ERP for IT suggested for better visibility

Does IT need its own customized ERP system?

Citing issues enterprises have in assessing cost effectiveness of IT and in managing IT, panelists at the Dow Jones Enterprise Ventures 2006 conference on Wednesday debated the merits of developing ERP for IT.

Unlike current ERP systems, which help automate processes associated with manufacturing or services, ERP for IT would provide visibility into IT operations.

In a panel session entitled “Big Governance: Expanding IT Management,” representatives from companies such as Computer Associates and AMR Research noted issues with visibility into IT.

“Speaking with a lot of senior IT executives in [Global 1000] businesses, it’s amazing to me how little visibility they have,” into services being providing, how much they cost and how value can be measured, said AMR Research Director Dennis Gaughan.

Opportunities exist for software companies to develop technology that would uncover information necessary to make better business decisions pertaining to technology, Gaughan said.

Questions are raised about the value of investing in technology, which could comprise 50 percent of a company’s capital budget, he said. “The scary thing is, the CIOs just can’t answer that question,” said Gaughan.

A more linear and smooth approach is needed to categorize assets, said Alan Nugent, senior vice president and general manager for Enterprise Systems management at Computer Associates.

“At the core of the frustration that a lot customers have and people have relative to managing infrastructure and all the relative pieces of it, is we always take an asset-centric approach,” such as with managing databases, he said. The industry has not matured enough to look at the entire management stack, translate data about assets, correlate that and pick out pieces of relevant information relevant to specific business problems, Nugent said.

An actual ERP for IT system might be difficult for a single provider to offer but is possible, according to panelist Gary Oliver, president and CEO of Blazent, which offers business intelligence solutions for IT.

“I think it’s very difficult for one company to be the provider of all that whole capability,” Oliver said.

But he, too, concurred that the situation presents opportunities for smaller companies.

“I think there’s a real opportunity for earlier-stage companies to do a piece of that and do it really, really well,” said Oliver.

In pursuing this vision, companies would need to think about exactly what an ERP system is, said Gaughan. But existing major vendors, such as IBM, CA, Hewlett-Packard and Mercury Interactive, are saddled by already having a slew of products they need to sell, he noted.

“[These companies’] visions are much colored by the portfolio of products that they already have,” Gaughan said.

Users, however, will not rip out what they already have but are looking for a system for better visibility and forecasting, Gaughan said.

Enterprise IT departments have not focused on the issue of gauging the value of IT investments because of other tasks to tackle, Tom Cole, general partner with the Trinity Ventures venture capital firm, said.

“I think the real [reason] the cobbler’s children have no shoes is I think it’s a question of priorities,” Cole said. Issues such as worms, hackers and regulatory compliance have taken precedence, he said.

“The value of keeping your CEO out of jail completely outweighs the need to keep your IT system running more smoothly,” said Cole.

One type of business that has been gauging IT investments is the outsourcing business, Cole said. An outsourcer’s entire business is predicated on providing IT services, as opposed to the role of IT in enterprises, he said.

“At the end of the day, even if it’s strategic, IT is still going to be a cost center,” rather than a revenue generator, said Cole.

Nugent said he did not think it was possible for a single vendor to provide a SAP-like offering for IT infrastructure. A lack of standards is one issue, he said. SAP is the major ERP vendor.

A lack of business-related skills among IT professionals also was cited as an obstacle in assessing the business value of technology. Finding someone with an MBA or business degree who can understand technology is a problem, Gaughan said.

“That’s a huge issue with a lot of companies,” said Gaughan.