January 30, 2019

Engineering ERP Architecture for the 21st Century!

Dennis Jolluck

Dennis Jolluck
Vice President - Applications Development & Field Product Management - Latin America Division/Oracle

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"All of a sudden, software vendors are no longer selling technology, they are selling a service!"

 

Introduction

Today’s digital business world is utterly dependent upon the innovations in enterprise software that took place and evolved over the last 60 years. The progress made in this industry has been nothing short of spectacular. We are well aware of Moore’s Law and how it related to speed and cost in producing microchips. That very foundation has led us from where only a few successful companies could afford to leverage technology where the majority access it today globally. The evolution of enterprise software arose from the “dinosaur” mainframes to the current technologies of cloud computing and virtualization. More importantly, during the last seven years, there has been a dramatic transformation that has taken place. Today’s hot topics are Cloud, Mobility, Embedded Analytics, Big Data, Artificial Intelligence and Block Chain. Enterprise software vendors have no choice but to re-architect and reengineer their software stack for the 21st century.  Alternatively, for vendors, to “add-on” complexity, or attempt a “rip & replace” technology on top of their 1980’s architecture is no longer sustainable.    

Today’s new business model – SaaS (Software as a Service) – was born as the result of the exponential rise in data volumes, network performance became cheaper, and asignificant increase in bandwidth. All of a sudden, software vendors are no longer selling technology, they are selling a service! This is a major mindset and transformation in a vendor's behavior. As a result, new players are emerging today to provide solutions for the cloud and traditional enterprise vendors are trying to evolve. The cloud customer no longer has to worry about building data centers, hiring technical staff, acquiring licenses, installing the software, doing backups and upgrades, applying software patches or addressing security at multiple levels. This shift is occurring since the market is demanding a ‘pay as you go’ business model, with minimum maintenance, more flexibility and perhaps a simpler way to experience the application.  But not all cloud solutions are built alike!    

Modern Architecture Design Principles

Oracle’s strategy in developing a Modern Architecture for the 21st Century took no “shortcuts”. The architecture was completely re-engineered and re-written based on Oracle’s service-oriented architecture, open standards and the “best of the best” functionality (explained below). Why?  A modern architecture is deemed to use the latest development technology, which results in both agility and innovation. Also, it enables new ways of executing superior performance and maintain a competitive advantage. It evolves and considers a company’s growth and changes in a fast moving market (scalability from 10 users to 10K users and beyond).

Oracle’s approach is unique and based upon creating the “perfect storm” when you consider the following principles:

  • Leveraged the acquisitions related to ERP & BI, Oracle has over 130 years of R&D innovation between E-Business Suite, Peoplesoft, J.D. Edwards and Hyperion. Oracle extrapolated the “best from the best” with respect to architectural design. For example: Peoplesoft: Ease of change for personalization; J.D. Edwards – Low TCO for SMB’s;  EBS – Single Data Model & Embedded Analytics; Hyperion – Essbase modeling.    
  • Technology Endurance: Oracle has already guided ERP customers through 3 major discontinuous technology shifts: Green Screen, Client/Server, and Browser.   Oracle anticipated the shift to the cloud 12 years ago. 
  • Solicited feedback from Oracle’s broad and industry deep customer base through user groups, advisory boards and executive contacts for guidance on how Oracle can improve the architecture to make their jobs easier, less costly and more productive.
  • Leveraged the Oracle Technology Stack (deemed best in class): From storage, servers, virtualization, the database, middleware and in the application layer. More importantly, Oracle Fusion Middleware, a standards-based, commercially available development platform which allows a customer to deploy on-premise or in the cloud as PaaS.
  • Lessons learned from hosting Oracle e-Business Suite in a managed cloud services environment 18 years ago. Based on customer feedback, delivering a single tenant model still did not deliver the cost savings or simplicity required.  Companies still had to pay for the hardware and software and administration costs. 

Based on the above principles, the following are some of the key components behind Oracle ERP Cloud, the foundation of a Modern Architecture for the 21st Century:

Deployment Flexibility: @ Customer, Public or Hybrid

SaaS providers need to strive to provide a deployment choice to the enterprise customer:  Public Cloud, @ Customer or a Hybrid Approach.  No matter how you deploy, it’s the same code line, for all platform services, standards-based, built upon a set of common infrastructure services (e.g. Database, Collaboration, Mobile, Analytics).   One comment on the Hybrid deployment model:    Some ERP vendors choose this approach since they are trying to leverage their 20th century ERP architecture with some newly acquired modules.  For example, business processes such as “Order to Cash” and “Source to Pay” may be integrated to jump “back and forth” between a public cloud and an on-premise deployment.   This is marketed as a Hybrid Cloud solution.  However, if you look under the covers, this is not considered “best practices”.  Hybrid solutions have different code lines, integration points, user interfaces, patching processes, data models, maintenance and data synchronization, as well as upgrades to consider.  This is a far divergence from providing the market with one common platform or development tool.

Mobility: Smartphone’s & Tablets

I asked my daughter how many students in High School have Smartphones.  Answer:  100% (and 90% owned iPhones). The upcoming millennial workforces (80 million strong) are being nurtured on the Smartphone & digital media….from Facebook to Wikipedia to YouTube.   Likewise, an enterprise cannot ignore a mobile-first strategy to secure powerful analytics and forecasting tools, real-time information on financial data, inventory and sales opportunities.  An engineered approach from the bottom up application for mobile devices adjusts to the form factor of the device and must be adaptable to either a smartphone or a tablet.  Beware of out-dated technology that may reflect user interfaces and form factors that are not aligned with the device.  

Mobility means applications have optimized user interfaces that support the users’ work wherever they are and on whatever device they are using at the time.  Developers also make sure the designs (e.g. Mobile Expenses) take advantage of the device themselves, such as cameras to take a photo of the receipt and voice technology to record the expense event.

Embedded Analytics without a Data warehouse

Many businesses today are nowhere near the advanced age of analytics. In fact, the average finance professional can spend up to 75% of their time (per CFO Magazine) executing the mundane – collecting and validating data, maintaining and updating spreadsheets and developing reports. High performing organizations, on the other hand, provide their professionals with a self-service process and environment that enables them to go through embedded analytics to rapidly focus on insightful analysis, interpretation of the analysis, discussion of options and decision evaluation…in real-time.   

A modern architecture allows the user to view an anomaly in a GL (General Ledger) balance and drill down all the way to the source transactions to identify the problem. Benefit: rapid decision making. There is no need to wait 30 days for IT to execute a data extract and reporting process from a data warehouse. Also, you can export pre-created content (e.g. dashboards, analytic charts or grids from your General Ledger or Reporting System to PowerPoint, Word or Excel).  Predictive analytics can be addressed not only for your ERP system, but also other data sources as well. No need to rekey or reconcile data from the transaction system to the presentation materials for Senior Management or Board meetings. 

Embedded Collaboration & Social Capabilities

Within the last 10 years, the industry has created a range of collaboration functionality (and acronyms) related to the “social enterprise,” such as user profiles, content sharing, conversations, blogs/wikis, social network analysis, social tagging, ratings and recommendations.   All of these solutions have now been transformed from our personal usage socially and became relevant to the enterprise workplace.      

According to Oracle CEO, Mark Hurd, every business leader want to attract the BEST talent to their workplace. But how?  An organization can address this by offering job flexibility, transparent career paths, faster rewards, and a more modern and engaging workplace. The 80 million millennial who will be entering the workforce will expect a modern architecture with modern tools in order to be innovative…..and collaboration is essential! Why? Well, the alternative is to be prepared for the fact that 60% of millennials will leave a job within 3 years. They want flexibility and engagement! 

A modern architecture can deliver an integrated social network that provides secure ‘in-context’ collaboration tied directly to the financial transactions & processes (as compared to separate and disjointed email messages). A social conversation can be specifically tied to a transaction whether it’s in the context of a specific journal, payment in payables or a receivables invoice. 

Centralized Financial Architecture & Sub-ledger Accounting Model

As compared to Oracle’s traditional ERP systems, major architecture changes were made to centralize accounting, taxes and payments. This functionality was removed from the sub-ledgers and centralized to provide more control, flexibility and simplicity for enterprises to enable a lower TCO. This new architecture enables centralized administration of Global Shared Services. With a traditional architecture, if there were three legal entities, then there would be three operating units and consequently three responsibilities, one responsibility for each unit. With a modern architecture, you would only need one responsibility to manage the accounting, billing, procurement for multiple operating units. From a business perspective, the entity can determine if it desires to centralize or decentralize payables, purchasing or receivables. 

Configurable Architecture

Customization is something that could be a “show-stopper”, especially when an enterprise is considering a move to the “public cloud”. This is where a software vendor's enterprise development experience comes into play (as compared to a "start-up"). This is composed of deep industry knowledge, as well as localization and legislation expertise from numerous countries. Based on this domain knowledge, this is a significant opportunity to take advantage of when presented with reengineering the architecture. 

Oracle attempted to minimize the customizations, especially addressing the country localizations. What Oracle did not know then (25+ years ago), they know today!  They took advantage of that fact and built many of their customer’s “customizations” into the product as a “configuration”.  So customers are not required to take on this often complex process by themselves. To clarify, the configuration is better, because it is easier to implement and cheaper to maintain. Customization of a core cloud app is generally not permitted because it destroys the economic foundation of cloud computing. If an organization cannot compromise on customizations, then an on-premise deployment is the only alternative, however, you lose countless cloud benefits from the tradeoff. 

User Experience

User experience does not hold the same meaning as the user interface, which is the look and feel of an application, including the layout and interaction model. This topic has evolved to position the complete experience for a user to accomplish a task, including across traditional application boundaries. The scope has broadened across all mobile devices: how employees work with their peers, work from home, from the airport, while travelling, and in their car. A cloud platform is driving all of these devices and connectivity. A cloud user experience enables employees in using the system a no-brainer.     

Most developers created a dedicated User Experience lab to synchronize what device will be used in what location to accomplish what type of task…ubiquitously.  This maintains the user experience at a balance of personalized detail, which encompasses 10% of the tasks that 90% of the users are doing 90% of the time.         

Virtual Private Database

Unlike most “SaaS only” software suppliers, Oracle Cloud does not force customers to co-mingle their data. Oracle understands many companies will never allow their data to be exposed to unauthorized users, internal or external to the data center itself. What Oracle has done is create a cloud architecture that delivers the benefits of shared infrastructure while protecting the customers’ proprietary data in an isolated database instance. This is called ‘virtual tenancy’. With the Oracle Cloud, you share the hardware, you share the middleware and you share the application.  BUT YOU DO NOT SHARE YOUR DATABASE WITH OTHER CUSTOMERS.  More importantly, by having your own private database, the customer chooses the right time for upgrading and ensures the “noisy neighbor syndrome” (e.g. where a co-tenant monopolizes bandwidth, disk I/O, CPU and other resources, and can negatively affect other users' cloud performance) does not affect performance. With Oracle Cloud, the enterprise is not forced to upgrade over a single designated weekend, there is flexibility and choice!  This allows time for user education and downtime planning.

Summary

Few executives would argue that speed and innovation are critical success factors in today’s digital world. By innovating quickly, testing new products or new services to the market or introducing and transformed business models, and release them on a regular basis is a competitive weapon. In order to be “digitally agile”, an enterprise requires a foundation to provide those capabilities. The first step is an ERP architecture. Built on standards and engineered for speed. Processes that once took days to complete now take minutes. Proactive decision making is the currency of the digital age. Personalized and relevant to customer behavior or real-time insight into the supply chain or back-office processes. 

From the perspective of the enterprise software vendor, the bar for excellence has been moved very high today. Complexity is the enemy of agility.  There is a great digital divide between how we consume technology personally versus how we use it in the workplace. In the ERP software vendor market space, there are only a handful of vendors who attempted to address this transformation by re-architecting and rewriting their software for the modern era. But how many of these ‘start-up’ cloud vendors have the financial viability, the technology stack/development platform, and the domain expertise of over 130 years of R&D innovation? Then we have the traditional ERP vendors, who will continue to add new layers of code, which result in more complexity (e.g. different data models, user interfaces, workflows) for their customers. So who benefits?  The customer or the software vendor?   

In lockstep fashion, it is becoming apparent that cloud computing has started to migrate closer to the center of board meetings and executives strategy discussions for the following reasons: 

  • Eliminate or minimize the time and expense of maintaining commodity technology infrastructure;
  • Insulate the enterprise from accelerating technology change by placing this responsibility into the hands of the software vendor;
  • Focus on managing their talent better. Rather than competing with ‘silicon valley’ for IT talent, they now can focus on targeted IT resources to address their industry domain expertise and customer specific competitive differentiation; and,
  • Leverage technology to outmaneuver the competition, disrupt industries, and force the business to align and clarify its’ strategies with its infrastructure.

The challenge for Senior Management today is to keep pace in the digital age.  Without the right ERP architecture, there is a real danger of traveling in the wrong direction, traveling too slowly in the right one, or not moving forward at all.  

Comments? You can contact me directly via my ExecRanks profile.

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