Last month AMS released the results of its survey, Enterprise integration: a priority for business, which was carried out by PMP Research. The survey defines enterprise integration as “the effective integration of business processes, applications and organisations and the implementation of technical solutions to support that integration”. In the study PMP surveyed 155 companies in the financial services, insurance, telecommunications and utilities sectors. Its findings revealed major problems with the current integration efforts of some of Europe’s largest companies.
The study identified three key issues that are hampering integration initiatives:
- Firstly, enterprise integration is at a low level across Europe’s largest telecommunications, financial services, insurance companies and utilities. Very few companies have experience of higher levels of integration and can provide a vision or serve as role models for the rest.
- Second, the majority of companies are approaching integration on an ad hoc, project by project basis, responding to short-term business priorities rather than working to an enterprise-wide integration strategy.
- Finally, companies are finding integration challenging and complex.
Many are struggling to demonstrate return on investment (ROI) from integration projects and the survey points to a skills gap with lack of in-house expertise threatening the success of integration efforts.
Through the research and work with clients across Europe, AMS estimates that about 30% of integration budgets are currently being wasted. This is waste that we can ill afford in an economic downturn, with real pressure on IT budgets. Surveys of CEOs in 2001, for example, including the recent Merrill Lynch TechStrat survey, have shown that IT spending budgets are down, with further declines expected next year.
The survey used a four-level integration maturity model to assess the current status of European enterprises. It found that only 25% of companies have moved beyond using middleware tools to connect applications and that only 5% of respondents are integrating their businesses with partners and suppliers to extend their service offering and enhance customer service.
A quarter of companies still have to re-key data due to lack of integration between systems, at a huge cost to the business. With integration at such a low level, there is a real danger that efforts will be derailed as companies fail to see clear evidence of significant business benefit.
Money down the drain?
Despite millions of euros already spent on IT integration programmes, the survey reveals that over 50% of companies are investing in short term, stand-alone projects, driven by economic and competitive pressures and the need to cut costs and improve customer service. In the rush to address these issues, longer term and enterprise-wide planning is being overlooked.
This leads to duplication of costs and effort, to multiple projects where just one would do. Companies are in danger of creating expensive roadblocks to crucial future initiatives and AMS’s experience suggests that many will fall hostage to a series of projects with disjointed or conflicting objectives, providing little long term benefit to the business.
Interestingly, lack of enterprise-wide planning seems to be a recurring theme in AMS research studies. Over a year ago (September 2000), we conducted research into return on investment in e-business. That study found that e-business investments were frequently being made without careful planning, scrutiny, or setting of success metrics. Fourteen months on, businesses continue to struggle to demonstrate return on investment. Our integration study finds that over one third (34%) of the companies surveyed embark on projects without quantifiable objectives and 40% cannot specify when their integration projects will pay back. In the current climate, without clear evidence of ROI, executive support for integration projects will quickly evaporate.
The big picture
Overall, the study leads us to conclude that companies urgently need to take a more disciplined and holistic approach to integration – and to justifying integration initiatives. While fewer than 40% of the companies surveyed have a corporate team in place to co-ordinate implementation of an enterprise integration strategy, it is clear that organisations will only see real benefits from integration efforts if they develop such a co-ordinated programme, mapping out clear links and dependencies between projects.
With IT budgets in decline and IT directors across Europe voicing plans to make the most of what they have, rather than investing in new solutions, AMS would encourage companies to:
- Develop an enterprise-level vision for EI, endorsed at the highest level;
- Define a robust, high level strategy that will reduce the risk of failure or derailment while providing flexibility as business needs change;
- Develop a watertight business case for each project. Justify costs at the programme and project level and regularly review each against its business case;
- Prioritise projects according to business needs and to secure early returns in line with the strategy;
- Leverage legacy systems and only fix what’s broken;
- Address the skills gap by choosing an integration partner with care.
Demand a robust methodology – the antidote to complexity. Look for programme management and business consulting skills, as well as technical capabilities and legacy systems expertise.
The promise of enterprise integration is significant. Effective integration improves customer service, speeds time to market, increases operational efficiencies and reduces costs. The challenge for European businesses – and for the consulting firms that support them – is to ensure that integration programmes and projects deliver on that promise.
- Nick Leyland is director of enterprise integration at AMS.
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