Gartners PaceLayered Application Strategy Michael Guay This presentation

Gartner’s Pace-Layered Application Strategy Michael Guay This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2011 Gartner, Inc. and/or its affiliates. All rights reserved.

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Pace Layering: A New Beginning • Business strategy and market conditions change faster than IT systems can adapt. • In 2010, Gartner introduced the pace-layered application strategy framework • This presentation will review the concept and provide guidance on adoption, governance and change management.

Pace Layering: Key Issues 1. What are the key aspects of a pace-layered application strategy? 2. How should application leaders implement a pace-layered application strategy without creating chaos? 3. How can you use a pace-layered strategy to help your organization drive sustainable differentiation and increased innovation?

Why Is a New Application Strategy Needed? The Conversation Between Business and IT Leaders Is Not Working! Alternative Business Models New Ideas Improved Processes Better Ideas Common Ideas Business Leader One Size Fits All Apps/IT Leader

The Pace-Layered Application Concept • Most organizations have a heterogeneous portfolio of business applications. • The applications range from mainframe to i. Pad, data center to cloud, and critical to casual. • The business processes they support may change every few years or every few days. • No single strategy or governance model can be appropriate for all applications. • The problem is only getting worse…

A Pace-Layered View of Applications New Ideas Better Ideas Competitive Threats Systems of Innovation Systems of Differentiation Systems of Record Greater Efficiency Common Ideas Unique Processes

A Public Sector Pace Layered View of Systems Pace Layered Application Strategy™ “I don’t know exactly what I want. I need to experiment. ” Systems of Innovation Systems of Differentiation* Systems of Record “I know what I want, but my needs are unique and there are no packages. ” © 2011 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. “I know what I want and it doesn’t have to be unique. ” *Also referred to as “Uniqueness”

Characteristics of Layers Characteristic Process Characteristics Data/Information Content Change Control / Governance Business Engagement Planning Horizon Record Differentiation Innovation Structured, repeatable Configurable, autonomous Dynamic, ad hoc Highly structured, well managed, mainly internal, audited Internal and external, some unstructured; more dynamic Structured and unstructured data; heavy reliance on external data Static/Stable Both Dynamic Strict Control and Testing More Streamlined Ad Hoc Formal Governance Process Part of the Team Doing the Work 7+ years 1 -2 years 2 -3 months

Systems of Record: Core "Records" and Common Processes • Employee Records • Benefits • Payroll Human Resources • Accounts Payable • General Ledger • Budget • Tax, Treasury Financial • Vendors • Requisition to Order • Inventory Procurement Stabilized and Lower TCO: Invest in Differentiation and Innovation • Processes: Common processes — incremental improvement • Information: Core records — very high quality/audit, reporting • Systems: Core ERP/SCM/CRM suites or legacy systems • Change Drivers: Long-term shifts, regulatory change, trickle down

Unstable Foundations Lead to Failure t e en rvic im e nt s S e S ysi al An n io x t va Bo o n In sion n s pe bmi O u S Fac Presebook ence Droid App e on h i. P App ndations Recomme e Engin eview Product R e Servic n vatio o n n I f o Systems Custome Processe r Service s and Sy stems Systems Prod of Differ Con figu entiation Ord uct Unstable nt opme l e v e ct D Produ Processes d n a R&D stems and Sy er rd o c e R f o m e t Sys r me sto Cu S p up r lie rato r

Systems of Differentiation: Unique Processes and Information Key Question: What are the real business differentiators for your enterprise? Human Resources Finance Procurement Processes & Info. • Recruit to Retire • Transactional (AP/AR) • Req to Check • Benefits / Payroll • General Ledger • e. Commerce (SCM) • Self - Service • Budgeting • Inventory • Processes: Unique/differentiating processes, rigorous/detailed, medium pace of change • Information: Analytics and forecasting — often combining system of record data and other data • Systems: Best-of-breed, Saa. S, sometimes modules of a suite • Change Drivers: Successful innovations, commoditization, competitive pressures

Systems of Innovation: New Processes and Information Web Social Mobile Multichannel • Processes: Emerging processes, experiments/proofs of concept, often fairly manual/basic processes, process "lite" • Information: Increasingly external, advanced analytics/models, scenario planning • Systems: Experimentation "sandbox": - Portals, content management & collaboration - "Lite" Application Development — mashups, Web, social, mobile - QR codes • Change Drivers: New ideas, innovation

Pace Layering: Key Issues 1. What are the key aspects of a pace-layered application strategy? 2. How should application leaders implement a pace-layered application strategy without creating chaos? 3. What should public sector organizations be aware of when implementing a pace-layered application strategy?

Use FACT to Determine Optimal Deployment Choices Finance • • • Assess TCO for the option: calculations and assumptions should be transparent Source of cost data and assumptions should be documented COA should be developed to show and continually account for cost components Agility • • • Agility characteristics for deployment options need to be compared to the requiremenst for the software system May be difficult to ascertain unless you have been measuring over time The ability to adapt the application easily over time must be a crucial design constraint Control • • Software needs to be managed at many levels (data, security, change (code) control), requires management time More dynamic and involved governance to deliver appropriate control Technology • • • Need to assess the operational load impact of a specific deployment option (Ex: Saa. S solution may create significant additional loading on external network connectivity, on premise may place more burden on existing servers) Determine “connective tissue” products and architecture Identify the impact of a specific deployment decision on current and planned enterprise architectures.

Interaction Between the Layers Requires "Connective Tissue" Common Elements of Connective Tissue System of Innovation • Master Data Management • Process and Data Integration System of Differentiation VS. • Business Service Repository • Integrated Composition Technology • Common Security Architecture System of Record • Integrated Monitoring and Management • External Connectivity

Governance Differences Between the Layers System of Record Process Change Architecture Funding Development Practices Business Engagement Planning Horizon System of Differentiation Strict Change Control System of Innovation Experimentation Alternate Platforms Traditional Capital Process Departme ntal Investment Pool Agile Practices tal & Itera tive Incremen Waterfall Formal Process 7+ years Doing the Work e team Part of th 1 -2 years 2 -3 months

Establish Realistic Process and Data Integrity Requirements Ambiguous, and Highly Flexible Process Integrity Facebook Campaign Sales Interaction Shipping Well. Understood, Tightly Controlled Prospect Web Visit Quotation Invoicing Order Entry Cash Receipt Data Integrity Modest Expectations System of Innovation Scenario Models Social Database System of Differentiation Budgeting, Planning, Forecasting Direct Marketing Database System of Record Audit and Compliance Reporting, Reconciliation High Integrity

Recommendations for Layers Characteristic Strategic Focus Record Differentiation Innovation Improve execution Better design New idea 10 to 20 years 3 to 5 years 6 months to 3 years Infrequent More frequent; configurability is key Very frequent; "throwaway" customization Understood and stable Understood and dynamic Ambiguous and dynamic Data Integrity High Moderate Limited Support Requirements 75% technical 25% business 50% technical 50% business 25% technical 75% business Life Span Pace of Change Process Viability Sourcing Technical Deployment Investment Integrated packaged Best of breed application suite Custom, orchestrated, open innovation On-premises cloud emerging On-premises or Saa. S Any, but typically onpremises Capital asset Capital or expense Expense

Example: Pace Layered Applications Large Enterprise in 2012 CLM Supply Base Management MDM of Supplier Data Supplier E-invoicing Spend Analysis Systems of Innovation E-Catalog Contingent Workforce Management Strategic Sourcing Procurement Network — North America E-Procurement — ERP #1 Procurement Network — South America Procurement Network — Western Europe AP Invoice Automation Systems of Differentiation E-Procurement — ERP #1 Purchasing — ERP #2 Purchasing — ERP #3 Purchasing — ERP #X Systems of Record X

Example: Pace Layered Applications Large Enterprise in 2016 Service Procurement MDM of Purchased Part Data Global P 2 P Network Systems of Innovation Supply Base Management Strategic Sourcing Regional Procurement Network(s) CLM Contingent Workforce Management Spend Analysis MDM of Supplier Data Systems of Differentiation Purchasing — ERP #1 Purchasing — ERP #3 E-Procurement With E-Catalog Purchasing — Shared Service Systems of Record

How to Build a Pace-Layered Strategy 1. Create a panel of business users and IT application experts. 2. Decompose existing suites into individual applications. 3. Associate each application with the business process it supports. 4. Analyze the characteristics of each application and process. 5. Use the pace-layered application characteristics as a starting point to assign the application to a layer. 6. Adapt your application governance model to fit the objectives and needs of the three layers. 7. Establish a set of connective technologies to facilitate the interoperability of the application within and between layers. 8. Build awareness of pace layers throughout the organization. 9. Encourage users to think about applications and processes based on their probable rate of change.

Pace Layering: Key Issues 1. What are the key aspects of a pace-layered application strategy? 2. How should application leaders implement a pace-layered application strategy without creating chaos? 3. How can you use a pace-layered strategy to help your organization drive sustainable differentiation and increased innovation?

How Can Pace Layers Enable Differentiation? • Provide a process to consider individual business activities rather than application categories. • Create a framework to support the coexistence of integrated suites and “best-of-class” apps. • Establish a governance process that allows departments to specify, justify and even purchase their own applications. • Encourage a dialogue between business and IT leaders about which activities are (or should be) truly differentiating. • Introduce the idea that differentiating applications change at a faster pace.

How Can Pace Layers Encourage Innovation? • Create a category of "Innovation Applications" with a budget and governance process. • Establish a development environment with tools and resources to make innovative apps. faster and easier to develop. • Use the pace layers model to shift some funding from systems of record apps. to Innovation apps. • Develop "connective tissue" that allows innovation apps. to access master data and call Web services without compromising data integrity or security.

Pace Layer Recommendations ü Move away from a monolithic application strategy, and categorize current and planned applications by layer. ü Develop a differentiated strategy for each layer: • Budgeting • Selection criteria • Architectural standards ● Maintenance and support ● Data management ● Deployment model ü Establish standards for connective tissue across the layers: governance, integration and integrity. ü Conduct regular pace layer reviews with the business to consider recategorizing applications. ü Overhaul — rationalize, standardize, simplify, modernize — applications from the bottom layer up. ü Drive "new idea"-style innovations from the top layer down by providing a system of innovation.

Pace Layer Recommendations ü Use service-oriented architecture (SOA) concepts as the connective tissue between layers. ü Deploy systems of record at the lowest total cost of ownership (TCO) to the business. ü Do not intrusively customize purchased applications. ü Deploy built or composite applications for systems of differentiation.

Top Public Sector Risk Issues • Organization and Project Leadership Turnover • Organizational Autonomy • Funding Process • Governance (ownership, change control) • Treating Integration As a Separate Issue • Excessive Customization. . . - Trying to replicate old systems and processes - Trying to add unique capabilities needed by agency

Public Sector Specific Recommendations • Secure Political Support for Transformation First • Figure out how to keep it for life of project • Make sure political appointees and civil service have been convinced it is important • Agree on standard processes • Segregate COTS and unique capabilities • Build benefits realization process tied to incentives

Related Gartner Research è Application Deployment Options Through the Pace Layer Lens Matthew Hotle, Andy Kyte (G 00235531) è Gartner's Application Pace Layer Model: Governance and Change Management Bill Swanton (G 00211809) è Connecting Technology for a Pace-Layered Application Strategy Dennis Gaughan (G 00211492) è What Can Gartner's Pace Layered Application Strategy Do for an Enterprise's Business? Alex Drobik Jim Shepherd (G 00215750) è ERP Strategy: Why You Need One, and Key Considerations for Defining One Nigel Rayner, Jeff Woods (G 00210356) For more information, stop by Gartner Solution Central or email us at solutioncentral@gartner. com.