Oracle unveils new electronic signature functionality for FDA regulated manufacturers

At Oracle AppsWorld yesterday, I sat in on a presentation on Oracle's new solution for electronic records and electronic signatures (ERES), a requirement for companies regulated by the US Food and Drug Administration (FDA) under 21 CFR Part 11. I was quite impressed with Oracle's approach to satisfying these requirements.

Oracle has taken a clever approach to defining what is an "electronic record" for purposes of signing. One of the challenges of implementing electronic signatures in complex applications such as Oracle is that what the user thinks of as a "record" (e.g. a master batch record) may be logically stored in multiple tables in the relational database. So, when user signs an electronic record, what is he signing? And what does the signature apply to? Oracle solves this problem by presenting electronic records to the user in an electronic "paper format" that brings together all the information that forms the "record." When the user signs this "record," Oracle stores it with its signature information, in an "evidence store." The evidence store is maintained in XML format, separately from live files. Records in the evidence store represent what users have signed, and they can be printed or exported in PDF format, satisfying the electronic copies requirement of Part 11. Oracle's approach, to me, is attractive in that it makes electronic records and electronic signatures clearly equivalent to paper records and handwritten signatures, the key objective of Part 11.

Oracle's electronic signature capability was developed using its workflow engine, allowing all the functionality of Oracle's workflow to be applied, such as multiple approvers, designee assignment, and approval routings. Record update does not take place until all required signatures are executed.

Oracle has implemented its electronic signature framework in a modular fashion, allowing Oracle (or the client) to selectively enable signatures as desired throughout the system. So far, Oracle has enabled electronic signatures for 30 events that are important for compliance with good manufacturing practices. The focus in the current version (11i9) is primarily process manufacturing (i.e. pharma clients). Additional events for discrete manufacturing (i.e. medical device clients) will be available in the middle of this year (11i10).

Although Oracle's ERES solution has been in general release for about a year, in the presentation, Oracle indicated that its first installation is just going live this week. Oracle has put a lot of good thought into this functionality. This, along with its broad offerings for life science companies, such as its Clincial Suite (see my post earlier this week), indicate that Oracle is going to be a serious contender in this industry.

Vendor application integration tools are no silver bullet

Reader Les Phillips wrote me right after I posted my note yesterday on Oracle's new interest in providing an application integration capability for its applications suite. Les works for a large well-known company that shall remain unnamed, which also happens to be an Oracle client. Les finds the current selection of application integration tools something of a mixed bag.

Frank, I have been reading your Spectator for some time now and find it very informative .... I found your most recent entry about Oracle and integration interesting. Like many Oracle customers we have been asking for more integration interfaces into Oracle Applications for years. Moreover, acquisitions continue to dot our enterprise landscape making integration challenging.

Currently we are reviewing technology to help with our system integration projects. The majority of these tools portray themselves as Business Process Management (BPM) applications. They all have wiz-bang GUIs that build business processes by dragging and dropping process nodes. Of course, they gloss over business process complexity and integration complexity by providing the most basic examples (seller/buyer, ATM)

They all come with the common theme "so easy to use even a Business Analyst could use them!" This seems reminiscent of the past when CASE [Computer Aided Software Engineering] tools meant the end of coding. Most of these BPM tools are much too functional to clearly distinguish the functional process from the business process. The business process representation would be cluttered with transformations, data lookups, subsystem calls, and other things a business analyst would not care to see. This would not make life easier for business analysts.

OK, they [i.e. application integration tools] might not be BPM tools but maybe they provide ease of integration? One concern here is the long-term effects of using an integration framework. The up time may be quicker by allowing the developer to rapidly deploy an integrated piece of the process but at what cost? There has to be a gotcha in there somewhere.

I agree with Les that there is no silver bullet for application integration. Some problems are best addressed by an integration framework or "hub" as Oracle calls it. Other needs are best addressed simply by a custom "point-to-point" integration. In fact, in a post in August, 2002, I suggested some criteria for deciding which approach to take. Les agrees, when he also writes,

I like the vendor offerings [for application integration] but also the freedom of a home-grown approach. Somewhere between these paradigms must be just right. We currently have a system developed on one these enterprise application integration (EAI) products that is near impossible to upgrade without a total rewrite due to vendor changes in the framework architecture. Therefore, the longevity of these solutions could be as short as a point-to-point solution, though cost much more. I imagine it will be that way for many years as the standards for business process modeling get hashed out and the system providers offer better integration options...

Back on the subject of Oracle's Customer Data Hub--it's no doubt a good move on the part of Oracle, and it will be welcomed by many customers. Just don't expect it to solve all your integration problems.

Oracle decides that integration is a good thing, after all

I'm spending some time at the Oracle AppsWorld conference in San Diego this week. One interesting development is Oracle's willingness to open up its application suite to integrate with other disparate systems. CEO Larry Ellison spent a lot of time on this subject in his keynote speech today. While other vendors, such as SAP and Siebel, have built integration technology into their offerings, responding to customer demands for such capabilities, Oracle has been somewhat of a hold out, choosing to emphasize the benefits of standardizing the entire business on a single enterprise suite, namely Oracle's.

Apparently Oracle has realized that few companies these days are prepared to undergo massive conversions to a single enterprise application suite. Even if a large company adopts such a strategy, it could be many years, perhaps more than a decade, before it is realized. Companies doing acquisitions every few years might never reach the goal. Therefore, as long as multiple systems are a reality, integration is a necessity. If Oracle does not provide integration tools, other vendors will.

In recognition of this market reality, Oracle is releasing something called the Customer Data Hub, to help companies pull information from multiple systems into one centralized place. Ellison likens the data hub to the large consumer credit databases that allow thousands of financial institutions to integrate their consumer credit data, even though they are on disparate systems. (Personally, having worked for one of the major credit data providers years ago, I think the analogy is weak. Consumer credit databases are more like gargantuan data warehouses, more like business intelligence applications, rather than data hubs allowing participant systems to interface with each other.)

Nevertheless, Oracle deserves credit for its new found interest in integration. But it has a lot of catching up to do. SAP has its Netweaver technology; Siebel has its Universal Application Network; IBM last year purchased Crossworlds, an early application integration vendor; and Microsoft has its Biztalk server, a lower end offering that addresses the same need.

CNET has a summary of Oracle's Customer Data Hub. A report on Ellison's keynote is here.

Oracle beefs up its Clinical suite with acquisition of SiteWorks

Oracle has acquired SiteWorks Solutions, a vendor of clinical trial management software. SiteWorks products include SiteMinder, which is used by hospitals and research institutions to manage their participation in clinical trials, and TrialMinder, which provides the same functionality for sponsoring pharmaceutical companies and contract research organizations (CRO).

This acquisition makes a lot of sense for several reasons. First, Oracle is one of the few major enterprise applications vendor that even attempts to address the clinical study requirements of life science companies (SAP and Siebel are two others). Second, Siteworks fills a gap in Oracle Clinical. To this point, Oracle's clinical suite has been more of a data management platform than a complete application. Adding Siteworks rounds out Oracle Clinical into a complete application. Finally, there should not be much of an integration challenge for Oracle: Siteworks technology is already Web-based and built on Oracle's 9i database, providing some interesting automation opportunities for users. For example, when a clinician or researcher at an investigative site enters data using Oracle Clinical's existing remote data capture capability, the data is not only available immediately to all authorized personnel, but can also trigger an automatic payment request to the trial sponsor.

Keith Howells, VP of Oracle's Pharmaceutical Applications group, sums it up, "We studied this market area long and hard, and we decided that what our customers needed told us to get a solution quickly rather than however long it would take to get a solution ourselves. We found SiteWorks was far and away the best company."

More details are in Oracle's press release.

The brain drain

Bob Cringley, with his usual insight, explains why he thinks offshore outsourcing is, in the grand scheme, not in U.S. national interests, and ultimately not even in the long term interest of the U.S. companies doing the outsourcing.

... while America remains a country of great technical capability, that capability is being compromised by a new kind of brain drain as we simply allow our local industries to fall apart. Send enough technical work to India or China, and what once was the engineering department ends up working down at Home Depot. The industries that are being particularly affected are information technology, telecommunications, and aerospace. These are also the only U.S. industries that in the 1990s produced substantial trade surpluses. We are shipping overseas the only manufacturing work that still makes money for America.

There are those who argue that the numbers involved are too small to worry about. What do a few thousand engineering jobs matter? These people simply don't know how thin the engineering talent is in many companies. Take 100 programmers out of any software company short of Microsoft or IBM ,and you've crippled some program and maybe the whole company. And the same is true for most of these other critical industries where big work is typically done by small teams.

Cringley thinks the issue is big enough to become an issue in the next presidential election.

Read Cringley's whole column.

An intriguing analysis of SAP's partnership with Sybase

Last November, I wrote a short article on SAP's partnership with Sybase to bundle its database with SAP's Business One offering to small businesses. Now Josh Greenbaum, writing for Datamation, provides a more in-depth analysis on what the SAP/Sybase combination means in terms of competition with Microsoft for small business market share.

Greenbaum recounts the history of Sybase's missteps in the database market, first in the 1980s by licensing a desktop version of its SQL Server database to Microsoft and later in the 1990s by rebuffing the overtures of SAP, which was looking for an alternative to Oracle's database, since Oracle was starting to compete with SAP for application software. Against this backdrop, Greenbaum goes on to analyze Sybase's current opportunity with SAP:

It may be a classic case of too-little, too-late. But I think it may give Sybase a much-needed chance for revenge and redemption.

One reason this may work is that SQL Server isn't always the database of choice for Microsoft's flagship Axapta enterprise software. Developers worldwide know that big Axapta projects can tax SQL Server's scalability limits -- forcing these partners and their customers into the relatively expensive hands of Oracle. A lower-cost Sybase alternative tied to SAP's software and reputation could make Business One a viable competitor to Axapta and the rest of the Microsoft Business Solutions product line.

Another reason is that SAP is actively courting Microsoft partners, many of which are feeling pressured to support Microsoft's attempts to use pricing as a way to compete with SAP. This policy has resulted in lower revenues for a Microsoft partner network made up of relatively small companies that have been punished by the recent recession and lack the financial resources to absorb a large number of low-ball deals. These partners may be heartened by the prospect of being able to compete on price with Microsoft without killing their profit margins.

The final reason that this might work is that SAP will now be in the position to offer Business One on Linux, something that was impossible when SQL Server was the only database Business One supported. This may be the big redemption play for Sybase: aiding and abetting the Linux market, particularly as a replacement technology for SQL Server, could mean sweet revenge for Sybase's past errors.

That last point is particularly intriguing: a small business enterprise system with no Microsoft application software, no Microsoft database, and no Microsoft server operating system.

Read Greenbaum's whole article.

Executives hesitate to recommend their ERP vendors

Yankee Group, in collaboration with Monitor Group, has published a very interesting study regarding customer willingness to recommend their ERP systems, and the news isn't good for any of the major ERP vendors. The study says,

"No single ERP company stood out as a brand of choice. The share of respondents inclined to recommend a particular supplier was starkly lower than scores for similarly complex business products. It's typical in a healthy business category to see about 50 percent of decision-makers recommending a market-leading brand. The highest recommended rating in the ERP category was 32 percent."

Across the board, the results are stunningly dismal. According to a TechWeb summary of the study, the highest position went to Oracle (32%), followed by PeopleSoft (29%), and SAP (26%). Microsoft, which just entered the ERP marketplace in the last two years with its acquisition of Great Plains and Navision, comes in at only 14%. Scraping the bottom is SSA Global, which only had 1% of its customers recommending it.

The study should be a wake-up call for ERP vendors:

ERP vendors thrive on maintenance revenue and installed-base sales. As the market consolidates and competing products mature, repeat-customer revenue becomes even more important. Yet ERP brand loyalty and distinctive corporate characteristics, qualities that mature industries use to lock in customers, are weak.

Clearly, there is an untapped market opportunity for ERP vendors that want to seriously focus on the things that, according to the study, really matter to customers: high integrity, fast return on investment, inexpensive operation, easy implementation and excellent service. In the TechWeb summary, Yankee analyst Jon Derome says, "You have this disjoint where vendors are marketing speeds and feeds, pushing technology innovation in the marketplace; and buyers aren't interested in those attributes. They're interested in practicalities, such as understanding my business and delivering what you promised."

The Yankee Group report can be found on Yankee's web site.

Internal IBM memos reveal plans to move thousands of jobs offshore

The Wall Street Journal is reporting today on internal IBM documents that reveal IBM's apparent plans to move thousands of jobs offshore. IBM's analysis of its hourly rates in the US vs. offshore is striking.

A chart of internal billing rates developed by IBM's Chinese group in Shanghai shows how dramatic the labor savings can be. The chart doesn't show actual wages, but instead reflects IBM's internal system by which one unit bills another for the work it does.

Besides the low-level programmers billing at $12.50 an hour, the chart shows that a Chinese senior analyst or application-development manager with more than five years experience would be billed at $18 an hour. The person familiar with IBM's operations said that person would be equivalent to a U.S. "Band 7" employee billed at about $66 an hour. And a Chinese project manager with seven years experience would be billed at $24 an hour, equivalent to a U.S. "Band 8" billed at about $81 hourly.

But, for political reasons, IBM doesn't really want to call attention to its offshoring intentions:

The IBM documents show that the company is acutely aware of the sensitivities involved. One memo, which advises managers how to communicate the news to affected employees, says among other things: "Do not be transparent regarding the purpose/intent" and cautions that the "Terms 'On-shore' and 'Off-shore' should never be used." The memo also suggests that anything written to employees should first be "sanitized" by human-resources and communications staffers.

However, the article points out that, because of the overhead involved in moving jobs offshore, the total savings from offshoring are much less than the simple comparison of hourly rates would suggest.

Dean Davidson, an analyst who follows outsourcing for Meta Group, in Stamford, Conn., says that companies usually find their actual cost savings from moving offshore are less than they would expect based on straight wage comparisons. "The reality is a general savings of 15%-20% during the first year," Mr. Davidson says. That's far less than the 50% to 80% savings based on hourly labor rates, he says.

I wrote previously on the fact that companies moving jobs offshore are not particularly eager to trumpet the cost savings. IBM's internal documents are further evidence of that.

The full WSJ article is on the WSJ website (subscription required). A brief summary is available here.

Escaping the ROI Trap, Part 2

My post on "Escaping the ROI Trap" has gotten a lot of feedback, especially after it was included in last week's Carnival of the Capitalists. Overall, the feedback was positive. But a few writers provided additional perspective.

For example, Enrico Camerinelli of Meta Group provided a description of Meta Group's model and where he sees the ROI trap fitting into it:

At META Group we use an IT investment portfolio model, where we segment IT investments along 3 layers:

Run the Business (RTB) investments. IT investments that cover core enterprise day-by-day operations (e.g., electricity, heating/air conditioning, payroll, data center operations for specific services).

Grow the Business (GTB) investments. IT investments covering business processes that allow the enterprise to expand its reach. Such processes are not too distant from the traditional way the enterprise manages its ordinary business (e.g., a bank wanting to implement a user self-service application for online account status checking).

Transform the Business (TTB) investments. IT investments covering brand new processes adopted by the enterprise. New business models and new disciplines are introduced to manage new business streams (continuing with the bank example, Unicredito, one of Italy's largest banks, is offering supplier sourcing and procurement services to its clients).

For RTB investments, the evaluation system is mostly related to cost elements. Surveyed organizations declare they reference the total cost of ownership (TCO) model as the most used evaluation methodology to drive investment choices.

In the context of GTB, the level of discretionary spending and the "knowledge" of the supported business processes require widely available technology and know-how. The software solution is thus viewed as a "features & functions black box" that supports the company strategy, and the organization perceives value in the full exploitation of the resources invested in the software. Interviewed participants confirm they find in "return on investment" models the appropriate cost/benefit estimation support. Such models "check-list" the features and functions against the business processes and operations the software is expected to support.

For TTB spending, the lack of historical memory and experience in controlling such projects demands a "risk of investment" approach. Interviewed enterprises envision the software solution as an aggregation of components that build the appropriate IT portfolio/ ecosystem. While the organization well knows and is able to anticipate business objectives and adoption risks, the same cannot hold true for what functionalities of packaged software solution must be adopted to cover those processes. The value is thus in minimizing the risk of the software investment through evaluation models that "configure" the building blocks of the enterprise software solution around focused processes and a calculated (and accepted) level of risk....

In my opinion, the "ROI trap" occurs at the TTB investment level. Therefore, I see a perfect integration between my Risk of Investment model and your four actionable items in "How to escape the ROI trap."

Dr. Joseph Smolira at Belmont University points to options analysis as a way to overcome the ROI trap. Smolira writes on his weblog,

I was particularly interested in Frank Scavo's post on capital budgeting, although I am not sure I completely agree with him. He makes an behavioral argument why capital budgeting projects are not undertaken. Astute financial managers (at least those who have taken my class) know that the application of NPV techniques, or in the situations given in Scavo's post, real options analysis, would solve the problem.

Framing of Risky Decisions
My main point regarding the ROI trap was not to spell out how investment decisions SHOULD be made. It was to describe how such decisions, frequently, ARE made. The problem is that decision makers often refuse to approve an investment made on the basis of ROI, no matter how sound the financial analysis. That's why I call it the ROI trap. The trap, to the presenter, is in thinking that a dispassionate ROI analysis will lead the decision maker to the "right" decision. Sometimes it does. But too often it does not. As Max Bazerman points out in his book, Judgment in Managerial Decision Making, people are "naturally risk-averse concerning gains and positively-framed questions" and "risk-seeking concerning losses and negatively framed questions." In other words, the way many investment decisions are presented--guaranteed costs and uncertain benefits--is precisely the opposite of the natural bias of the decision maker. Read my original post on the ROI trap for a full explanation.

I have come to the conclusion that management bias against uncertainty is at the root of many failed attempts to sell new information systems. In a section entitled "The Framing of Risky Decisions," Bazerman writes, "People value the creation of certainty over an equally valued shift in the level of uncertainty." Merely reducing the level of uncertainty does not carry as much weight to a decision maker as elimination of uncertainty altogether. Therefore, according to Bazerman, risky decisions should be framed in such a way that certainty is created, especially in respect to benefits.

Example
If elimination of uncertainty is the key to escaping the ROI trap, then the business case for new systems ought to be structured less like a bet on future benefits and more like an insurance policy against bad things happening.

For example, suppose you are proposing a new ERP system to replace a legacy system. Following the conventional wisdom, you would first estimate the future benefits, both tangible and intangible. For example, the new system might help reduce inventory, improve administrative productivity, or speed up collections. You would then estimate the costs of the new system, such as the cost of the software, hardware, and implementation. You would then calculate the return on investment. If you keep it simple, you calculate a payback period (e.g. 24 months). If you are more sophisticated, you calculate a net present value for the discounted cash flow, which takes into account the cost of money. If you are really sophisticated, you include options analysis, as Dr. Smolira suggests, to take into consideration the risks that future benefits might not be realized.

But whether simple or sophisticated, the ROI approach does not address the fact that decision makers hate uncertainty when it applies to benefits. Many times I have heard executives say, in effect, "Yes, but can you guarantee that inventory will be reduced, productivity will be increased, or collections will improve?" This, after presenting the ROI using the very assumptions on benefits that the decision maker himself provided!

Often you can sense the ROI trap before it is sprung. If so, perhaps a different approach in presenting the business case will have better success. Instead of starting with the benefits, start with the costs. Risk-averse decision makers won't hear anything about benefits anyway until they find out what are the costs, so get that out of the way early. But present the costs as an insurance premium. Insurance against what? Against bad things happening. For example, the legacy system might be unsupported by the vendor, or poorly understood by existing IT staff, or unreliable. Therefore, business continuity might be threatened. The costs of continuing to support the legacy system might become exorbitant. The company may be at risk for regulatory non-compliance, such as insufficient internal controls under Sarbanes-Oxley, or 21 CFR Part 11 compliance under FDA regulations. The legacy system may not be able to keep up with increased customer demand, or it may not accommodate new products or international expansion. If you look at risk broadly, nearly everything that you consider as a benefit of the new system can be translated into a risk of a bad thing happening if the legacy system is retained.

Escaping the ROI trap means clearly presenting the case that staying with the current situation is not an option. As long as the decision maker believes that nothing bad will happen if the legacy system is retained, the new system will never be approved. The promise of uncertain future benefits is not enough to overcome the guaranteed cost of the new system.

Does this mean that an ROI calculation should not be presented? Of course not. In many companies, an ROI calculation must be submitted as part of any capital expenditure request. But the ROI calculation is usually only the formal justification for what the executive wants to do. The key is to understand the executive's natural bias against uncertainty and to frame the investment decision so that it offers some form of certainty instead of merely accounting for uncertainty. Only then can you escape the ROI trap.

SSA Global lays out its future in warehouse management systems

ARC Advisory has a good summary of SSA's direction for warehouse management systems (WMS) in general and EXE in particular. Through acquisitions, SSA now has a number of WMS offerings: individual WMS modules that are part of SSA's various ERP packages; the Warehouse BOSS system that it picked up from Computer Associates; and EXE, a Tier I WMS provider that SSA acquired last year. ARC explains the individual EXE solutions:

EXE 2000 is aimed at high volume warehouse, e.g., retail, or automotive spare parts, and include task management and labor standards, but its 200 customers mainly reside in English speaking countries. EXE 3000 is the old mainframe Dallas product, and EXE 4000 is an n-tier, highly international WMS aimed at Third Party Logistics (3PL) and CPG with approximately 500 customers.

ARC goes on to explain how SSA's various WMS offerings will fit with its ERP offerings:

In the short term, most likely the iSeries Warehouse BOSS will fit best with the predominantly iSeries based BPCS & PRMS ERP solution, and Unix/NT based EXE 4000 will sell into the Baan base. There were hints that EXE 4000 and Baan ERP could create a useful automotive solution, particularly for Tier 1 and 2 automotive suppliers required to support sequence-in-line supply into the OEM. 3PL could be another target market, especially if the solution integrated CAPS Logistics, a strong TMS offering and Baan ERP.

The full summary is on the ARC Advisory web site.

For more on the the untapped potential of warehouse management and transportation management systems, see my post back on Jan. 21, 2003.

Offshore outsourcing driving down US IT salaries

A new study by Foote Partners LLC, a salary research group, confirms what has been obvious: IT salaries are dropping. The study indicates that although the general economic downturn is partly to blame, offshore outsourcing is another contributing factor.

In a year long study of 400 Fortune 1000 companies, researchers found that by 2006, the organizations expected from 35 percent to 45 percent of their current full-time IT jobs to go to workers overseas, David Foote, president and chief research officer for Foote Partners, said.

"What we found is a lot of correlation between a decline in pay for skills and certification in areas that are actually moving offshore," Foote said. "There's no need anymore for premium pay for those skills ... and also, a lot of bonuses have quite frankly been redirected to a very small number of people."

Foote points specifically to declining US IT salaries in application development and maintenance, tech support call centers, and some database work. But there are some areas where salaries are holding up better:

There are areas in IT where jobs are expected to remain onshore--at least for a while, Foote said. Those jobs tend to require a deep understanding of a company's business processes. Those jobs involve system architecture and prototyping, data and process modeling, and other pre-implementation work. Work related to security and network administration and management also appears safe.

Excepts above are from this TechWeb article on Yahoo.

Update, Jan. 15: Datamation has another article on the Foote survey plus a similar one from Janco Associates. This article is more positive on salary increases for those jobs that remain onshore, including CIO salaries.

Update, Jan 16: Meanwhile, business is good for Infosys, one of the leading offshore service providers in India. Most recent quarterly revenues are up 38%, with margins holding up nicely. Infosys added 3,666 new employees during the quarter, bringing total headcount to 23,209. Top Consultant has the story.

The Technology Cynic

My friend Dave Harding has launched a new weblog, The Technology Cynic. One thing is for sure, Dave is not afraid to take a definite position on issues. Check it out at www.techcynic.com.

Carnival of the Capitalists

This week's Carnival of the Capitalists, a summary of business-related posts that rotates from site to site, is up at Jeremy Wright's Ensight.org. Jeremy comments on my post The ROI Trap, which is driving a lot of traffic to the Spectator this morning.

Good news and bad news for PeopleSoft in survey of JDE customers

CNET reports on IDC's recent survey of J.D. Edwards customers. The good news: JDE customers are happy with the PeopleSoft acquisition. The bad news: they aren't buying much new software from PeopleSoft.

A survey IDC released Monday showed that more than 80 percent of J.D. Edwards software users retain a positive view of PeopleSoft and the manner in which the company handled the merger. Only 9 percent of respondents to the survey said they harbor a less favorable view of the combined vendor. However, the report said 69 percent of former J.D. Edwards customers have no immediate plans to buy new software from PeopleSoft.

Here's the article.

Offshore labor drove firm to brink

Matt Marshall in the San Jose Mercury News reports "the over-the-cliff tale of Ishoni Networks," which last month filed for bankruptcy, a victim of moving to India too quickly. Matt writes,

Backed with more than $68 million from venture capitalists from the United States and elsewhere, Ishoni once was branded a rising star. It was developing a cutting-edge chip to allow voice and data services over a single Internet connection -- and was valued as high as $200 million and employed 170 people.

Seeking to cut expenses, Ishoni created a subsidiary in Bangalore, India, and hired software engineers there on the cheap.

Weirdly, though, the subsidiary stopped returning phone calls from Ishoni's Santa Clara-based chief operating officer, Amin Varis, early last year.

Varis made a surprise visit to India in May and learned a big lesson about how much damage 12,000 miles of distance -- even when connected by Internet and phone lines -- can do.

Indian executives, he found, had forced their engineers to join a rival firm, Ample Wave Communications, apparently in a scam to scoop up Ishoni's intellectual assets and then bankrupt it.

Read the whole story.

Update, Jan 24.: More details on the Ishoni Networks debacle, along with a balanced view of doing business in India, can be found in this article from Venture Capital Journal.

Day three at MD&M West

Traffic is definitely lighter on the expo floor today. But one advantage, at least for me, is that vendors are willing to take the time to explain product details more thoroughly. So I took advantage of the occasion to take a closer look at one smaller CRM player, ADAPT Software.

ADAPT is one of those companies that I give credit to for clearly defining their market segment. They focus solely on providing CRM applications to mid-market manufacturing and distribution companies (under $500M). The company has been around since 1996, with operations just down the street in Irvine, CA. Functionality includes sales (contact and opportunity management, sales planning), marketing (campaign and event management), customer service and defect tracking, technical support knowledge base, and a Web portal for customer self-service. The product is written in Magic and runs over Microsoft platforms with a small client, client/server architecture.

ADAPT's marketing strategy is also clearly defined. They do no direct sales, but only sell through a reseller channel (40 resellers today). They also sell through other software companies (e.g. Syspro) that private label ADAPT's CRM solution with their own offerings. The strategy seems to be working: Adapt currently has 300 active customers.

ADAPT sells a minimum five user license for about $6,000, making it an affordable CRM solution for small companies. More information can be found on ADAPT's web site.

Day two at MD&M West

Yesterday, I attended an all day presentation by Ed Kimmelman and John Gagliardi on the relationship between the US Quality System Regulation (21 CFR Part 820) for medical devices and ISO 13485, the international standard being adopted by most of the rest of the world. Because many US medical device manufacturers also export to international markets, it is important to comply with the international standard as well. Fortunately, as Ed and John point out, there is a very large degree of consistency between the US regulation and the international standard. Yet John and Ed pointed out where there are important differences, where the ISO standard goes beyond the US regulation, and vice versa.

Why is this relevant to enterprise systems? Because when conducting software validation it will be increasingly important to include the ISO standards as well as the US regulations as a source of regulatory requirements. That's my interest in this subject.

Today, I attended a workshop by Andrew Snow, from HEI, Inc., on risk management. Although Andrew's emphasis was primarily on analyzing and managing risks in medical device design and development, many of the same concepts are applicable when implementing and validating enterprise systems for intended use in medical device manufacturing. Too often, companies treat all features and functions of enterprise systems as equally important, when from a risk profile, there are enormous differences that should be reflected in the validation plan for each part of the system. For more critical areas, risk analysis tools such as fault tree analysis and failure modes and effects analysis (FMEA) can be useful in analyzing and managing such risks.

Down on the exposition floor, visitor traffic seemed to be picking up today, according to several exhibitors I spoke to.

Enterprise software vendors catching on to medical device marketplace

I'm attending the Medical Design & Manufacturing (MD&M) West show in Anaheim, CA this week, representing Computer Economics, and will try to blog some of my observations from the show.

After attending this show last year, I wondered why more application software vendors didn't participate as exhibitors. MD&M West is billed as the largest medical OEM tradeshow in the world, and this is an industry that has many growing companies that should be looking for software. Nevertheless, last year there were only a handful of software vendors on the floor, mostly quality management and manufacturing execution system (MES) vendors. This year there are a few more. Here's a partial list.

ERP solutions: Exact Software, IFS, IQMS, Syspro, and Columbus IT Partner (a reseller of Microsoft Business Solutions Axapta product). But still no sign of the big three -- SAP, Oracle, and PeopleSoft.

Manufacturing Execution Systems (MES) and Factory Automation: Datasweep, Camstar, GE Fanuc Automation

Quality Management: AssurX, Netregulus, Pilgrim Software, Tip Technologies, EtQ, Inc., Minitab

Product Lifecycle Management: Dassault Systems

Customer Relationship Management: ADAPT Software

Document Management: Hyland Software

Show floor traffic seems a little light this year. Several of the vendors think it has to do with the fact that the show is scheduled for the first week back from December holiday period.

The exposition runs today through Thursday (Jan. 6-8). Admission to the show floor is free. More details are on the MD&M West web site.

Has Siebel turned the corner?

Siebel pre-announced Q4 results today that are above its previous estimates. The company is estimating revenue at $365 million, including $150 million from new license sales. Previously, the company is now projecting revenue to come in at $335-355M and new license sales at $120-140M.

Although some of the lift is no doubt due to a seasonal bounce (i.e. traditional end of the year deal making), the fact that Siebel exceeded its own estimates is encouraging, especially on that new license sales number. This is another indication that companies may be finally starting reinvest in new applications.

Reuters has a short summary of the conference call.