The Trouble With Enterprise SoftwareF A L L 2 0 0 7 .docx

The Trouble With
Enterprise Software
F A L L 2 0 0 7 V O L . 4 9 N O . 1
R E P R I N T N U M B E R 4 9 1 0 1
Cynthia Rettig
Please note that gray areas reflect artwork that has been
intentionally removed. The substantive content of the ar-
ticle appears as originally published.
C O N T R A R I A
Te ch n o l o g y h a s a l -
w a y s b e e n a b o u t
hope. Since the begin-
ning of the industrial
revolution, businesses
have embraced new
technologies enthusi-
a s t i c a l l y, a n d t h e i r

optimism has been
re w a rd e d w i t h i m -
p r o v e d p r o c e s s e s ,
lower costs and re-
duced workforces. As the pace of technological
innovation has intensified over the past two de-
cades, businesses have come to expect that the next
new thing will inevitably bring them larger market
opportunities and bigger profits. Software, a tech-
nology so invisible and obscure to most of us that it
appears to work like magic, especially lends itself to
this kind of open-ended hope.
Software promises evolutions, revolutions and
even transformations in how companies do busi-
ness. The triumphant vision many buy into is that
enterprise software in large organizations is fully
integrated and intelligently controls infinitely com-
plex business processes while remaining flexible

enough to adapt to changing business needs. This
vision of software lies at the core of what Thomas
Friedman in “The World Is Flat” calls “the Wal-
Mart Symphony in multiple movements — with
no finale. It just plays over and over 24/7/365.”1
Whole systems march in lock step, providing syn-
chronized, fully coordinated supply chains,
production lines and services, just like a world-
class orchestra. From online web orders through
fulfillment, delivery, billing and customer service
— the entire enterprise, organized end to end —
that has been the promise. The age of smart
machines would seem to be upon us.
Or is it? While a few companies like Wal-Mart
Stores Inc. have achieved something close to that
ideal, the way most large organizations actually
process information belies that glorious vision and
reveals a looking-glass world, where everything is

in fact the opposite of what one might expect.
Back-office systems — including both software ap-
plications and the data they process — are a
variegated patchwork of systems, containing 50 or
more databases and hundreds of separate software
programs installed over decades and intercon-
nected by idiosyncratic, Byzantine and poorly
documented customized processes. To manage this
growing complexity, IT departments have grown
substantially: As a percentage of total investment,
IT rose from 2.6% to 3.5% between 1970 and 1980.2
By 1990 IT consumed 9%, and by 1999 a whopping
22% of total investment went to IT. Growth in IT
spending has fallen off, but it is nonetheless sur-
prising to hear that today’s IT departments spend
70% to 80% of their budgets just trying to keep ex-
isting systems running.
According to a multiyear study of over 400 com-

panies by MIT researchers Jeanne Ross, Peter Weill
and David Robertson,3 IT departments tend not to
be innovative leaders within organizations, but
rather conservative forces, viewed by business ex-
ecutives as cost sinks and liabilities. In many
companies, it takes the IT department one to two
years to implement a new strategic initiative —
hardly the agility companies are striving for. The
research shows the typical IT structure is so dense
and extensive that it’s often a miracle that it works
at all. The researchers observe: “Legacy systems
cobbled together to respond to each new business
initiative create rigidity and excessive costs. Every
change becomes a risky, expensive venture.”
The Proliferation of Complexity
How did this happen? James Cordata, who has
written extensively about the information econ-
omy, points out that as work became more complex

and specialized over the 20th century, the use of
data — numbers and facts — as fodder for more
and more analysis and fact-based decision making
intensified. And digital technology “was perfect for
this kind of world.”4 Of course, digital technology
The Trouble With Enterprise Software
Has enterprise
software become
too complex to
be effective?
CYNTHIA RETTIG
FALL 2007 MIT SLOAN MANAGEMENT REVIEW 21
This article, originally
published on the
MIT Sloan Management
Review Web site,
stirred up a good deal
of discussion in the

blogosphere, a sampling
of which is included in
the following pages.
22 MIT SLOAN MANAGEMENT REVIEW FALL 2007
not only supported that complexity but also played
a large part in actually creating it, weaving a con-
tinuous web of unending data. “More computers
are better than fewer” remains a key belief of Amer-
ican business, Cordata says. “There are no limits to
how much is good.” Management became accus-
tomed to the idea that buying more computers and
more software would continue to cut costs and im-
prove operations.
But there are limits, some of which are inherent
in the nature of software itself. Software is code,
lines and lines of code that run sequentially. Build-
ing software programs entails accumulating more

and more code. Much of the seemingly boundless
complexity of enterprise software is founded on
conditional branching (if-then statements) and a
hierarchy of interacting objects, all of which ma-
nipulate information in a logical succession of
small steps. Each step contains explicit instruc-
tions. To build software, programmers routinely
break down processes into discrete steps, effectively
systematizing and standardizing how work is done.
An entire sequence of such instructions works
more like a calculator than a “thinking machine.”
Thus the so-called intelligence of digital technol-
og y ar ises not throug h mag ic, nor, in more
contemporary terms, through some emergent or
self-organizing principle, as some would believe.
The result is not greater than the sum of the parts.
Rather, it’s more akin to Adam Smith’s division of
labor and Frederick Taylor’s scientific manage-

ment, a process dependent on relentless analysis
and rationalization of the work to be done.
General software programming used in enter-
prise systems may contain intricate branching and
handle a huge number of conditions, all of which
allow it to control a certain amount of complexity.
It does not, however, tolerate ambiguity, inconsis-
tencies or illogical conclusions. To be sure, there
are fuzzy logic programs, dynamic simulations,
genetic algorithms and neural nets with subtler
powers, but a vast amount of software working in
today’s large organizations is not of these more ad-
vanced types. In fact, enterprise software systems
are more likely to succeed at relatively straightfor-
ward tasks such as procurement and order
processing. As the problems get more complex, so
does the software that solves them. It is estimated
that for every 25% increase in complexity in the

tasks to be automated, the complexity of the soft-
ware solution itself rises by 100%.5
Business users and management inevitably want
changes in their automated processes as their needs
and markets evolve. And they expect to be able to
customize their software to fit their own needs.
“Software is infinitely malleable,” says computer
historian Martin Campbell-Kelly.6 This is in theory
true; however, as enterprise software becomes in-
creasingly comprehensive and complex, the costs
and risks involved in changing it increase as well.
No single person within an organization could
possibly know how a change in one part of the soft-
ware will affect its functioning elsewhere.
Software’s supposed flexibility and unending
ability to manage complexity contributed to the
discrepancies between the great expectations and
mediocre reality that plagued the first round of

implementations of enterprise resource planning
systems. In the middle to late 1990s, U.S. corpora-
tions rushed to purchase and install such systems.
These systems — Germany-based SAP Aktienge-
sellschaft’s is the most common — promised to
eliminate the complexity of multiple operating sys-
tems and applications by replacing them with a
single set of interconnected modules to run the fi-
nancial, manufacturing, human resources and
other major functions of a typical multinational
corporation. Theoretically, a single monolithic sys-
tem would seamlessly connect various distinct and
geographically separate locations through private
C O N T R A R I A
From the Wall Street Journal
Business Technology Blog
http://blogs.wsj.com/biztech
Technology is supposed to simplify business. This has been true
from
the Industrial Revolution to the Internet age. But did the large
software

applications that were supposed to streamline large companies
instead
irrevocably slow them down?
There’s a compelling argument to be made that they have. The
aver-
age company spends $15 million on Enterprise Resource
Planning
software, the monolithic systems of record from vendors like
SAP and
Oracle, and many large companies have spent tens and even
hundreds
of times that, according to [Ms. Rettig’s article].
Some of this resonates. Certainly, companies that have tried to
cus-
tomize these systems to reflect their own customized processes
have
spent a lot of time and money to do so. And ERP systems do
introduce a
certain amount of rigidity. On the flip side, having a system of
record is a
benefit in and of itself that shouldn’t be discounted. — Ben
Worthen
SLOANREVIEW.MIT.EDU
http://sloanreview.mit.edu
networks. Companies understood that they could
customize these systems as needed to suit their

unique business processes.
That was the hope. But these massive programs,
with millions of lines of code, thousands of instal-
lation options and countless interrelated pieces,
introduced new levels of complexity, often with-
out eliminating the older systems (known as
“legacy” systems) they were designed to replace. In
addition, concurrent technological and business
changes made closed ERP systems organized
around products less than a perfect solution: Just
as companies were undertaking multiyear ERP
implementations, the Internet was evolving into a
major new force, changing the way companies
transacted business with their customers, suppli-
ers and partners. At the same time, businesses were
realizing that organizing their information around
customers and services — and using newly avail-
able customer relationship management systems

— was critical to their success.
The concept of a single monolithic system failed
for many companies. Different divisions or facili-
ties often made independent purchases, and other
systems were inherited through mergers and ac-
quisitions. Thus, many companies ended up having
several instances of the same ERP systems or a vari-
ety of different ERP systems altogether, further
complicating their IT landscape. In the end, ERP
systems became just another subset of the legacy
systems they were supposed to replace.
The Costs of Implementation
ERP systems were expensive, too, costing com-
panies more than they had ever paid for software
when costs had been based on per-workstation
usage. But that price tag was dwarfed by the in-
stallation charges, because companies had to
hire brigades of outside consultants, often for a
number of years, to actually get the software up

and running. While the average installation cost
$15 million, large organizations ended up spend-
ing hundreds of millions of dollars. Even such
large expenditures did not guarantee success,
however. In fact, 75% of ERP implementations
were considered failures.7
Try as they might to measure the productivity
gains of ERP implementations or IT in general, re-
searchers have yet to arrive at any coherent or
consistent conclusions. One problem is that there
is little statistical ev idence, especially about
whether the benefits of ERP implementations out-
weigh the costs and risks. Researchers even have
suggested that ERP implementations are so diffi-
cult that those companies that actually complete
them with relative success gain a competitive ad-
vantage in the marketplace.8 It seems that ERPs,
which had looked like the true path to revolution-

ary business process reengineering, introduced so
many complex, difficult technical and business is-
sues that just making it to the finish line with one’s
shirt on was considered a win.
All that complexity and all those options created
another conundrum. As Nicholas Carr famously
pointed out in his book, “Does IT Matter? Informa-
tion Technology and the Corrosion of Competitive
Advantage,”9 simply implementing the plain-vanilla
business processes that your competitors have does
not provide any competitive advantage. On the
other hand, as many companies learned the hard
way, customizing the already complex ERP software
created yet more complexity and even larger risks.
From Rough Type: Nicholas Carr’s Blog
www.roughtype.com
Over the last two decades, companies have plowed many
billions of dol-
lars into enterprise resource planning (ERP) systems and the
hardware

required to run them. But what, in the long run, will be the
legacy of
ERP? Will it be viewed as it has been promoted by its
marketers: as a
milestone in business automation that allowed companies to
integrate
their previously fragmented information systems and simplify
their data
flows? Or will it be viewed as a stopgap that largely backfired
by tangling
companies in even more systems complexity and even higher IT
costs?
In “The Trouble with Enterprise Software,” Cynthia Rettig
deftly lays
out the case for the latter view. Enterprise systems, argues
Rettig, not
only failed to deliver on their grand promise, but often simply
aggravated
the problems they were supposed to solve. Different divisions
or facilities
often made independent purchases, and other systems were
inherited
through mergers and acquisitions. In the end, ERP systems
became just
another subset of the legacy systems they were supposed to
replace.
So what’s the solution? Rettig doesn’t offer one, beyond
suggest-
ing that top executives do more to educate themselves about the
problem and to work more closely with their CIOs. That may be
good
advice, but it hardly addresses the underlying technical
challenge. But
Rettig nevertheless has provided a valuable service with her

article.
While some will argue that her indictment is at times
overstated, she
makes a compelling case that the traditional approach to
corporate
computing has become a dead end. We need to set a new course.
— Nicholas Carr
SLOANREVIEW.MIT.EDU
C O N T R A R I A
Without intimate knowledge of how the integrated
pieces of these modular software packages actually
worked, customizing could lead to in-house bugs
and glitches that were hard to foresee and expensive
to fix. Perhaps even worse, customization made
changing the software later — or upgrading to a
newer version — far more difficult, and in some
cases prohibitively expensive. Christopher Koch,
executive editor of CIO Magazine, tells the story of

one head of a corporate SAP installation group who
bragged that he had his installation time down to a
mere three months for various facilities around the
world: “It didn’t matter that he was honing his skills
on a 10-year-old version of the software because the
costs of upgrading are so huge — tens, even hun-
dreds of millions of dollars, or as much as it cost to
install the stuff in the first place — that he keeps in-
stalling old versions of the software so that it will
line up with the old software they already have.”10
Unexpected bugs present another type of dif-
ficulty that increases with complexity. Robert
Pool, technology journalist and author of “Beyond
Engineering,” explains it this way: “It’s possible to
go through a program line by line and make sure
that each individual instruction makes sense but it
is not possible to guarantee that the program as a
whole has no flaws.”11 The average professional

coder makes 100 to 150 errors for every 1,000 lines
of code, according to a Carnegie Mellon study
conducted by Watts Humphrey.12 That means for
every million lines of code there would be 100,000
mistakes. Software developers do extensive testing
on the paths users seem likely to take and correct
many of these errors. Nevertheless, they cannot
test or even anticipate every possible usage path, so
released software inevitably contains unknown
defects. “Civilization depends on software. So al-
though much software code is poorly written, you
can’t just stop the world to fix it,” says Bjarne
Stroustrup, the Danish-born computer scientist
who designed the popular C++ programming
language. On the other hand, Stroustrup does
concede that “muddling along is expensive, dan-
gerous, and depressing.”13
The Vagaries of Data
The data that software processes and generates is

another constant and growing problem. Estimates
of errors are astoundingly high. Single systems can
have error rates of 50% or more from myriad
sources — everything from mistyped data to stale
information to data placed in the wrong fields
within the database structure. But the really nasty,
intractable data problems erupt when companies
integrate multiple data sources, as was necessary
for ERP implementations, so that they could have
all their product, inventory and production records
stored in one place. Because of differing formats,
conventions, abbreviations and so on, such inte-
grations can result in a 100 or more records that
actually point to a single product or customer. In
the case of enterprise system implementations,
data problems alone precipitate many of the fail-
ures perceived by business users and much of the
added expense as well. Overwhelmed by the sheer

difficulty and complexity of the new software itself,
companies literally “forgot about the data,” as exec-
utive vice president John Nicoli of Harte-Hanks
Trillium Software in Billerica, Massachusetts, de-
scribes it, until the tail end of the project, thereby
necessitating enormous reworking to properly
clean up and integrate the data.14 And with corpo-
From Andrew McAfee’s Blog
http://blog.hbs.edu/faculty/amcafee
It is certainly true that enterprise systems have failed in many
companies,
and it’s also true that, as [Ms. Rettig] points out, many others
have not
been able to shut off legacy systems to the extent they expected
after ERP
went live. But it is simply not the case that researchers have
been unable
to draw any coherent conclusions about these technologies.
Rettig’s argument falls into a long line of pessimistic writing
about the
value of corporate IT. Much of this writing takes the implicit,
and at times
explicit, view that the executives who make technology
decisions are
dupes, perennially falling for a “triumphant vision” of software.
The only

way I can see for the IT pessimists to be right is if the delusion
about IT’s
benefits is both persistent and virtually universal. And I don’t
buy that.
“ERP doesn’t help” is a testable hypothesis, and some
colleagues
of mine have tested it. NYU’s Sinan Aral, Georgia Tech’s D.J.
Wu, and
my friend and coauthor Erik Brynjolfsson at MIT recently
published a
wonderful paper, “Which Came First, IT or Productivity?
Virtuous Cycle
of Investment and Use in Enterprise Systems”
(http://papers.ssrn.com/
sol3/papers.cfm?abstract_id=942291). [This paper] contains a
vital in-
sight: If IT were not delivering value, rational decision makers
would not
keep investing in it.
I agree that it’s important not to naively accept anyone’s
triumphant
vision of corporate IT. But it’s also important not to make
claims in the
other direction that are too sweeping. Perhaps most
fundamentally, it’s
critical at some point to stop floating hypotheses about IT’s
impact (or
lack thereof), and to start testing them. — Andrew McAfee
SLOANREVIEW.MIT.EDU

rate data stores doubling every three years, such
data issues are only compounding.
Is enterprise software just too complex to de-
liver on its promises? After all, enterprise systems
were supposed to streamline and simplify busi-
ness processes. Instead, they have brought high
risks, uncertainty and a deeply worrying level of
complexity. Rather than agility, they have pro-
duced rigidity and unexpected barriers to change,
a veritable glut of information containing myriad
hidden errors, and a cloud of questions regarding
their overall benefits. Leaders in computer science
are clearly worried. “Complexity is death,” says
Chuck Thacker, one of 16 technical fellows at Mi-
crosoft Cor p. “We are hang ing on w ith our
fingertips right now.”15
Business executives, however, simply want to

continue to believe that technology will lower
costs, improve processes and reduce the size of the
workforce. They don’t want to understand IT is-
sues. In part, this is because technology requires
special skills and intellectual talents that are quite
distinct from those needed to understand and
manage business organizations, markets and
strategy. But it is also because executives do not
like to hear about the downside of technology.
Observes Jim Shepherd, senior vice president of
Boston-based AMR Research Inc., “Senior man-
agers often don’t particularly want to be told that
there’s a high risk and that there’s a great deal of
expenditure involved in minimizing it.”16 Yet the
only sure thing about new technologies and the
changes they introduce is their uncertainty. In
summarizing decades of research into technologi-
cal change, MIT Sloan School of Management’s

Wanda Orlikowski and the National Science
Foundation’s Suzanne Iacono conclude that
changes involving technolog y are both “pro-
foundly complex and uncertain.”17
For their part, CIOs and their managers rate
aligning IT with business strategy as their No. 1 pri-
ority. They struggle year after year to prove the value
of IT to the business side of the organization. Yet the
cost overruns, delays and outright failures of enter-
prise systems have if anything widened the digital
divide between IT and the executive suite.
The Next New Thing
The proposed fix for these problems — the next
new thing — is service-oriented architecture. Ba-
sically, SOA proposes to overcome the problems
involved with updating and changing legacy sys-
tems by building modular cross-system business
processes. These processes would connect the rel-
evant pieces of functionality from various IT

systems, thereby making it easier to change pro-
cesses to adapt to new business goals. But technical
realists point out that many difficult technical
problems must be solved before SOA can become
the backbone for a new strategic architecture, in-
c l u d i n g ro b u s t p ro to co l s f o r a cce s s i n g t h e
applications, high-quality integrated data stores
and a sound methodology for managing the over-
all process. Researchers Ross, Weill and Robertson
admit that most companies are in the early stages
of a four-part transformation to SOA that may
take many years — even decades — to realize.18
The estimates of how long this will take reflect a
growing acknowledgment of just how deep and
radical are the organizational changes these tech-
nological innovations mandate. It is a process of
From the ZDNet.com Blog
http://blogs.zdnet.com

There’s really nothing new in [Ms. Rettig’s] analysis. But
Rettig goes a
step further and says there’s no hope for the future. In fact,
while she
doesn’t offer any remedies for her gloomy prognosis, she does
quash
one — service-oriented architecture (SOA).
Rettig doesn’t offer any encouraging words about SOA as an
ERP
workaround. SOA may take years to come to full fruition, not in
enough
time to help beleaguered companies, she says. And SOA may
simply be
too slow to keep up the dynamic business environments of
today. Not to
mention technical challenges. Rettig says that SOA increases
complex-
ity, as it becomes “additional layers of code superimposed on
the
existing layers,” and she doesn’t buy the Lego-block concept
that un-
derpins much of the thinking about SOA.
Let’s put it this way: aside from SOA, what is the alternative?
No one
is willing, or can afford to, to stay with the rigid, stovepiped
systems in
their current form. One solution is just throw the entire mess
out, and
buy a huge, well-integrated, modular application. But no one
has the
time or budgets. The only workable approach, then, is gradual
integra-
tion between systems, and gradual, greater agility — if not
through SOA,

then how? SOA, pure and simple, is the first step to software
industrial-
ization — creating massive, adaptable systems in an automated
and
modular fashion through greater economies of scale. ERP was a
step in
this direction, since it modularized, and brought many vital
pieces of
the business together into a single standardized system. SOA
takes it to
the next level, beyond the domain offered by a single vendor.
That’s the
core value proposition of SOA. — Joe McKendrick
SLOANREVIEW.MIT.EDU
C O N T R A R I A
adoption and adaptation that by definition cannot
occur overnight. Nor, conclude the researchers,
can companies skip a step. Given that only 6% of
companies have made it into the later stages, this
model would suggest that companies are in for a
long haul if they are to escape the tangle of techno-
logical complexity inherent in large organizations

today, and it will be a journey fraught with cultural
as well as technical problems.
The timeline itself for this kind of transforma-
tion may just be too long to be realistically
sustainable and successful. The dynamic business
environments of today, where whole industries and
markets can undergo radical changes in a matter of
a few years and the horizon for corporate strategies
has shrunk from 10 years to three to five, makes it
questionable whether companies actually can
maintain a focused strategy long enough to align
their core business processes with IT.
Technical problems raise additional questions
about the feasibility of such an undertaking. The
hallmark of service-oriented architecture — one
reasonably might argue its entire raison d’être — is
the fundamental modularity of its software business
processes. A self-contained business process adopts

parts of the functionality from multiple enterprise
applications to automatically complete a set of tasks.
For example, a single business process might begin
with an order from a customer on the Internet in a
web services system and send it to manufacturing in
an ERP system. The same business process would set
up delivery in a logistics system and then send all the
relevant information to billing in an accounting sys-
tem as well as a customer relationship management
system. Companies would build (or purchase) busi-
ness modules for their core processes. They would
then be able to change these processes easily, snap-
ping out and in functional pieces of code from
enterprise systems in Lego-like fashion.
The Lego dream has been a persistent favorite
among a generation or more of programmers who
grew up with those construction toys. Unfortu-
nately, however, software does not work as Legos do.

For one thing, a unit of software code is not similar
to other software code in terms of scale or function-
ality, as Legos are.19 On the contrary, code is widely
various and heterogeneous. It contains different
numbers and types of connections to other code,
more like fractals, as Victoria University of Welling-
ton researchers James Noble and Robert Biddle
describe it, than Legos, with their uniform connec-
tions. Software engineering expert Robert Glass sees
another problem with the Legos idea: The notion of
reusable software works on a small scale. Program-
mers have successfully built and reused subroutines
of standard functions. But as software grows more
complex, reusability becomes a difficult or impos-
sible task. “It is simply a problem too hard to be
solved, a problem rooted in software’s diversity.”20
“Complexity is a deadly software killer,” says
Yale University computer scientist David Gelern-

ter, and he argues that managing complexity is
more of an art than a science, and a difficult one at
that, especially given the monumental real-world
systems today’s software attempts to automate.21
And to the extent that these service-oriented ar-
chitectures use subsets of code from within ERP
and other enterprise systems, they do not escape
the mire of complexity built over the past 15 years
or so. Rather, they carry it along with them, incor-
porating code from existing applications into a
fancy new remix. SOAs become additional layers
of code superimposed on the existing layers. That
means it is possible that a process will fail at some
point due to some fault in the layers below, and in
order to understand and fix that problem, software
engineers will need to deal with the layers of enter-
prise applications below the modular business
processes.

From the Deal Architect Blog
www.dealarchitect.typepad.com
The good news is [Ms. Rettig’s] article will get executive
attention. Not
that they do not know. I recently met an executive at a client
about to
start an ERP implementation. He sounded like a man headed to
the gal-
lows. Nervous, not excited about the project. (That afternoon, I
felt
really embarrassed for our industry that after 100K+ ERP
projects, we still
cannot make it a no-brainer.)
But it is way past talking about messes. Companies are in
various stages
of ERP hangover management, not always looking at software
as a service
(SaaS), as those vendors would have you believe — it’s not that
easy to rip
and replace a backbone ERP solution — but software as a
customized ser-
vice (SaCS). [Those companies are in] aggressive re-negotiation
of ERP
maintenance contracts or moving to third party maintenance.
The only ones who do not seem to realize the party is over are
the
vendors, who are using service-oriented architecture (SOA),
compliance
and more low payback justifiers to extend the run.
— Vinnie Mirchandani

SLOANREVIEW.MIT.EDU
Culturally, this long-term plan calls for closer and
closer communication and collaboration between
the IT and business sides of the organization. While
much to be desired, this has proved difficult in the
past, and with increasing complexity in software sys-
tems, it is unlikely to improve by itself in the future.
Differing backgrounds and perspectives, goals, even
vocabularies — all hamper efforts to improve com-
munication across this internal digital divide. Biases
intrude: A recent study by Forrester Research Inc. of
Cambridge, Massachusetts, found that only 28% of
CEOs thought their CIOs were proactive or creative
in terms of business process improvement.22 For-
rester’s advice to CIOs is to get more deeply involved
in the business issues and educate executives on what

IT is and what it actually does.
Sound advice, no doubt, but it may be time for
business executives themselves to become more
proactive. Executives could educate themselves
more about technology. They could send promis-
ing younger executives to executive programs
designed to teach business people how to better
understand, communicate with and capitalize on
their IT. And business schools, too, could do better
at teaching the interdependence of business and IT.
At present, however, corporations see in software’s
seductive invisibility and seemingly open-ended
flexibility a never-ending frontier of promise,
where hope triumphs over reality and the search
for the next new thing trumps addressing difficult
existing problems. And hope, unfortunately, has
never been a very effective strategy.
Cynthia Rettig was director of knowledge management

for B2B consulting company Canopy International of
Newton, Massachusetts. She has consulted to software
companies for over 20 years. Comment on this article or
contact the author through [email protected]
REFERENCES
1. T. Friedman, “The World Is Flat: A Brief History of the
Twenty-First Century” (New York: Farrar, Straus and Gir-
oux, 2005), 128.
2. J. Dedrick, V. Gurbaxani and K.L. Kraemer, “Informa-
tion Technology and Economic Performance: A Critical
Review of the Empirical Evidence,” ACM Computing
Surveys 35, no. 1 (March 2003): 18.
3. J.W. Ross, P. Weill and D.C. Robertson, “Enterprise
Architecture As Strategy: Creating a Foundation for
Business Execution” (Boston: Harvard Business School
Press, 2006), 11.
4. J.W. Cordata, “Progenitors of the Information Age:
The Development of Chips and Computers,” in “A Nation
Transformed By Information,” ed. A.D. Chandler and J.
W. Cordata (New York: Oxford University Press, 2000),
206-208.
5. R.L. Glass, “Facts and Fallacies of Software Engi-
neering” (Boston: Pearson Education, 2003), 58.
6. M. Campbell-Kelly, “From Airline Reservations to
Sonic the Hedgehog: A History of the Software Industry”
(Cambridge: MIT Press, 2004), 198.
7. K.K. Hong and Y.G. Kim, “The Critical Success Fac-
tors for ERP Implementation: An Organizational Fit

Perspective,” Information & Management 40, no. 1
(October 2002): 25.
8. L.M. Hitt, D.J. Wu and X. Zhou, “Investment in Enter-
prise Resource Planning: Business Impact and
Productivity Measures,” Journal of Management Infor-
mation Systems 19, no. 1 (summer 2002): 71-98.
9. N. Carr, “Does IT Matter? Information Technology and
the Corrosion of Competitive Advantage” (Boston: Har-
vard Business School Press, 2004).
10. C. Koch, “The Monopoly That Matters More Than
Microsoft,” Nov. 13, 2006, http://advice.cio.com.
11. R. Pool, “Beyond Engineering: How Society Shapes
Technology” (New York: Oxford University Press, 1997),
137.
12. C. Mann, “Why Software Is So Bad,” Technology
Review (July-August 2002): 32-38.
13. J. Pontin, “Bjarne Stroustrup: The Problem With Pro-
gramming,” Technology Review (January-February
2007): 22.
14. Author’s interview with John Nicoli, executive vice
president, Harte-Hanks Trillium Software; Aug. 8, 2005.
15. S. Rosenberg, “Anything You Can Do, I Can Do
Meta,” Technology Review (January-February 2007): 45.
16. M. Wheatley, “ERP Training Stinks,” CIO Magazine,
June 1, 2000, 86-96.
17. W. Orlikowski and C.S. Iacono, “The Truth Is Not Out

There: An Enacted View of the ‘Digital Economy,’” in
“Understanding the Digital Economy: Data, Tools and
Research,” ed. E. Brynjolfsson and B. Kahin (Cam-
bridge: MIT Press, 2000), 355.
18. Ross, “Enterprise Architecture As Strategy.”
19. S. Rosenberg, “Dreaming in Code: Two Dozen Pro-
grammers, Three Years, 4,732 Bugs, and One Quest for
Transcendent Software” (New York: Crown Publishers,
2007), 94-95.
20. Glass, “Facts and Fallacies of Software Engineering.”
21. D. Gelernter, “Mirror Worlds: Or the Day Software
Puts the Universe in a Shoebox … How It Will Happen
and What It Will Mean” (New York: Oxford University
Press, 1992), 51.
22. S. Shay, “CEOs Rate IT: Steady but Uncreative,” CIO
Magazine, April 1, 2007, 20.
Reprint 49101.
Copyright © Massachusetts Institute of Technology, 2007.
All rights reserved.
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1. What are the core problems and challenges presented in the
case study?
Many significant challenges were present in Accenture’s
journey of IT transformation. One major obstacle that they
faced immediately after separating from the original company
and becoming Accenture was the limitation in time for using
Anderson’s technology. For only one year, Accenture were
allowed to use Anderson’s technology infrastructure, which

raised their need to build a new infrastructure a short period of
time. This has led to another important decision to be made
about which application should be develop in-house and which
one they should outsource, and whether they should outsource
in or out the firm. Moreover, an issue was the high cost of
running and maintaining infrastructure. Considering the
diversity of their business offices all over the globe and the
offices’ adoption of their own systems, it was very difficult to
attain one-platform infrastructure for all their branches. After
opting to apply one-platform infrastructure, they had to decide
whether it was better to choose a single-vendor approach or it
was more beneficial to deal with different vendors. They used
one-vendor infrastructure for easier communication and
information sharing between the applications. However,
regarding to this decision, they had to overcome the problem of
one instance of the system for all the offices around the world
with their different needs. In addition, IT employees’ unwilling
to was a problem that Accenture needed to overcome. Accenture
had to convince IT employees for the invaluable opportunities
of business growth and cost reduction that the proposed solution
may bring to their businesses since it required IT employees to
learn and to change their rules to adapt to the new system. In
2001, Andersen Consulting took the brave step of parting from
Arthur Andersen, its parent. After separating from Arthur
Andersen, the new firm changed their name to Accenture. The
new firm had a bright future but it also faced some challenges
in building a new IT infrastructure that is capable enough to
support a global organization that offers consultancy on a
leading edge technologies. It was obvious that Accenture’s IT
infrastructure needed to be rebranded.
Organization structure of Accenture was quite different from
Andersen’s, so this also added to deficiencies of the firm. The
new firm also had a limitation for using Andersen’s
technologies for only 1 next year. So the constraints were
already there as the new firm emerged. Accenture had to face
few challenge in IT too while moving ahead. Their systems

were made up of patchwork of legacy applications that didn’t
interconnect among themselves. Also, the systems used outdated
software platform which made it impossible for the key systems
and database to be accessed remotely over the internet.
There was also a dire need of strong infrastructure for
individual accounting and HR software systems for different
offices since they had no global infrastructure with accounting
and HR systems. Due to the outdated software platforms they
were using, they major systems and data repositories were
inaccessible remotely from the internet. For this purpose, they
sought assistance of large and expensive private networks which
added to their costs. Mostly, they did the financial aggregations
and reporting manually which wasted a lot of valuable time and
resources.
Another challenge that Accenture encountered was to persuade
the group business leaders to migrate their customized local
applications to a standard platform. By standard platform, they
wanted business leaders to migrate their applications to a single
global instance of that platform. Accenture decided upon a
single instance platform since they thought that multiple
instances of a platform will result in complexity in a longer run.
In future, even if there is a minor update, having multiple
instances will demand that update to be run for all those
instances which becomes quite complex and is wastage of time
and resources.
In short, a smart transformation was needed that could cater
organization’s need to in building up a new IT infrastructure.
2. Describe at least 3 Management practices used by Accenture
in the IT transition process from 2001 to 2008.
· Changing management’s and employees’ attitudes towards
technology:
One major factor that clearly contributed to the prevalent
success of Accenture’s IT transformation was changing how the
firm as a whole conceive IT. Accenture dealt with IT like an
independent business, and a panel of C-level executives would

determine the budget the spending priorities of IT. Having
different executives would help have “strategic, financial,
operational, and technical” point of views, which guaranteed
more thoughtful, and thus, Accenture has succeeded.
· Ensuring efficiency and effectiveness:
During the tremendous transformation of IT in Accenture, the
steering committee has made many actions in order to ensure
efficiency and effectiveness. For example, when choosing the
platform, the steering committee decided to use one-vendor
architecture. They prefer one vendor to multiple vendors for
applications from one vendor can share information with each
other flawlessly, which would end up with effective and
efficient deployment of IT. Also, the products they develop are
driven by the internal customers’ and system users’ needs.
Instead of having an outsourcing company to decide which
applications and requirements are needed for the business,
managers and customers could contribute to the decision of
developing a new model.
· Considering cost reduction through the use of innovative
technology:
The IT has a dramatic influence in terms of cost saving. One
major decision the help reduce the spending was choosing one-
platform architecture. This allowed them to significantly
minimize the cost of deploying and maintaining IT in the
offices around the globe. Also, they sought cost reduction by
moving the servers from Madrid to Argentina.
After the transition process, the employees count has reached up
to 180,000 which was 75,000 back in 2001. There was seen a
significant increase in Accenture’s revenues which went up to
$21.6 Billion starting from $11.44 Billion in 2001. Their
revenue is reported to be increased by 143% after the
transformation process.
Accenture created a strong, central IT governance which
enabled them to reduce their IT costs by 64% after the transition
process. Another management practice that was practiced during

the transition process was about encouraging the innovation.
Accenture encouraged all positive ideas on improving their IT
infrastructure and the outputs were fruitful; they reduced their
IT costs and increase their revenue.
Accenture chose right people for right things which enabled
their firm flourish and prosper. All the people in charge were
aligned with the goals of the organization which enabled
organization to achieve success in this transition period. People
were motivated and enthralled, so they really made good
decisions for their IT infrastructure. The IT management of
Accenture’s had a clear and bright vision. They proposed IT to
run as a business within a business instead of running it as a
cost center and this is what made them stand out.
Accenture had managed to do proper project planning for their
organizational goal. They were focused and clear on their
organization objectives in the IT transition process. Also, there
was proper system for tracking and reporting project progress so
the stakeholders knew where they stand. This enabled them to
compare their actual progress with the planned progress so they
can estimate how far they are from reaching the actual goals.
These were key management practices that helped in a
successful IT transition process.
3. Pretend that you are the CIO of Accenture - What decisions
you need to make beyond 2009?
If I were the CIO of Accenture beyond 2009, I would
continue having an independent committee that would decide
for the budget and spending of IT. As it was in 2008, this
committee would include different C-level executives for
having a comprehensive thought of what might and might not
benefit the firm. Also, I would inspire the departments to
provide their suggestions that are related to IT to the committee
to be seriously discussed, as long as they are attached with ROI
analysis for more than a couple of year. I would rather highly
reward the employee who came up with the suggestion if its
efficiency, effectiveness, and cost reduction were proven. Also,

I would promote the innovation in using IT to support the
business. Overall, I would follow the steps of Accenture’s CIOs
since 2001 to maintain the prosperous story of Accenture
accomplishments in the IT field. Looking at the organizational
culture and available options at Accenture, I feel that it is very
important for Accenture to be equipped with latest technology
since 3/4th of their employees spend their time outside the
office and travelling to client locations. It is the need of these
road warriors to possess advanced technological platforms to
offer an extra ordinary level of uninterrupted services to the
customers. All offices of Accenture need to use a standard
information system to communicate date and information with
each other. Standardization is of great importance for any
organization as it efficiency of internal communication. A
standard information system is easy to manage and organize and
it helps in managing customer and partner relationships. I
would recommend the company to use SAP as their Management
System, Microsoft as their official software provider and Intel
& Cisco as the hardware providers. Cisco shall be used for all
network related equipment whereas Intel should be consulted
for all hardware related services. These 3 products meet firm
needs and demands with lower level of complexity and are
expected to offer greater benefit. The decrease in IT costs in the
past 9 years is commendable. SAP is a perfect fit with a single-
platform solution. SAP is regarded as number one platform to
offer financial solutions, technological services and HR
applications. It is important to choose one-platform solution
since it will enable the firm to have lower IT support resources
when dealing with single approach platform.
1. What are the core problems and challenges presented in the
case study?
Many significant challenges were present in Accenture’s
journey of IT transformation. One major obstacle that they
faced immediately after separating from the original company

and becoming Accenture was the limitation in time for using
Anderson’s technology. For only one year, Accenture were
allowed to use Anderson’s technology infrastructure, which
raised their need to build a new infrastructure a short period of
time. This has led to another important decision to be made
about which application should be develop in-house and which
one they should outsource, and whether they should outsource
in or out the firm. Moreover, an issue was the high cost of
running and maintaining infrastructure. Considering the
diversity of their business offices all over the globe and the
offices’ adoption of their own systems, it was very difficult to
attain one-platform infrastructure for all their branches. After
opting to apply one-platform infrastructure, they had to decide
whether it was better to choose a single-vendor approach or it
was more beneficial to deal with different vendors. They used
one-vendor infrastructure for easier communication and
information sharing between the applications. However,
regarding to this decision, they had to overcome the problem of
one instance of the system for all the offices around the world
with their different needs. In addition, IT employees’ unwilling
to was a problem that Accenture needed to overcome. Accenture
had to convince IT employees for the invaluable opportunities
of business growth and cost reduction that the proposed solution
may bring to their businesses since it required IT employees to
learn and to change their rules to adapt to the new system. In
2001, Andersen Consulting took the brave step of parting from
Arthur Andersen, its parent. After separating from Arthur
Andersen, the new firm changed their name to Accenture. The
new firm had a bright future but it also faced some challenges
in building a new IT infrastructure that is capable enough to
support a global organization that offers consultancy on a
leading edge technologies. It was obvious that Accenture’s IT
infrastructure needed to be rebranded.
Organization structure of Accenture was quite different from
Andersen’s, so this also added to deficiencies of the firm. The
new firm also had a limitation for using Andersen’s

technologies for only 1 next year. So the constraints were
already there as the new firm emerged. Accenture had to face
few challenge in IT too while moving ahead. Their systems
were made up of patchwork of legacy applications that didn’t
interconnect among themselves. Also, the systems used outdated
software platform which made it impossible for the key systems
and database to be accessed remotely over the internet.
There was also a dire need of strong infrastructure for
individual accounting and HR software systems for different
offices since they had no global infrastructure with accounting
and HR systems. Due to the outdated software platforms they
were using, they major systems and data repositories were
inaccessible remotely from the internet. For this purpose, they
sought assistance of large and expensive private networks which
added to their costs. Mostly, they did the financial aggregations
and reporting manually which wasted a lot of valuable time and
resources.
Another challenge that Accenture encountered was to persuade
the group business leaders to migrate their customized local
applications to a standard platform. By standard platform, they
wanted business leaders to migrate their applications to a single
global instance of that platform. Accenture decided upon a
single instance platform since they thought that multiple
instances of a platform will result in complexity in a longer run.
In future, even if there is a minor update, having multiple
instances will demand that update to be run for all those
instances which becomes quite complex and is wastage of time
and resources.
In short, a smart transformation was needed that could cater
organization’s need to in building up a new IT infrastructure.
2. Describe at least 3 Management practices used by Accenture
in the IT transition process from 2001 to 2008.
· Changing management’s and employees’ attitudes towards
technology:
One major factor that clearly contributed to the prevalent

success of Accenture’s IT transformation was changing how the
firm as a whole conceive IT. Accenture dealt with IT like an
independent business, and a panel of C-level executives would
determine the budget the spending priorities of IT. Having
different executives would help have “strategic, financial,
operational, and technical” point of views, which guaranteed
more thoughtful, and thus, Accenture has succeeded.
· Ensuring efficiency and effectiveness:
During the tremendous transformation of IT in Accenture, the
steering committee has made many actions in order to ensure
efficiency and effectiveness. For example, when choosing the
platform, the steering committee decided to use one-vendor
architecture. They prefer one vendor to multiple vendors for
applications from one vendor can share information with each
other flawlessly, which would end up with effective and
efficient deployment of IT. Also, the products they develop are
driven by the internal customers’ and system users’ needs.
Instead of having an outsourcing company to decide which
applications and requirements are needed for the business,
managers and customers could contribute to the decision of
developing a new model.
· Considering cost reduction through the use of innovative
technology:
The IT has a dramatic influence in terms of cost saving. One
major decision the help reduce the spending was choosing one-
platform architecture. This allowed them to significantly
minimize the cost of deploying and maintaining IT in the
offices around the globe. Also, they sought cost reduction by
moving the servers from Madrid to Argentina.
After the transition process, the employees count has reached up
to 180,000 which was 75,000 back in 2001. There was seen a
significant increase in Accenture’s revenues which went up to
$21.6 Billion starting from $11.44 Billion in 2001. Their
revenue is reported to be increased by 143% after the
transformation process.

Accenture created a strong, central IT governance which
enabled them to reduce their IT costs by 64% after the transition
process. Another management practice that was practiced during
the transition process was about encouraging the innovation.
Accenture encouraged all positive ideas on improving their IT
infrastructure and the outputs were fruitful; they reduced their
IT costs and increase their revenue.
Accenture chose right people for right things which enabled
their firm flourish and prosper. All the people in charge were
aligned with the goals of the organization which enabled
organization to achieve success in this transition period. People
were motivated and enthralled, so they really made good
decisions for their IT infrastructure. The IT management of
Accenture’s had a clear and bright vision. They proposed IT to
run as a business within a business instead of running it as a
cost center and this is what made them stand out.
Accenture had managed to do proper project planning for their
organizational goal. They were focused and clear on their
organization objectives in the IT transition process. Also, there
was proper system for tracking and reporting project progress so
the stakeholders knew where they stand. This enabled them to
compare their actual progress with the planned progress so they
can estimate how far they are from reaching the actual goals.
These were key management practices that helped in a
successful IT transition process.
3. Pretend that you are the CIO of Accenture - What decisions
you need to make beyond 2009?
If I were the CIO of Accenture beyond 2009, I would
continue having an independent committee that would decide
for the budget and spending of IT. As it was in 2008, this
committee would include different C-level executives for
having a comprehensive thought of what might and might not
benefit the firm. Also, I would inspire the departments to
provide their suggestions that are related to IT to the committee
to be seriously discussed, as long as they are attached with ROI

analysis for more than a couple of year. I would rather highly
reward the employee who came up with the suggestion if its
efficiency, effectiveness, and cost reduction were proven. Also,
I would promote the innovation in using IT to support the
business. Overall, I would follow the steps of Accenture’s CIOs
since 2001 to maintain the prosperous story of Accenture
accomplishments in the IT field. Looking at the organizational
culture and available options at Accenture, I feel that it is very
important for Accenture to be equipped with latest technology
since 3/4th of their employees spend their time outside the
office and travelling to client locations. It is the need of these
road warriors to possess advanced technological platforms to
offer an extra ordinary level of uninterrupted services to the
customers. All offices of Accenture need to use a standard
information system to communicate date and information with
each other. Standardization is of great importance for any
organization as it efficiency of internal communication. A
standard information system is easy to manage and organize and
it helps in managing customer and partner relationships. I
would recommend the company to use SAP as their Management
System, Microsoft as their official software provider and Intel
& Cisco as the hardware providers. Cisco shall be used for all
network related equipment whereas Intel should be consulted
for all hardware related services. These 3 products meet firm
needs and demands with lower level of complexity and are
expected to offer greater benefit. The decrease in IT costs in the
past 9 years is commendable. SAP is a perfect fit with a single-
platform solution. SAP is regarded as number one platform to
offer financial solutions, technological services and HR
applications. It is important to choose one-platform solution
since it will enable the firm to have lower IT support resources
when dealing with single approach platform.

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