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SAP INSIGHT

ENTERPRISE
APPLICATIONS:
BEST OF BREED VERSUS
BEST OF SUITE
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Table of Contents
Executive Agenda 1
Best-of-Breed Versus Best-of-Suite Applications: Decision Criteria 3
The Road Ahead: Service-Oriented Architecture 10
Conclusion 13
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ENTERPRISE
APPLICATIONS:
BEST OF BREED VERSUS
BEST OF SUITE

by Shashi Rao
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EXECUTIVE AGENDA
In making any major enterprise application deci-
sion, most organizations carefully weigh a number
of factors – some soft and some hard – before com-
mitting investment and resources to moving the
project forward.
In a few cases, the decision-making process is fairly
straightforward in that the circumstances dictate
the “obvious” choice. For instance, IT projects
undertaken for strategic reasons, such as migrating
the company to a standard platform, reinventing IT
to drive competitive advantage, or “changing the
game” are typically decided in favor of a best-of-suite
offering from a major enterprise software provider.
Such projects are usually all-encompassing, and the
risk of going with anything less would likely be too
high.
At the other end of the spectrum are very targeted
IT investments that address a niche need with prod-
ucts that are not available from the major players.
Specific requirements for product design software or
advanced financial modeling, for example, usually
favor the vendor that best provides the targeted
requirement.
A vast majority of major new enterprise IT projects
are undertaken to support a specific business initia-
tive or set of initiatives. These projects typically go
Balancing Most enterprise applications decisions are based on a combination of easily quantified
Disparate factors with strategic and emotional factors.
Considerations
Features/functions
capability to meet
business requirements

Industry specificity

Technical architecture

Services and support
Figure 1
beyond departmental or geographical boundaries,
affect multiple functional areas, and are global in
nature. Business initiatives that streamline the sup-
ply chain, enable organizations to improve customer
relationships, or manage the new-product pipeline
typically fall into this category.
In these cases, organizations frequently face multi-
ple options that fall largely into two separate camps,
as follows:

“Best-of-breed” applications. This term refers to
applications considered to offer the best function-
al depth for a single area or a group of related
application categories. Offered by smaller inde-
pendent vendors (as opposed to large enterprise
software providers), these applications typically
offer depth of functionality across a specific area.

“Best-of-suite” applications. This term refers to
applications offered by the large enterprise
providers as part of an integrated suite. These
applications are sometimes not as rich in func-
tionality as the best-of-breed options, but they are
viable contenders on the strength of their integra-
tion with the enterprise footprint.
Making the decision between a best-of-breed versus
best-of-suite approach to enterprise software can be
a challenging proposition. This is true in large part
because organizations must balance one set of

Executive alignment
Product Political
Prior experience with vendor
Capability Considerations
Internal support/bias

Partnership opportunity
Enterprise
Applications
Decision-Making
Criteria

Soft and hard benefits

ROI,total cost of ownership, net
Business present value, internal rate of return
Case
Risk considerations

Strategicconsiderations (burning
platform, mergers and acquisitions,
and so on)
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factors that are easily quantified with other equally
relevant considerations that are difficult or impossi-
ble to measure.
In SAP’s point of view, a fact-based economic analy-
sis – and the relevant metrics associated with such
an analysis – should form the basis of such deci-
sions. Organizations that perform total economic
analysis while making the best-of-breed versus best-
of-suite decision are able to project the total eco-
nomic value under both scenarios and compare the
two approaches, considering differences in capital
expenditures, project plans, and investment time
horizons.
In truth, there is no one-size-fits-all strategy. The
best-of-suite argument will continue to prevail as
suite solutions expand their application footprint,
while best-of-breed solutions with clearly differenti-
ated offerings can add demonstrable value.
2
Looking forward, organizations will continue to face
the challenge of choosing between these two
approaches – placing increased demands on IT flexi-
bility and ability to support change. Leading-edge
companies are already beginning to realize the limi-
tations introduced by tightly integrated applications
– limitations that are hindering them from making
near-term innovations in business practices and
processes. Many of these same companies are begin-
ning a shift to a new generation of “service-
oriented” architectures, or SOAs, that promise to go
a long way toward reducing if not removing current
obstacles to new initiatives. Organizations need to
take a close look at the opportunities presented by
SOA and plan an IT strategy that enables them to
define a cost-effective yet flexible approach to
addressing the realities of business transformation.
CIOs who manage this change well can usher in a
new era of IT management – and true flexibility for
the business.
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BEST-OF-BREED VERSUS BEST-OF-SUITE

APPLICATIONS: DECISION CRITERIA

What factors, then, should your organization con- Integration Costs

sider in making a decision between best of breed and
best of suite? A sound economic analysis is the start-
ing point. Economic analysis, including internal
rate of return, net present value, return on invest-
ment, and so forth, should be the ultimate measure
of investment success. ROI is the ultimate financial
measure because it comprehensively factors in costs,
benefits, risk, and the time value of money. Organ-
izations that perform total economic analysis dur-
ing the decision-making phase can compare the two
approaches in terms of capital expenditures, project
plans, and investment time horizons. SAP’s experi-
ence has shown that total cost of ownership (TCO),
incremental benefits and the timing of these bene-
fits, and project risk are the three most critical fac-
tors that drive the economic analysis.
TOTAL COST OF OWNERSHIP
The first element to consider is TCO. TCO analysis
enables organizations to identify, project, measure,
and track direct and indirect costs of an IT project.
The following are some key considerations that
account for TCO differences between the two
approaches.
Direct Cost Considerations
Direct costs measure direct expenditures incurred
by the project, including project capital, internal
labor, and consulting fees. These costs can be bud-
geted beforehand.
1. All dollar amounts in this SAP Insight refer to U.S. currency.
Integration costs often represent a significant por-
tion of a major IT project. The percentage of enter-
prise IT budget committed to ongoing application
integration averages 40% and may rise to as much as
70% in certain situations. Typically, a best-of-suite
approach requires minimal interfacing. Internal
interfaces between modules of the package are
maintained by the vendor and require minimal sup-
port. (If these interfaces need to be customized,
however, the degree of customization and upgrade
support will also factor into long-term costs.) A
best-of-breed approach, on the other hand, can sig-
nificantly increase the direct costs of a project
because the enterprise backbone and other ancillary
applications must be integrated.
SAP estimates the costs of implementing a best-of-
breed application at 20% to 30% higher than imple-
menting a like application resident in an enterprise
resource planning (ERP) system. The largest cost
drivers include initial implementation plus ongoing
expenses related to supporting a fragmented appli-
cation portfolio.
The costs of developing and maintaining additional
applications to an existing portfolio are not trivial.
At an estimated $16,000 to $32,000 for development
and $4,000 to $8,0001 for support per interface, these
costs can add up quickly as the numbers of required
interfaces increase. For instance, integrating a

Integration Integration Complexity Low Moderate High

costs are Number of interfaces designed 50 75 100
nontrivial
Labor (in hours per interface)
and add up
quickly as Design 133 179 312
the number Development 102 134 308
and com-
Testing 60 83 202
plexity of
integration Implementation 54 75 175
points Total labor per interface 349 471 997
increase.
Total labor in hours 17,450 35,325 99,700
Initial deployment @ $80/hour ($M) $1.4 $2.8 $8.0
Figure 2 Ongoing support and maintenance ($M) $0.3 $0.6 $1.6

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best-of-breed service management solution to the
core ERP, supply chain, and engineering applica-
tions can easily add 300 interfaces – ranging from
simple batch interfaces to complex real-time inter-
faces – resulting in significant additional costs to the
project.
In addition to the development and maintenance
cost of integrations, additional investments in infra-
structure are required – typically in middleware and
additional hardware. Further, these interfaces and
the middleware infrastructure need to be revisited at
each upgrade cycle, potentially requiring further
upgrades and adding to the cost.
Given the significance of the integration issues,
organizations should pay particularly close atten-
tion to the number of interfaces required, the com-
plexity of these interfaces, and the need for ongoing
upkeep of the integration points and data fields as
the products change over time. For example, data
interfaces batched once a day in a standard format
are less complex than a connection that must oper-
ate in real time in varying formats.
Support Costs
Support costs typically encompass the IT and busi-
ness staff required to support the project post-
deployment – ongoing development, upgrades, test-
ing, training, help desk, and so forth. Increases in
direct support costs are largely a function of the
extent of portfolio fragmentation within an organi-
zation. The most obvious reasons include the need
to maintain multiple skill sets, inability to consoli-
date support through centers of excellence, hiring
consultants for applications where internal skills do
not exist, and multiple training regimens.
An ASUG/SAP Benchmarking study confirms that
companies that maximize the value of internal IT
resources via a shared-services operation – a center
of excellence – achieve superior TCO results. Survey

Companies are willing and continue to spend on inte-

gration. According to a recent AMR Research study,
“Typical IT budget is about 3% of revenue, and inte-
gration technology/software infrastructure spend rep-
resents 8% of that overall budget.”*
In a survey conducted by AMR Research in 2002, the
average in-house integration project cost $2.1 million,
while projects using an integration product ranged
from $50,000 to $5.25 million, with an average of
$1.4 million per project across the 27 projects sur-
veyed. Several projects with application vendors
reached the $10 million mark.
*AMR Research, “The Manufacturing IT Spending Profile,
2005–2006”

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data showed that companies maintaining a center of
excellence experience 17% lower costs per concur-
rent user and 47% lower costs per active user than
companies without a center of excellence.2
Best-practice companies pay close attention to the
impact of portfolio fragmentation as they weigh
their best-of-breed versus best-of-suite decisions.
The cost advantages of a best-of-suite approach are
often dramatically greater if the best-of-breed deci-
sion is likely to increase the fragmentation of the
existing IT portfolio significantly – in other words, if
the organization’s IT portfolio already consists of
multiple best-of-breed applications and a move to
an integrated portfolio is not planned. In this case,
organizations should consider a standard platform,
since the incremental cost to support another best-
of-breed application is likely to be lower than for a
standardized best-of-suite footprint.
Indirect Cost Considerations
Indirect or unbudgeted costs are those incurred by
lost opportunities – for example, operational com-
plexity and organizational inefficiencies. These costs
are reflected in IT capital and overall management
efficiency over a period of time. While indirect costs
are not normally included in project TCO calcula-
tions, a proper estimate of their implications should
be included in any economic analysis model.
Opportunity Costs
A fragmented IT portfolio is an obstacle to agile
business strategies – in part because it’s so deeply
embedded in operations and organization, in part
because information systems are rigid and the inter-
connections between different applications are com-
plex. Introducing a new product or service, adding a
new channel partner, or targeting a new customer
segment: any of these can present unforeseen costs,
complexities, and delays. The expense and difficulty
can be so great that some companies abandon new
business initiatives rather than attempt one more
change to their enterprise applications.
A leading consumer electronics manufacturing
company, for example, found that rolling out key
new functionality for the front office of each of its
three divisions to drive new business was simply too
cost-prohibitive to justify the expected returns. The
company chose to standardize its front office on an
SAP® customer relationship management (CRM)
application, not because the individual divisions

2. “Best Practices in Managing the Total Cost of Ownership: ASUG/SAP Benchmarking Study,” SAP Insight (May 2006)

Given an optimized ERP environment, the incremental TCO of add-on

non-ERP-provided functional solutions is usually 20%–30%.
Incremental
Costs of Adding
a Best-of-Breed
Application into
an Existing Best-
of-Suite
Integration planning, development,
Integration maintenance and
Costs
Environment testing, migration costs upgrades

Redevelopment/test of integration

Integration infrastructure
points upon application upgrade
(hardware, middleware licensing)
Best-of-Breed
Additional training and support
Implementation costs
Costs

Best-of-Breed
Best-of-Suite Operating
Implementation Costs
Costs
Best-of-Suite
Operating
Costs
Savings

Figure 3 Cost of
Cost of Operations
Implementation Optimized
Solution &
S th
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were dissatisfied with their front-office applications,
but because IT could not support their critical busi-
ness initiatives at a fast enough pace. Standardizing
on a common CRM platform well integrated with
the back office enabled IT to “build once and deploy
everywhere,” rapidly improving the time to market.
Portfolio fragmentation has even bigger effects if the
company’s operations span multiple divisions,
plants, and geographies. In such cases cross-division
initiatives can rarely be undertaken without consid-
erable risk. The opportunity cost of relinquishing
the associated benefits should form an important
part of the overall TCO analysis.
Master Data and Business Process
Fragmentation
IT systems in many cases enforce the rules and codi-
fy business processes across divisions and geogra-
phies, and sometimes even within a single division.
IT portfolio fragmentation results in increased oper-
ational costs from attendant fragmentation of busi-
ness processes. These costs are usually difficult to
isolate and quantify, but the drawbacks are usually
quite evident to company managers, suppliers, and
customers alike.
For example, customers get different price quotes
for the same product across geographical bound-
aries. Divisions procure the same material from
multiple vendors and are unable to leverage volume
discounts. Resources for routine transactional activ-
ities cannot be easily shared. Consolidated reporting
and visibility becomes a nightmare resulting in
many hours expended in reconciliations – and the
list goes on. The tangible operational costs that arise
make a significant impact and should be considered
in the overall economic analysis.
Organizational Costs
In short, adding a bolt-on solution typically results
in duplication of support resources, multiple train-
ing regimens, multiple sources for problem resolu-
tion, and the challenges of software upgrades across
many vendors’ products.
BUSINESS BENEFITS
The second critical factor that drives the economic
impact of the decision relates to the benefits derived
from application functionality and capability.
Indeed, these are the benefits that offset and exceed
TCO, produce return on the investment, and
improve an organization’s bottom line. Given the

An ASUG/SAP TCO Benchmarking study confirms

that companies maintaining a center of excellence
experience 17% lower costs per concurrent user and
47% lower costs per active user than companies
without a center of excellence.

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higher costs and business risks of a best-of-breed company may find the best-of-breed quality man-
approach, companies need to weigh the incremental agement packages to be slightly more feature-rich.
benefits in detail. But if the company cannot identify a business
process that would lead to better yields and lower
Incremental Benefits
defects, and consequently lower warranty and
Both the best-of-breed and best-of-suite approaches
returns, there would be no reason to include any
are likely to provide basic benefits by improving
incremental benefits. However, the same customer
business processes and efficiencies. When it comes to
might look at some specific capability that the SAP
delivering advanced benefits, however, the two
application might not provide currently and con-
alternatives diverge sharply.
clude that it may be able to reduce its defect rate by
When evaluating incremental functionality provid- a higher percentage than with the SAP approach.
ed by a best-of-breed application such as CRM, sup-
Time Value of Benefits
ply chain management (SCM), or product life-cycle
While they vary in their functionality and effective-
management, your organization should identify the
ness, either the best-of-breed or best-of-suite appli-
specific business processes that the advanced func-
cations deliver financial benefits in terms of revenue
tionality will enable. To use this functionality as a
enhancements and cost savings once they are opera-
justification for going with a best-of-breed approach,
tional. It follows, however, that each day spent
you should first verify that the single-vendor solu-
deploying, integrating, testing, and rolling out the
tion will not enable an equally effective process and
application beyond the optimal implementation
then quantify the benefit of the advanced process in
period represents a loss of potential benefits. The
financial terms such as increased revenue, decreased
time value of benefits therefore becomes an impor-
cost, or more efficient use of capital.
tant factor in the best-of-breed versus best-of-suite
An example of this reasoning in action is a manufac- solution evaluation.
turing firm using an SAP application as its ERP
Evaluating the incremental benefits from a net pres-
backbone that analyzes the impact of bringing in a
ent value (NPV) perspective becomes even more
best-of-breed solution for better quality manage-
critical if the best-of-suite provider does not provide
ment. After reviewing competing products, the
the requisite capability at the time of evaluation, but
Stages of IT Architecture Evolu
Business
Composit

Lower time value of benefits are due to delays in integration.

Time Value
Enable flexible
of Benefits definition of new
as Related to products and
Componentization
of Objects (SOA)

Integration partner model

Delays
Enable extension
of the process
to extended ecosystem
Automate/
Integrate

Increase automation
and transparency

Figure 4 Process Efficiency Process Flexibility Process/Business

Model Innovation

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has concrete plans to provide functionality in the
near term. Although the initial releases from suite
vendors may be less mature than those of the point-
solution vendors, the applications of the integrated
solution vendor, when they finally “arrive,” typical-
ly offer higher levels of business process integration.
As a result, they provide a higher potential benefit
stream. Looking at the NPV, accounting for the tim-
ing of benefit accrual from a point solution in addi-
tion to its incremental benefits, provides a clearer
analysis than pure incremental benefits alone.
PROJECT RISKS
The third major factor that drives the analysis is
project risk. Internal CRM projects are fraught with
business and technology risks, each of which can
translate into project delays, cost overruns, and
unanticipated development and maintenance.
These risks can directly reduce a project’s ROI
because, when the risks materialize, they can
increase the TCO, reduce the financial benefits, or
both.
Moreover, the risks are highly relevant while pro-
jecting ROI during project planning. The rate used
to discount the expected project cash flows (costs as
well as financial benefits) measures project risk and
increases or decreases proportionately with that
risk.
Vendor-Specific Risks
Perhaps the greatest vendor-specific risk is vendor
viability. A number of smaller niche players, on the
other hand, have been acquired by larger players
that may not consider every application particularly
relevant. Betting a critical piece of operations on a
platform that is unlikely to be supported in the
future greatly increases the risks of realizing any
benefits from the resulting improvements.
Project-Specific Risks
The other risks are more specific and need to be
evaluated when relevant to the project at hand.
Specific risk items include the following:

Taking on the integration challenge in-house effec-

tively transfers the risks from the vendor to your
organization itself. Holding the vendor accountable
for failure scenarios is more difficult and only exacer-
bates the problem and delays the resolution.

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User adoption risks – A significant risk to any
enterprise application project is that the users will
not embrace the system. The result: business as
usual. Getting user acceptance of a single system
with a common look and feel is less problematic
than getting users to learn multiple systems with
inconsistent procedures and terminology. However,
for system users that spend much of their time in a
single application, a unified interface that lacks criti-
cal capabilities (for example, sales and marketing)
delivers little value. Consequently, the impact of
user adoption risk diminishes.
Integration risks – Integration problems are
always a possibility with a best-of-breed approach.
Potential problems include longer-than-expected
time to benefit and degraded system performance
due to interface conflicts. The risk is dependent on
the extent and complexity of the interfaces in ques-
tion. In any case, taking on the integration chal-
lenge in-house effectively transfers the risks from
the vendor to your organization itself. Holding the
vendor accountable for failure scenarios is more dif-
ficult and only exacerbates the problem and delays
the resolution.
Ongoing support risks – In cases where the
investment needs to be supported for long periods,
there is more risk associated with supporting multi-
ple systems from a mix of vendors than in support-
ing a single system from one vendor. In the first
case, the burden of support shifts to the customer
rather than the single vendor.
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THE ROAD AHEAD: SERVICE-ORIENTED

ARCHITECTURE
As the pace of business continues to quicken, busi- rigid criteria for introducing new capabilities, many
ness executives demand differentiation and business companies have effectively limited the freedom of
innovation for top-line growth combined with pro- launching new business initiatives in fear of the
ductivity and efficiency for bottom-line growth. IT expense and difficulty of attempting a change in
needs the flexibility to support change at a much their enterprise applications. Many of these same
faster pace than before. Even if sound economic companies are beginning a process to shift to a new
analysis suggests best of suite as the right approach, generation of SOAs that promise to go a long way
it is unlikely the leading vendors can keep up with toward reducing if not removing current obstacles
the demands in every functional area at the pace to new initiatives.
demanded by the business.
THE PROMISE OF SOA
The focus shifts from feature and capability to the
IT platform, which needs to provide the capability SOAs enable companies to introduce new business
to compose custom business processes quickly while processes and practices at a faster pace and lower
maintaining master data integrity and business cost. Instead of the traditional approach of connect-
process standardization. In essence, the argument ing disparate applications using customized – and
between best of breed and best of suite becomes less thereby expensive – interfaces, SOAs rely on loosely
relevant – and the issue of flexibility and speed of coupled connections. Applications can be joined
response to changing business demands becomes together easily without much customization and
paramount. just as easily taken apart and reassembled – even if
they use incompatible operating systems or different
Leading-edge companies are already beginning to semantics in their local operations. All the informa-
realize the limitations introduced by tightly inte- tion required to make such an exchange possible is
grated applications – limitations that are hindering described and contained in the interface. The infor-
them from making near-term innovations in busi- mation is presented in a way that is broadly under-
ness practices and processes. In optimizing their IT stood through the use of standards and protocols.
architectures, consolidating interfaces, and applying

Stages of Value Creation

Business Process

Value
Stages of IT Architecture Evolution

Composition

Benefits of
Service-
Oriented Enable flexible
Architecture definition of new
products and
Componentization
of Objects (SOA)

partner model

Enable extension
of the process
to extended ecosystem
Automate/
Integrate

Increase automation
and transparency

Figure 5
Process Efficiency Process Flexibility Process/Business
Model Innovation
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WHY SOA? THE BUSINESS BENEFITS
To understand the full benefits of SOAs, let’s consid-
er the case of a quote-to-cash scenario for a make-
to-order manufacturing company. How would such
an architecture help achieve the near-term operat-
ing flexibility required for competitive differentia-
tion and long-term transformation to support the
business strategy?
Today, the business processes involved in this sce-
nario span multiple organizational silos – from the
end customer to the internal team to external sup-
pliers. Several internal and external systems are in
place, including ERP, CRM, HR, SCM, supplier rela-
tionship management, and financials, as well as
homegrown, legacy, and third-party solutions.
The process starts with the receipt of a request for
quotation (RFQ) from the end customer. The
account manager enters the information into the
CRM system and then assesses the opportunity. The
internal team is notified of the opportunity and
assembles pricing and material information from
multiple internal and external sources. Depending
on the sourcing needs, the internal team may pro-
duce an RFQ to source more competitive quotations
from suppliers; this typically happens when insuffi-
cient manufacturing capacity exists or where prices
that are more competitive can be obtained.
Today, the manufacturer must rely on its internal
team as human integrators to bridge the flow of
information between multiple systems and parties.
The extended quotation management process
requires extensive offline communication, paper-
work processing, data reentry, and other adminis-
trative tasks. This practice is clearly ineffective, reac-
tive, unreliable, time-consuming, and difficult to
manage for all parties involved – and the result is
poor process governance and fragmented data. Any
changes to the RFQ require a wave of updates to the
existing applications, thus compromising data accu-
racy and responsiveness. Parts of this flow could fea-
sibly be automated through hard-wired integrations
between internal ERP systems and the supplier’s sys-
tems, but this is difficult – and worse, it increases
TCO by making the IT landscape yet more complex.
With SOA, the architecture would expose, or make
visible to other applications, the features and capa-
bilities of each of the contract manufacturers’ SCM
applications. The company’s IT department would
accomplish this by creating a standardized interface
allowing, say, an order’s status to be available as a
Web service that any application could share using
the same standards and protocols. Some examples of
these applications include purchase order and con-
tract status tracking, costing updates, sourcing, and
purchase order creation.
This new approach enables different systems to
communicate using a common language and
reduces the need for data reentry and offline com-
munication. For example, the document controller
receives supplier quotation information through
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enterprise service vendors developed for a third- enterprise, allowing companies to focus more tight-
party CRM solution. As a result, errors in transmis- ly on core competencies and source capabilities
sion of information are reduced and, with fewer from a broader range of partners. The make-to-
people involved in “swivel chair” integration, effi- order manufacturer, for instance, could use SOA to
ciency improves. focus on its core strength: customer relationships.
With automated connections enabling more visible
From a cost perspective, SOA requires a one-time
and coordinated communications with contract
investment to write code, making the service acces-
manufacturers, the company can off-load more of
sible by any application with an interface adhering
its product-manufacturing activities to specialized
to the same standards and protocols. In contrast,
companies, and logistics and warehouse operations
hard-wired connections have less reusable code, so
to a third-party provider with specialized expertise
each new connection represents a substantial pro-
in transportation and planning. The manufacturer
gramming effort. The initial investment in an SOA
can then focus its energies on initiatives that drive
is amortized further each time a new connection is
value for end customers – shorter lead times or
created.
value-added service bundling, for example – to out-
As more functionality becomes exposed in the distance the competition.
architectures, customers can use this functionality
to orchestrate business processes in a much more
sophisticated way. The architectures create the
foundation for loosely coupled business processes
delivering even more flexibility. Loose coupling can
accelerate a more fundamental unbundling of the

In essence, the argument between best of breed and

best of suite becomes less relevant – and the issue of
flexibility and speed of response to changing business
demands becomes paramount.

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CONCLUSION
Most organizations will find that no single applica-
tion strategy is best for every enterprise. While the
best-of-suite solution often delivers the highest ROI
when all factors are considered, best-of-breed appli-
cations will continue to be preferable when a fea-
ture- and functionality-rich solution is called for.
SAP has determined that best practice is to set up a
process that continually evaluates IT investments
using a sound economic framework. Companies
exemplifying best practices usually set up an IT gov-
ernance structure comprised of IT and business
managers and executives that enables them to reach
sound decisions collaboratively and quickly. Based
on SAP research, companies that do a good job of
managing the best-of-breed versus best-of-suite
dilemma share some common elements, as follows:

They have established strict guidelines for priori-
tizing IT investments within governance
structure.

They closely align IT with the business and ensure
that business and IT are jointly responsible for pri-
ority and delivery.

They focus on the business impact of every IT
solution.

They measure benchmarks against key metrics.

They treat master data standards as sacred. As a
result, product, vendor, customer master records,
and the like are unified.

They have a strong preference for a single plat-
form with limited exceptions for nonconforming
strategies. Should a best-of-breed solution prove
necessary, they establish a transition plan when
similar capability becomes available from the best-
of-suite vendor.

They implement only the necessary components
needed to drive value.

They pursue development plans with the best-of-
suite vendor either through established channels
(such as user groups) or custom development.

They collaborate on a product road map – either
developed in-house or provided through a certi-
fied partner.
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IT best practitioners, however, will continue to look lowest total cost of ownership, and more important-
at innovative ways of simplifying their IT landscape ly, IT agility and flexibility. CIOs who manage this
and lowering TCO while delivering the highest change well can usher in a new era of IT manage-
value to their customers – the business users – and ment – and true flexibility for the business.
supporting their initiatives. SOAs offer a promising
alternative to achieving the balance between best-of-
breed capability to enable business initiatives at the

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ABOUT THE AUTHOR

Shashi Rao, senior principal of value engineering
with SAP America, has been involved in developing
customer strategy and business cases in the software
industry for over 10 years. With SAP, he has led
more than 40 customer engagements in various
industry verticals. He holds a master’s degree in
computer engineering from Rensselaer Polytechnic
Institute and a master’s in business administration
from the Kellogg School of Management at
Northwestern University.

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