Modular Enterprise creates profound agility

If we can put the global issues aside for a second, there is the promise of everything digital. Data, cloud, automation, artificial intelligence, and user experience are some of the building blocks for the expected digital future. Companies need to grow faster, in more sustainable ways, facing increasing competition. How do enterprises cope with all this?

Would it be possible for companies to reorganize their critical businesses in case of a crisis quickly? When a supply chain suddenly breaks, how could the business assets affected be moved or replaced to ensure business continuity? Indeed, a silver bullet for that does not exist, but could there be something for organizations to improve fundamentally?

Could the business assets of an enterprise be treated as modular building blocks? It is an ambitious thought, yet a pursuable one. Is there a paradox: if organizations that boast digitality and agility fail to cope with market disturbance, are they genuinely digital and agile? In such a case, maybe the digitalization and agility are on the surface, not deeply in the structure.

Enter modular enterpise

Gartner coined the term "Composable Business" in 2020. One of its promises is having business capabilities as "packages", and ultimate modularity. We at Tietoevry acknowledge and favour the ambitious principles and the value proposition of composable business. To embrace the composable thinking and package the concepts we feel are of value, we created an equation of our own that combines the proven practices of postmodern and the new composable thinking into what we call “Modular Enterprise”. Composable thinking is a necessary stepping stone to becoming modular, but modularity is the end game’s target.

Elements of modular enterprise

1) Postmodern enterprise (also ERP)

Another Gartner concept: was established already in 2014. Many large and midsize companies have at least some degree of postmodernism in their ERP design. To some, postmodern enterprise follows pace-layering, which is a concept of arranging the business IT landscape into logical layers and defining where there is mostly commodity and where customer development is preferred. We can generalise that Postmodern Enterprise stands for solid alignment of the business applications - foundations of the Business Modularity.

2) Business modularity

Business modularity is about enterprise architecture, particularly the business architecture part. The critical point here is that some new thinking is required from the business to shape its structure towards improved flexibility, resilience, and in the end, agility. In other words, an enterprise does not become modular by just having a Business Architect model the business domains into smaller chunks. What is modular, then? Answer: when the business processes within the business capabilities can be freely consumed in a composable fashion. Business modularity is perhaps the most crucial element of the modular enterprise.

3) Data effectivity

This element makes or breaks a modular enterprise in conjunction with the previous one. The novel yet simple idea here is to embrace the data utilization of the business domains and capabilities within them. Business leaders and owners of business domains should be able to articulate what data is unique to their respective areas - understanding the data that gets created in a particular domain and what data is required as input from other domains are crucial. The data governance needs to take a few steps ahead: data governance principles need to be simple enough to be implemented in what we can coin as a data fabric.

4) Cloud & APIs

The final element contains these two usual suspects. However, the point is not to drop some cloudy dust on top of the enterprise IT stack and use modern integration methods here and there. Cloud needs to be native to bring the total value. The particular word with APIs is "managed." It is one thing to utilize loosely coupled, internet-era integration technologies in various ways and one thing to manage the consumption of the APIs that provide contextual data and are cyber secure.

SAP modular enterprise?

The future of business IT looks ambitious and shiny, modular and agile. Can we go on and implement a modular ERP, then? Looking at my crystal ball, I can see that organizations embracing modular enterprise will outpace their competitors in their digital transformation efforts. But climbing the steps of maturity is hard work, and there are no shortcuts. The organizations that can state being modular are typically outstanding in their fundamentals.

Many SAP customers are either renewing or planning to renew their ERP systems. In this sense, is S/4HANA already paving the way for modular? If the new ERP landscape design follows the solid principles of postmodern - alignment of applications - the answer is yes. For the first element, that is. My good colleague Kari Pietiläinen wrote about Headless SAP which contains valid technical principles for elements 1 and 4 of our modular equation.

How to fulfil the equation of modularity for S/4HANA? The leading thought should be about business modularity: designing the landscape based on the nature and the context of the business domains. How much flexibility a business domain should have? Is it possible that the services of that business domain will be outsourced? Divested? Would it make sense to prepare for that and consider SaaS first, then complement the core with S/4HANA? Not forgetting the element nr. three, data. Do not let software vendors dictate your data models but make the data yours.

In his recent blog about "The Journey Toward a Composable Enterprise", Martin Heinig, Head of Ventures and New Technologies at SAP writes: “In practice creating a composable enterprise is an extremely sophisticated endeavour, both from a technical and an organizational perspective.” That very much reflects the message of this blog article. The journey towards composable, modular, is not trivial. It is not random. It is not one project or one system but improving and building foundations. And, most importantly, as Martin reminds us, the organization, not just technology.