System architecture is a key to an effective digital transformation, especially in today's day and age with the plethora of technologies an organization needs to succeed. With a variety of supporting technologies, system architecture is becoming more important than ever.
What exactly is system architecture and how does it apply to digital transformations? Stayed tuned!
System architecture has always been a critical aspect of any digital transformation. If you think about all the different technologies that organizations need to thrive. From financial systems, warehouse management system, supply chain, human capital management, smart factories, Internet of things, Industry 4.0, robotics on the shop floor, and many more. There are a lot of happenings within organizations that require different technologies and need to come together to provide common business processes and visibility into what's going on throughout the operations.
The best way to think about system architecture is a visual representation of how different technologies within the business landscape tie together. The first step is a complete audit of current technologies that are currently in use.
A lot of organizations, you'd be surprised, are not fully aware of what all the different systems are or their purpose within the business. We have one client that has several hundred different ERP systems, or so they think, but they can't name them, and they don't have them documented anywhere. They're not entirely sure how many exactly they have. This is a good reminder that it's important to understand what your systems are and how they all tie together.
For example, a lot of organizations start with a core ERP system. When I talk about system architecture, I'm talking about either current state, future state, or both. The same concept applies, whether you're trying to assess where you are today, and it also applies when you're defining your future state as well. The first thing that you often see is ERP software. That's oftentimes the central, core, master record, system of truth, for a lot of your financial inventory management types of transactions. ERP software is not enough to address all the needs of your organization.
Oftentimes, other best of breed systems, such as a CRM system for sales and HCM system for HR. There might be supply chain software; this would be the procurement and logistics planning. 3PL providers might also be integrated to your supply chain systems and warehouse management.
Another example of a system diagram would be business intelligence. Companies find that some systems don't provide the proper analytics and reporting capabilities, so they need a third party, bolt-on business intelligence system. I'll stop there for now as I could list dozens of different systems, but these are the major ones that we oftentimes see with our clients.
All in all, system architecture involves analyzing the core business processes and what integrations are needed. Many clients end up with a spaghetti diagram of a variety of different touch points between systems.
It’s critical that organizations understand the overall system landscape and any major touch points within those different processes.
The next part of system integration is to show, not just the integration points, but illustrate and highlight what the data flows are between systems.
Let's say we're starting with the sales process. You have a salesperson that has closed a deal and they are due commission. You're going to have commission that's captured in the sales or the CRM system. That commission now needs to tie back to your ERP system, because now you've got a liability on the financial side of your ledger that says, we owe that salesperson a certain amount of commission. This ultimately shows up as a liability in your financials.
As a result of these commissions, you now have something they needs to tie into payroll. The HR systems need to know how much the salesperson gets paid for the commission they closed. The payroll info is going to be fed from the CRM or the sales processes into the ERP software funnel. That's just one example of how one simple transaction, one simple step in a process can tie to multiple systems or touch different systems.
Now, your salesperson has closed a deal, they're due commissions, that touch your financials, touch what payroll is due to them. It might trigger what's going to point out another system. Let's say you're a manufacturing organization and you have manufacturing planning systems. Now the salesperson has sold a widget that now you need to go produce.
Your ERP software might create a master production schedule for what types of manufacturing needs to happen. That ERP software is now going to feed to your manufacturing execution software. That's going to create a production order and now you can see how this process triggers another step in the process that touches multiple systems. These integration points are very significant.
If you look at all the transactions in a typical business, within all the different systems they use, this becomes a massive complex diagram as I mapped out above. This is simplified intentionally. The key here is to understand the end-to-end process flows, what systems are involved, where the touch points are, and how data flows between those different systems.
Another consideration that system architects need to solve is, where does the data reside? There are transactional triggers and many touchpoints that happen between systems, but where does master data reside? Where is the real source of truth? When
there are multiple systems, the risk is there might be data in one area that doesn't match up against another system’s data output. The key thesis is making sure that the data stays in sync. Oftentimes, organizations will pick a central system, like their ERP software that serves as the master data and the single source of truth, and that ends up feeding data back to the other systems.
Another important consideration in this process is cybersecurity. When you're a system architect, you must look at the cybersecurity of your system. If there is a security breach, that's ultimately going to affect the other systems as well. Cybersecurity is an important output from this whole system architecture exercise. It also helps us identify where the vulnerabilities are, and what our cybersecurity strategy might be going forward.
Implementation Strategy The final thing I'll mention about system architecture is the future state. This ultimately defines the implementation strategy planning and roadmap. If replacing some or all technologies, understanding the roll out the technologies, what the sequence is, and what the priorities are is pivotal to project success.
For example. say you decide to leave all systems in place, but you’re going to swap out the ERP system in phase one. Then in the next phase, you’re going to target the supply chain. Now the question is, what are you going to do with that touch point in the meantime? Well, simply you're going to implement new ERP software. You're going to build an interim integration point.
The thing is, you are going to have to replace that integration point when you replace this system. The process provides a technical plan and input into the overall implementation strategy.
I hope this has provided advice or considerations as you dive into the system architecture and how it ties into your overall digital strategy and your digital transformation. For more information on this topic, I encourage you download our annual 2021 Digital Transformation Report. This covers everything you need to know about digital transformation best practices, software rankings, independent software reviews, and other things that are going to make your project more successful.
If you have any questions regarding more about system architecture and tactics in building this infrastructure, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board as you move through your digital transformation journey.