Wednesday, June 26, 2002
How to grow your e-procurement network.
This CIO Magazine article
has more insight into how and why companies are not getting all the benefits from the e-procurement investments they have already made. The article outlines five strategies for moving smaller suppliers from phone and fax communications: 1) assessing the e-business readiness of suppliers, 2) appointing an e-business implementation manager for each supplier, 3) showing suppliers the business value for them in participating, 4) pitching the benefits directly to end-users in your supplier's organization, and 5) monitoring participation and following up when it falls off.
Tuesday, June 25, 2002
Microsoft helps the business case .... for Linux
AMR points out
more unintended consequences of Microsoft's actions. Microsoft's new Licensing 6.0, which changes maintenance and support from a full payment basis (i.e. you don't pay for an upgrade until you buy the upgrade) to a prepaid basis (i.e. you make regular payments to Microsoft and receive future upgrades as long as you are paid up). The latter is the traditional model of enterprise application vendors such as SAP and Oracle. The unintended consequence of Microsoft's change in licensing fees is that there is now a tangible cost-savings for switching away from Microsoft. In other words, the business case in the past for Linux was hampered by the fact that the existing Microsoft investment was a sunk cost, and the cost savings were all in the future in avoiding a Microsoft upgrade. But now, if clients switch from Microsoft, there is immediate cost avoidance in terms of on-going Microsoft licensing fees. CIOs and CFOs should all go back and adjust their ROI spreadsheets.
Where are the greatest opportunities for Linux to displace Microsoft in the enterprise? AMR points to three areas: (1) web infrastructure, with Apache/PostgreSQL replacing IIS/SQL Server, (2) network attached storage, and (3) LAN file and print services. All of these represent low-risk, high return opportunities to Linux to gain a foothold in many companies.
Update: Microsoft sponsored study of Win2K vs. Linux is not all good news for Microsoft
(Dec. 17, 2002).
Monday, June 24, 2002
Webcasting can be a source of low-hanging fruit.
The Gartner Group offers an interesting case-study
of how it saved over $200,000 by converting one quarterly "all hands" meeting from a live satellite feed to a Webcast. It is a reminder of how, in these days of expense cutting and travel restrictions, companies need to make better use of Webcasting or Webconferencing. A variety of external service providers such as Centra
, and WebEx
make it possible for you to do it with virtually no infrastructure investment, provided Internet connectivity of all participants is adequate.
Once again, the main objections are not technical, but cultural and traditional. Surely, there will always be situations where face-to-face meetings are essential. Nevertheless, there are many cases where Webcasting or Webconferencing can better serve the needs of the participants. For example, Gartner found an unexpected benefit to their first quarterly Webcast: a greater number of employees were posing questions. If you've ever participated in a Webcast software demonstration or Webcast presentation, you know that the format can make group participation less threatening than standing up in front of a large group of peers. So in that respect, the Webcast format is not a compromise but actually a better alternative. There isn't too much fruit hanging lower than that.
Many e-procurement systems are installed but not fully used.
A study by A.T. Kearney, highlighted in an article in InternetWeek
and one in Line56
shows that many companies are not getting the full benefits of the e-procurement systems they already have. Kearney surveyed 147 companies and found that 96% had installed e-procurement systems such as electronic catalogs, e-sourcing, electronic RFx, and Internet auctions. Yet, those same companies were only running an average of 11% of their corporate spending through their e-procurement systems. Specifically, only 14% of direct materials, 15% of indirect materials, 4% of services, and 8% of capital spending were being done electronically. As a result, 23% of the same companies say they haven't met their e-procurement objectives, and 48% say they're still waiting for measurable results.
Now, I would like to know more about the original sample of companies, because I do not see anywhere near 96% of the companies that I deal with having implemented any sort of e-procurement beyond using Google to search for supplier web sites once in awhile. Perhaps the companies in Kearney's sample were deliberately chosen for their past purchase of e-procurement technology.
Nevertheless, the conclusion is unmistakable. Installing new technology, such as e-procurement systems, is not difficult. Converting suppliers, and even converting purchasing groups, from old ways of doing business is challenging. Companies greatly underestimate how much tradition, culture, and organization must be changed to get full benefits from e-procurement. How great are the potential benefits? Kearney points to those companies from the study that it counts in the "leader" bracket, who achieved a 41% improvement in cycle time, a 10% reduction in staff, and a 13:1 ROI.
Saturday, June 22, 2002
Transora’s Data Catalog shows the value of public e-marketplaces
. Transora, a public e-marketplace in the consumer packaged goods (CPG) industry, announced in February that Proctor & Gamble is now maintaining all its U.S. item information in Transora’s Data Catalogue. Eight major CPG manufacturers, including P&G, Reckitt Benckiser, and Kraft Foods are now participating in the catalog, which can maintain 225 product attributes on each item.
Public e-marketplaces, such as Transora, have been struggling to find a value-add against the private exchanges of the major retailers. Product catalogs are a good example of a value-add, because they can only be maintained by a neutral third-party. They offer significant savings to manufacturers, distributors, and retailers as the cost of each participant separately maintaining such information is eliminated. Furthermore, the consolidated data catalog is a key enabler to collaboration initiatives such as Collaborative Planning, Forecasting, and Replenishment (CFPR), which require all participants to agree on product nomenclature.
If they are to win the battle against the private exchanges, public e-marketplaces must continue to develop such value-added services that deliver tangible benefits. iSourceOnline has further discussion
Friday, June 21, 2002
Web hosting: Survival of the fittest.
For more insight into the view from the side of web hosting providers, read this article on CNet.
Is the pendulum beginning to swing away from Web outsourcing?
Loudcloud recently announcement that it will be selling its managed service provider (MSP) business to EDS and will morph into a provider of systems management software company under the name Opsware. The popular wisdom is that it is difficult for upstarts such as Loudcloud to compete against large traditional outsourcing providers, such as EDS and IBM. But with Intel's similar announcement
this week that it is closing its web hosting division, we wonder whether it's simply a matter of less demand. If the market for web hosting were growing, there ought to be room for upstart providers to find a niche.
In today’s economy, monthly outsourcing fees are clearly visible and a tempting target for the CFO’s red pen. On the other hand, the costs of an in-house Web commerce capability may be dispersed across many budgetary line items, such as salaries, benefits, floor space, insurance, and even utilities. Therefore, in evaluating the outsourcing decision, companies should conduct a thorough analysis that includes both hard and soft costs as well as the strategic risks and opportunities for both alternatives, to be sure the benefits are really there, one way or another.
Thursday, June 20, 2002
E-business adoption rate is ... dropping
. A recent InformationWeek survey of 375 IT managers shows a decline over the past year in the use of nearly every type of Internet application. For example, use of e-commerce dropped 10 points from a year ago to 57%, and the use of Internet-based supply-chain management dropped 4 points to 51%. The only growth area was intranets, which rose 3 points to 94%. Furthermore, although the drop was observed across all size companies, it was greatest among companies under $100M in annual revenue. Interestingly, the one bright spot is manufacturing, where Internet sales now account for 13% of revenue, versus 8% last year, the greatest increase among all industries.
This drop in adoption is consistent with a trend we first noticed in the Institute of Supply Management (ISM) survey, which showed a small drop in e-procurement adoption from Q4-2001 to Q1-2002. At the time, we thought it might just be statistical noise. But now, the drop has been confirmed more generally by InformationWeek.
Several factors appear to be behind the general decline in e-business adoption, including cost and complexity of solutions, traditional ways of doing business, and the general economic slowdown, which limits investment.
Thursday, June 13, 2002
Auto makers advancing in e-business by shutting down e-business units
. Both General Motors and Toyota are shutting down their separate e-business units and folding them in to the overall business. Rather than viewing this as a step backwards for Internet commerce, we view this as an advance because it indicates a greater acceptance and use of the technologies as a normal part of doing business. The fact that we still refer to the use of Internet technology as "e-business" indicates that it still not fully adopted. After all, we don't speak of "telephone business" or "fax business," because those technologies are simply part of how companies do business today.
Mid-market may be sweet for CRM ASPs
A recent survey
shows that mid-market firms will be a growth market for CRM applications, with only 20 percent of such companies having implemented some sort of CRM system so far. However, this market may be more open to an application service provider (ASP) delivery model than the large company segment has been. On average, 30 percent of the survey indicated they would consider an ASP application.
As the mid-market increases adoption of CRM, pure play ASP solutions such as Salesforce.com
may gain an advantage, especially if they can accommodate integration with enterprise systems by means of emerging web services standards.
by Frank Scavo, 6/13/2002 10:24:00 AM | permalink
| e-mail this!
Manufacturer replaces Seibel with JDE's CRM suite
. Computerworld mentions the case of a J.D. Edwards client, F.W. Murphy, in Tulsa, Okla., that "is actually ripping out its Siebel Systems Inc. installation" in favor of JDE's CRM product. The major problem with Seibel was the need for custom integration between JDE and Seibel. Although JDE only acquired its CRM system (from YouCentric) last year, apparently the promise of integration had become enough of a selling point to justify replacement of market-leader Seibel. As the CRM offerings of major ERP vendors become more robust, Seibel may encounter similar setbacks. As Mitch Meyers, VP of Operations at F.W. Murphy, said, ""We feel ERP is the dog, and we don't want to let the tail wag the dog."
Tuesday, June 11, 2002
Microsoft’s move into enterprise applications may have unintended consequences
Microsoft’s acquisition of Great Plains last year, and of Navision this year, make Microsoft now the world’s fifth largest ERP vendor. In addition, Microsoft is developing its own CRM product. Although Microsoft no doubt views enterprise systems as a growth opportunity, there are significant risks to Microsoft in terms of partner relationships. Many of the ERP and CRM vendors develop for Microsoft operating systems (Win 2000), data bases (MS SQL), and application platforms (.NET). But now with Microsoft as a competitor, to what extent will they want to continue basing products on Microsoft technologies? We believe that there could be some unintended consequences to Microsoft’s decision to compete in the enterprise systems space. For example, J.D. Edwards has already announced that IBM's DB2 is now its preferred database, even though JDE also can run over MS SQL and Oracle. And, JDE already appears to be moving toward a J2EE architecture with its acquisition last year of YouCentric, a CRM vendor. How long will it be before it announces Linux as its preferred server platform?
For more on the impact of Microsoft's decision on enterprise system vendors, read this article in Computerworld
i2 taking the right actions in today's market
At i2's Planet 2002 conference, i2 outlined its plan for improving its business. Among the many announcements, several are particularly interesting in terms of current trends in the market:
First, i2 announced that, in order to ensure software quality, it is delaying release the new v6.0 until the end of 2002. Although normally a rescheduled delivery date would be seen as a negative, this should be viewed as good sign that i2 is taking software quality seriously, as opposed to the common practice among enterprise system vendors of shipping products on time and then issuing numerous patches for bugs found during client implementation (see weblog entries regarding Oracle, on May 21
and May 22.
Second, i2 is emphasizing sales of key standalone solutions, such as demand planning, factory planning, transportation management, and spending analysis rather than pushing a full suite or bundle approach for new sales. This is a good sign of i2 recognizing that, in this market, prospects prefer to make small incremental investments rather than a bet-the-farm bet on new technology.
Third, i2 is rationalizing its 107 separate products into 63 applications. Although this still sounds like an unworkable number of offerings, i2 is moving them all to a common J2EE platform, which should provide better interoperability and a more componentized architecture. This should further encourage clients to take a pick-and-choose strategy to implementation. SCM applications are incredibly complex, and such actions that software vendors take to allow a step-by-step approach to implementation will bring greater adoption in the long run.
by Frank Scavo, 6/11/2002 07:37:00 AM | permalink
| e-mail this!
Monday, June 10, 2002
Light at the end of the tunnel?
New market projections from AMR Research
project the total market for enterprise systems will grow from $38B in 2001 to $70B in 2006. Nevertheless, the mix will change. CRM accounts for 29% of spending today and will grow to 38% by 2006. SCM and PLM are 20% today and will grow to 30% by 2006. But ERP, which makes up 47% of the market today, is expected to shrink to only 27% in 2006. In all categories, however, it is an open question as to how many of today's vendors will survive to see a turnaround in the market.
Friday, June 07, 2002
SAP aims to cover all market tiers
At the SAP Sapphire conference this week, co-CEO Hasso Plattner laid out the vision for SAP's offerings to the large, mid-tier, and small company markets.
At the high-end
, SAP continues to offer its core extended ERP suite known as MySAP
. However, consistent with the trend throughout the industry, SAP is repositioning some functionality from the R/3 core to the CRM, SCM, and PLM modules.
For the mid-tier
, SAP is offering a scaled-back version it is calling MySAP All-in-One
. It is the same program code as MySAP, but limited to a single database and application instance with fewer options.
But the real news is at the low end
, where SAP is introducing a completely different product that it calls SAP Business One
(available in the US in late 2002). This system is based on technology that SAP acquired recently from Israeli firm TopManage, and SAP is promising to eventually make it compatible with MySAP. Assuming it can execute on this promise, this will create a strong story for small growth companies who imagine that one day they will be large enough for MySAP. With most smaller ERP vendors in financial trouble these days, the CFO of a small growth company is going to find it hard not to at least consider SAP.
Line 56 has more information on SAP's offerings.
by Frank Scavo, 6/07/2002 09:47:00 AM | permalink
| e-mail this!
Thursday, June 06, 2002
If you liked Y2K, you'll love HIPAA.
It appears there is some amount of denial in the health care industry about HIPAA.. Simmi Singh, of Silverline Technologies, reports that although Congress may give some temporary relief, HIPAA is not simply going to "go away." This head-in-the-sand attitude within the health care industry leads to three concerns. The first concern is readiness, in that organizations have generally not completed their full assessment of what it will take to comply and do not have a comprehensive remediation plan in place to meet critical deadlines in 2003. The second concern is that many health care organizations seem to be relying on software vendors to provide compliance without having firm commitments regarding when they will be compliant. The third concern is that integration testing between providers, health plans, and government agencies will take longer and be more complex than expected. So, health care organizations should wake up and start planning for a mad rush to the finish line.
Tuesday, June 04, 2002
You don't need e-procurement to consolidate suppliers, but the suppliers who "win" will want enforcement.
In recent meetings with software vendors in the e-procurement and enterprise asset management market, they admit that you don't really need new systems in order to consolidate suppliers. However, the suppliers that win in your consolidation are not going to give up price concessions without having some assurance that they are going to see an increase in volume. Their fear is that, without a formal system for enforcing their favored supplier status, "maverick spending" will continue to divert business to old local suppliers. Therefore, companies should aggressively pursue supplier consolidation efforts, but be prepared to implement some sort of formal system to enforce rules that really give the business to approved suppliers. Otherwise, you may find suppliers reluctant to give better prices, terms, and conditions.
Public B2B marketplaces will rise again.
At a recent IT for Management Conference
at the UC Irvine MBA school, a panelist from a local high tech manufacturer made a strong case for private marketplace exchanges (i.e. those owned by a single dominant participant) over public marketplaces (i.e. independent, or those owned by a consortium of dominant players). Although we agree that private marketplaces are currently enjoying the pendulum swing away from all things dot-com, we believe this is a temporary situation. Private marketplaces put too much demand on the majority (i.e. those other than the marketplace owners). For example, a supplier cannot bear the expense of developing and maintaining custom interfaces to the private marketplace of each of its major customers. To the credit of one old-line industry, the automotive OEMs have had the sense to operate a single public marketplace, Covisint, on behalf of the entire vertical industry. This greatly reduces the demand placed on automotive suppliers. We believe that eventually many other industries will follow suit.
(c) 2002-2014, Frank Scavo.
Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.
About the Enterprise System Spectator.
Send tips, rumors, gossip, and feedback to Frank Scavo at
I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.
Selecting a new enterprise system can be a difficult decision.
My consulting firm, Strativa, offers assistance that is independent and unbiased.
For information on how we can help your organization make and carry out these decisions, write to me.
For reprint or distribution rights for content published on the Spectator, please contact me.
Go to latest postings
ERP Support Staffing Ratios
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report
IT Help Desk/Service Desk Management
Get these headlines on your site, free!
Blog Roll and Favorite Sites
Strativa: ERP software vendor evaluation, selection, and implementation consultants, California
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Vinnie Mirchandani: The Deal Architect
Oliver Marks' Enterprise 2.0 Blog
Si Chen's Open Source Strategies