Aligning Tactical Decisions with Strategic Goals

IT Modernization is the process of evolving IT such that it is aligned with and able to support the ever changing needs of the business. Modernizing legacy systems can literally transform a business by enabling it to be more agile, competitive and profitable.

Leveraging and exploiting open standards, open systems and open architectures provides the foundation upon which to modernize IT and grow your business.

In Part I of this article, we looked at four patterns that are useful indicators for determining how to develop a modernization plan. Loss of business agility, restricted or delayed access to information, higher operating expenses due to maintenance, and shortage of resources with legacy skill sets all play a role in the challenge to meet the needs of the business. Most organizations are long overdue in addressing these challenges, which helps us conclude that the time for modernization is now.

In Part II of this article, we examine how to align tactical decisions with strategic goals to address immediate challenges and maximize business benefit and ROI.

When planning a successful IT modernization project, implementing a combined tactical and strategic solution approach to modernization not only reduces costs, but enhances business value, and provides game-changing solutions that have additional benefits that enable companies to do the following:

• Build an infrastructure that provides a solid foundation upon which to grow the business
• Provide solutions tailored to the specific needs of the company
• Become more dynamic, competitive, and able to weather economic changes

The result? Corporate top-line revenue growth + Reduced cost = Improved profit margin and shareholder value.

Why modernize IT now?

Over the past two years, the global economic malaise and resulting revenue challenges have driven a tremendous level of corporate introspection. Much of what was taken for granted, or assumed to be untouchable, is now coming under the corporate eye for review and justification. What should be kept, what should be changed, what can be changed, and what should be shut down or sold off are serious questions being faced by nearly all businesses regardless of industry. This corporate introspection results in serious discussions and tough decisions on how to reduce costs in IT.

Spend Wisely
IT organizations are under tremendous pressure to do more with less. While the focus of doing more with less isn’t a new topic, the intensity and detail of scrutiny is. Fortunately, there are many options for solving the challenges presented by legacy software and infrastructure.

Reducing cost is an imperative and important tactical discussion focused on keeping a company alive and operational today. However, what about tomorrow? Considering the future expands the focus from tactical survival to include strategic direction and drive -- introducing the concept spend wisely. Discussion of both tactical and strategic options at the start of a modernization initiative results in a focus on economic efficiency -- getting the most business value from the investment while also reducing costs.

Typical modernization project scenario
Let’s look at an example. For the case of discussion, we’ll assume a customer is running a mission critical application system built with COBOL and using some legacy data store (e.g. VSAM, IMS/DB, IDMS, Adabas).

The example customer runs a global manufacturing business. As a direct result of the current economic situation, IT is pushing hard to find technology solutions that will immediately reduce costs.

Tactical Focus
Rehosting is a logical approach that entails migrating the legacy application and data to an Open Systems-based middleware and database solution. While this relatively simple solution can result in significant cost reduction, the rehosted application is still COBOL-based and continues to carry all the legacy challenges and limitations, delivering limited incremental business value/benefit.

While this provides a solid solution to a tactical pain point, it begs the question, “What next?"

Enhancing Business Value
With cost savings in place, the company in question might look at where to go from there. Should they build new systems? Implement packaged applications or re-architect the old ones? Integrate with SOA? This is typically a multiphase approach that uses existing budget made available from the rehosting project to fund from a more strategic modernization project that provides increased business benefit and value.

Getting Strategic
Rather than immediately stepping into a tactical rehosting project, what if we altered the initial discussion to include two key questions:

• What is the 5-year goal for your business?
• What limits/prevents you from achieving your 5-year goal/objectives?

The answers to these questions can provide surprising results. Going back to the global manufacturing company that we mentioned above, we find that while they need to reduce costs they want to become a more dynamic, competitive manufacturer that can react and respond more readily to changes in the global economy to meet their customer needs. Of course, a key factor limiting growth and transformation is their legacy systems. This is a common response, and a very typical situation.

Solving their key challenge means solving the legacy challenge, begging the question -- What do these legacy systems do?

Now we learn a very interesting fact… the existing legacy systems provide business functionality that is basically General Ledger (GL) and Supply Chain Management (SCM).

Let’s consider the business factors. Limitations in the legacy GL and SCM system prevent the manufacturing company from seeing their business in real time. As a result, to keep the assembly line moving they must ensure they never run out of inventory in the supply chain. This requires excess inventory to be on hand. In addition, Purchasing may not be able to negotiate the best prices.

New GL and SCM capability/functionality provided by a complete, open and integrated solution comprised of packaged applications (COTS), middleware and databases, leveraging SOA to link new systems and old systems, can provide a real time visibility into the business. It is this visibility that enables the manufacturing company to adopt a just-in-time inventory process resulting in a reduced inventory and buy at better prices. It also frees up large amounts of cash that can be used to grow and transform the business.

Now, the manufacturing company is into a discussion of financing the immediate project from future cash savings. The result is that they get a final solution that provides maximum business value and benefit more quickly and at reduced cost.

In Summary

In today’s business climate, it’s easy to understand the reasons why organizations look at cost savings as the primary driver for dealing with legacy. The challenge is being able to take a step back and understand the long term goals for the organization. Combining a tactical and strategic solution approach to modernization enables companies to not only lower IT costs in the short term, but invest these savings into strategic initiatives that provide real business value and provide a foundation for the future. With the right recipe, you can have your cake and eat it too.

Howard Curzman is the director of Oracle Modernization Sales Development. Barry Perkins is vice president of Oracle Modernization and Oracle Integrated Solutions businesses at Oracle.