THE PACE LAYERED APPLICATION STRATEGY AND ERP

One of the most common problems organizations face when attempting to implement a postmodern applications strategy is creating and managing a diverse portfolio of business applications and technologies, serving different purposes, while delivering a faster response time, greater return on investment, without sacrificing integration, data integrity, or governance.  Gartner offers a strategy called the Paced-Layered Strategy to address this problem by categorizing business applications by the nature of the problem they address, their rate of change, and the distinctiveness of the solution.

This strategy outlines a methodology to govern applications throughout their entire life-cycle in order to support evolving business requirements.  Implementing this strategy will help organizations with the definition, governance, consolidation, and prioritization of investments in business applications and systems including Enterprise Resource Planning (ERP).  Applying this model directly to ERP strategy will facilitate a balanced application portfolio of integrated suite applications sourced from a strategic ERP vendor, and on applications sourced from specialized vendors.  This will help ensure that ERP systems support agility, differentiation, and innovation rather than stifling it.

The Pace-Layered strategy has been adapted from the concept of shearing layers, coined by architect Frank Duffy, which refers to buildings as composed of several layers of change which evolve in different timescales.  The concept of shearing layers has lead to the architectural design principle known as Pace-Layering, which arranges the layers to allow for maximum adaptability. This same method of categorization can be applied to layers of technology systems within an organization.

Pace Layer thinking utilizes a granular approach to business applications in a portfolio – does this application support a common requirement, a unique business process, or an innovative new business methodology?  By sorting applications in this way, organizations can apply the appropriate governance, funding, and data-models based on the characteristics of each application.

The Pace-Layered Strategy divides information technology systems into three categories or layers:

Systems of Record

These systems support the core business functions and manage critical master data with a slow rate of change, common functions between organizations and are often subject to regulatory changes.

 Systems of Differentiation

These applications utilize unique company processes or industry-specific capabilities, with medium-cycle change requiring frequent reconfiguration to accommodate changing business practices or customer requirements.

Systems of Innovation

These applications have a short life-cycle and can be built ad-hoc to address emerging business requirements or opportunities.  Often using departmental or outside resources and consumer-grade technologies.

Postmodern ERP as System of Record

Pace layers force the categorization of applications by process or function rather than the more common cross-process package (ERP, CRM, etc.) classification used in business applications.  A postmodern ERP system will primarily, though not exclusively, serve as a system of record.  Individual modules within the ERP package will likely touch every layer.  For example, financial accounting, order entry, and collaborative demand planning are often part of a single ERP package but are separate modules that belong in three different layers in the Pace-Layered Application Strategy.  By sorting applications based on the layer instead of vendor packaging, the organization can apply appropriate governance, funding, and data models to manage each module optimally.

A Pace-Layered Application Strategy Will Help:

• Organizations Reduce the Dominance of ERP Vendors in Application Strategy
  • Identify preferred ERP vendor(s) for systems of record.
  • Consider best-in-breed or industry-specific solutions for systems of differentiation and innovation.
  • Define a connective-tissue strategy to support a more flexible application portfolio.
• Business Users identify more Opportunities for Differentiation and Innovation
  • Decompose the application portfolio into small groups.
  • Look for areas of differentiation and innovation even within process areas defined as systems of record.
• Organizations create a more Differentiated ERP Governance Model
  • Manage ERP systems as foundational systems of record.
  • Differentiate governance strategies across pace layers.
  • Build a road-map of application dependencies across pace layers.

How to Build a Pace-Layered Strategy

1. Create a team of business users and application experts.
2. Decompose existing suites into individual applications/modules.
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. Adopt your application governance model to fit the objectives and needs of all 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 based on their probable rate of change.

Need help developing a Postmodern ERP strategy? Contact us to discuss your ERP options with one of our consultants.

To learn more about Postmodern ERP and how it can benefit your business, download our free eBook!