Insight: Competitive Edge

What is Edge of the Enterprise IT Spending?
Edge of the enterprise represents a new way of examining IT budgets and spending. We asked enterprises to identify how they allocated technology spending from a business perspective rather than asking about subjective categories of spending defined by a 3-letter acronym such as ERP, SCM, PLM and SRM.

Viewing IT spending through this prism shows that consumer goods companies and enterprises in other industries have cut spending on technologies focused inside the enterprise and are using those dollars to fuel business centric initiatives designed to improve the flow of information and goods through the supply chain. These initiatives vary by industry and process area, spanning business strategies from coordinating forecasts with customers to managing RFx processes over the Internet. One defining characteristic for all edge applications is that they must enable external parties to access and interact with internal data and applications to perform a business task.

Why are Consumer Goods Companies Spending So Much at Edges?
Increasing demands from customers and business units are the two major reasons why companies have cut IT spending on internally-oriented technologies and reallocated those resources to edge projects and technologies that reduce costs and improve service. Edge technologies enable critical network-oriented processes such as UCCnet, RFID, Network Supply Management and Collaborative Planning and Logistics. Consumer goods companies will continue to increase edge spending, as retailers require increased visibility, synchronization, and collaboration from its supply network.

Recommendations
Develop a business case for edge of the enterprise projects. ROI still rules at the edges of the enterprise. Each approach to implementing an edge solution will yield different costs and benefits. For example, building a custom edge application using development tools should deliver benefits more quickly however the total cost of ownership and risks could make that direction undesirable.

Recommendations
Establish a clear governance structure. Enterprises need to define the process and controls surrounding the design, development, deployment, management and retirement of information technologies. The need for governance becomes paramount at the edge of the enterprise as suppliers and customers are directly affected.

Extending processes beyond the edge of the enterprise requires changing business practices inside and outside the enterprise. Without active leadership edge of the enterprise initiatives will bog down and not evolve beyond the pilot stage.