Whereas standard software, such as SAP ERP, is the backbone for implementing standard business processes, customised software helps implementing and managing specific, business-critical functions and processes. Find out in this article how to define when to opt for which kind of software.
Which Business Process in which IT System? – The Gartner Model
According to Gartner’s Pace-Layered Application Strategy, IT systems are to be divided into three categories:
- Systems of Record
Standard software or own legacy systems that support core transaction processing and manage critical master data.
- Systems of Differentiation
Industry- or business process-specific applications that enable unique capabilities, used by the organisation to raise competitiveness.
- Systems of Innovation
Ad-hoc applications, built to address new requirements or new opportunities.
ERP systems, such as SAP ERP, belong to the first category, Systems of Record, because they are used to implement standard business processes, not helping the organisation to stand out from its competition. In case of doubt, I recommend to adapt the business processes in question to the standard software because process adjusting generally helps keeping down the total costs (Total Cost of Ownership).
Business-critical processes, however, are a key factor for an organisation to differentiate from competitors. Because of that, they are managed in the so-called Systems of Differentiation.
How IT technology raises your organisation’s competitiveness
An organisation can differentiate its business from competitors by closing process gaps within its ERP system, for instance by implementing additional software features, or by improving its ERP system’s user-friendliness and performance. Identifying these system adjustments makes up a solid business case and value proposition for the Business Departments.
It depends from organisation to organisation whether a business process is called critical or not. In some cases, critical business processes can be defined on industry level, e.g. in the machinery industry, the offer process is a critical factor for competition because at that stage, organisations differentiate from each other in terms of flexibility and response speed to the customer requirements.
How to manage your Critical Business Processes
In order to manage so-called “Value Adding Processes” (= Critical Business Processes), I recommend implementing Integrated Custom Software Solutions. These are software solutions that are custom developed according to a product-based concept as it were a standard product with an own software Release Strategy Management.
According to Gartner’s Pace-Layered Application Strategy Modell, these solutions belong to the Systems of Differentiation category. In case a custom software solution also makes it possible to design an entirely new process (for instance by integrating social media in the sales process), this can also be called a Solution of Innovation.
In my following blog post (Successfactors for Implementing Custom Software), you will learn how to implement Custom Software successfully in your existing IT landscape.