name is initial concept data model and
the complexity of the data model increases as it progresses to logical and
then to the physical data model. The conceptual data model is written just
so as to understand and conceptualize at high level the different entities in
the data and how they relate to one another. The logical data model has
the details of the data defined, independent of how they will be actually
implemented. The physical data model is where the exact details of the
data model to be implemented in a database of choice are defined.

Data Mart Data marts are small slices of the data warehouse. They have
a more limited audience and/or data content. Data Mart is the access layer
of the DWH environment that is used to get data out to the users. It is a
subset of the data warehouse that is usually oriented to a specific business
line or team. Data mart is a simple form of a data warehouse that is
focused on a single subject or functional area such as Sales, Finance, or
Marketing and hence it has to deal with fewer data sources than the
DWH handles. Data marts are often built and controlled by a single
department within an organization. Given their single-subject focus, data
marts usually draw data from only a few sources. The sources could be
internal operational systems, a central data warehouse, or external data.
The primary difference between DWH and Data Mart is that the DWH is a
Corporate entity, whereas a Data Mart pertains to a line of business.

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Data Marts are usually much smaller that a DWH combines data from
databases across the enterprise. The data in a Data Mart is accessed using
a Business Intelligence Application.

There are two basic types of data marts dependent and independent a
categorization based on the data source that feeds the data mart.
Dependent data marts draw data from a central data warehouse that has
already been created. Independent data marts, in contrast, are stand-alone
systems built by drawing data directly from operational or external sources
of data, or both and hence the ETL process that involves moving data from
operational systems, filtering it, and loading it into the data mart is far
more intensive.

Fact Table A table that stores quantitative information for analysis and
is often in denormalized form. It consists of the facts or metrics of a
business process. A fact table holds the data to be analyzed. For example,
a Table that stores Sales Metrics Customer Code, Product Code, Date and
Time Stamp, Quantity Sold. There can be Cumulative Fact Tables that
stores summary information like Total Sales by Customer or Day Totals and
a Snapshot Fact Table. It is the central table in a star schema of a data
warehouse. A fact table typically includes two types of columns: fact
columns and foreign keys to the dimensions. The key aspect that the
Business Analyst or the Business User must know and consider in the
design is the granularity of the Fact Table, i.e., the lowest level of
information to be stored, which Dimensions to be included and hierarchy of
each Dimension data. There are also what are known as Factless Fact

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Tables which are Fact Tables without any fact it may sound ridiculous yet
true this just means that the Table does not have any Metrics.

Dimensional Model: Dimension Data Modelling is used for creating


Summary Information for example, summarization of Sales by Day, Week,
Month and Year or by Regions. Firstly, Dimension is the same category of
information; the best example being Year, Month, Week and Day are all
the same type Time Dimension data. Dimensions provide structured
labelling. An Attribute represents a single type of information in a
dimension, for example, year is an attribute in the Time dimension.
Dimension Data Model is a Data Model commonly used in OLTP systems. In
such data models, the same data would be stored differently in a
dimensional model than in normalized database table. In a dimensional
model, there are two types of tables Fact Tables and Dimension Tables.
We have discussed Fact Tables previously in this section. Dimensional Table
store records related to a particular dimension. No facts are stored in a
dimensional table. Conformed Dimension is a dimension that has exactly
the same meaning and content when being referred to in different Fact
Tables.

Below are two views of a Dimension Data Model. The first is a schematic of
a Dimension Data Model you can see how the Fact Table fits in with
different Dimension Tables.

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This figure below is a cube view of the Dimensional Data Model of a


company that has Product, Time, Market Dimensions. A Dimensional
database may be thought of as a Database Cube with three or four
dimensions that enables the users to take a slice of the database on any
dimension.

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The two schematics above should give you a fairly simplistic understanding
of how data is organized in a Data Warehouse to produce the reports that
you require. This also should tell you the critical role that the business
analysts and business users play in making a Data warehouse design a
success.

Dimension Data Modelling typically involves one or more Fact Tables and
Dimension Tables. The Hierarchies are typically stored in the Dimension
Table itself for example, the Location Hierarchy will contain region,
country, state and city. Then there is the problem of Slowly Changing
Dimension a common issue facing data warehousing practitioners a
standard example is of customers who change their location frequently. In
designing DWH Data Models, there are two typical approaches Snowflake
Schema and Star Schema a couple of line on each is just so that you
catch the terminologies. Star Schemas are a common form of dimensional
data modelling in which each dimension is represented by a single
dimension table. In the Snowflake Schemas, a dimension can have more
than a single dimension table by extending different hierarchies in a
dimension into their own dimension tables.

Aggregation is a summary of detail data that is stored with or referred to


by a cube. They are the basis for fast response to data queries in OLAP
applications. An aggregation is possible at each intersection of a level of
one or more dimensions. Any combination of dimension levels can become
a stored aggregation, as long as it is appropriate within the defined
hierarchies. It is one way of speeding up query performance. Facts are
summed up for selected dimensions from the original Fact Table. The
resulting aggregate table will have fewer rows, thus making queries that
can use them go faster.

ETL Extraction, Transformation, and Loading: ETL is an process to


extract data from different types of systems, transform it into a structure
thats more appropriate for reporting and analysis and finally loads it into
the database and or cube(s). They are three database functions combined
into one tool, to pull data out of one database and place it into another
database. In lay terminology, it is the movement of data from one area to
another the Data Staging Area to the Data Storage Area.

In the process of Extracting, data from different source systems is


converted into one consolidated data warehouse format which is ready for

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transformation processing. The Transformation process may involve the


following cleaning (mapping NULL to 0); filtering by selecting only certain
columns to load; splitting a column into multiple columns and vice versa;
joining together data from multiple sources; transposing rows and
columns; applying any kind of simple or complex data validation for
example, if the first 3 columns in a row are empty then reject the row from
processing. Lastly, Loading the data into a data warehouse or data
repository other reporting applications.

OLAP Online Analytical Processing: OLAP provides end-users a quick


way of slicing and dicing the data. OLAP performs multidimensional
analysis of business data and provides the capability for complex
calculations, trend analysis, and sophisticated data modelling and enables
a user to easily and selectively extract and view data from different points
of view.

OLAP as defined first by by Dr. Codd was Fast Analysis of Shared


Multidimensional Information the key feature out of this list is
Multidimensional. That is, the ability to analyze metrics in different
dimensions such as time, geography, gender, product for example, if
sales for the company are up (?) what region is most responsible for the
increase? And which store in this region is most responsible for the
increase? And which product category(s) contributed most to the increase?
To answer these questions, one needs to perform an OLAP analysis of the
data.

To facilitate this kind of analysis, OLAP data is stored in a multidimensional


database (a RDBMS is two-dimensional), that considers each data attribute
(such as product, geographic, time period, etc.) as a separate dimension.
The OLAP software locates the intersection of dimensions and displays
them. Attributes such as time periods can be further broken down into sub-
attributes.

OLAP can be used for data mining or discovery of previously undiscerned


relationships between data items. An OLAP database does not need to be
as large as a DWH since not all transactional data is needed for trend
analysis. Using ODBC, data can be imported from existing relational
databases to create a multidimensional database for OLAP.

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Depending on the underlying technology used, OLAP can be broadly


divided into two different camps Multidimensional OLAP or MOLAP and
Relational OLAP or ROLAP. MOLAP stores data in multidimensional cubes
and ROLAP stores data in relational databases.

OLAP is the foundation for Intelligent Solutions including Business


Performance Management, Planning, Budgeting, Forecasting, Financial
Reporting, Analysis, Simulation Models, Knowledge Discovery, and Data
Warehouse Reporting. OLAP enables end-users to perform ad hoc analysis
of data in multiple dimensions, thereby providing the insight and
understanding they need for better decision making.

Drill Down is the process of dividing an information area up into finer and
finer layers in a hierarchy, with the objective of narrowing down to a
specific area of data that can be analyzed for a business decision. Drill
Across is data analysis across dimensions, Drill Through is data analysis
that goes from an OLAP cube into the relational database and Drill Up is a
data analysis to a parent attribute. Hierarchy defines the navigating path
for drilling up and drilling down. All attributes in a hierarchy belong to the
same dimension.

Finally, the much misused phrase Slice and Dice the simplest
meaning of this term is to present data/information in a variety of different
and useful ways. Essentially, it is the process of breaking down a mass of
data into smaller parts to enable analysis from different viewpoints for a
better understanding. You typically dice and then slice data views. Smaller
slices of data provided in different views can elicit better insight.

At this point, it is appropriate to present what is a typical DWH Architecture


and how the various elements that we dealt with so far interface. The
schematic below is an understandable representation:

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8.2.3 Data Cleansing

Data cleansing is the process of altering data in a given storage resource to


make sure that it is accurate and correct deleting old, incomplete or
duplicated data. There are many ways to pursue data cleansing in various
software and data storage architectures mostly focussed on careful
review of data sets and the protocols associated with any particular data
storage technology. Data cleansing is also commonly referred to as data
scrubbing. Data cleansing is also sometimes loosely and incorrectly
referred to as data purging (deleting old or useless data). While data
purging is usually focussed on clearing space for new data, data cleansing
focuses on maximizing the accuracy of data in a system. A data cleansing
method may use parsing or other methods to get rid of syntax errors,
typographical errors or fragments of records. Many times, merging multiple
sets led to duplication of data in which case data cleansing may be used to
fix the problem such instances may arise in any type of database, not
necessarily in a DWH.

Many issues involving data cleansing are similar to problems that


archivists, database admin staff and others face around processes like data
maintenance, targeted data mining and the extract, transform, load (ETL)
methodology, where old data is reloaded into a new data set. These issues
often regard the syntax and specific use of command to effect related tasks

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in database and server technologies like SQL or Oracle. Database


administration is a highly important role in many businesses and
organizations that rely on large data sets and accurate records for
commerce or any other initiative.

Typically, each Enterprise System is measured on getting the tasks of that


system done in the shortest time at the lowest cost. While each system
ensures data integrity within the system, inter-system data integrity is
seldom evaluated; this is not intentional, but fait accomplice what one
system calls a product another system terms it a component or even a
service. So, when data from all these systems get into a DWH, we have a
big problem. The result is the need for Data Cleansing. DHW is a system
used for managerial decision making and it is paramount that DWH
systems have clean data on which they report.

What is dirty data? Are data anomalies that create wrong outputs. Dirty
data is created when reality is different from what is captured and stored.
Data quality problems are present in single data collections, such as files
and databases, e.g., due to misspellings during data entry, missing
information or other invalid data. When multiple data sources need to be
integrated, e.g., in data warehouses, federated database systems or global
web-based information systems, the need for data cleaning increases
significantly. This is because the sources often contain redundant data in
different representations. In order to provide access to accurate and
consistent data, consolidation of different data representations and
elimination of duplicate information become necessary.

A data cleaning approach should satisfy several requirements. First of all, it


should detect and remove all major errors and inconsistencies both in
individual data sources and when integrating multiple sources. The
approach should be supported by tools to limit manual inspection and
programming effort and be extensible to easily cover additional sources.
Furthermore, data cleaning should not be performed in isolation but
together with schema related data transformations based on
comprehensive metadata. Mapping functions for data cleaning and other
data transformations should be specified in a declarative way and be
reusable for other data sources as well as for query processing.

Data Quality problems may be of two types Single source or Multi-


source. In the Single Source, you can have data entry errors, misspellings,

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redundancy, duplicates and contradictory values. In the Multi-source, you


have issues such as overlapping, contradictions, inconsistent data,
inconsistent aggregating and timing. In both Single Source and Multi-
source data types, there are additional issues arising at the Schema level
such as integrity issues, uniqueness, referential integrity, naming conflicts,
structural conflicts and heterogeneous data models.

Data Cleansing Approaches:

Data Analysis: To detect which kinds of errors and inconsistencies are


to be removed, a detailed data analysis is required. In addition to a
manual inspection of the data or data samples, analysis programs should
be used to gain metadata about the data properties and detect data
quality problems.

Definition of Transformation Workflow and Mapping Rules:


Depending on the number of data sources, their degree of heterogeneity
and the dirtyness of the data, a large number of data transformation
and cleaning steps may have to be executed. Sometime, a schema
translation is used to map sources to a common data model; for data
warehouses, typically a relational representation is used. Early data
cleaning steps can correct single source instance problems and prepare
the data for integration. Later steps deal with schema/data integration
and cleaning multi-source instance problems, e.g., duplicates.

Verification: The correctness and effectiveness of a transformation


workflow and the transformation definitions should be tested and
evaluated, e.g., on a sample or copy of the source data, to improve the
definitions if necessary. Multiple iterations of the analysis, design and
verification steps may be needed, e.g., since some errors only become
apparent after applying some transformations.

Transformation: Execution of the transformation steps either by


running the ETL workflow for loading and refreshing a data warehouse or
during answering queries on multiple sources.

Backflow of cleaned data: After (single source) errors are removed,


the cleaned data should also replace the dirty data in the original sources
in order to give legacy applications the improved data too and to avoid
redoing the cleaning work for future data extractions.

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The other key element in Data Cleansing is Conflict Resolution and Tools
and there are many good ones in the market.

8.3 BUSINESS INTELLIGENCE

BI is a set of sophisticated analytical techniques used in identifying,


extracting and analyzing hard business data such as sales revenue by
products or departments or associated costs and incomes. Objectives of a
BI action include understanding of a firms internal and external
strengths and weaknesses, understanding of the relationships between
different data for better decision making, detection of opportunities for
innovation and cost reduction and optimal deployment of resources.

BI is accomplished through the use of special softwares and helps


companies organize and analyze data to make better decisions. In todays
business, this may include both internal and external data sources, such as
marketing data (from internal sources) and social media channels.

While business intelligence could to the layman mean all the large amounts
of data collected and stored by a company, in the context of BI we are
essentially dealing with the system of leveraging the large data to create
Business Intelligence for critical decision making. And that involves a large
number of software tools, methodologies, business systems and the
process of analyzing the data and generating the right reports for the right
people at the right time.

Business intelligence software is designed with the primary goal of


extracting important data from an organizations raw data to reveal
insights to help a business make faster and more accurate decisions. The
software typically integrates data from across the enterprise and provides
end-users with self-service reporting and analysis. BI software uses a
number of analytics features including statistics, data and text mining and
predictive analytics to reveal patterns and turn information into insights.

BI, therefore, is not one piece of software. The types of tools that make up
a business intelligence software application solution generally include tools
for spreadsheets, operational dashboards, data mining tools, reporting
tools, search and query tools, analytics processing softwares such as OLAP,
content viewer, and other components of ERP systems. Often, business
intelligence software may also integrate tools designed for specific

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verticals, such as retail, healthcare or education. It actually covers all that


we have discussed in this chapter so far.

The large ISVs in the BI space including SAP, Oracle, IBM, Microsoft,
Information Builders, MicroStrategy and SAS, have been around for years,
but there is also a number of BI start-ups that see their products get
absorbed as a feature in a larger players software. A few of the mid-size
BI vendors to consider include Actuate Corporation, Alteryx, Logi Analytics,
QlikTech and Tableau.

8.3.1 The Big Data

That brings us to the term Big Data that is so much talked about today
and what is Big Data? are data sets that are too large and complex to
manipulate or interrogate with standard methods or tools. There is much
IT investment going towards managing and maintaining big data.

Big Data is a popular term used to describe the exponential growth and
availability of data, both structured and unstructured. And big data may be
as important to business and society as the Internet has become. Why?
The assumption is, more data may lead to more accurate analysis. And, it
is assumed that more accurate analysis may lead to more confident
decision making. And, better decisions can mean greater operational
efficiencies, cost reductions, reduced risk and increased business for the
company.

Big Data is defined in terms of Volume, Velocity, Variety, Complexity and


Variability. Below we will briefly articulate what each of these mean to
make data big.

Volume Contributed by many years of stored history data both


transactions and summarized in DWHs as well as unstructured streaming
data from self-service channels and social media.

Velocity Velocity is the speed at which data is streaming in today


driving the need to deal with torrents of data in near-real time. Reacting
quickly enough to deal with data velocity is a challenge for most
organizations.

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Variety Data today comes in all types of formats structured, numeric


data in traditional databases, information created from line-of-business
applications, unstructured text documents, e-mail, video, etc. Managing,
merging and governing different varieties of data is becoming difficult to
grapple with.

Variability The data that flows in today may be highly inconsistent


with periodic peaks is something trending in social media? Daily,
seasonal and event-triggered peak data loads can be challenging to
manage particularly when it is unstructured data.

Complexity Todays data comes from multiple sources. And it is still an


undertaking to link, match, cleanse and transform data across systems.

Why do organizations need to do anything at all with Big Data? The hopeful
vision is that organizations will be able to take data from any source,
harness relevant data and analyze it to find answers that resolve key
issues such as product development strategies and cost rationalization
without having to compromise customer service and presence. It is
intended that by combining big data and high-powered analytics, it may be
possible to recalculate entire risk portfolios in minutes, or identify root
causes of failures and defects in near-real time thereby saving potential
billions of dollars.

Even while the industry is gung-ho on big data, there is a lot of confusion
around the term leading upto its pros and cons. There are questions being
asked as to whether big data is really big after all? Hasnt DWH always held
very large amounts of data?

Big Data is a collection of data from traditional and digital sources inside
and outside your company that represents a source for ongoing discovery
and analysis. That means big data consists of all traditional data derived
from product transaction information, financial records and interaction
channels, such as the call center and point-of-sale plus volumes of digital
data thats now growing at an exponential rate.

Big Data can also consist of unstructured data that comes from
information that is not organized or easily interpreted by traditional
databases or data models, and typically, its text-heavy Twitter tweets
and other social media posts are examples of unstructured data.

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Multi-structured data that comes in a variety of data formats and types and
can be derived from interactions between people and machines, such as
web applications or social networks. An example is web log data, which
includes a combination of text and visual images along with structured data
like form or transactional information.

As digital disruption transforms communication and interaction channels


and as marketers enhance the customer experience across devices, web
properties, face-to-face interactions and social platforms, multi-structured
data will continue to grow and be a key element in big data analytics. The
insights gathered through analytics will start improving customer
engagement strategies and in turn improving the way big data is being
utilized for immediate value-added offline and online interactions.

In this scheme of things, Big Data Predictive Analysis solutions become


important. Forrester defines this as Software and/or hardware solutions
that allow firms to discover, evaluate, optimize, and deploy predictive
models by analyzing big data sources to improve business performance or
mitigate risk.

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8.4 DWH and BI PRODUCTS

In this section, we will cover a host of products and tools that are required
across the Data Warehouse and BI space. I have categorized these into
their respective areas of use so such as ETL, Data Mining, etc. I should be
noted that most of the vendors in the DWH and BI space have products
that cover all the requirements. However, each vendor with the exception
of the large companies have their relative strength areas.

8.4.1 Data Modelling Tools

There are a number of data modelling tools to transform business


requirements into logical data model, and logical data model to physical
data model. From physical data model, these tools can be instructed to
generate SQL code for creating database. The Table below lists the popular
Data Modelling Tools:

Tool Name Company Name


Erwin Computer Associates
Embarcadero Embarcadero Technologies
Rational Rose IBM Corporation
Power Designer Sybase Corporation
Oracle Designer Oracle Corporation
Xcase RESolution LTD

8.4.2 Data Mining Tools

Following are a list of tools for Data Mining these are the top order tools.
However, besides these there are many niche tools and also for the mid-
sized companies.

1. IBM Cognos Business Intelligence Data Mining Software from IBM

2. IBM SPSS Modeler Data Mining Software from IBM

3. HP Vertica Analytics Platform Data Mining Software from HP

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4. SAS Enterprise Miner Data Mining Software from SAS Institute

5. Oracle Data Mining Data Mining Software from Oracle Corporation

6. Microsoft Analysis Services Data Mining Software from Microsoft

7. TIBCO Spotfire

8. Angoss KnowledgeSTUDIO data mining tool provided by Angoss

9. Clarabrige Enterprise Class Text Analytics Solution

10. Halo BI Data Mining Software

11. KXEN Modeller Data Mining Tool from KXEN

12. LIONsolver an Integrated Software Application for Data Mining, BI


and Modelling that implements the Learning and Intelligent
OptimizatioN (LION) approach

13. NetOwl Suite Multilingual Text and Entity Analytics Products that
enable Data Mining

14. Neural Designer Data Mining Software from Intelnics

15. QIWare Data Mining Software from ForteWares

16. STATISTICA Data Miner Data Mining Software from StatSoft

8.4.3 OLAP Tools

OLAP tools enable analysis of Multidimensional Data interactively from


multiple perspectives. All OLAP Tools comprise of three parts
Consolidation or Roll-up, Drill-down and Slicing-and-Dicing. Below are a list
of popular OLAP Tools in the market.

1. SAP BusinessObjects Analysis


2. IBM Cognos
3. Orcale OLAP 12c
4. SQL Server Analysis Services

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5. Hyperion
6. MicroStrategy
7. Palo OLAP Server

8.4.4 ETL Tools

There are a host of ETL Tools, the most popular of which are the first two
Informatica and Cognos:

1. Informatica Power Center


2. IBM Cognos Data Manager Formerly known as Cognos
DecisionStream
3. IBM Websphere DataStage Formerly known as Ascential DataStage
4. SAP BusinessObjects Data Integrator
5. Microsoft SQL Server Integration Services
6. Oracle Data Integrator Formerly known as Sunopsis Data
Conductor
7. Sybase Data Integrated Suite ETL
8. SAS Data Integration Studio
9. Oracle Warehouse Builder
10. ab Initio
11. Information Builders Data Migrator
12. Pentaho Pentaho Data Integration
13. Embarcadero Technologies DT/Studio
14. IKAN ETL4ALL
15. IBM DB2 Warehouse Edition
16. Pervasive Data Integrator
17. ETL Solutions Ltd. Transformation Manager
18. Group 1 Software (Sagent DataFlow
19. Talend Talend Open Studio
20. Expressor Software Expressor Semantic Data Integration System
21. Elixir Elixir Repertoire
22. OpenSys CloverETL

8.4.5 Business Intelligence Tools

1. IBM Cognos and BI


2. SAP BusinessObjects XI
3. SAP NetWeaver BW (+HANA) 7.3
4. Oracle Hyperion System 9 BI+

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5. Oracle BI (OBIEE) 11.1


6. Oracle Siebel Business Analytics Applications
7. SAS Business Intelligence Visual Analytics
8. MicroStrategy 9.4 Dynamic Enterprise Dashboards
9. Microsoft BI and Analysis Services 2014
10. TIBCO Spotfire Enterprise Analytics
11. QlikView 11.2
12. Information Builders WebFOCUS Business Intelligence
13. Tableau Software 8.2
14. JasperSoft 5.5 from TIBCO
15. Pentaho Open BI Suite
16. SPSS ShowCase
17. Board 8.1

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8.4.6 Reporting Tools

There are a host of good Reporting Tools available in the market; primary
considerations are ease of use and the learning curve. One of the most
popular Tool is Crystal Reports that is usable by lay users.

It is reasonable to expect quite some overlap between BI Tools and


Reporting Tools. However, when we refer to Reporting Tools, we mean
those that are simple and easy to use.

Below is a list of Reporting Tools:

1. BizzScore Suite BizzScore Management Dashboard, v7.4, EFM


Software

2. Board Management IntelligenceToolkit Board reporting, v8.1, Board


International

3. SAP BusinessObjects 11 Reporter; WebIntelligence; Crystal Reports,


v4.0/FP3, SAP

4. IBM Cognos Series 10 - Cognos Query and Reporting, v10.2.1, IBM

5. JasperReports from TIBCO (open source): iReport Designer, v5.5,


JasperSoft

6. Microsoft BI Tools Reporting and Analysis Services; Power BI;


SharePoint, 2014, Microsoft

7. MicroStrategy MicroStrategy Report Services, v9.4.1, Microstrategy

8. Oracle Enterprise BI Server Oracle Enterprise Reporting, v11.1.1.6,


Oracle

9. Oracle Hyperion System Hyperion Interactive Reporting, v9, Oracle

10. Pentaho BI Suite Open Source; Pentaho Report Designer and Engine,
v5.1, Pentaho

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11. QlikView QlikView Business Discovery (No Pixel-perfect Reporting),


v11.2, QlikTech
12. SAP Netweaver BI SAP Crystal Reporting, v7.3, SAP

13. SAP Enterprise BI Server Query and Analysis, v9.4, SAS Institute

14. Style Intelligence Style Report, v11.5, InetSoft

15. WebFocus Reports and Dashboards; Query and Analysis, v8.01,


Information Builders

16. Yellowfin BI Collaboration, Dashboards and Mobile BI, v7.0, Yellowfin

8.5 DATA WAREHOUSE IMPLEMENTATIONS

At outset, let me inform you that there are very few ground-up DWH
Project builds in the world. If at all, you will get such projects only in
Greenfield Enterprise Solutions in India and the developing world where
companies wake up and decide to move out of MS Excel workbooks or 30-
year old flat-file based software systems and go for the most current IT
implementations. Even in such greenfield implementations, the DWH
project will typically start only a year after the remaining enterprise
solutions have reached stable operations and adequate data has been built
up, cleansed and studied by business. Most time its an overhaul of the
existing Enterprise Data Warehouse as business feels that the DWH is not
meeting their requirements.

Though the most complex task or project in Enterprise Solutions


Implementation, Data Warehouse implementation projects also have a
broad structure.

A typical roadmap for a DWH implementation project is given below:

1. Requirements Gathering and Specifications


2. Environment Setup
3. Data Modelling
4. ETL
5. OLAP Design
6. UI Development
7. Reports POC

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8. Query Optimization
9. Performance Tuning
10. Reports Development
11. Production Roll-out

Business analysts, business users and SMEs are the most vital cog in any
Data Warehousing or Business Intelligence or Analytics project at all
stages. It is essential to identify the entire team of business specialists and
get senior management buy-in for the continuance of the named team,
throughout the project from Requirements Definition to implementation.
While this is true of any IT implementation, in the DWH Project, the impact
of the Business/SME team and their continuance through to the end is
always the difference between success and failure. This team should be
experienced and empowered and have a direct line to the senior
management.

We will discuss some of these Data Warehouse specific project stages


below.

Data Modelling is the most important step and the foundation stone in a
DWH project. A good data model permits the DWH system to grow easily
and allows for good performance. As discussed in earlier sections, the
Logical Data Model is built based on user requirements then translated into
the Physical Data Model. Prerequisite to the data modelling stage is the
identification of data sources. Though this is sometimes mixed up with the
ETL stage, it should be emphasized that it is always better to identify the
data sources right at start because if certain data is found to be not
available at the ETL stage, it upsets the project. The Data Modelling phase
delivers the Data Sources Document, Logical and Physical Data Models.

The ETL process is usually the longest phase of a DWH Project and may
take as long as 50%-60% of the total project schedule and efforts. This is
laborious work involving collection and analysis of sources data, design the
columns and finalize the business rules in sync with the logical and physical
data models. The deliverables from this phase are a Data Mapping
document and ETL Scripts.

OLAP Design involves databases specially designed and optimized for


efficiency in data retrieval and easy and efficient and quick reporting. This
involves examining the relational tables, the available levels, hierarchies

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and identifying attributes for each dimension. The required stored and
calculated measures are identified as part of the business requirements
specifications phase. The resulting logical model becomes the design for
the OLAP data model. Critical points to note are the aggregations you
create and use to query the cube is the major factor that influences query
response time. The aggregations that are being stored with the cube, affect
cube build time, the absolute cube file size, OLAP Server CPU usage and
query response times. As a result, determining and building your cube
aggregations is a crucial component of good cube design. Deliverables from
this phase are OLAP Cube Reports and document specifying the OLAP
cube dimensions and measures.

Reports POC To the business, end-user and senior management, the


Reports are the sole purpose and a huge spend and efforts that goes into
implementation of a DWH. As such, there is a no partial success to a DWH
implementation. It is from this point of view that the project devotes as
much time and efforts as possible to design and development of Reports. It
is another matter that the business Report requirement changes by the
day. So, it is recommended that Reports development exercise go through
a POC Phase particularly in the case of greenfield implementations. The
end-user plays the most important role in this phase and the software
developer is only a tool in the hands of the end-user. It is always desirable
to document all aspects of reports development and sign-off at every
stage.

Performance Tuning Essential to check the performance of the DWH


you designed works at the speed expected of it by the users. There are
three areas that need to be tuned ETL, Query Processing and Reports. At
this phase, the implementation requires a full-scale Production equivalent
setup in the Test Environment with data of scale equivalent to that in
Production.

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8.6 RISKS and PITFALLS OF DWH PROJECTS

All large and complex projects have almost similar challenges and risks and
most large, complex IT Projects see failures of some sorts schedule
overruns, budget overruns, failure to deliver the agreed or sometimes even
a total failure of the project and its scrapping.

That said, Data Warehousing projects some specific challenges a DWH is


by design there to support users asking ad hoc questions off the available
data and information for intelligent business decisions. The common
problems that plague DWH Projects can be grouped by the expectations
that are set management expectations what is realistic to expect vis--
vis the need of the business, technology a lack of understanding of what
technology can really deliver, the time lines the urgency of the business
without realizing the feasibility of meeting these.

Most of the fatal risks for a data warehouse project are organizational
rather than technical, i.e., building a data warehouse that doesnt address
a relevant business need. Risks factors include, but not limited to:

Senior Management: Lack of SM Sponsor or sponsors quits the project;


no management commitment; and inappropriate organization structure.

Business: Unrealistic expectations from the business; scope creep;


frequent change of requirements and scope; changing priorities; and
users not available.

Project Management: Poor Project Management; agreeing to


unrealistic schedules; taking on the project with inadequate Budget; poor
staffing with untrained or inadequate staff; and poor vendors
management.

Technical: Architecture failures; exceeding platform capabilities; poor


database design; and Data cleansing issues.

Lack of proper skills and experience.

Most people have to go through at least one failure before they


understand how different a data warehouse is from a transaction
processing system or small data mart. You can have wonderful logical

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models, but turning those into an efficient, integrated, enterprise-wide


physical design is a most difficult task.

Not having people who really understand the source system provided on
a timely basis and for an adequate amount of time.

Not understanding what the organization needs from a data warehouse


and how the data warehouse helps achieve the strategic objectives of the
organization.

Lack of a data quality project as an integral part of the data warehouse


implementation. If users dont have confidence in the answers they get
from the data warehouse, they wont use it.

What is to be understood is that a Data Warehouse and Business


Intelligence never ends it is an ongoing project that will change and
morph through every minor or major change in the organization and
business and market.

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8.7 SUMMARY

Investments in business analytics grew exponentially from 2009 to 2013,


with annual average growth rates of 8.5% amidst a scenario of slump in
the overall IT spend. Even while businesses were delaying other IT
investments, they were putting analytics at the top of IT priority. Analytics
has created significant competitive advantage. But even while analytics has
become mainstream, the steep growth rates in analytics spend is flattening
out. Clearly, there are challenges. While the number of companies using
analytics increases, it is becoming harder to gain the kind of advantages
that are expected.

In this new data environment, it will become increasingly important for


businesses to know the most valuable information, where the data they
use comes from, with whom it is being shared, whether they have access
to what and how others are using the same data.

Given that many companies, are seeking a competitive edge with analytics,
the corporate leaders need to ask themselves the following questions:

Is my organization open to new ideas that challenge current practice?


Does my organization view data as a core asset?
Is senior management driving the organization to become more data-
driven and analytical?
Is my organization using analytical insights to guide strategy?
Are we willing to let analytics help change the way we do business?

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8.8 SELF ASSESSMENT QUESTIONS

1. What do you understand from Data Warehouse is a subject-


oriented, integrated, time-variant and non-volatile collection of data
for management decision making?

2. Explain the layers in a simplified DWH architecture.

3. What do you understand from Metadata?

4. How is Data Integrity important in business decision making?

5. With an example from your organization, explain the concept of a Data


Mart.

6. Explain ETL and OLAP and how they are central to the concept of DWH.

7. What is dirty data and are the factors in Data Cleansing?

8. How is Big Data influential in the current business context?

9. Which are the Reporting Tools that suit your organizational needs best?

10. List the risks involved in implementing a DWH Project.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture

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Chapter 9
CLOUD COMPUTING AND SAAS
Objectives

After completing the chapter, you will understand:

Concepts of Cloud.
Concepts of SaaS, PaaS and IaaS.
Business Benefits, Risks and Challenges, Security Issues.
Vendors for Cloud, SaaS.

Structure:

9.1 Introduction
9.2 Evolution
9.3 Cloud Concepts
9.4 Components of Cloud Computing
9.5 Cloud Deployment Models
9.6 Cloud Service Models
9.6.1 Software as a Service (Saas) Model
9.6.2 Benefits of SaaS to the Customer
9.7 Managing Security Issues
9.7.1 Cloud Specific Security Issues
9.7.2 Cloud Security Plan
9.8 Risks and Pitfalls
9.8.1 Potential Risks
9.8.2 Security Provisions in Cloud Contracts
9.8.3 User Responsibilities
9.9 Cloud Vendors
9.10 Summary
9.11 Self Assessment Questions

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9.1 INTRODUCTION

Cloud computing is a subscription-based service where companies can


obtain networked computing resources and storage space. A very good
example is GoDaddy E-mail services offered to corporates and used
typically by small enterprises that do not have or want to spend standard
requirements such as e-mail. The GoDaddy E-mail is not housed on the
companys physical servers; the companys employees can access e-mail
through an internet connection from anywhere. The company can avoid
having large storage space on the employees desktop or laptop for
downloaded e-mails, like in an Outlook. Similarly, the companies can opt
for various software services on a cloud.

9.2 EVOLUTION

Cloud Technologies is not an altogether new concept of the past 5-6 years.
In the late 90s long before the term Cloud and SaaS had come about,
there was a similar model the ASP (Application Service Provider) that
came with the first wave of Internet and strengthened in the early 2000
Dot Com era. The ASP Model enabled many small first-time Dot Com
ventures to take off with low investments. Many B2C dot coms using well-
known products such as InterShop launched their shopping sites using the
ASP Model. These dot coms did not even have a one-person IT
department; the outsourcers developed the site and the ASPs hosted their
site and maintained it for a small annual fee. So, the model of Cloud or
SaaS is not just a recent great idea.

However, the ASP Model did not survive and new business models came
about Cloud, SaaS, IaaS and PaaS.

How are the new models different from ASP? Let us spend a paragraph to
understand the reason why the old business model failed and what is
different in the current ones.

So as to understand why Cloud-SaaS succeeds, lets discuss the key


differences between the Cloud-SaaS models and the ASP Model:

Application Deployment: The primary difference is the ASP only


deployed applications belonging to the customer that reduced the cost
arbitration and made customization as difficult as with in-house

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deployment. The SaaS deploys its own software applications or products;


it provides the customer with a product and deployment and ongoing
maintenance/enhancements. SaaS is a complete lifetime solution and
where the customer saves on buy cost and also customization
headaches.

Implementation Timelines: ASP deployments were tedious as it


involved a third-party that knew little of the product. In the SaaS Model,
the product is available immediately.

Upgrades and Enhancements: In ASP deployment, upgrades and even


small enhancements was always the responsibility of the customer as the
ASP did not own it. In the SaaS model, the customer only had to queue
their enhancement or change requests and it would be implemented and
available to an agreed time frame.

Cost: The biggest advantage of SaaS is the cost advantage particularly


for the SMBs SaaS applications typically charge on the basis of
transactions.

Multi-tenant Scalability: SaaS offers products that are designed for


use in a multi-tenant environment. The code base is disparate and each
customer can have a custom experience. Yet the disparate code base is
maintained and enhanced specifically for each customer seamlessly. This
is one of the biggest USP of the SaaS Model. Tier-1 ERP products like SAP
are made available for many SMBs as though it was specifically designed
for them.

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9.3 CLOUD CONCEPTS

Cloud computing is a model for enabling convenient, on-demand network


access to a shared pool of configurable computing resources (e.g.,
networks, servers, storage, applications, and services) that can be rapidly
provisioned and released with minimal management effort or service
provider interaction. This cloud model is composed of five essential
characteristics, three service models, and four deployment models.

The essential characteristics of Cloud Services are:

On-demand Self-service: A consumer can unilaterally provision


computing capabilities, such as server time and network storage, as
needed automatically without requiring human interaction with each
services provider.

Broad Network Access: Capabilities are available over the network and
accessed through standard mechanisms that promote use by
heterogeneous thin or thick client platforms (e.g., mobile phones,
tablets, laptops, and workstations).

Resource Pooling: The providers computing resources are pooled to


serve multiple consumers using a multi-tenant model, with different
physical and virtual resources dynamically assigned and reassigned
according to consumer demand. There is a sense of location
independence in that the customer generally has no control or knowledge
over the exact location of the provided resources but may be able to
specify location at a higher level of abstraction (e.g., country, state, or
datacenter). Examples of resources include storage, processing, memory,
and network bandwidth.

Rapid Elasticity: Capabilities can be rapidly and elastically provisioned,


in some cases automatically, to scale rapidly outward and inward
commensurate with demand. To the consumer, the capabilities available
for provisioning often appear to be unlimited and can be appropriated in
any quantity at any time.

Measured Service: Cloud systems automatically control and optimize


resource use by leveraging a metering capability at some level of
abstraction appropriate to the type of service (e.g., storage, processing,

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bandwidth, and active user accounts). Resource usage can be monitored,


controlled, and reported, providing transparency for both the provider
and consumer of the utilized service.

Depending on an organizations requirements, different technologies and


configurations are appropriate. To understand which part of the spectrum
of cloud systems is most appropriate for a given need, an organization
should consider how clouds can be deployed (deployment models), what
kinds of services can be provided to customers (service models), the
economic opportunities and risks of using cloud services (economic
considerations), the technical characteristics of cloud services such as
performance and reliability (operational characteristics), typical terms of
service (service level agreements), and the security opportunities and risks
(security).

A cloud computing system may be deployed privately or hosted on the


premises of a cloud customer, may be shared among a limited number of
trusted partners, may be hosted by a third party, or may be a publically
accessible service, i.e., a public cloud. Depending on the kind of cloud
deployment, the cloud may have limited private computing resources, or
may have access to large quantities of remotely accessed resources. The
different deployment models present a number of trade-offs in how
customers can control their resources, and the scale, cost, and availability
of resources.

In outsourced and public deployment models, cloud computing provides


convenient rental of computing resources: users pay service charges while
using a service but need not pay large up-front acquisition costs to build a
computing infrastructure. The reduction of up-front costs reduces the risks
for pilot projects and experimental efforts, thus reducing a barrier to
organizational flexibility, or agility. In outsourced and public deployment
models, cloud computing also can provide elasticity, that is, the ability for
customers to quickly request, receive, and later release as many resources
as needed. By using an elastic cloud, customers may be able to avoid
excessive costs from overprovisioning, i.e., building enough capacity for
peak demand and then not using the capacity in non-peak periods.
Whether or not cloud computing reduces overall costs for an organization
depends on a careful analysis of all the costs of operation, compliance, and
security, including costs to migrate to and, if necessary, migrate from a
cloud.

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Cloud computing generally favours applications that can be broken up into


small independent parts. Cloud systems generally depend on networking
and hence any limitations on networking, such as data import/export
bottlenecks or service disruptions, reduce cloud utility, especially for
applications that are not tolerant of disruptions.

As complex networked systems, clouds are affected by traditional


computer and network security issues such as the needs to provide data
confidentiality, data integrity, and system availability. By imposing uniform
management practices, clouds may be able to improve on some security
update and response issues. Clouds, however, also have potential to
aggregate an unprecedented quantity and variety of customer data in cloud
data centers. This potential vulnerability requires a high degree of
confidence and transparency that cloud providers can keep customer data
isolated and protected. Also, cloud users and administrators rely heavily on
Web browsers, so browser security failures can lead to cloud security
breaches. The privacy and security of cloud computing depend primarily on
whether the cloud service provider has implemented robust security
controls and a sound privacy policy desired by their customers, the
visibility that customers have into its performance, and how well it is
managed.

Inherently, the move to cloud computing is a business decision in which the


business case should consider the relevant factors, some of which include
readiness of existing applications for cloud deployment, transition costs
and life cycle costs, maturity of service orientation in existing
infrastructure, and other factors including security and privacy
requirements.

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9.4 COMPONENTS OF CLOUD COMPUTING

The topology of Cloud Computing has several components Data Center,


Distributed Servers and Clients with specific roles and purpose for each
element.

Clients: Clients are very much the same devices that you have in a
standard LAN/WAN environment desktops, laptops, Mobile devices
Mobile devices being the more important in a Cloud environment because
one of the key differences between Cloud and native environment being
mobility. The clients may also be Thin Client and Thick Client. Thin
Clients are obviously more popular because all the computing resources
required by the users including storage space is offered on the Cloud.

Data Center: Data Center is a centralized location where storage


devices and servers required to execute the applications are located.
Large organizations typically have multiple Data centers Primary, BC,
etc. However, in case of a Cloud service, the enterprise does not require
to own a data center. Another data center concept used in cloud
computing is Server Virtualization; in fact, virtualization started within
local data centers and has been quickly seized by cloud service providers
as a means of reducing server costs. Virtualization is a concept by which
software can be installed on a physical server that provides multiple
instances of virtual servers you can have a dozen virtual servers
running on one physical server.

Distributed Servers: Organizations have multiple data centers


primary and disaster recovery locations. Large organizations also have
multiple primary and disaster recovery sites. However, costs are
inhibiting. Cloud services use multiple or geographically distributed
servers to improve responses. This also gives the cloud service providers
flexible options in security. Amazon and Google have data centers and
servers over the world. Increase of hardware will be based on the
requirements of each site.

Infrastructure: Cloud computing is not a one-size-fits-all offering. The


cloud service provider configures the infrastructure depending on the
applications required or offered and the architecture of cloud
deployment. This is how, cloud can satisfy a small enterprise and also a
large enterprise the infrastructure is dynamically configured to meet

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the computing requirements, the applications required and the type of


service that the offerings are bundled into.

9.5 CLOUD DEPLOYMENT MODELS

Essentially, cloud deployments can be classified into the following types.


They are generally based on the needs of the industry.

1. Public Cloud: A public cloud can be accessed by any subscriber with an


internet connection and access to the cloud space. It may be owned,
managed, and operated by a business, academic, or government
organization, or some combination of them. It exists on the premises of
the cloud provider.

2. Private Cloud: A private cloud is established for a single or specific


group or organization and limits access to just that group. It may be
owned, managed, and operated by the organization, a third party, or
some combination of them, and it may exist on or off premises.

3. Community Cloud: A community cloud is shared among two or more


organizations or a community that has similar cloud requirements or
shared concerns (e.g., mission, security requirements, policy, and
compliance considerations). It may be owned, managed, and operated
by one or more of the organizations in the community, a third party, or
some combination of them, and it may exist on or off premises.

4. Hybrid Cloud: A hybrid cloud is essentially a combination of at least


two clouds, where the clouds included are a mixture of public, private,
or community that remain unique entities, but are bound together by
standardized or proprietary technology that enables data and application
portability; for example, cloud bursting for load balancing between
clouds.

5. Outsourced Private Cloud: It is a Private Cloud service that has been


outsourced to a Cloud Service Provider. While aspects such as
infrastructure requirements are determined by a contract, the one key
issue is security. The private cloud has two security perimeters, one
implemented by a cloud consumer and one implemented by a provider.
The two security perimeters are joined by a protected communications
link. The service provider takes responsibility to enforce the provider-

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implemented security perimeter and to prevent mingling of private cloud


resources with other cloud resources that are outside the provider-
controlled security perimeter. There are various options for ensuring
security and separation between private cloud resources and other cloud
resources Virtual Local Area Network (VLAN), VPN, separate network
segments or clusters, etc. If not carefully designed, the customer may
end up in a virtual public cloud.

9.6 CLOUD SERVICE MODELS

Cloud Computing services is a utility based model that may be of software


offered as SaaS or Infrastructure, servers and other hardware offered as
Infrastructure as a Service (IaaS) or of hosted platform such as Operating
Systems and System tools/utilities offered as Platform as a Service (PaaS).

The software may be hosted anywhere on the cloud providers choice of


Data Centers and the consumer just goes by Pay as you go based on
usage this model is the SaaS. The difference between the old ASP Model
and SaaS is that ASP just hosts and charges you, whereas SaaS provides
the software on an appropriate platform and meters your usage for billing.
All resources such as VMs, CPU cycles, storage etc. are provided on
demand.

Following are the various service models in Cloud Computing offerings:

Cloud Software as a Service (SaaS): The capability provided to the


consumer is to use the providers applications running on a cloud
infrastructure. The applications are accessible from various client devices
through a thin client interface such as a Web browser (e.g., web-based
e-mail), or a program interface. The consumer does not manage or control
the underlying cloud infrastructure including network, servers, operating
systems, storage, or even individual application capabilities, with the
possible exception of limited user-specific application configuration
settings.

Cloud Platform as a Service (PaaS): The capability provided to the


consumer is to deploy onto the cloud infrastructure consumer-created or
acquired applications created using programming languages and tools
supported by the provider. The consumer does not manage or control the
underlying cloud infrastructure including network, servers, operating

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systems, or storage, but has control over the deployed applications and
possibly application hosting environment configuration.

Cloud Infrastructure as a Service (IaaS): The capability provided to


the consumer is to provision processing, storage, networks, and other
fundamental computing resources where the consumer is able to deploy
and run arbitrary software, which can include operating systems and
applications. The consumer does not manage or control the underlying
cloud infrastructure but has control over operating systems, storage,
deployed applications; and possibly limited control of select networking
components, for example, host firewalls.

9.6.1 Software as a Service (SaaS) Model

SaaS is software deployed as a hosted service and accessed over the


Internet. Historically, SaaS goes back to the late 90s or the early Internet
era and hence is the predecessor of cloud computing and was then
commonly known as Web services.

While cloud computing provides convenient rental of computing resources


which are accessed by consumers over a network, individually allocated to
consumers and paid for based on usage, SaaS, is rented access to an

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whole application. The application is owned by the Cloud provider and the
program resides on and is executed on the providers servers. The
consumers browser provides the interface to the providers server. The
SaaS providers main responsibilities are to ensure that the software that it
supplies is solidly supported and tested. The SaaS applications be scalable
to increasingly larger consumer workloads, maintain the necessary
infrastructure. To carry this out in a secure environment with specified
uptime for the consumer is a critical aspect.

All customers have valuable organizational data stored in the cloud and
some of this information may be proprietary and business-sensitive;
therefore, a secure environment is paramount.

1. Who are SaaS consumers?

Organizations providing their members or employees with access to


typical software applications such as office productivity or e-mail.

End-users who directly use software applications, whether on their own


behalf or that of their organization.

Software application administrators who configure an application for


end-users.

2. What does a consumer get? The right to use specific applications on


demand, and application data management, such as backup and data
sharing between consumers.

3. How are usage fees calculated? Typically, based on the number of


users, the time in use, per-execution, per-record processed, network
bandwidth consumed, and quantity/duration of data stored.

4. Scope of Control
SaaS Cloud Provider Admin Control over the applications and Total
control over Hardware, OS and Middleware.

SaaS Consumer Limited Admin Control over applications typically at


the user level.

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9.6.2 Benefits of SaaS to the Customer

Compared with traditional IT model, SaaS clouds provide scalability and


also shift the burden significantly from consumers to providers, resulting in
greater efficiency, performance and cost efficiency. Some of the key
benefits are:

Unlike in-house software applications, the consumer is not burdened with


complex installation procedures.

SaaS applications have very small footprints on client computers and


hence, very little or no client-side software are required and hence
savings.

No distribution costs and hence well suited to the SMBs.

License management overheads can be significantly reduced using SaaS.

Centralized Management and Data hence, the SaaS provider manages


the data, including compliance, security, backup, and disaster recovery.

Platform or hardware is the responsibility of the SaaS provider.

Savings in upfront investments and costs cloud providers provision the


hardware, power, and other computing resources at scale and more
efficiently than individual consumers can for their limited requirements.
Business volumes on applications like ERP reduce per unit cost to
consumers. This provides cost savings to consumers both upfront and
recurring.

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9.7 MANAGING SECURITY ISSUES

The information housed on the cloud is often seen as valuable to


individuals with malicious intent. There is a lot of personal information and
potentially secure data that people store on their computers, and this
information is now being transferred to the cloud. This makes it critical for
you to understand the security measures that your cloud provider has in
place, and it is equally important to take personal precautions to secure
your data.

The first thing you must look into is the security measures that your cloud
provider already has in place. These vary from provider to provider and
among the various types of clouds. What encryption methods do the
providers have in place? What methods of protection do they have in place
for the actual hardware that your data will be stored on? Will they have
backups of my data? Do they have firewalls set up? If you have a
community cloud, what barriers are in place to keep your information
separate from other companies?

Most cloud providers have standard terms and conditions that may answer
these questions. Small businesses may have more leverage to discuss the
terms of their contract with the provider. However, the large and
Fortune-500 organizations that have very tight security requirements may
have to enforce their own standards on the Cloud provider.

9.7.1 Cloud Specific Security Issues


Security challenges in Cloud may be those in traditional in-premise
implementations or those specific to cloud implementation. The first four
discussed below are security issues that we face in in-premise
implementations too, whereas the later ones are specific to cloud
deployments:

Authentication and Authorization: These would have to change for


Cloud deployments; forensics would become much more difficult to
complete. Beyond the user authentication, there is a cloud-specific need
for mutual authentication, identity management, session key
establishment, user privacy and security against many popular attacks.

Availability: To ensure reliable and timely access to cloud data or


computing resources. The availability of cloud services is a big concern,

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since if the cloud service is disrupted it affects more customers than in


the traditional model.

Data Confidentiality: The cloud system is related to the areas of


intellectual property rights, covert channels, traffic analysis, encryption,
and inference. Cloud computing involves the sharing or storage of
information on remote servers owned or operated by others, while
accessing through the Internet or any other connections. Cloud
computing services exist in many variations, including data storage sites,
video sites, tax preparation sites, personal health record websites and
many more. The entire contents of a users storage device may be stored
with a single cloud provider or with multiple cloud providers. Whenever
an individual, a business, a government agency, or any other entity
shares information in the cloud, privacy or confidentiality questions arise.

Virtual Machine Security: Virtual machines used in cloud providers


may also have vulnerabilities. Such vulnerabilities represent an even
more serious problem in multi-tenant environments, where compromise
of even a single virtual machine can affect all users on the same physical
server.

Information Security: Unlike traditional in-premise deployment, in the


SaaS model, the enterprise data is stored outside the enterprise
boundary at the SaaS-vendor data center. Therefore, the SaaS vendor
must adopt additional security checks to ensure data security and
prevent breaches due to security vulnerabilities in the application or
through malicious employees. This involves the use of strong encryption
techniques for data security and fine-grained authorization to control
access to data.

Network Security: In Cloud-SaaS deployments, all data flow over the


network needs to be secured in order to prevent leakage of sensitive
information. This involves the use of strong network traffic encryption
techniques such as Secure Socket Layer (SSL) and the Transport Layer
Security (TLS) for security.

Resource Location: In SaaS-Cloud deployment model, the end-users


will generally not be aware of where the resources are located possibly
in other legislative domains. This poses a potential problem when
disputes happen, that sometimes go beyond the control of cloud

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providers. A secure SaaS model must be capable of providing reliability


to the customer on the location of the data of the consumer.

Cloud Standards: For Network Architecture, Data Format, Metering and


Billing, Quality of Service, Resource Provisioning, Security, Identity
Management and Privacy.

Data Segregation: As a result of multi-tenancy, multiple users can store


their data using the applications provided by SaaS and intrusion of data
of one user by another becomes possible. A malicious user can use
application vulnerabilities to handcraft parameters that bypass security
checks and access sensitive data of other tenants. SaaS models should
ensure a clear boundary for each users data not only at the physical
level but also at the application level.

Data Access: Issues are mainly related to security policies provided to


the users while accessing the data. In a typical scenario, a small business
organization can use a cloud provided by some other provider for
carrying out its business processes. This organization will have its own
security policies based on which each employee can have access to a
particular set of data. Suffice that the model must also be able to provide
organizational boundary within the cloud because multiple organization
will be deploying their business processes within a single cloud
environment.

Web Application Security: One of the must-have requirements for a


SaaS application is that it has to be used and managed over the web.
Security holes in the web applications, thus, create a vulnerability to the
SaaS application. Traditional network security solutions such as firewalls,
IDS and IPS do not adequately address this problem. SaaS introduces
new security risks that cannot effectively be defended against at the
network level and require application level defences.

Identity Management and Sign-on Process: ID Management deals


with identifying individuals in a system and controlling the access to the
resources in that system by placing restrictions on the established
identities and is one of the biggest challenges in information security. Its
all the more challenging a task when the applications are always has
used from outside the firewall or DMZ. In such scenarios, the

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provisioning and de-provisioning of the users in the cloud becomes very


crucial.

9.7.2 Cloud Security Plan


Selecting a service provider with strong security procedures and services in
cloud computing can be a strategic move, but enterprise organizations
need to continue to take an active role in security and risk management.
Working together, the cloud provider and the enterprise can ensure that
existing security practices are being complemented and that enterprise
resources are protected according to industry best practices.

Concerns around the security of cloud infrastructure have been viewed as a


barrier to adoption, but these can be addressed by the user organization
adopting a good framework for assessing the vendor and a process of
auditing and tightening the security policies and procedures.

Creating a security strategy and plan must be one of the first


considerations for enterprise IT organizations that opt for Cloud-SaaS
deployment. While choosing and partnering with a service provider with
strong security procedures and services in cloud computing is the first
important step, enterprises need to continue the initiative and develop
their own security and risk management plan.

Such a Security Plan would be similar to any in-house Information Security


Policy framework, with the exception that it should include the technical
considerations that govern cloud issues. Below is a typical structure for
ensuring security and compliance of the SaaS/Cloud while meeting
organizational security and compliance objectives. The following plan is an
extract from a Cloud Security Alliance Whitepaper.

1. Step 1 Review Your Business Goals: Security is not a one-size-


fits-all and depends on the organizations goals and objectives. The
organization should develop a cross-department Security Policy that
includes People, Processes and Technology.

2. Step 2 Maintain a Risk Management Program: An effective cloud


computing risk management program is important for reducing the
overall risk to the organization. It is also essential for prioritizing the
utilization of resources and for providing the business with a long-term
strategy.

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3. Step 3 Create a Security Plan that Supports Your Business


Goals: Develop goals with measurable results that are consistent with
providing support for the growth and stability of the company. The goals
should include specification date for completion, verification of
achievement, and a measurable expected result. Security professionals
are encouraged to regularly conduct careful analysis to develop
responsible programs and build in the necessary controls and auditing
capabilities to mitigate threats and maintain a reasonable security
program that protects organizational assets.

4. Step 4 Secure Corporate-wide Support: Gain the approval of your


cloud computing security plan from not only executive management but
also the general workforce. Organizations need to establish levels of
security that meet business goals and comply with regulatory
requirements and risk management policies, but that can be centrally
managed and conveniently implemented across the organization with
minimal negative impact to productivity. Gaining this acceptance
streamlines adoption throughout the organization.

5. Step 5 Create Security Policies, Procedures, and Standards:


With input from a variety of business units, establish a set of guidelines
to ensure that all compliance measures are identified. Cloud services are
a major advantage for growing organizations that have not yet
embedded established policies and procedures into the company. The
enterprise can rely on the best practices the service provider has
developed over years of experience in similar environments.

6. Step 6 Periodic Audit and Review: Review the security plan on a


regular basis, report on achievements of goals, and audit the
compliance of the organization to the security policies and procedures.

7. Step 7 Continuously Improvement: Annually review your cloud


computing security plan with senior management and your cloud
services provider. Many companies believe that once they have solid
policies and procedures in place they do not need to revisit them but
your industry and your business will change over time, and the
technology available to support your security plan will evolve.
Understanding the dynamic nature of your business and constantly
evaluating your security requirements are the foundation for
implementing a successful continuous improvement strategy.

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There are several research works happening in the area of cloud security.
The Cloud Security Alliance (CSA) is gathering solution providers, non-
profits and individuals to enter into discussion about the current and future
best practices for information assurance in the cloud. The Cloud Standards
website collects and coordinates information about cloud-related standards
under development by the groups. The Open Web Application Security
Project (OWASP) maintains list of top vulnerabilities to cloud-based or
SaaS models which is updated as the threat landscape changes. The best
security solution for SaaS applications is to develop a development
framework that has tough security architecture.

While Cloud-SaaS security has been improving to acceptable standards,


the concern remains that no matter how careful you are with your personal
data, by subscribing to the cloud you will be giving up some control to an
external source. This distance between you and the physical location of
your data creates a barrier.

9.8 RISKS and PITFALLS

While public cloud offers many potential benefits for the enterprise, yet
there are still many public-cloud-migration holdouts among CIOs, and their
hesitation is still largely tied to perceived risks and the debate around
cloud computing risk continues. This isnt because the risks that large
enterprises care about have worsened or because there is a new set of
risks that presents concern. The clarity of clouds risk-adjusted value
proposition thus has yet to emerge, mostly because evaluations of risk and
value remain moving target.

Risk is not something intrinsic to the cloud, but rather the lack of a
consistent framework in large enterprises for engaging with and managing
cloud services.

The risk issues normally associated with cloud technologies, such as data
privacy and security, are evolving rapidly. Even the technologies
themselves vary by provider and service. The absence of a consistent
approach to these technologies and providers should be the risk that most
concerns CIOs, as it will exacerbate the risks of what could otherwise be a
perfectly acceptable sourcing arrangement.

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9.8.1 Potential Risks

Given below are six potential risks and a discussion on their impact. As you
will notice, some of these are also security issues and have been dealt with
in the previous section.

1. Privileged User Access: Associated with external management of data


of cloud user organization, everyone would like to have the benefits of
not owing the hardware at the same time owning and controlling the
storage. Cloud data centers are operated by small teams who do not
report to the users; its largely an automated process where software is
in control of other software or data. But an organization could have
untrustworthy or unreliable employees at its on-premises data center.
However, the fact that data center operation is largely an automated
processes itself means that clouds are far more secure than thought to
be. Refer the Gartner Survey on Public Cloud Risks Security and
privacy are paramount though dated 2009 is still quite relevant.

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2. Regulatory Compliance: Owing to the Gartners report on cloud


computing risks was published back in 2008, prominent cloud providers
have actually acquired certification for their services and data centers.

3. Data Location: Organizations think of it as a big issue regarding what


will happen if their data swims out of control. Taking a step back, if one
pictures an individual walking out of his office with a laptop on which his
critical data is stored, the chances are high that this laptop could be
snatched from him. So, the risk of data location is much greater if one
does not store ones data in the cloud. An intelligent response to the
menace of data location is to choose multiple cloud services and store
different portions of data in different clouds, so decreasing the danger of
data location.

4. Data Segregation: An aspect which deals with the issue that ones
data should not mix with someone elses data. Yet again, the response
to this issue is automation. Todays cloud services use highly automated
services which literally decrease the chances of data loss and data
segregation to nearly zero.

5. Data recovery: Such data that are mission critical to an organization


must be backed-up double or even triple backed-up and it is in the
organizations own interest that it puts in checks and even its own
storage for such data.

6. Long-term Viability: Whether the cloud provider remains in service for


eternity. Most cloud providers can easily achieve a higher level than a
business on its own, particularly in the case of todays small-scale
businesses. Looking at the cloud giants of today, they do not look like
they are going to hit any difficulties anytime soon.

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9.8.2 Security Provisions in Cloud Contracts


To help ease the concerns of cloud security, which Gartner says is still a
chief inhibitor to enterprise public cloud adoption, it is essential for buyers
to strengthen contracts and service-level agreements to mitigate their
risks. Below are some of the common and recommended security
provisions in cloud contracts and how common and effective they are.

1. Customer Audits on Demand: Clauses that allow customers to audit


vendors. Their effectiveness depends on how much the vendor allows
the customer to inspect.

2. Data Deletion Certificate: This is proof that data is deleted when


service expires. This is highly effective and legally defensible but
generally never practiced.

3. Disaster Recovery: Many vendors claim cloud services, by their


nature, equate to disaster recovery, but that cannot always be the case.
If, for example, data is only stored in a single location of a cloud
provider without an offline backup, that creates a single point of failure.
The effectiveness of this clause in a contract is essential and highly
effective, but the challenge is to verify the actual existence of a DR site.
While vendors may claim they have robust systems, they are often
reticent to provide evidence, citing security concerns.

4. Downtime Credits: These provide the user credits or some sort of


reimbursement in case of downtime. While credits are helpful as a
deterrent, it is a post-factor remedy and does not prevent an outage
from happening in the first place. These are very common in contracts
and have its genesis in Maintenance SLAs.

5. Encryption: There are multiple encryption methods. If encryption is


done by the vendor when the data reaches the providers cloud, it is less
expensive and less secure compared to if the user encrypts the data
before sending it to the cloud. Important factor is who stores and has
access to the encryption keys. The more copies of the keys, the less
secure it is. There are third-party tools that can also be used to provide
encryption as a service.

6. Evaluations: Many buyers use third-party security services to verify


their providers security controls, such as ISO27001 or SOC1 and SOC2

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audits. But, a vendor simply reporting that it complies with these audits
in many cases does not provide end-users with the information they
need to evaluate the providers system for their specific security needs.

7. Full Indemnification for Security Failure Impact: In this situation,


a contract would outline that if there is a security breach that the
provider would be responsible for losses of the customer.

8. Hacking Insurance: Insurance by a third party, or by the vendor could


help displace costs resulting from a security or data loss issue.
Potentially very helpful, but does not necessarily create incentive for
provider to avoid a breach.

9. Negotiate Security Clauses: These allow customers to negotiate


higher levels of security for certain programs or data.

9.8.3 User Responsibilities

Within the user organizations, the organization must account for the
following three deficiencies:

Lack of a Consistent approach The lack of a consistent approach to


evaluate cloud service providers. Studies conducted around flaws in
cloud services indicate there are several missteps that should represent
immediate disqualification or screening criteria for vendors. However,
many organizations have yet to evolve their vendor evaluation criteria.

Lack of Clear Guidance for integration and the migration of


applications to cloud platforms. This should take the form of reference
architecture patterns that developers, project managers and business
partners can use off-the-shelf to promote consistency in managing
architectural risk.

Lack of Clear Communication with key stakeholders around ITs


strategy for engaging cloud services. Vendors have a clear incentive for
bypassing IT in selling and promoting cloud services because they can
increase the contract value by 50% to 100% by going directly to
business partners, and they can reduce the sales cycle time by 50% to
80%. For IT to promote consistent evaluation frameworks and
architectural guidance, leaders need to convey a strategy that ties to

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articulated business objectives, shapes business partner expectations


and defines challenges that require business-IT collaboration to solve.
This is particularly true in areas where provider/platform risks need to be
tested in coordination with business partners and providers to determine
what constitutes acceptable risk management.

Large enterprises that successfully manage cloud technologies and risks


recognize that, no matter how the market evolves, cloud services are likely
to represent an element of our future technology architectures, and they
need the reference models in place to define the role these services play.
They understand that the bigger risk lies not in the technology or provider,
but in the cost of lost opportunities if the enterprise is unable to take
advantage of different-in-kind cloud capabilities.

9.9 CLOUD VENDORS

When we discuss Cloud and its vendors, its to be borne in mind that its
not one package; as we have discussed earlier, you have SaaS, PaaS and
IaaS, Cloud Storage, etc. Each of these is a specialized service PaaS you
could have vendors who deal only platform and others deal only with cloud
storage service. There are cloud services brokerages or any other type of
cloud service provider that does not cover the hardware and software
vendors that may be used to build cloud infrastructure.

I have provided below a list of Cloud Service providers categorized by the


service they provide. These are mainly the ones identified by analysts such
as Gartner, Forbes and PwC as among the leading service providers in their
areas of speciality. Below is a list of top Cloud Service providers:

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Cloud Platforms
Cloud Storage Cloud Security
Cloud Software and
Development

FinancialForec.com Mulesoft Carbonite Veracode

Intacct Red Hat Intronis Zscaler

Zoho LogMein Evault CipherCloud

Google Parallels Acronis Alert Logic

Tableau Software Software AG Trend Micro

SAP Engine Yard Blue Coat

Workday Pivotal Software AVG Technologies

SalesForce.com Webnsense

Avalara Asigra

Marketo

NetSuite

Oracle

IaaS Providers PaaS Providers


Amazon Web Services Salesforce.com
Microsoft Microsoft
RackSpace Google
CISCO Systems NTT Communications
Nebula Engine Yard
EMC Mendix
Cloudscaling CloudControl
IBM Docker
Comcast AppPoint Software
NTT Communications CenturyLink

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Verizon Software AG
AT&T IBM
CenturyLink SAP
HP Red Hat
Navisite

Unlike other Cloud Services, SaaS vendors are specific to product, for
example Siebel CRM SaaS offering only the CRM on a SaaS platform or
Microsoft Dynamics ERP for SMBs as a SaaS offering.

SaaS companies revenues are showing a steady increase. IDC Estimates


that by 2016, about 25% of new business software purchases will be
service-enabled software. SaaS delivery will constitute about 14.2% of all
software spending and 18% of all applications spending. IDCs 21.3%
compound annual growth rate forecast for SaaS reflects the strength of the
new business model.

Companies outside the tech industry are accelerating their efforts to


digitize their products and services. More traditional businesses are
acquiring software companies or investing in software. But mainstream
companies dont want to just purchase a software or hardware product that
they will have to integrate into their product as well as continually upgrade,
maintain and support. To digitize their offering in the most efficient way
possible, they need a software partner that will provide the service using
the hardware as a delivery vehicle, sometimes as a loss leader. Below is
PwCs Top-20 SaaS:

SaaS Companies

Salesforce.com Oracle Siebel Symantec Fujitsu

Microsoft
Cisco Citrix Blackboard
Dynamics

Intuit IBM Amazon.com GXS

Concur
ADP Google Athenahealth
Technologies

SAP Adobe DATEV Compuware

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While the bulk of enterprise software is still deployed on-premises, SaaS


(software as a service) continues to undergo rapid growth. Gartner predicts
the total market to top $22 billion by 2015.

The SaaS market will also see significant changes and new trends in 2014
as vendors jockey for competitive position and customers continue shifting
their IT strategies toward the deployment model. Below are some of the
choices that the users will be offered by SaaS vendors.

Multi-tenancy: SaaS vendors have always stressed the benefits of multi-


tenancy, a software architecture where many customers share a single
application instance, with their information kept separate. Multi-tenancy
allows vendors to patch and update many customers at once and get more
mileage out of the underlying infrastructure, thereby cutting costs and
easing management. There are other variations on multi-tenancy coming
up, such as Oracles new 12c database an option for the release allows
customers to host many pluggable databases within a single host
database, an approach that Oracle says is more secure than the
application-level multi-tenancy used by others.

Hybrid SaaS: It is a concept of application code bases that are movable


between the two deployment models could become more popular in 2014.
Oracle offers Fusion Applications that could be deployed either on-premises
or from its cloud, but due to the apparent complexity involved with the first
option, most initial Fusion customers have chosen SaaS.

Geographic Spread/Depth: Vendors offer to enterprise customers, SaaS


offerings that are built for disaster recovery and are broadly available.
Users in parts of the world that have fewer data centers will have SaaS
options and vendors will be able to provide regional or global roll-out
options.

Better Pricing Models: In-premises software vendors such as Oracle and


SAP will streamline their commercial models to provide on annual
subscriptions, not perpetual software licenses and annual maintenance. Not
only that vendors Cash Flow Model will be different but will also help
dissatisfied customers to move more easily to a rival product compared to
the in-premises deployment where the customer is locked-in. It is this
model that has hit SaaS vendors churn, or customer turnover. At the

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same time, the model makes the vendor more responsive to customer
needs and customer retention strategies become very important.

Market Consolidation: Expect to see more mergers and acquisition


activity in the SaaS market as vendors buy up their competitors and
partners. Oracle, SAP and Salesforce.com have both invested heavily in
these areas already and are likely to swallow smaller companies to
consolidate their market presence.

Verticalization of SaaS: There will be more stratification of SaaS apps as


vendors build or buy with the aim of targeting whole verticals. Vendors will
continue to launch SaaS apps specifically tailored to particular verticals,
e.g., healthcare, manufacturing, retail, etc. The challenge that customers
face is to decide the extent of vertical specialization of vendors.

SaaS-PaaS Inseparable: Salesforce.com released the Salesforce1, a


revamped version of its PaaS that couples its original Force.com offering
with tools from its Heroku and ExactTarget acquisitions, a new mobile
application and 10 times as many APIs. Other vendors will also follow suit.
PaaS serves as a force-multiplier for SaaS vendors creating a pool of
developers and systems integrators who create add-on applications and
provide services to customers. Oracle, SAP and other SaaS vendors have
been building out their PaaS offerings.

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9.10 SUMMARY

If you are considering using the cloud, be certain that you identify what
information you will be putting out in the cloud, who will have access to
that information and what you will need to do to make sure it is protected.
Additionally, know your options in terms of what type of cloud will be best
for your needs, what type of provider will be most useful to you, and what
the reputation and responsibilities of the providers you are considering are
before you sign up.

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9.11 SELF ASSESSMENT QUESTIONS

1. State two definitions for Cloud Computing.

2. How are SaaS, IaaS and PaaS different from each other? Expand in a
few lines your understanding of each of these services.

3. For two scenarios a Large Indian Enterprise and a SMB in India,


explain your understanding of the areas where they can utilize SaaS.

4. Explain any three Cloud Deployment Models. What types of applications


you would recommend deploying on a Public Cloud for your
organization?

5. For your organization, which cloud security issues do you see as key?

6. How does location of a cloud provider violate your organizations


Information Security Policies and what mitigations you would put in
place if for business compulsions you have to opt for cloud?

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

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Chapter 10
ENTERPRISE IT INFRASTRUCTURE
Objectives

After completing the chapter, you will understand:

IT Solution Components in an Enterprise that have not been covered so


far.

Networks, LAN/WAN, IPLC, MPLS, VPN, Network Management Tools.

Data Center, Storage, Storage Area Networks, Networks Attached


Storage.

Unified Communication.

Network Security; Firewalls Internet, Extranet, Perimeter Security


Intranet/Extranet, NIPS, E-mail/Web Content Security, Antivirus, Security
Management.

Information Security and Corporate Governance .

Structure:

10.1 Introduction
10.2 Enterprise Networks
10.2.1 Network Components
10.2.2 Area Networks
10.2.3 Network Designs
10.2.4 Internet and Office Services
10.3 Data Centers
10.4 Enterprise Data Storage
10.5 Unified Communications
10.6 Network Security
10.7 Information Security
10.8 Corporate Governance of Information Technology
10.9 Summary
10.10 Self Assessment Questions

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10.1 INTRODUCTION

In the previous chapters, we have covered all aspects of solutions required


to run an enterprise core ERPs to document management, integration
and cloud based solutions.

However, these applications do not run by themselves; an enterprise IT


requires a whole host of other technology solutions that are fairly hidden or
run away from the limelight, nevertheless equally vital, actually the
backbone of all enterprises. Some of these are essential to an enterprise
even though they may be small companies with no IT department and
business IT solutions run off a cloud.

These are networks that power your e-mail, Unified Communication and
Network and Information Security frameworks that are vital and regulatory
requirements to any organization however small.

We will discuss these briefly in this chapter giving you enough appreciation
of these areas.

10.2 ENTERPRISE NETWORKS

A Network is a group of communication systems that connect with each


other and multiple computers and computer/office equipment and allow
sharing of resources such as files, printers, Internet connection and
computer resources such as servers or storage.

In the world of computers, networking is the practice of linking two or


more computing devices together for the purpose of sharing data.
Networks are built with a mix of computer hardware and computer
software.

A network is a group of devices that can communicate and be connected


by physical and/or wireless connections. In scale, it can range from single
PC sharing basic peripherals to massive data centers located around the
worldwide, to the Internet itself. Computer networks serve a number of
purposes, some of which include:

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Communications such as e-mail, instant messaging, chat rooms, etc.


Shared hardware such as printers and input devices
Shared data and information through the use of shared storage devices
Shared software, which is achieved by running applications on remote
computers

Early computer networks of the late 1950s included the US militarys Semi-
Automatic Ground Environment (SAGE) and the commercial airline
reservation system called the Semi-Automatic Business Research
Environment (SABRE). Based on designs developed in the 1960s, the
Advanced Research Projects Agency Network (ARPANET) was created in
1969 by the US Department of Defense and was based on circuit switching
the idea that a single communication line, such as a two-party telephone
connection, deserves a dedicated circuit for the duration of the
communication.

An enterprise network is an enterprises communications backbone that


helps connect computers and related devices across departments and
workgroup networks, facilitating insight and data accessibility. An
enterprise network reduces communication protocols, facilitating system
and device interoperability, as well as improved internal and external
enterprise data management.

Enterprise Networks support thousands of users across a companys


diverse geographical locations involving hundreds of servers. Each location
may look like a simple system, but the complexity increases as these
systems are linked together. Some characteristics of Enterprise Networks
are:

Large involving many 1000s of network devices.


Geographically distributed over continents and countries.
They are tightly controlled by IT departments that have (nearly)
complete control over user desktops and network connected equipment.
The technologies are only increasing in complexity and diversity.
Due to enterprises need for ever expanding demand, Network services is
a quest for anytime, anywhere, any form and never ending.

The four types of organizations sampled below will give you an


understanding of the dimension of Enterprise Networks:

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Small one-building Office a single subnet (department) in an


organization of say 10 machines having requirements of decentralized
resources, sharing printers, files etc. Typical Network Hardware
requirements would involve a few switches and a few meters of cables.

A Medium Enterprise or a single entity in a large organization with a few


100 users and centralized model for data storage of about 100 machines.
A typical network requirements would be 10-20 switches and 2-3
routers and 4-5 servers with network security and network
administration.

A Large Enterprise with 1000s of users spread over multiple sites with
a few sites having a few 1000s of machines would have a complex
network with a few 100s of switches, 10s of routers, duplicate servers,
firewalls, DHCP, Proxy Servers and logging, DMZ, WAN and Internet
security management hardware and softwares.

A mega multinational corporation like General Electric or Bank of America


would have offices distributed over all continents and most of the
developed/developing countries, with multiple data centers and millions
of machines and devices. These organizations have their own dedicated
networks with multiple redundancy, data, voice and video channels, and
such facilities as drop boxes, etc. Such an organization would have their
own MPLS leased-line WAN Backbone(s) connecting multiple WANs and
LANs through a complex design of DMZs and Proxy Servers and Firewalls
with multiple layers of redundancy built-in. These organizations would
have their own Internet Security and Information Security Policies in
place which at times are even stringer than ISO 27001, network
administration teams, network design teams continually reviewing and
redesigning the network capabilities and upgrades. These are by
themselves studies in Enterprise Networks.

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The diagram below gives you a view of a simple Enterprise Network:

The key purpose of an enterprise network is to eliminate isolated users and


workgroups. All systems should be able to communicate and provide and
retrieve information. Additionally, physical systems and devices should be
able to maintain and provide satisfactory performance, reliability and
security. An enterprise network would include LANs and WANs and
integrate all systems, including Windows and Apple computers and
operating systems (OS), Unix systems, mainframes and even related
devices such as smartphones and integrates various system
communication protocols.

Further, we will discuss some basics of Networking and common


terminologies and components that are involved in day-to-day activities in
the IT industry.

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10.2.1 Network Components

This simple network evolved into the present-day Internet. Some of the
basic hardware components that can be used in networks include:

Network Devices: Equipment that connects directly to a network


segment are referred to as a devices. These devices are of two types
End-user devices and Network devices. End-user devices include
computers, printers, scanners, and other devices that provide services
directly to the user. Network devices include all the devices that connect
the end-user devices together to allow them to communicate.

Interface Cards: These allow computers to communicate over the


network with a low-level addressing system using MAC (Media Access
Control) Addresses to distinguish one computer from another. They are
also called LAN Adapters.

Repeaters: These are electronic devices that amplify communication


signals and also filter noise from interfering with the signals.

Hubs: These contain multiple ports, allowing a packet of information/


data to be copied unmodified and sent to all computers on the network.
They connect a group of hosts.

Bridges: These connect network segments, which allows information to


flow only to specific destinations.

Switches: These are devices that forward, make forwarding decisions


and otherwise filter chunks of data communication between ports
according to the MAC addresses in the packets of information. Switches
add the intelligence to data transfer management.

Routers: These are devices that forward packets between networks by


processing the information in the packet. In other words, Routers are
used to connect networks together. Routers, by default, break up a
broadcast domain, and route packets of data from one network to
another. Cisco became the de facto standard of routers because of their
high-quality router products.

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Firewalls: These reject network access requests from unsafe sources,


but allow requests for safe one.

There are various types of networks, which are classified according to


specific characteristics such as connection types, whether they are wired or
wireless, the scale of the network, and its architecture and topology.
Network types include local area networks, wide area networks,
metropolitan area networks and backbone networks.

SWITCH
Switch in the context of networking is a high-speed device that receives
incoming data packets and redirects them to their destination on a local
area network (LAN). A LAN switch operates at the data link layer (Layer 2)
or the network layer of the OSI Model and, as such it can support all types
of packet protocols. Essentially, switches are traffic police of a network.

A switch in an Ethernet-based LAN reads incoming TCP/IP data packets/


frames containing destination information as they pass into one or more
input ports. The destination information in the packets is used to determine
which output ports will be used to send the data on to its intended
destination.

Switches are similar to hubs, only smarter. A hub simply connects all the
nodes on the network communication is essentially in a haphazard
manner with any device trying to communicate at any time, resulting in
many collisions. A switch, on the other hand, creates an electronic tunnel
between source and destination ports for a split second that no other traffic
can enter. This results in communication without collisions.

Switches are similar to routers as well, but a router has the additional
ability to forward packets between different networks, whereas a switch is
limited to node-to-node communication on the same network.

ROUTER
Router is a device that analyzes the contents of data packets transmitted
within a network or to another network. Routers determine whether the
source and destination are on the same network or whether data must be
transferred from one network type to another, which requires encapsulating
the data packet with routing protocol header information for the new
network type.

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Based on designs developed in the 1960s, the Advanced Research Projects


Agency Network (ARPANET) was created in 1969 by the US Department of
Defense. This early network design was based on circuit switching. The first
device to function as a router was the Interface Message Processors that
made up ARPANET to form the first data packet network.

The initial idea for a router, which was then called a gateway, came from a
group of computer networking researchers who formed an organization
called the International Network Working Group, which became a
subcommittee of the International Federation for Information Processing in
1972.

In 1974, the first true router was developed and by 1976, three PDP-11-
based routers were used to form a prototype experimental version of the
Internet. From the mid-1970s to the 1980s, mini-computers were used as
routers. Today, high-speed modern routers are actually very specialized
computers with extra hardware for rapid data packet forwarding and
specialized security functions such as encryption.

When several routers are used in a collection of interconnected networks,


they exchange and analyze information, and then build a table of the
preferred routes and the rules for determining routes and destinations for
that data. As a network interface, routers convert computer signals from
one standard protocol to another thats more appropriate for the
destination network.

Large routers determine interconnectivity within an enterprise, between


enterprises and the Internet, and between different internet service
providers (ISPs); small routers determine interconnectivity for office or
home networks. ISPs and major enterprises exchange routing information
using border gateway protocol (BGP).

HUB
Hub in the context of networking, is a hardware device that relays
communication data. A hub sends data packets (frames) to all devices on a
network, regardless of any MAC addresses contained in the data packet. A
switch is different from a hub in that it keeps a record of all MAC addresses
of all connected devices. Thus, it knows which device or system is
connected to which port. When a data packet is received, the switch
immediately knows which port to send it to. Unlike a hub, a 10/100 Mbps

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switch will allocate the full 10/100 Mbps to each of its ports, and users
always have access to the maximum bandwidth a huge advantage of a
switch over a hub. Common types of hubs used in networking are network
hubs, passive hubs, intelligent and switching hubs.

Network Hubs: These are common connection points for network devices,
which connect segments of a LAN (local area network) and may contain
multiple ports an interface for connecting network devices such as
printers, storage devices, workstations, servers, etc. A data packet arriving
at one hubs port may be copied to other ports allowing all segments of the
network to have access to the data packet.

Passive Hubs: These only serve as paths or conduits for data passing
from one device, or network segment, to another.

Intelligent Hubs: Also known as manageable hubs, these hubs allow


system administrators to monitor data passing though and to configure
each port, meaning to determine which devices or network segments are
plugged into the port. Some ports may even be left open with no
connection.

Switching Hubs: These hubs actually read the attributes of each unit of
data. The data is then forwarded to the correct or intended port.

NETWORK INTERFACE DEVICE


A network interface device is a device that serves as a demarcation point
between the carriers local loop and the customers on-premises wiring.
This is where the data wires end and a customers home wiring starts.
Phone companies are responsible for maintaining the wiring up to the
network interface device, while customers are responsible for the wiring
after this point. These devices are located outside of houses, generally
somewhere near the utility entrance point. A network interface device is
also known as a network interface unit.

Network interface devices are the little grey telephone boxes outside of
homes that provide connection to a public switched telephone network.
One side of the network is locked with a small tie ring, while the other is
left open for the customer to access.

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When a connection is not working properly, determining whether it is the


customers or the providers wiring that is faulty is facilitated through a test
jack inside the network interface device. If the test jack works, there is
something wrong with the customers wiring and the customer needs to
perform the necessary repairs. If the test jack doesnt work, the line is
determined to be faulty and must be repaired by the network service
provider.

Most network interface devices include circuit protectors, which protect the
customers wiring, equipment and personnel from transient energy on the
line such as from a lightning strike to a telephone pole. A simple network
interface device has no intelligence or logic, and lacks capabilities beyond
wiring termination, circuit protection and a place to connect test
equipment.

10.2.2 Area Networks


Networks can be categorized in several different ways. One approach
defines the type of network according to the geographic area it spans.
Local area networks (LANs), for example, typically span a single home,
school, or small office building, whereas wide area networks (WANs), reach
across cities, states, or even across the world. The Internet is the worlds
largest public WAN. One way to categorize the different types of computer
network designs is by their scope or scale. For historical reasons, the
networking industry refers to nearly every type of design as some kind of
area network. Common examples of area network types are LAN, WAN and
WLAN (Wireless LAN).

LAN (Local Area Network): LAN connects network devices over a


relatively short distance. A networked office building, school, or home
usually contains a single LAN, though sometimes one building will contain
a few small LANs (perhaps one per room), and occasionally a LAN will
span a group of nearby buildings. In TCP/IP networking, a LAN is often
but not always implemented as a single IP subnet. In addition to
operating in a limited space, LANs are also typically owned, controlled,
and managed by a single person or organization. They also tend to use
certain connectivity technologies, primarily Ethernet and Token Ring.

WAN (Wide Area Network): As the term implies, a WAN spans a large
physical distance. The Internet is the largest WAN, spanning the Earth. A
WAN is a geographically dispersed collection of LANs. A network device

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called a router connects LANs to a WAN. In IP networking, the router


maintains both a LAN address and a WAN address. A WAN differs from a
LAN in several important ways. Most WANs (like the Internet) are not
owned by any one organization but rather exist under collective or
distributed ownership and management. WANs tend to use technology
like ATM, Frame Relay and X.25 for connectivity over the longer
distances. A WAN connects more than one LAN and is used for larger
geographical areas. WANs are similar to a banking system, where
hundreds of branches in different cities are connected with each other in
order to share their official data. A WAN works in a similar fashion to a
LAN, though on a larger scale. Typically, TCP/IP is the protocol used for a
WAN in combination with devices such as routers, switches, firewalls and
modems.

Home Networking with LAN-WAN: Residences typically employ one


LAN and connect to the Internet WAN via an Internet Service Provider
(ISP) using a broadband modem. The ISP provides a WAN IP address to
the modem, and all of the computers on the home network use LAN (so-
called private) IP addresses. All computers on the home LAN can
communicate directly with each other but must go through a central
gateway, typically a broadband router, to reach the ISP.

Other Area Networks: While LAN and WAN are by far the most popular
network types mentioned, you may also commonly see references to
these others are (i) Wireless Local Area Network a LAN based on WiFi
wireless network technology; (ii) Metropolitan Area Network a network
spanning a physical area larger than a LAN but smaller than a WAN, such
as a city; A MAN is typically owned and operated by a single entity such
as a government body or large corporation; (iii) Storage Area Network
connects servers to data storage devices through a technology like Fibre
Channel; (iv) System Area Network links high-performance computers
with high-speed connections in a cluster configuration also known as
Cluster Area Network.

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10.2.3 Network Designs

Computer networks also differ in their design. The two basic forms of
network design are called:

Peer-to-peer Networks: Peer-to-peer Networks have no dedicated


servers and are just a group of workstations connected together for the
purpose of sharing resources and data. All workstations are equal and
any of them may participate as a server or client. Peer-to-peer networks
are designed to satisfy the needs of small firms or home use that has
just a few computers and allow all of these to access the data in each
other and common resources such as printers, FAX, etc. In a Microsoft
Exchange setup, a Peer-to-peer network is categorized as a Workgroup.
You will find in large offices, many Workgroups created such as Marketing
Workgroup, Accounts Workgroup. Members of the Workgroup have
common access but restricted to those from outside the workgroup. All
Windows versions have built-in peer-to-peer networking capabilities.

Server-based Networks: Server-based Networks features centralized


server computers that store e-mail, web pages, files and or applications.
On a peer-to-peer network, conversely, all computers tend to support the
same functions. Server-based networks are much more common in large
and medium business and peer-to-peer networks much more common in
small business and homes and home-office configurations. Server-based
networks can be administered centrally, central point for back-up of files,
security/access rights and user accounts. The network server holds a list
of users who can user it services and their access rights. The services
provided by Server-based networks are File and Print Server, Application
Servers, Web Servers and Directory Servers.

File Servers were the original reason for Server-based networks and enable
sharing of files by authorized users across the network. Their typical
characteristics are Access Control Lists (ACL), large memories and storage
space, Multiple CPUs, Fast I/O buses, hot-swappable disks and Application
Servers are those that run a specialized application typically Mail Servers.
Typical are Microsoft Exchange Server or a Lotus Domino Server. Web
Servers are those that run HTTP and publish information on the Internet
and corporate site they host the web applications of the enterprise.

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Network Topologies represents its layout or structure from the point of


view of data flow. In so-called Bus Networks, for example, all of the
computers share and communicate across one common conduit, whereas
in a Star Network, all data flows through one centralized device. Common
types of network topologies include Bus, Star, Ring Networks and Mesh
Networks, Hybrid and Wireless Network Topologies.

Multi-Protocol Label Switching (MPLS) is a standards-approved end-


to-end circuit technology that speeds up network traffic flow and makes it
easier to manage. MPLS involves setting up a specific path for a given
sequence of packets, identified by a label on each packet. It is a scalable,
protocol-independent transport. In an MPLS network, data packets are
assigned labels. Packet-forwarding decisions are made solely on the
contents of this label, without the need to examine the packet itself.

Multi-Protocol Label Switching (MPLS) provides a mechanism for forwarding


packets for any network protocol. It was originally developed in the late
1990s to provide faster packet forwarding for IP routers. Since then, its
capabilities have expanded massively, for example to support service
creation (VPNs), traffic engineering, network convergence, and increased
resiliency. MPLS is now the de facto standard for many carrier and service
provider networks and its deployment scenarios continue to grow. MPLS
supports a range of access technologies, including T1/E1, ATM, Frame
Relay and DSL.

The predecessor of MPLS was IPLC (International Private Leased Circuit), a


point-to-point private line used by an organization to communicate
between geographically dispersed offices throughout the world. An IPLC
can be used for Internet access, business data exchange, video-
conferencing, and any other form of telecommunication. IPLC is hardware
intensive in times of heavy traffic leading to slower data traffic speeds.
IPLC has major drawbacks in situations where traffic engineering and
setting performance characteristics for different classes of traffic are
required. Factors like delay and jitter also come in causing problems in
networks where data like video-conferencing are used.

MPLS has the ability to create end-to-end circuits, with specific


performance characteristics, across any type of transport medium,
eliminating the need for overlay networks or Layer 2 only control
mechanisms. MPLS has an edge over IPLC on this front since it provides

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network administrators the ability to set the path traffic will take through
the network, and set performance characteristics for a class of traffic.

Voice Over Internet Protocol (VOIP) is a technology used for


delivering different kinds of data from a source to a destination using IP
(Internet Protocol). The data may be in many forms, including files, voice
communication, pictures, fax or multimedia messages. VoIP is most often
used for telephone calls, which are almost free of charge. Data is more
secure and faster with private networks, but the costs are much higher. For
the purpose of a communication system with very low cost, VoIP was
introduced. This technology provides fast and high quality voice
communication all over the world.

10.2.4 Internet and Office Services

There are three types of application deployment on the Internet Internet,


Intranet, Extranet these are briefly explained below:

Internet is the deployment of applications/information that the


organization wishes to make available to everyone in the external world.
It uses protocols such as HTTP, FTP or SMTP and is available to everyone,
anywhere. The Firewall open the Web Server to everyone outside the
organization.

Intranet are those that deploy applications on HTTP or FTP but


available only to company internal employees. Though the applications
are on a Web browser, they are not available to the open world. Access is
allowed only from within the Firewall.

Extranet is Intranet applications extended to select outside users such


as the companys partner organizations. Full Access is available from
within the Firewall and limited access outside the Firewall to select
organizations who are business partners.

Common Windows Server Concepts Starting from VMS platform


many years ago, Microsoft Windows NT and its subsequent versions have
become a key part of network operating systems that provide for a number
of built-in services such as below:

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File and print Servers allow sharing of files and printers across the
network.

DNS and WINS Services allow the admin to configure DNS and
NetBIOS name resolution.

DHCP Services allow the admin to configure the server to assign IP


addresses to clients on the network.

Directory Services to build a central list of objects such as user


accounts that authorize user log-in; commonly known as Microsoft Active
Directory.

Web Services to build and operate internet services.

E-mail Services to configure the server to send/receive e-mails using


SMTP. This feature also helps application developers to build in E-mail
into applications.

Group Policies allow the admin to deploy the settings down to the
client operating systems from a central server. By this, admin can apply
organizations common settings on all client machines. Examples folder
redirection, file permissions, user rights and installation of software and
updates.

Directory Services holds a list of users that are allowed to log-in to the
network and user rights for each of these and information on the users.
When a user tries to log-in to the network from any client machines, the
log-in request is sent to the Directory Server database that verifies the
credentials and passes or rejects the attempt to log-in. Servers can
perform multiple roles it can function as a File Server as well as provide
Directory Services.

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10.3 DATA CENTERS

A data center is a centralized repository, either physical or virtual, for the


storage, management, and dissemination of data and information
organized around a particular body of knowledge or pertaining to a
particular business. By the very term Data Center, one presumes that they
are a central repository of Data meaning information; however, in
computer terminology, data includes not just information but also the
software, i.e., the programs that process the data.

For example, the US Governments National Climatic Data Center (NCDC),


is a public data center that maintains the worlds largest archive of weather
information. A private data center may exist within an organizations
facilities or may be maintained as a specialized facility. Every organization
has a data center, although it might be referred to as a server room or
even a computer close. In that sense, data center may be synonymous
with Network Operations Center or commonly referred to as NOC a
restricted access area containing automated systems that constantly
monitor server activity, web traffic, and network performance.

The data center is the Achilles heel of IT operations and hence any
discussion on Enterprise Solutions is incomplete without stressing the
importance and critical aspects of a Data Center. Typically, large
corporations have multiple Data Centers Primary (DC), Disaster Recovery
(DR), Near-site Redundancy (NR) and some of the mega Fortune-500
corporations in the US even have remote underground Disaster Recovery
centers with hot replication so that not even the last transaction is lost.

A user sitting in Paris may be executing a software program that is run out
of a data center somewhere in the US. The data that this user processes by
executing computer programs update not only the primary data center, but
in real-time update two or more disaster recovery data center sites. So, in
such a scenario, if the primary data center goes down for whatever reason,
the user will be blissfully unaware of such an event as s/he is not affected
in the least.

The following Data Center elements is a must know for all:

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Disaster Recovery: When designing a data center, we choose reliable


equipment, components and technology, but eventually every system fails.
Thus, resiliency is an important aspect of the design plan. Disaster
recovery is the response and remediation that a company follows after a
planned or unplanned failure. Businesses often have a secondary data
center used mostly for backup. This facility can take on responsibility in the
case of a primary data center failure, but the recovery time will depend on
business requirement like cost, distance between data centers, application
criticality, and scope of the recovery.

The amount of data loss a company can tolerate, also known as its
recovery point objective (RPO) is a very important parameter. Recovery
time can be between 2 hours to days or even weeks, based on the
companys applications. Highly critical applications require less downtime
and less data loss. For that reason, a disaster avoidance solution might be
a better option for businesses with many highly critical applications.

Disaster Avoidance: Early action can be taken to protect business critical


applications from failure, thereby avoiding downtime and data loss.
Consider a scenario in which you have been informed that a storm is
coming and will hit your data center within 6 hours. If all the application
workload can be moved to another companys data center, your operations
can proceed normally.

Three critical elements play a key role in disaster avoidance. First, you
need to know that a disaster is coming. Second, the two facilities should be
close enough to perform live migration or what VMware calls vMotion.
(Note that VMware is discussing long distance vMotion, however.) Third,
the data link carrying the application workload between data centers must
be big enough to carry all the memory pages involved in the live migration
of the virtual machines.

Although disaster avoidance includes the term disaster, this process can
also be used for maintenance purpose. There are times you may migrate a
workload to another data center for routine maintenance.

Many other technologies can be included to support a seamless user


experience during disaster avoidance. IP localization, clustering, inbound
traffic optimization, and load balancing are just a few.

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Active-Active Data Centers: Rather than running all applications in one


data center with another for backup, some businesses chose the option to
distribute applications to more than one data center. If you have two data
centers, for example, you can run some applications in one data center,
and some in the second. Or the same application could operate run from
both data centers in scale-out fashion. Both are considered an active-active
data center model because the two data centers are actively used and
resources are not sitting idle. Data loss and recovery time are expected to
be zero or near zero.

The design of an active-active model is different from a compute, storage,


applications and network services standpoint than a traditional design.
Replication, stretch clustering, scale-out design, IP localization, layer 2
extension, load balancing, and state synchronization are the main
characteristics of an active-active data center design.

RPO and RTO: We have already mentioned data loss and recovery time,
as well as RPO. The recovery time objective (RTO) is the time it takes
applications to come back up after the planned or unplanned failure.
Backup technologies can be used to avoid data loss, but replication
technologies at the host, application or storage level are also used to
decrease RPO. To support active-active data centers, avoid traffic hair-
pinning, and provide read/write capability to storage, you may need to
implement a solution specific to your storage environment. This can help to
reduce RTO, because storage at both data centers can be leveraged by
applications. To reduce RPO at the storage level, a synchronous replication
solution can be implemented. Latency should be within the limit of the
replication solution to avoid poor application performance.

East-West and North-South Traffic: Applications residing in the data


center can be built in many tiers. Three-tier application architecture is well
known and commonly implemented by developers. Applications may
interact with services such as Active Directory, DNS, and DHCP, and also
can interact with other applications. Within or between data centers, if the
application talks with other applications or within application tiers, with
other components, or with common services, the traffic pattern is called
east-west.

When web servers talk with application servers or application servers talks
with database servers, these interactions are examples of an east-west

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traffic pattern. Applications can be accessed from campus networks, branch


offices, the WAN, or the Internet. In this case, applications are considered
to be to the south, so the communication is defined as north-south.

Leaf-and-Spine Architecture The leaf and spine network architecture,


or distributed core, was developed to allow traffic to scale, and to travel in
east-west routes, in addition to the more traditional north-south patterns.
The model consists of two components: spine switches and leaf switches.
The main idea of the leaf-and-spine architecture is that every leaf connects
to every spine and every spine connects to every leaf. In general, leaves
are not connected to each other and spines are not connected to each
other.

For specific and critical workloads, leaf devices can be connected to each
other, providing even lower latency. On top of leaf and spine physical
architecture, its possible to deploy Layer 2 or Layer 3 protocols such as
TRILL, FabricPath, SPB, or VXLAN. Cisco recently announced that its ACI
fabric uses VXLAN tunnels on top of leaf and spine architecture with the
Nexus 9000 series switches

10.4 ENTERPRISE DATA STORAGE

Storage often doesnt get the attention it deserves, which can turn out to
be a costly oversight. This section provides an overview to get you up to
speed on the various storage subsystems and the devices and technologies
that support them.

Though storage isnt often given enough attention in system architecture,


but it can make or break the service level agreement (SLA) for your
application response times. Understanding how to build a cost-effective,
high-performance storage system can save you money not only in the
storage subsystem, but in the rest of the system as well. Storage Systems
is a huge highly specialized topic with major advancements happening in
real-time. However, in this section, we will cover only a gist.

Even as recent as 10 years back, a Hard Disk of 40MB was considered an


extremely costly buy. Today, we get a few Gigabytes of Main memory, a
few Terabytes of Hard Disk, a small back-up flash drive of a few
Terabytes for a couple of 100 Rupees and laptops with Flash Drives of 1 TB.
This signifies the advancements in storage devices. However, all that is not

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enough because due to the proliferation of Mobiles, etc., organizations are


dealing with volumes of data that are unprecedented the Big Data and
storage and its cost is still a chicken-and-egg situation.

To meet the escalating demand for data-intensive graphics, web


transactions, and other digital firm applications, the amount of data that
companies need to store is doubling every 12 to 18 months. Companies
are turning to new kinds of storage infrastructures to deal with the
complexity and cost of mushrooming storage requirements. Large
companies have many different storage resources disk drives, tape
backup drives, RAID, and other devices that may be scattered in many
different locations. This arrangement is expensive to manage and makes it
difficult to access data across the enterprise. Storage networking
technology enables firms to manage all of their storage resources centrally
by providing an overall storage plan for all the storage devices in the
enterprise. There are alternative storage networking arrangements. In
direct attached storage, storage devices are connected directly to individual
servers and must be accessed through each server, which can create
bottlenecks.

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Direct attached storage (DAS), storage area network (SAN), and network
attached storage (NAS) are the three basic types of storage. DAS is the
basic building block in a storage system, and it can be employed directly or
indirectly when used inside SAN and NAS systems. NAS is the highest layer
of storage and can be built on top of a SAN or DAS storage system. SAN is
somewhere between a DAS and a NAS.

Direct Access Storage (DAS) is the most basic storage subsystem that
provides block-level storage, and its the building block for SAN and NAS.
The performance of a SAN or NAS is ultimately dictated by the
performance of the underlying DAS, and DAS will always offer the highest
performance levels because its directly connected to the host computers
storage interface. DAS is limited to a particular host and cant be used by
any other computer unless its presented to other computers over a
specialized network called a SAN or a data network as a NAS server.

Redundant Arrays of Inexpensive Disks (RAID) was coined in an


era of Single Large Expensive Drives (SLED). There are several types of
RAID, but the concept is the same: an array of disks composed of various
sized stripes of usually redundant data. This increases speed and fault
tolerance.

Storage Area Network (SAN) offer a higher level of functionality than


DAS because it permits multiple hosts (server computers) to attach to a
single storage device at the block level. It does not permit simultaneous
access to a single storage volume within the storage device, but it does
allow one server to relinquish control of a volume and then another server
to take over the volume. This is useful in a clustering environment, where
a primary server might fail and a back-up server has to take over and
connect to the same storage volume. Because a SAN offers block-level
storage to the host, it fools the application into believing its using a DAS
storage subsystem, which offers a lot of compatibility advantage.

Storage area networks (SANs) go a step ahead of NAS by placing multiple


storage devices on a separate high-speed network dedicated to storage
purposes. A high-speed network dedicated to storage that connects
different kinds of storage devices, such as tape libraries and disk arrays so
they can be shared by multiple servers. The SAN storage devices are
located on their own network and connected using a high transmission
technology such as Fibre Channel. The network moves data among pools of

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servers and storage devices, creating an enterprise-wide infrastructure for


data storage. The SAN creates a large central pool of storage that can be
shared by multiple servers so that users can rapidly share data across the
SAN.

Network Attached Storage (NAS) Attaching high-speed RAID storage


devices to a network so that the devices in the network can access these
storage devices through a specialized server dedicated to file service and
storage. NAS is a file-level storage technology built on top of SAN or DAS
technology. Its basically another name for file server. NAS devices are
usually just regular servers with stripped down operating systems that are
dedicated to file serving. NAS devices typically use SMB (server message
block) for Microsoft compatibility or NFS (network file system) for UNIX
compatibility. The benefit of a NAS over a SAN or DAS is that multiple
clients can share a single volume, whereas SAN or DAS volumes can be
mounted by only a single client at a time. The downside to a NAS is that
not all applications will support it because theyre expecting a block-level
storage device, and most clustering solutions are designed to run on a
SAN. Many modern NAS appliances will support SAN technologies like
iSCSI, and you can basically build the same hybrid storage solution using a
general purpose operating system like Linux, BSD, or Windows using your
own hardware.

Storage Management The term storage management encompasses the


technologies and processes organizations use to maximize or improve the
performance of their data storage resources. Its a broad category that
includes virtualization, replication, mirroring, security, compression, traffic
analysis, process automation, storage provisioning and related techniques.

By some estimates, the amount of digital information stored in the worlds


computer systems is doubling every year. As a result, organizations feel
constant pressure to expand their storage capacity. However, doubling a
companys storage capacity every year is an expensive proposition. In
order to reduce some of those costs and improve the capabilities and
security of their storage solutions, organizations turn to a variety of
storage management solutions.

Management Technologies, like storage virtualization, deduplication and


compression, allow companies to better utilize their existing storage. The
benefits of these approaches include lower costs both the one-time

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capital expenses associated with storage devices and the ongoing


operational costs for maintaining those devices. Storage management
technologies, such as replication, mirroring and security, can help a data
center improve its reliability and availability. These techniques are often
particularly important for back-up and archive storage, although they also
apply to primary storage. IT departments often turn to these technologies
for help in meeting SLAs or achieving compliance goals. The primary
organization involved in establishing storage management standards is the
Storage Networking Industry Association (SNIA). It has put forth several
important storage specifications, including the Storage Management
Initiative Specifications (SMI-S) and the Cloud Data Management Interface
(CDMI). SMI-S defines the attributes of storage hardware, such as Fibre
Channel switches, Fibre Channel and iSCI arrays, NAS devices, tape
libraries and host profiles. It also addresses storage management software
issues, such as configuration discovery, provisioning and trending, security,
asset management, compliance and cost management, event management
and data protection. The CDMI specification provides standards for cloud
storage services, enabling interoperability among various storage
management solutions.

10.5 UNIFIED COMMUNICATIONS

Unified communications is the integration of real-time communication


services such as instant messaging, presence information, telephony, video
conferencing, desktop sharing, data sharing, call control and speech
recognition with non-real-time communication services such as unified
messaging.

It is a phrase used to describe any communications system, usually a


business system, that encompasses a broad range of technologies and
applications that have been designed, sold and supported as a single
communications platform or as one entity. Unified Communications
systems generally enable companies to use integrated data, video, and
voice in one supported product.

Unified communications systems typically include the means to integrate


real-time or near-real-time unified messaging, collaboration and interactive
systems. For example, a single user can access a variety of communication
applications such as e-mail, SMS, video, fax, voice, and others through a
single user mailbox. Additionally, unified communications has expanded to

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incorporate collaboration and other interactive systems such as scheduling,


workflow, Instant Messaging (IM) and voice response systems. Unified
communications also provide the integration through multiple devices. For
example, many service features, options, and user accounts are as readily
available to you from your PDA, laptop or other wireless device, as if you
were using your desktop PC.

Unified communications technology is known by many names: collaborative


communications, unified communications and collaboration (UCC), and
information and communications technology (ICT). Unified communications
is defined differently depending on the industry expert you speak to. What
was once telecommunications has evolved to encompass all forms of
communication, from messaging to Web conferencing. As current
technology improves and new technology enters the marketplace, the
components of unified communications also develop. Briefly, the following
include Unified Communications:

Internet Protocol (IP) Telephony has become a critical part of unified


communications technology as enterprises move on from traditional
phone service and use the Internet to deliver voice, fax and other forms
of communication. IP telephony (IPT) takes advantage of the Internet to
deliver phone calls. Although IP telephony (IPT) and Voice over IP (VoIP)
are used interchangeably, VoIP is technically a subset of IPT. IPT takes
advantage of the Internet to deliver phone calls, while VoIP is the
transport mechanism used to manage voice communications over IP.

Presence Technology makes it possible to locate and identify a computing


device when the user connects to the network, regardless of the devices
location. It also allows users to monitor the availability or state of
another user, adding ease and convenience to unified communications.

Unified Messaging The term unified communications was ultimately


derived from unified messaging. Messaging technologies include e-mail,
voicemail, faxes and instant messaging (IM). Unified messaging
incorporates messaging services like fax and voicemail into a single
mailbox that a user can access via e-mail or phone.

Conferencing From audio to Web to video, conferencing has evolved as


newer technologies emerge. Conferencing allows for greater mobility and
presence for an enterprise.

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10.6 NETWORK SECURITY

What is network security? How does it protect you? How does network
security work? What are the business benefits of network security?

Network Security is a specialized field in computer networking that involves


securing a computer network infrastructure. Network security is typically
handled by a network administrator or system administrator who
implements the security policy, network software and hardware needed to
protect a network and the resources accessed through the network from
unauthorized access and also ensure that employees have adequate access
to the network and resources to work. A network security system typically
relies on layers of protection and consists of multiple components including
networking monitoring and security software in addition to hardware and
appliances. All components work together to increase the overall security
of the computer network.

Network security refers to any activities designed to protect your network.


Specifically, these activities protect the usability, reliability, integrity, and
safety of your network and data. Effective network security targets a
variety of threats and stops them from entering or spreading on your
network. So, what are the threats to my network? Many network security
threats today are spread over the Internet. The most common include:

Viruses, worms, and Trojan horses


Spyware and adware
Zero-day attacks, also called zero-hour attacks
Hacker attacks
Denial of service attacks
Data interception and theft
Identity theft

How Does Network Security Work?


Protecting corporate information and technology assets from intruders,
thieves, and vandals is a significant challenge for all enterprises.
Investments in security technology are made to implement technologies
that can support the centralized management and enforcement of security
policy. No single solution protects you from a variety of threats. You need
multiple layers of security. If one fails, others still stand. Network security
is accomplished through hardware and software. The software must be

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constantly updated and managed to protect you from emerging threats. A


network security system usually consists of many components. Ideally, all
components work together, which minimizes maintenance and improves
security. To give you a summarized view of this complex are, the security
management may be summarized in the following four solutions:

Identity Management (IM) solutions are responsible for authenticating and


authorizing the network-based users who need to use online services and
resources. Identity Management solutions generally include:

Provisioning is the process of granting and revoking the appropriate


access rights and privileges to employees, customers, suppliers, and
business partners.

Web Access Control products provide centralized and automated


management to validate a user, and then permit the user to access
resources in the environment for which that user has been granted
permission.

Single Sign-On (SSO) allows a user to log onto every assigned system
that user has access to once, using a single user ID and password
combination.

Vulnerability Management helps the enterprise identify vulnerabilities or


weaknesses in the computing environment, and provide the infrastructure
to eliminate them. Vulnerability Management solutions generally include:

Firewall is a system or group of systems that enforces an access control


policy between two networks. The firewall has a dual role as the
mechanism that exists both to block and to permit traffic attempting to
access network resources.

Vulnerability Assessment tools evaluate and monitor operating systems


and applications for needed fixes to known problems, such as viruses,
worms, unsecured backdoors, and security holes.

Network vulnerability scanners Network vulnerability scanning is the


process of checking for all the potential methods an attacker might use
to tamper with an organizations network by analyzing the types of
software and system configurations on a given network.

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Threat Management focuses on identifying and responding to anomalous


and malicious events that occur throughout the network. Threat
Management solutions generally include a combination of intrusion
detection and security event management technology.

Intrusion detection systems monitor network traffic, verify the integrity


of system files, monitor network event logs, and may also include
deception systems to lure and trap hackers.

Security Event Management Security event management products


actively monitor IT resources across an organization, filter and correlate
events, and automate responses to security incidents.

Trust Management is the practice of protecting and enabling activities


that are of high risk to the enterprise. These solutions rely on encryption
and access control techniques to create a secure process for authorized
individuals. Trust Management solutions generally include:

Public Key Infrastructure (PKI) is the combination of encryption


technologies, digital certificates, and certificate authorities that allows
enterprises to protect the security of their communications and business
transactions on the Internet.

A Virtual Private Network (VPN) is a private data network that uses the
public telecommunication infrastructure (as opposed to a system of owned
or leased lines), maintaining privacy through the use of a tunnelling
protocols and security procedures.

Below are some of the common Network Security components that


you often hear of, briefly described.

Firewall is a logical wall spread around the IT domain of an organization


that helps protect it from unauthorized user intrusion and attacks and
provides information privacy to the organization and its users. It is a set of
hardware and related programs that are located at network gateway
servers to protect the resources and users of private network from
unauthorized external access or intrusion. Any organization with an
Internet access installs a firewall at the gateway between its internal LAN
and internet to prevent unauthorized outside access and prevent inside
users from access unwanted or malicious external content. A firewall works

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closely with a router program, examines each incoming network packet to


determine its good content or acceptability and permits forwarding to its
internal destination. A firewall includes and works with a Proxy Server that
makes network requests on behalf of workstation users an external
request is not made by the companys workstation directly, rather such
requests are routed through the proxy server and hence it is known as a
Proxy Server. Firewalls are always installed on a separate server, so that
incoming requests dont go directly to private network resources. There are
a number of firewall screening methods typically, they screen for
identified and approved domain names and IPs. For users in transit with
laptops, firewalls allow remote access into the private network by the use
of secure logon procedures and authentication certificates. There are a
large number of companies making firewall products and most of their
features include logging and reporting, automatic alarms at given
thresholds of attack with GUI interfaces for controlling the firewall.

Network Intrusion Protection System (NIPS) A network intrusion


protection system (NIPS) is an umbrella term for a combination of
hardware and software systems that protect computer networks from
unauthorized access and malicious activity. NIPS hardware may consist of a
dedicated Network Intrusion Detection System (NIDS) device, an Intrusion
Prevention System (IPS), or a combination of the two such as an Intrusion
Prevention and Detection System (IPDS). Note that while an NIDS can only
detect intrusions, an IPS can proactively stop an attack by following
established rules, such as changing firewall settings, blocking particular IP
Address or dropping certain packets entirely. The software components of
NIPS consist of various firewalls, sniffer and antivirus tools in addition to
dashboards and other data visualization tools.

A NIPS continually monitors an organizations computer networks for


abnormal traffic patterns, generating event logs, alerting system
administrators to significant events and stopping potential intrusions when
possible. A NIPS is also useful for internal security auditing and providing
documentation for compliance regulations. Spyware, viruses and attacks
continue to grow and it is now recognized that a layered combination of
security systems working together is necessary to protect computer
networks from compromise. A NIPS in some form is vital for any computer
network that can be accessed by unauthorized persons. Computers holding
sensitive data always need protection; however, even seemingly
insignificant networks can be hijacked for use in botnet attacks.

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sniffer In common industry usage, a sniffer (with lower case s) is a


program that monitors and analyzes network traffic, detecting bottlenecks
and problems. Using this information, a network manager can keep traffic
flowing efficiently. A sniffer can also be used legitimately or illegitimately to
capture data being transmitted on a network. A network router reads every
packet of data passed to it, determining whether it is intended for a
destination within the routers own network or whether it should be passed
further along the Internet. A router with a sniffer, however, may be able to
read the data in the packet as well as the source and destination
addresses. Sniffers are often used on academic networks to prevent traffic
bottlenecks caused by file-sharing applications.

Spyware In general, spyware is any technology, such as tracking


software that aids in gathering information about a person or organization
without their knowledge. On the Internet (where it is sometimes called a
spybot or tracking software), spyware is programming that is put in
someones computer to secretly gather information about the user and
relay it to advertisers or other interested parties. Spyware can get in a
computer as a software virus or as the result of installing a new program.
Data collecting programs that are installed with the users knowledge are
not, properly speaking, spyware, if the user fully understands what data is
being collected and with whom it is being shared. However, spyware is
often installed without the users consent, as a drive by download, or as
the result of clicking some option in a deceptive pop-up window. Software
designed to serve advertising, known as adware, can usually be thought of
as spyware as well because it almost invariably includes components for
tracking and reporting user information. However, marketing firms object
to having their products called spyware. As a result, McAfee (the Internet
security company) and others now refer to such applications as potentially
unwanted programs (PUP).

Host Intrusion Detection Systems (HIDS) and Network Intrusion


Detection Systems (NIDS) are methods of security management for
computers and networks. In HIDS, anti-threat applications such as
firewalls, antivirus, spywares and spyware detection programs are installed
on every network computer that has two-way access to the outside
environment such as the internet. In NIDS, anti-threat software is installed
only at specific points such as servers that interface between the outside
environment and the network segment to be protected. All methods of
Intrusion Detection (ID) involve the gathering and analysis of information

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from various areas within a computer or network to identify possible


threats posed by hackers and crackers within or without the organization.
Host-based and network-based ID systems have their respective
advantages and limitations. The most effective protection for a proprietary
network is provided by a combination of both technologies. HIDs examine
specific host-based actions, such as what applications are being used, what
files are being accessed and what information resides in the kernel logs.
NIDs analyze the flow of information between computers, i.e., network
traffic they essentially sniff the network for suspicious behaviour
thus, NIDs can detect a hacker before hes able to make an unauthorized
intrusion, whereas HIDs wont know anything is wrong until the hacker has
already breached the system. The primary benefits of HIDs are that they
can prevent attacks from resulting in any damage if a malicious file
attempts to rewrite a file, the HID can cut-off its privileges and quarantine
it they are a last line of defense to ward off attacks missed by the NID.
NIDs provide the ability to protect computer systems from one network
location; they also provide a broader examination of a corporate network
via scans and probes and allow administrators to protect non-computer
devices, such as firewalls, print servers, VPN concentrators and routers.

What are the Business Benefits of Network Security? With network security
in place, your company will experience many business benefits. Your
company is protected against business disruption, which helps keep
employees productive. Network security helps your company meet
mandatory regulatory compliance. Because network security helps protect
your customers data, it reduces the risk of legal action from data theft.
Ultimately, network security helps protect a businesss reputation, which is
one of its most important assets.

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10.7 INFORMATION SECURITY

Information Security Policy of an organization is intended to protect the


interests of the organizations stakeholders by ensuring confidentiality,
integrity and continuous availability of information systems under its
Governance.

Information is an asset that is valuable for all organization assets are


no longer machinery or buildings in fact information assets are far more
valuable to current-day organizations because their loss and its impact is
far wider and can cripple organizations. Organization uses the term
information asset to emphasize that fact. The purpose of Information
Security is to protect information assets from various types of threats in
order to ensure continuous business operations, to minimize damages and
to maximize business opportunities and return on investment.

Any Information Security framework must maintain or ensure


Confidentiality, Integrity and Availability of information assets of the
organization. Its scope is to provide management direction and support for
information security in accordance with business requirements and relevant
laws and regulations.

The benefits of implementing Information Security policies and practices


are Secure business information, Manage risks, Enhance customer
confidence, Improve security posture and culture, and Build capability to
rapidly recover from incidents/disasters.

ISO 27001 is an International Standard which provides a model for


establishing, implementing, operating, monitoring, revising, maintaining
and improving an Information Security Management System. It is an
enhanced version of BS7799, and now a globally accepted standard. ISO
27001 Consists of two parts ISO 17799:2005 Code of practice which
are guidelines and recommendations and ISO 27001:2005 Information
Security Management System. The structure of ISO27001 is Control
Clauses (Security Domains), Control Objectives and Controls. The following
are some of the policies that are typically specified in an Information
Security Framework:

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Information Security Policy


E-mail Policy
Internet Policy
Personnel Security Policy
Intellectual Property Rights Policy
Policy Document DR and BC Plan
Data Privacy related Guidelines
Media Management Guidelines

Scope of Information Security Needless to say, the scope of such a


Information Security implementation would be the entire company or a
part of it and defines the following Physical location and boundary,
Business processes, Broad IT infrastructure, Interfaces and dependencies
and Document the scope.

The scope of the documents that govern any Information Security


Management Systems (ISMS) is explained in the diagram an extract from
ISO27001 given below.

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It is also essential that an enterprise-wide Information Security


Management System should specify detailed guidelines, processes and
procedures to manage and protect information. The Security Policy aims at
protecting clients and business information resources by safeguarding its
Confidentiality, Integrity and Availability. All information and related
resources (systems, network and data) are covered under the scope of this
comprehensive policy inclusive of customer information resources within
the custody of the organization. Below is a schematic that gives you an
idea of such an implementation.

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The above diagram is a sequential representation of the various processes


that are in to be put in place to ensure information security. The diagram
typically depicts how a user accesses data. The user is bound by the
Personnel Security policy and customer specified NDA. Physical, Logical and
Network security controls shield the data from users. Data is stored on
servers in a data center. Various procedures, such as Asset Management
procedure, Data Privacy guidelines, Data Back-up procedure, Change
Management procedure, Access Rights policy and Data Disposal procedure,
implement a range of security controls that ensure data security while
storage, transmission, usage and up to disposal.

Information Security Organization The functional structure is headed


by the Head of Operations. The IS Steering Committee, a team of
members from the top management, is responsible for establishing
Information Security policy and ensures that security objectives and plans
are established.

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!
The IS Steering Committee communicates the importance of meeting IS
objectives and conforming to IS policy, its responsibilities under the law
and the need for continual improvement. The committee also allocates
budget for Infosec activities including staffing. The IS Steering Committee
decides on the acceptable level of risks and conducts a management
review of ISMS. The regional Information Security Forums support and
ensure proper implementation of the ISMS uniformly across the region.
They meet at regular intervals to review the threats, status of security
implementation, security incidents and actions, specify methodologies and
responsibilities for implementing Information Security select control
objectives and controls to be implemented in order to ensure Information
Security, support the organization-wide Information Security initiatives as
per the security policy and procedures that are defined as part of the
Information Security Management System, review the Information Security
incidents and handle them as per the Incident Handling Procedure, support
system and network auditing through process such as vulnerability
assessment and institutionalize Disaster Recovery and Business Continuity.
A typical organization structure for Information Security Management is
given below; this varies from organization to organization based on it size,
the nature of its business.

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1 0 . 8 C O R P O R AT E G O V E R N A N C E O F I N F O R M AT I O N
TECHNOLOGY

IT Governance is part of the Corporate Governance framework and has


come about due to the need to focus and measure the performance of all
functions that are responsible for value creation. It has its background in
the fact that since the 1980s Industry has seen a series of failures and
serious cost overruns in most (if not all) IT Projects and business resulting
derailment of business goals. With implementations of Quality Assurance
processes such as ISO 9001 and CMMi, IT Governance has evolved and
matured and is now an important element of regular Corporate
Governance.

While the concept IT Governance first emerged in the mid-1990s, it


matured during the downturn of early 21st century after the DOT COM
failures and a series of major M&As in the Financial Services sector. The
recognition of governance emerged from the change in corporate approach
to Information Technology as not a cost center or an enabler but an
investment that is to add measurable value to business and success of
company strategies. Information Technology Governance are primarily
aimed at:

Ensuring that spend on IT generates business value


Provide Management Oversight
Risk mitigation for mega projects in budgeting, approval processes
and during the project life cycle.

With the maturation of Six Sigma Techniques and its successful adoption by
corporates such as Motorola and General Electric Corporation, it becomes
possible to measure IT Projects and correlate their performance and value
generation directly to corporate objectives.

IT Governance has moved from pinning the responsibility on the CIO to


shared accountability of the Enterprises Management and key
stakeholders.

There are a couple of popular models of Corporate IT Governance:

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The Governance, Risk Management, Compliance (GRC) Model


The Governance, Value Delivery, Performance Management (GVP) Model.

The GRC model was born out of series of business failures due to lack of
regulatory compliance and management of risks. GRC evolved from the
compulsion to help companies devise risk management measures that
identify, manage, monitor, and report on risks across the business before
they materialize into loss at optimized costs. Quality Assurance frameworks
such as ISO 9001 and CMM/CMMi also provided an assurance framework
for compliance and risk management and governance. The Governance
Risk Compliance (GRC) Governance Model focuses on:

Identification, management, monitoring, and analyzing of risks across


enterprise IT
Automating Risk Management and Compliance processes to meet the
persistent challenge of regulatory change and regulator interaction
Leverage Risk Data to prioritize IT investments
Understand risk in the context of business processes and goals
Leverage Compliance as a tool to mitigate risks and empower decision
makers.

Another way to appreciate IT Governance would be to separate the whats


and hows. Though managing risk and ensuring compliance and controls are
essential components of good governance, the primary focus should be on
delivering value and managing performance. That is where the GVP Model
comes in, that delegates the management of IT Performance retaining the
stewardship of Governance with the organizations governing body
separating the what and how.

what is to be achieved from the leveraging of IT resources


how of managing IT planning, organizing, directing and controlling use
of IT resources.

Briefly dealt with below are the frameworks for Corporate IT Governance:

COBIT (Control Objectives for Information and Related Technology) is


regarded as the worlds leading IT governance and control framework. It
provides a reference model of 37 IT processes typically found in an
organization. Originally created by ISACA, COBIT is now under the ITGI.

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ISO 38500 Corporate Governance of Information Technology provides an


effective framework for IT Governance to assist managers to understand
and fulfill their legal, regulatory, and ethical obligations w.r.t. IT.

CMM The Capability Maturity Model focus on software engineering.

The Balanced Scorecard (BSC) method to assess an organizations


performance in many different areas.

Some of the main challenges with IT Governance have been that it has
often been confused with compliance and controls. Quality Frameworks
that seemingly propagate a theory (though ill founded) that best results
are obtained through compliance and controls to ensure compliance have
not helped.

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10.9 SUMMARY

In this Chapter, we have covered some those areas of Enterprise


Information Systems that are essentially the backbone of any organization.
These are not visible to the user, however they are enable the user to use
the applications of day-to-day use.

A basic knowledge of these and their importance are essential to selection


and procurement of any business application software.

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10.10 SELF ASSESSMENT QUESTIONS

1. Describe any 5 Network components.

2. What is a Wide Area Network and describe a MPLS in that context?

3. For your organization, detail the computer equipment that you have,
based on which try to formulate a basic network requirement.

4. Describe Disaster Recovery and RPO and RTO.

5. Explain the concept of SAN.

6. Describe any two Unified Communication components that your use in


your organization.

7. Describe the components of Network Security and how they work


together.

8. Write a brief 3-para summary of your understanding of Information


Security.

9. Describe the term Corporate Governance Information Technology


Governance.

10. Briefly describe the two model of Corporate IT Governance.

11. What are the regulatory frameworks for managing Corporate IT


Governance?

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

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Chapter 11
ENCAPSULATING ENTERPRISE IT
SOLUTIONS
Objective
After completing the chapter, you will understand:

Summarizing learning from this book on Enterprise Solutions.

Structure:

11.1 Introduction

11.2 Enterprise Architecture Review

11.3 Disruptive Technologies

11.1 INTRODUCTION

Over the previous eleven Chapters, we have discussed every element of


what goes to make a total Information requirements solution for an
enterprise.

In Chapter 2, we have dealt with the core of business needs of an


enterprise in the ERP and how this vital system provided the IT solution
to the core business of an organization, be it a manufacturing company or
a retail chain or a bank or an insurance company or a hotel or a power T&D
Company. We have discussed various popular ERPs like SAP, Oracle, etc.
and how these sit at the very centrepiece of the organizations IT assets. In
this chapter, we also discussed the self-service technologies that provide
the business-to-business or business-to-consumer interface and connect
for selling their products and services.

In subsequent chapters, we have discussed software solutions for the other


important business functions that require substantial and sophisticated
technology solutions, such as CRM, Supply Chain, Supplier Relationship
Management, HRMS and Financial Management. We have also covered in
substantial detail the importance of data and information management and

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utilizing these to provide real-time decision support reports to all levels of


the management.

One of the most important aspects of Enterprise Solutions, that is the


Middleware and Workflow systems that integrate the ERP with the
peripheral systems into a well-integrated, yet loosely coupled solution and
manage the business workflow in such a manner as to provide the user a
seamless work environment. In this context, we discussed this extremely
technical subject the architectural concept of the Service Oriented
Architecture or SOA in fairly understandable language so as to get a
most current perspective of enterprise architecture.

In this final chapter summarizing this book, we will revisit enterprise


solutions architecture. We will also discuss some of the disruptive
technologies that analysts such as Gartner and McKinsey are predicting as
likely to make a big impact on the way companies do business in the
coming five years.

11.2 ENTERPRISE ARCHITECTURE REVIEW

Having come this far, we have achieved a fairly mature understanding of


what comprises a total Enterprise IT Solution for an organization. Let us
now proceed to summarize our study by an analysis of a typical Enterprise
Architecture Diagram presented below, that firms up our understanding of
enterprise solutions.

Having covered all components of IS/IT that any enterprise small or large
would require, I am introducing here below the Enterprise Architecture
for a mid-sized Financial Services organization with the express intention
of a more educated discussion on the enterprise solution.

The company as you might assume, may be a Bank or an Insurance


company. At the core of this Enterprise Architecture is the ERP.

If this medium-sized organization is engaged in Banking, the core business


systems would obviously be a Core Banking product depicted by two
boxed labelled as Core FS ERP-1/2 the ERP. Large Banks typically have
more than one core banking solution a Retail Banking software, Lending
solutions separately for retail and Commercial lending and other software
products such as for Debit Cards, Credit Cards, Private Banking, etc.

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Similarly, Insurance companies have more than one system they typically
have Policy Administration Systems (PAS) and Claims Systems. They also
have more than one PAS in most Life companies the older generation
systems retain the closed book policies while they move their newer Life
products and policies into newer generation PAS systems.

The same is true of manufacturing companies all large manufacturing


companies separate the manufacturing of new components and products
manufacturing into one ERP and service parts manufacturing into another
ERP.

Therefore, ERP implementations are not simplistic implementations of one


single ERP from one vendor. All large companies have multiple ERPs and
reason being that each ERP in the market has its own areas of strength
and companies buy and implement more than one solution so as to get the
best of the IT products. That automatically leads to complex integration
issues.

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The core ERP apart, you will notice all other business functions provisioned
HRMS, Financials, CRM, Data and Reports and also Treasury.

At the top end are the interfaces to the users internal and external and at
the bottom end is depicted the interfaces to the business partner
applications.

In the paragraphs below, I will try to explain the seamless integration of


these multiple software products as simple as possible that is the
Integration layer, its various layers and the ESB and how they ensure the
connect and transactions between the data layer and presentation/security
layers. In the enterprise schematic, we see the following layers:

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Security Layer
Presentation Layer
Business Process Layer (that includes workflow and rules engine)
Integration Layer with the ESB
Data Layer

Security Layer: The key building blocks of security are security layer
building blocks consist of identity and provisioning management to
authenticate users based on a single sign-on and allow fine-grained role-
based access to the services or components of the various enterprise
applications underneath. The following are some of the functional features
that are seen by the users of security layer components.

The Identity Manager handles your user ID/password, the roles associated
to users at the application level and privileges at the individual application
level, User ID creation process and association of users to groups and the
workflows for password management. The key security tasks come in the
form of handling of Rogue/Orphan account managed through access
denials, workflows and reconciliation.

Presentation Layer: Presentation layer represents the gateway for


presenting the IT capabilities of the underlying applications and as the
communication medium to the end-users.

It provides Interfaces for multiple delivery channels such as internet,


intranet, extranet, kiosks, SMS, PDA, dashboards and mobile worksites.
The presentation layer supports HTTP/HTTPS protocols, protocol switching
and also supports delivery to wireless browsers. It enables dynamic
content generation, Web collaboration through web conferencing, team
calendar and white board, Web services support including interactive
applications, dynamic forms creation and support for overlapping e-
signatures and import of external data from files.

Role based grants are checked against each application based on user
type. Services/transactions will be constructed as links with provision for
two-way redirection to the application directly and to the business
process (if configured).

Business Process: BPEL suites cater to a variety of functionality such as


graphical process model creation, monitoring resources, time and cost,

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version management, scenario based models, process orchestration with


nil/minimal coding, workflow integration for process model editorial
process, model approval processes, model export to process execution
engines, etc.

These business processes are to be defined at varying levels of granularity


(L1, L2, L3, etc.) to provide a conceptual view of the business process
models.

The building blocks of any BPEL are typically two major categories
Process Modelling and Execution and Business Rules Integration.

The Process Modelling and Execution involves and provides a BPM design,
conceptual models, business processes at various granularity levels, a
detailed task level granularity to be matched to composite service or low
level system services, the Process Execution Layer and its Transformations.
They also include definition of notifications to users, user groups or a
destination address.

BPEL engines have Adapters that integrate access to queues, files, DB


tables etc. and Service Registries that provide a Single point of control for
accessible services.

Process models (conceptual, logical and physical) created are stored in


common repositories and governed by a configuration management
process.

SOA developers (using models for orchestration) and business process


designers can continue to evolve these models parallelly and synchronize
them.

Individual applications will continue to use their own modelling tool(s) or


environment for modelling the service workflow applicable within that
system. For example, the core ERP will use its own in-built workflow
modeller to model the execution of a system service called from the
business layer.

The Business Rules are categorized at two levels and involves building
Business Process Layer Rules and Application In-built Rules.

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Business rules at the business process layer level are captured and used to
the extent required by service orchestration. The rules specific to ERP,
CRM, HRMS or other applications and available as out-of-box solution are
generally maintained as-is.

Integration Layer: Integration provides the backbone for connecting or


enabling integration across applications in the enterprise or external
systems. It also has infrastructure for applications to publish its services so
that transactions can be composed and orchestrated from the business
process layer or other applications to call and invoke them.

Integration layers handle many multiple tasks such as:

Incoming request delivery to integration layer


Data mapping to an integration data model (Global data model)
Provide Data Transformation components
Exception handling.

Design considerations in Integration Interface design are typically


identification process ownership, core domain model entities and establish
their relationships, data ownership, process interfaces based on process
ownership and data ownership and one key aspect, that is the identification
of reusable sub-processes based on process flows.

The Integration layer has two components an Integration Framework and


the Enterprise Service Bus.

The Integration Framework handles the service bus integration and


consumes services of external systems. They support a variety of web
services standards, provides interfaces to flat files and CSV files and a
variety of third-party payment gateways, XML and SMS/e-mail
notifications.

The Enterprise Service Bus functions are Service mapping, message


format transformations, rule-base or policy based Message Routing. ESBs
support http, https, TCP/IP, SSL, SOAP/Http, SOAP/JMS, WSDL and web
services standards including WS security and various routing protocols
such as FTP/POP/SMTP/IMAP/RMI. The ESB has a service registry, service
component description language (SCDL) and notifies and reports message
delivery failures and maintains service audits/logs.

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Data Layer

The data repositories may be any of the following databases Oracle,


DB2, SQL, etc.

Application databases will have their own instances and independently


existing.

Applications accesses their data through application level interfaces to


the data layer.

The Integration Layer enables data from across applications.

Underlying Technologies: Not to forget the IT solutions that are most


often taken for granted (or forgotten); these cannot be depicted in this
figure above but are an integral part of any Enterprise IT Solution. They
are the:

Enterprise Networks WAN and LAN.

Data Centers primary and multiple redundant data centers that ensure
business continuity.

Technologies such as Unified Communication, Identity Management, E-


mail services, Group Policies, Web Services, etc. that ensure your day-to-
day work go smoothly.

The security layers that ensure the organizations assets are protected
from malicious elements.

Lastly, the function that is seen as restrictive but most vital in todays
organizations Information Security.

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11.3 DISRUPTIVE TECHNOLOGIES

The history of IT has been defined by a series of highly disruptive paradigm


shifts that have fundamentally changed the IT landscape. Mainframes,
Mini-computers, PCs and the Internet have each led to a major
realignment of enterprises. The impact of these disruptive technologies has
been to increase the relevance, nay dependence, of business on IT and
technology.

Disruptive technologies typically demonstrate a rapid rate of change in


capabilities in terms of price/performance relative to substitutes and
alternative approaches, or they experience breakthroughs that drive
accelerated rates of change or discontinuous capability improvements.

The potential scope of impact is quite broad. To be economically disruptive,


a technology must have broad reachtouching companies and industries
and affecting (or giving rise to) a wide range of machines, products, or
services. The mobile Internet, for example, could affect how five billion
people go about their lives, giving them tools to become potential
innovators or entrepreneursmaking the mobile Internet one our most
impactful technologies. And the Internet of Things technology could
connect and embed intelligence in billions of objects and devices all around
the world, affecting the health, safety, and productivity of billions of
people.

Significant economic value could be affected. An economically disruptive


technology must have the potential to create massive economic impact.
The value at stake must be large in terms of profit pools that might be
disrupted, additions to GDP that might result, and capital investments that
might be rendered obsolete. Advanced robotics, for example, has the
potential to affect $6.3 trillion in labour costs globally. Cloud technology
has the potential to improve productivity across $3 trillion in global
enterprise IT spending, as well as enabling the creation of new online
products and services for billions of consumers and millions of businesses
alike.

Economic impact is potentially disruptive. Technologies that matter have


the potential to dramatically change the status quo. They can transform
how people live and work, create new opportunities or shift surplus for
businesses, and drive growth or change comparative advantage for

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nations. Next generation genomics has the potential to transform how


doctors diagnose and treat cancer and other diseases, potentially
extending lives. Energy storage technology could change how, where, and
when we use energy. Advanced oil and gas exploration and recovery could
fuel economic growth and shift value across energy markets and regions.

Some of these disruptive technologies forecasted by leading analysts such


as McKinsey, Gartner, Forrester and others are:

Mobility Is by the day getting well established, but the extent of its
possibilities and impact on business is still in a predictive state.

Automation of knowledge work Intelligent software systems that


can perform knowledge work tasks involving unstructured commands
and subtle judgment.

The Internet of Things Networks of low-cost sensors and actuators


for data collection, monitoring, decision making, and process
optimization.

Cloud technology Use of computer hardware and software resources


delivered over a network or the Internet, often as a service.

There are others such as advanced robotics, near-autonomous vehicles,


next-generation genomics, etc., but these are not for a discussion on
business enabling enterprise solutions.

In this section, we will discuss those disruptive technologies that will have
direct bearing on business and the enabling enterprise IT solutions areas
that CEO-CIO combinations will have to give senior management attention.

Mobility In just a few years, Internet-enabled portable devices have


gone from a luxury for a few to a way of life for more than one billion
people who own smartphones and tablets. In the United States, an
estimated 30% of Web browsing and 40% of social media use are done on
mobile devices; by 2015, wireless Web use is expected to exceed wired
use. Ubiquitous connectivity and an explosive proliferation of apps are
enabling users to go about their daily routines with new ways of knowing,
perceiving, and even interacting with the physical world. The technology of
the mobile Internet is evolving rapidly, with intuitive interfaces and new

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formats, including wearable devices. The mobile Internet also has


applications across businesses and the public sector, enabling more
efficient delivery of many services and creating opportunities to increase
workforce productivity. In developing economies, the mobile Internet could
bring billions of people into the connected world.

Automation of knowledge work Advances in artificial intelligence,


machine learning, and natural user interfaces (e.g., voice recognition) are
making it possible to automate many knowledge worker tasks that have
long been regarded as impossible or impractical for machines to perform.
For instance, some computers can answer unstructured questions (i.e.,
those posed in ordinary language, rather than precisely written as software
queries), so employees or customers without specialized training can get
information on their own. This opens up possibilities for sweeping change
in how knowledge work is organized and performed. Sophisticated
analytics tools can be used to augment the talents of highly skilled
employees, and as more knowledge worker tasks can be done by machine,
it is also possible that some types of jobs could become fully automated.

The Internet of Things Embedding sensors and actuators in machines


and other physical objects to bring them into the connected worldis
spreading rapidly. From monitoring the flow of products through a factory
to measuring the moisture in a field of crops to tracking the flow of water
through utility pipes, the Internet of Things allows businesses and public
sector organizations to manage assets, optimize performance, and create
new business models. With remote monitoring, the Internet of Things also
has great potential to improve the health of patients with chronic illnesses
and attack a major cause of rising healthcare costs.

Cloud Technologies Has been discussed substantially in the preceding


chapter. However, to summarize, with cloud technology, any computer
application or service can be delivered over a network or the Internet, with
minimal or no local software or processing power required. In order to do
this, IT resources (such as computation and storage) are made available on
an as-needed basiswhen extra capacity is needed it is seamlessly added,
without requiring up-front investment in new hardware or programming.
The cloud is enabling the explosive growth of Internet-based services, from
search to streaming media to offline storage of personal data (photos,
books, music), as well as the background processing capabilities that
enable mobile Internet devices to do things like respond to spoken

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commands to ask for directions. The cloud can also improve the economics
of IT for companies and governments, as well as provide greater flexibility
and responsiveness. Finally, the cloud can enable entirely new business
models, including all kinds of pay-as-you-go service models.

The above areas of technology apart, the following technologies and


techno-business developments will also gain considerable momentum:

1. Next-generation analytics: Most enterprises have reached the point


in the improvement of performance and costs where Cearley says they
can afford to perform analytics and simulation for every action taken in
the business. Not only will data center systems be able to do this, but
mobile devices will have access to data and enough capability to
perform analytics themselves, potentially enabling use of optimization
and simulation everywhere. Going forward, IT can focus on developing
analytics that enable and track collaborative decision making.

2. Big data: Big data has quickly emerged as a significant challenge for IT
leaders. The term only became popular in 2009. By February 2011, a
Google search on big data yielded 2.9 million hits, and vendors now
advertise their products as solutions to the big data challenge. The key
thing enterprises have to realize is that they just cant store it all. There
are new techniques to handle extreme data, such as Apache Hadoop,
but companies will have to develop new skills to effectively use these
technologies, Cearley says.

3. In-memory computing: We will see huge use of flash memory in


consumer devices, entertainment devices, equipment and other
embedded IT systems. In addition, flash offers a new layer of the
memory hierarchy in servers and client computers that has key
advantages space, heat, performance and ruggedness among them.
Unlike RAM, the main memory in servers and PCs, flash memory is
persistent even when power is removed. In that way, it looks more like
disk drives where we place information that must survive powerdowns
and reboots, yet it has much of the speed of memory, far faster than a
disk drive. As lower-cost and lower-quality flash is used in the data
center, software that can optimize the use of flash and minimize the
endurance cycles becomes critical. Users and IT providers should look at
in-memory computing as a long-term technology trend that could have

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a disruptive impact comparable to that of cloud computing, Cearley


says.

Extreme low-energy servers: What if you could turn 10 virtual


machines in one box into 40 slow physical servers that are tiny and use
very low amounts of energy? There is a call for this type of computing to
handle big data. For example, thousands of these little processors could
work on a Hadoop process, Cearley says. Gartner says that 10%-15% of
enterprise workloads are good for this. Moving the application from 10
images to 40 slower, less capable machines will only deliver on that
promise if the software will perform the same. Server technologies are
going to change to handle big data.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture

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Chapter 12
EPILOGUE IT OUTSOURCING
Objective

After completing the chapter, you will understand:

The history, evolution and concepts of IT Outsourcing in the Indian


context.

Structure:

12.1 Introduction

12.2 IT Outsourcing Conceptualised

12.3 History of IT Outsourcing

12.4 Indian IT Outsourcing and Offshoring

12.5 Operational Models

12.6 Commercial Models

12.7 Trends in Outsourcing

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12.1 INTRODUCTION

In any book that discusses Enterprises Solutions with Managers, it is only


appropriate to cover, at least briefly, the aspect of IT Outsourcing. India is
undoubtedly the leader in this and about 25% of Indias exports come out
of this Industry. More importantly, Indian IT Consulting can be termed a
one-way street or export only industry and apart from indigenous crafts
and trades, all other Industry segments have greater import component
compared to their exports. Another key aspect is IT Outsourcing. It is IT
Outsourcing that made the developed world sit up and recognize India as a
technological powerhouse and President Obama coin the phrase
Bangalored to mean decimated by Indian technical expertise. So, here
we go.

In business terms, outsourcing is the contracting-out of a section of the


business be it raw material, finished goods that go into an assembly or a
business process to a third-party. The term outsourcing became
popular in the United States near the turn of the 21st century. Outsourcing
has always been part of the business strategy in terms of make or buy
decisions that a company makes. The reason for outsourcing has always
been buy what is not your core competency, or buy that which is
what is best made by third-parties or its not profitable to make
everything in-house.

The car manufacturer does not need to make all the nuts and bolts in
manufacturing industry, these are called standard parts. However, there
may be some specialized nuts and bolts that the car manufacturer must
make in-house. Many times, companies make many things in-house just
because there arent any suitable subcontractor Indias defence
production industry is the best example either you import or make in-
house because there arent any domestic companies that have the
capability or willingness to invest in sophisticated manufacturing
techniques and machinery required to meet defence needs. There are also
companies such as Bugatti and Ferrari that makes cars but not ordinary
cars, so much so that every part is made in-house and assembled by hand
in such cases, its the product and pride in their product that prevents
outsourcing or sub-contracting or buy.

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Before we go further, I would like to put down a caveat that one chapter is
grossly inadequate to do justice to IT Outsourcing and Outsourcing
Management its very different from traditional sub-contracting functions.
This chapter only intended to introduce you to some concepts of
IT Outsourcing from the experiences of the author.

12.2 IT OUTSOURCING CONCEPTUALIZED

In India, outsourcing has a different colloquial meaning software


offshoring from US or EU or other developed countries. Over the past 20
years, we have taken it for granted outsourcing just means IT Offshoring.
Hence, this brief section on Outsourcing.

Gartner defines IT Outsourcing as IT Outsourcing (as a part of an


outsourcing definition) is the use of external service providers to effectively
deliver IT-enabled business process, application service and infrastructure
solutions for business outcomes. Outsourcing, which also includes utility
services, software as a service and cloud-enabled outsourcing, helps clients
to develop the right sourcing strategies and vision, select the right IT
service providers, structure the best possible contracts, and govern deals
for sustainable win-win relationships with external providers. Outsourcing
can enable enterprises to reduce costs, accelerate time to market, and take
advantage of external expertise, assets and/or intellectual property.
A business should outsource only what does not differentiate it in the
marketplace.

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12.3 HISTORY OF IT OUTSOURCING

In the 1980s, the earliest days of IT outsourcing, huge American


outsourcers such as IBM, Anderson Consulting (now Accenture) and EDS
dominated the outsourcing industry. They outsourced application
maintenance and development projects and also running mainframe data
centers. Those outsourcers gained from economies of scale, so much so
that they could open huge data centers and have people in common who
could serve the machines of multiple customers and technologies.
Accenture, EDS and IBM are still there to take over huge chunks of IT
operations, but the emergence of the Web has made it feasible to parcel
out more specific functions. But whatever companies decided to outsource,
theyve usually kept it away from their core competencies.

Until the late 1990s, that is Thats when ASPs burst on to the scene,
claiming they could take a companys most strategic functions and run
them remotely on their own applications. A business wouldnt need to
maintain an expensive IT department to build its own applications; it could
just rent the functionality over the Internet or a private network. This
appealed to dot coms with huge venture capital, business plans and little
else, and also to some established, brick-and-mortar retailers that wanted
to start making money quickly on the Web. As it turned out, ASPs could not
deliver on all their promises. In order to be profitable, they had to limit the
number of applications they supported. ASP customers have learned this
the hard way and when several major ASPs went bust, their customers
suddenly found themselves without the applications they needed to run
their businesses.

The bottom line: IT execs, especially those in highly specialized businesses,


wont go that route anymore.

Which brings us to the present; but before that lets us also briefly discuss
Indian IT Industry and its growth to being world leaders.

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12.4 INDIAN IT OUTSOURCING AND OFFSHORING

India has been outsourcing software work from overseas mainly USA since
the late 70s and 80s. The outsourcing model was small projects or parts of
projects, done entirely offline in India and shipped to the customer in tapes
or CDs mainly the middle life cycle that is coding and unit testing. That
was the age prior to availability of Leased-line communication
infrastructures.

It is impossible to know when exactly the Indian outsourcing industry as


we know it today, was born. However, there were five significant events in
Indian history of the 80s, 90s and first couple years of the current century
that ensured Indian IT Industry took quantum leaps to becoming the
undisputed world leader of IT services. In the early years of 2000,
Multinationals that did not outsource to India were seen as regressive and
their stocks seriously affected.

In the 1980s, Prime Minister Rajiv Gandhi tried to computerize the vast
and numerous departments of the Indian government, but senior
bureaucrats were initially reluctant to accept the technology. The personal
computer was largely used as a typewriter and assigned to the typists.
However, Sam Pitrodas (the Technology Adviser to Prime Minister Rajiv
Gandhi) intense push hugely assisted Indias IT companies and their story.

NASSCOM (National Association of Software and Services Companies),


established in 1988, is a non-profit organization that was started with the
objective of giving a voice to the software export companies within India.
NASSCOM has now become a global trade body with over 1500 members,
of which over 250 are companies from the United States, UK, EU, Japan
and China. NASSCOMs member companies are in the business of software
development, software services, software products, IT-enabled/BPO
services and e-commerce. The NASSCOM model has been emulated by
other Third World countries Brazil has its own BRASSCOM.

The next major event that boosted Indian IT Industrys growth was General
Electrics investment in IT Outsourcing to India and its Chairman Jack
Welchs commitment to the Government of India to use Indian IT
companies as outsourcers and offshorers in exchange for a substantial
purchase of GEs Aircraft Engines again facilitated by Sam Pitroda. This
resulted in GE Outsourcing substantial software work to thousands of

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Indian programmers spread across Mumbai, Bangalore and Chennai. With


the success of the offshore experiment, GE took the forward step to form
dedicated offshore development centers the acronym ODC was born in
mid-1995.

While the above two triggers were external, the next two came from within
by the sheer capability and agility of the Indian IT Industry to improve,
change and innovate. The first of these was the Y2K a huge software
problem brought about due to dates being in 6-digit format that caused
arithmetic errors around the century. The root cause of this problem was
not so much an Analyst/Programmer error but the fact that in the 70s and
80s, hardware was very expensive and the focus of all software
development was efficient utilization of computer memory and disk space
hence, programs ensured least memory and sick space was taken up and
hence, the least amount of data was always stored. Even in the 80s and
90s, the developed world was so widely computerized that a food store in
the US would not be able to check out an item of purchase if the
computers were down. Hence, the impact of Y2K issue on the developed
world was so wide that it could bring all activities to standstill. Indian IT
engineers started as cheap labour to just change the date formats, but
ended up rewriting many billions of lines of code, testing them and
productionizing them in a manner previously unconceivable to the Western
world. By the turn of century, multinationals had realized the potential of
the Indian Programmer the Indian Programmer had arrived.

Immediately following the happy turn of the century, came the DOT COM.
Again, the agile Indian programmer overnight absorbed the intricacies of
Web technologies to fuel the dot com boom the Indian Programmer had
come to stay.

I would say, it was the Y2K and the DOT COM that made Multinationals sit
up and realize that they needed the Indian programmers and analysts and
designers and architects to maintain, manage and grow their Information
technology assets its not a favour to India any more.

General Electric and Jack Welch also contributed immensely to Indian IT


Industry. With the help of GE, major Indian IT companies matured in set
up of development centers, security, processes, project management and
realized that this is an industry quite different from trading companies
had to invest in training and employee development to keep up with the

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world. By the end of the 20th Century, Indian IT companies had become
ISO 9000 certified and SEI-CMM Level 5 compliant.

SEEPZ can be called the birthplace of Indias IT Outsourcing and


Offshoring Industry was created in 1973 and was seen as export
processing zone. Since then, many other SEZs have been created in the
rest of India. SEEPZ mainly houses Electronic Hardware Manufacturing
Companies, Software Companies and Jewellery exporters of India. More
than 150 units operate in SEEPZ today. These include TCS, Tata Unisys,
iGATE (previously PATNI), Syntel and CGI Group Inc. The SEZ is a high
security entry zone. Employees of various companies need to have
permanent SEEPZ gate pass to gain entry. Visitors need special permits to
enter. Due to these hassles, government proposed making SEEPZ a Free
Trade Zone (FTZ) in 1999. However, gate pass and visitor pass rules
continue till date. Making SEEPZ a FTZ meant that it would be treated as
outside the customs zone of India. This meant no Excise or Customs Duty
will be levied on raw material but companies would also not be able to sell
their products in domestic market. Buildings in the zone are called
Standard Design Factories (SDF) with multiple units of 2000 sq.ft. each
within the SDFs. Companies were provided long-term lease of one or
multiple Units. Larger companies leased continuous units and remodelled
them into state-of-the-art offices for Software work. Within the premises is
located the ruins of an abandoned Portuguese church, St. John, the Baptist
Church of Mumbai built in 1579. This church also lay in ruins for many
years and access to it is restricted since SEEPZ was formed.

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12.5 OPERATIONAL MODELS

In this section, we will deal with the Operational Models. There are
essentially two Operational Models:

Staff Augmentation
Projects Outsourcing
Managed Services

Staff Augmentation: This is the most basic of all outsourcing models. You
add contractors to increase your output as demanded by the organization.
You still control all resources but this setup allows add-on services which
are presently deficient in your company (i.e., support services for market
expansion). In addition to being the most basic setup, this has the least
risk among all the outsourcing models. You may use this to expand current
capacity to serve short-term immediate business needs.

Projects Outsourcing: IT Outsourcing started with outsourcing of


projects small projects or parts of large projects and as Outsourcing
matured large projects were outsourced.

The projects were full life cycle bespoke development that included the
outsourcer to manage independently Design, Coding, Unit testing,
Systems and Integration testing and support UAT and Production
Implementation with a limited post-implementation warranty.

The Requirements Definition Phase was typically excluded from outsourcing


as:

This Phase involved direct discussion with the business community IT


Outsourcer was only responsible to the IT department.

The Requirements phase was quite uncertain in terms of its scope and
timelines and hence could not be estimated.

Without a Requirements Definition, the rest of the project could not be


estimated accurately.

Sign-offs with the business is always an internal action between Business


and IT department and vendors not involved.

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Scope and budget linked issues and those internal to the organization.

To a great extent, even Design Phase and more specifically the HLD was
also never outsourced and the outsourcer always came in from LLD
onwards.

Essentially, the IT Outsourcer is engaged only for those phases where the
scope and hence the estimates of effort and schedule can be defined as
accurately as possible.

General Electric Co. and Hitachi Corporation are two companies that
perfected this model best and leveraged outsourcing most effectively in
the90s. Their model is bulleted below:

Complete a high-level requirements study internally and obtain


budgetary approval.

Engage one or a few resources from the ODC vendors in the detailed
Requirements Definition Phase the resources would be deputed at
customer site and be part of the customers requirements team. These
resources would subsequently return to Offshore and be part of the
project team thereby transferring full knowledge of the requirements to
the offshore team.

High Level Design also done in-house with the same ODC resources that
took part in Requirements participating.

The signed-off Requirements documents and HLD are sent to the ODC
and the ODC provided estimates of timelines and effort.

The project is approved and executed based on the estimates signed-off.

Change Requests are tracked and a joint decision on their


implementation based on their impact on the project

This is a model perfected over a few years and practiced even today across
the IT Outsourcing world.

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Managed Services Outsourcing: It is sometimes better to have a long-


term engagement of services with your vendors. For growth, profit, or
expansion, you need concrete indicators of improvements in your business.
For this, you may use the managed services outsourcing model where
vendors would act as consultants. In this case, projects are treated as part
of a system where a competency of the clients business is managed.
Examples include offshore research facilities and multilingual systems and
technology for emerging markets. This setup is based upon mutual trust of
the client and vendor.

Managed Services is widely acknowledged as the best model to adopt for


technology outsourcing if you have a long-term outlook. Widely tipped as
the holy grail of technology outsourcing, Managed Services Model is an
attractive proposition both to vendors as well as the outsourcing
organization.

Managed Services is also known as the Fully Outsourced Model where the
vendor takes complete, end-to-end responsibility of a set of deliverables in
a project. This model is generally adopted when the work can be clearly
scoped out with clearly marked out deliverables even in Maintenance
scenarios. Complete decision making responsibilities for providing the
agreed services/deliverables is with the vendor.

Some of the key features of Managed Services Model are:

Clearly SLAs for each deliverable and penalties applicable for non-
delivery should be agreed contractually.

Generally, budgets are calculated on the basis of numbers of FTEs on the


project over a period of 1 to 5 years. However, budgets may also be
calculated based on the entire pieces of work a fixed price managed
services engagement. In such cases, the vendor has a free hand on
staffing and rotation of staff. The risks on such a model are that vendors
may allocate shared resources for the project resulting in delivery issues.

For this model to work, the client should show confidence in the vendor
to hand over whole applications to the vendor and the vendor should
have an excellent understanding of the clients systems.

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The role of the client will be that of a reviewer, contracts management


and budget tracking.

Vendor will be responsible for staffing managing stakeholder


expectations.

Delivery of service maybe performed from any location Onshore at


client location, Offshore, Near-shore or a combination.

Managed Services model is often adopted by organizations as a


continuation of an existing Staff Augmentation engagement after a long
trusted relationship where the vendors key resources are very familiar to
the organization.

Some of the advantages of Managed Services Outsourcing are as below:

Since delivery and stakeholder management are with the vendor, the
organization can focus on its core business.

The SLA-based contract put at rest customers worries of stakeholder


expectations.

SLA-based approach also results in adoption of good Processes and


Knowledge Management by the vendor, thus delivering measurable and
sustainable long-term benefits.

Vendors can take decisions without have to get the nod of the customer
at every step.

Long-term SLA based contracts help vendors make strategic investments


that indirectly benefit the customer also.

Most vendors bring in Industry Best Practices which again is a benefit to


the customer.

At the same time, there are also the negatives:

Culture mismatch between client and vendor organizations can often


result major communication gaps and lack of appreciation of the
customers pain-points and priorities a good gestation period (called

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Transition) is essential to stabilize the interfaces. Here is an example


early into a 5-year Managed Services contract, when the CEOs
Blackberry failed the vendor support engineer did rectify the issue within
the SLA, but that took 1.5 days. When questioned, the engineers candid
reply was Well I had other priority tickets ahead in the queue and
anyways I was within the SLA. What the vendors engineer did not
realize was the CEOs Blackberry is always Number 1 priority.

In multi-vendor scenarios, where one vendor manages Applications and


another manages Infrastructure, blame games are common, with both
parties not willing to take responsibility for failures. In fact, this happens
within the same vendor organization.

Transfer of contract from an existing vendor (possibly due to non-


performance) to another vendor becomes a major challenge for the
customer. General Electric is again the best example here the manner
in which they transferred the work out of WIPRO to TCS, PATNI and
SATYAM after Wipro was terminated in the contract renewal of Year 2001.

Selecting an Outsourcing Model: Deciding which of these Outsourcing


Models suits your companys needs best and each one has its own merits
but may be summarized into the following aspects:

Strategic Priority How much process or strategies are you willing to


control and augment in support of your business objectives?

Risk Tolerance What type of vendor-client relationship are you


comfortable with?

The advantage of picking one over the other is based on an assessment of


two factors your companys needs and the intrinsic quality of each model.
Its not just the cost factor, but the efficiency, efficacy, competency, and
maturity of a process and the vendor. A company adopting any particular
outsourcing strategy should also consider that when they free up the
operations, they now no longer have to perform the operations and it frees
up a lot of resources within a company to start to do higher level tasks.

The goal of outsourcing is to improve the profitability of companies as


such decisions should be based on an analysis of the company cost
structure, strategic priorities, risk tolerance and available outsourcing

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models. Decisions should be taken on what to retain in-house and what to


outsource. It is easier to begin with staff augmentation and work your way
towards more mature models.

Relationship with the vendor is of paramount importance in IT Outsourcing


again General Electric is the role model the more meaningful it is the
better value that the vendor can provide your company and the
Outsourcing becomes strategic.

Strategies are not static and will change over time as the company grows
and the dynamics of choosing different models will continue.

12.6 COMMERCIAL MODELS

There are two traditional time-proven commercial models of Outsourcing.


In the past 5-10 years, many newer commercial models have also been
tried out and are evolving. At the same time, the traditional pricing models
are intrinsic to or will be part of any of the newer models that are evolving.
It is also a fact that no one model is contracted across board in IT
Outsourcing. The traditional commercial models are:

Time and Material


Fixed Price

Time and Material is the oldest and most common commercial model.
It is no-risk model to both customer and vendor, where the vendor assigns
resources to the project or customer site. The customer is free to utilize
the resources as they would their own staff. As and when the customers
demand ceases, the resources are released typically a notice of two
weeks is given to the vendor. The biggest advantage to the customer is
retain control of the project as always, have additional resources as and
when required and no commitment to retain the resources beyond their
need. The vendor is assured of annuity revenue and over a period of their
resources gain sufficient confidence of the customer to manage the project
or transfer it to a managed services model. However, its favoured mainly
for Onsite engagements; the customer is apprehensive of the offshore T&M
as they dont have visibility to the activities and hence suspect low
productivity. The main disadvantage of this model is that the vendor is
continuously trying to augment their staffing in an attempt to increase
revenues. This becomes particularly difficult to resist in the last quarter of

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the vendors financial year when the sales is pushed to meet higher
targets.

Fixed Price Model Best suited when a project or a group of projects be


they Development or Maintenance can be estimated within a +/10%
accuracy on efforts. The vendor takes the hit if the project exceeds the
budget. The Fixed Price not-to-exceed is a corollary of the Fixed Price
Model where a Fixed Price is agreed upon and billing on actual is approved
by the customer as in Time and Material and if the project completes under
the budget, the vendor is paid on actual; else if the project exceeds the
budget, the vendor is paid on the price agreed. This model is resorted to
when the customer has reservations on the budget estimated by the
vendor. The biggest negative of Fixed Price is the vendors motivation
impacted negatively when projects go into overrun (be it due to the
customers delays or of the vendors own issues) and vendor organization
starts cutting down on resources and FP Projects typically go into
prolonged disputes. This requires senior management from both
organizations to show vision and appreciation of each others challenges.

Newer Commercial Models In the traditional IT outsourcing deal, the


vendor provides a service managing applications or servers or networks,
developing applications and the customer pays for it, whether at a fixed
price, on a time-and-materials basis or a cost-plus model. Enterprises that
have gone the outsourcing route many years back, now expect more value
from their IT service providers, whereas the vendors want increased
revenues and better margins. This combination of expectations has
resulted in many new pricing models that aim at satisfying the customer
and the vendors, to better align the concerns of both parties. Among the
new pricing structures increasing in popularity are gain-sharing
agreements, incentive-based contracts, shared risk-reward arrangements
and demand-based pricing.

Gain-sharing Pricing Model: This is a profit-sharing model (Gain-


share means profit share); the vendor gets a share of profits above an
agreed threshold. There is a base price agreed in the contract. By this,
the vendor has an equal interest to ensure that the customer makes
profits above the targets. Customers and vendors wanting to have a
true strategic or long-term partnership enter into such contracts.
Theoretically, this model encourages collaboration with both parties
work toward common business goals and allows the vendor greater

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freedom in decision making. However, this model requires a high level


of trust between vendor and customer and hence works only with long-
term vendors.

Incentive-based Pricing: Bonus payments are made to the vendor


for achieving specific performance levels above the contract's service
level agreements and always in conjunction with a traditional pricing
methods.

Shared Risk-reward Pricing: The vendor and customer jointly fund


the development of new products, solutions and services with the
provider sharing in rewards for a defined period of time. This is
typically in new ventures where the customer is not willing to pay the
market rates. At the same time, their business is critical as to require
the best services. In such a contract, the vendor becomes a business
partner of the customer. The vendors risk in terms of the costs, are
paid out and the risk-reward sharing is over and above the costs. More
than high commitment, the vendor needs to understand the business of
the customer and be willing to get into it wholly the vendor is
essentially moving out of its core competency. To the customer, it
mitigates some of the risks of new technologies, processes, or models
by assigning risk and responsibility to the vendor. However, for both
parties, results can be difficult to measure and rewards tricky to
quantify.

In the IT world, Outsourcing also involves transferring employees and


assets from one firm to another, but not always.

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12.7 TRENDS IN OUTSOURCING

Outsourcing has continuously changed and morphed starting from onsite


staff augmentation, to controlled offshore services to managed services
under various commercial models and contracts. Over the past 5 years, IT
services industry has seen customers doing more of their own IT services
deals, testing the service integration model, and continuing to struggle
with outsourcing transitions. Basically, customers are seen as being not so
happy with what vendors have been delivering or in the words of the IT
service providers the customers expectations are on the up-trend. Many
customers have bought over ODCs to make them their own captive centers
of course, 10 years back customers sold off their captives. Nevertheless,
the industry thinks that the next couple of years may see more customers
taking greater control of the IT outsourcing space.

An Increase in Insourcing: Of the IT services historically outsourced,


20% to 30% will be brought back in-house as buyers are more comfortable
to create retained organizations that not only govern the services, but start
to move more into operational control of the services. Customers who had
previously sold off their captives (10 years back) saw a gradual drain of
many of their experienced SME thereby diminishing the quality of services
the objective of insourcing is to get the best of talent back into their
ODCs under their control.

Greater Indian Presence in Infrastructure: Indian Software Industry


made its name on application development, maintenance and BPO. A few
Indian companies like HCL have long back seen the saturation of this space
and started Infrastructure businesses networking, data centers, etc.
Now, Indian IT companies are focussing on the big infrastructure deals that
were the privy of IBM, EDS, or CSC.

Inter-vendor Cooperation: The new contracts will legally bind all


vendors to work together so that the customer can leverage the best of
capabilities of all their vendors.

Challenges with Governance: With the increase in adoption of global


business services and the growing complexity and diversity of vendor
portfolios, the governance function will become an even more complex and
critical capability that enables organizations to manage performance, risk

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and compliance. And most organizations face challenges in recruiting and


hiring experienced senior resources to handle the governance.

Hybrid Offshoring: Offshoring to a supplier may not be the default,


rather, may see more hybrid models combination of insourced and
outsourced offshore services. Companies are starting to invest more in
global business services models, best of shared services and outsourcing
under a common governance model. This may see an increase in captives.
This is not altogether new to the industry.

Service Integration: After many years of Outsourcing and various


outsourced models, customers will refocus on service integration as their
own core competency, taking key functions back in-house. In traditional
outsourced models, a major customer concern was loss of visibility and
direct management. This has always been the biggest challenge that
vendors (big and small) in outsourcing the customer wanted ownership
and proactiveness from the vendor, yet wanted hands-on control an
impossible combination. Customers are now going back to internal service
integration which they feel provides more flexibility and knowledge of the
business required.

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REFERENCE MATERIAL
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Summary

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