Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

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Monday, May 31, 2004

Intentia, MAPICS, SSA, and Geac--what's the deal?

There's some interesting speculation going on about Intentia, MAPICS, and SSA and I'm trying to piece it all together.

To start, Nigel Montgomery at AMR thinks that Intentia's new CEO, Bertrand Sciard, may be on the hunt to acquire another ERP vendor.
Assuming Intentia can return to profitability, Mr. Sciard's plan is likely to include the swift acquisition of another ERP vendor with a strong presence in the United States. He's already considering candidates and clearly understands the art of an acquisition, based on his tenure at Geac. Intentia needs this as a springboard to grow in the region, and although he’s not mentioning names, an obvious target might be MAPICS. An interesting twist would be that General Atlantic (GA), a strong investor in Intentia’s rival SSA Global, also owns a slice of MAPICS. This raises the question of whether Symphony, which owns around 30% of Intentia, might seek to enlist GA, or its co-SSA Global investor Cerberus, as additional investors in the company in order to acquire. Either way, it’s likely that more funds will be forthcoming once growth resumes.
Montgomery's mention of SSA and MAPICS in a research note about Intentia is interesting, but I think he misses the obvious implication. It is more likely that General Atlantic Partners would want to put SSA and MAPICS together, rather than help Intentia acquire MAPICS, which would just create a stronger competitor for SSA. A month or two ago, I heard a rumor that SSA has some office space at the MAPICS headquarters in Atlanta. I have no independent confirmation of this, but if true it might indicate that a deal for SSA to acquire MAPICS is in the works.

It's possible that General Atlantic Partners would want SSA to also acquire Intentia, but that runs in the opposite direction that AMR thinks Intentia is headed.

So, if Intentia does not have a shot at MAPICS, who might be Intentia's likely acquisition target in North America? I would suggest Geac. Geac, based in Canada, is best known for its SmartStream financials system, which it picked up in 1996 from Dun & Bradstreet, and its System21 ERP suite, which it picked up in its acquisition of JBA in 1999.

I think Geac might be an attractive target for Intentia for four reasons. First, Geac has a substantial installed base in North America, which Intentia needs. Second, Geac has a good part of its installed base running the IBM iSeries (formerly AS400), which matches Intentia's installed base. Third, Geac's System21 installed base is largely in the food and beverage and apparel industries, which matches two key verticals that Intentia targets. And, finally, as Montgomery mentions in passing, Geac just happens to be the former employer of Intentia's new CEO, Bertrand Sciard, so he knows it well.

All just speculation on my part. But if readers have any other insight, please let me know.

Related posts
Intentia reaches for revival
Who's next on SSA's shopping list?
Latest word on the street concerning MAPICS

by Frank Scavo, 5/31/2004 07:02:00 AM | permalink | e-mail this!

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Friday, May 28, 2004

Who's gaining in the ERP horse race?

I've been under the general impression that SAP has been gaining market share against PeopleSoft and Oracle. But a recent market study by IDC says otherwise. According to eWeek,
The ... report painted an inconclusive picture of just who among the top ERP vendors—SAP AG, PeopleSoft Inc. and Oracle Corp.—is taking market share from whom.

The IDC numbers indicate that PeopleSoft's revenues fell nearly 8% from 2002 to 2003, while Oracle's revenues increased by nearly 8%, and SAP's grew at more than double that rate....

However, IDC research director Albert Pang, who authored the study, said there were no real gains or losses in market share among the top three vendors from 2002 to 2003. He said PeopleSoft's revenues fell largely because of the more than $100 million in maintenance revenue that the company wrote off as part of accounting for the J.D. Edwards acquisition.

Meanwhile, Oracle's gains were largely from increased maintenance revenues, not from selling new software. And SAP's 17% revenue gain came mostly from the strength of the euro, which the German-based company reports revenues in, against the dollar from 2002 to 2003. In real-dollar terms, SAP's revenues were also flat, Pang said.

"The top three were all essentially flat," Pang said.
Pang indicated that several other ERP companies did see an increase in market share, such as Microsoft, SSA Global, and Sage.

Related posts
ERP market on the rebound

by Frank Scavo, 5/28/2004 07:20:00 AM | permalink | e-mail this!

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Tuesday, May 25, 2004

PeopleSoft breathes new life into JDE World product

PeopleSoft has finally got a strategy for the old World product that it picked up with its acquisition of J.D. Edwards last year.

But first, some history. The World product was JDE's IBM iSeries (formerly AS/400) host-based product. Think of it as JDE Classic. Over a period of several years, JDE had been de-emphasizing World and was encouraging World users to migrate to its newer One World product, which is based on a cross-platform, network architecture. During the acquisition of JDE by PeopleSoft, PeopleSoft renamed these products PeopleSoft World and PeopleSoft EnterpriseOne, with PeopleSoft's own suite of products renamed PeopleSoft Enterprise.

In rationalizing its portfolio of products, PeopleSoft positioned the Enterprise Suite for large organizations, and indicated that EnterpriseOne would be best for mid-market companies. And World products would be targeted at, well, existing World users. Not a very strong story for the World products.

But now, PeopleSoft finally has found a role for World. At the Common user group earlier this month, PeopleSoft announced a bundled deal called "World Express," targeted specifically for companies between $20-100M. According to the press release, World Express includes:
  • World applications pre-installed on an iSeries box, including financials, distribution, manufacturing, HR, and project management, which should save users installation time.


  • Pre-configured business processes such as vendor returns, product costing, new product introduction, purchasing, and A/R, which should simplify some of the implementation effort.


  • Implementation and user training services by PeopleSoft-certified distributors.


  • Ongoing support.
The press release doesn't say so, but I'm told there is also a Web front end deployed in World Express, which would give users a GUI if they want it.

PeopleSoft is offering World Express through an expanded reseller channel that includes the extensive IBM reseller channel. (IBM and PeopleSoft also appear to be working on a similar arrangement for EnterpriseOne on Linux, but that's another topic).

To be honest, I like this story. In spite of JDE's past lack of focus on World, users simply refused to let the green screen version die. In addition, there are a large number of iSeries shops out there, especially small companies, that have a shrinking number of good iSeries packages to choose from. They like the reliability of the iSeries and many of them don't see any driving need to make their IT infrastructure more complex. They would like GUI for certain applications and like interoperability with Microsoft office. The World Express product is a good solution for such companies.

If IBM and other resellers can execute under this program, I think PeopleSoft may be pleasantly surprised at how well this new offering is received.

Related posts
Green screen refuses to die
PeopleSoft/JDE combination: off to a strong start

by Frank Scavo, 5/25/2004 05:40:00 PM | permalink | e-mail this!

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Saturday, May 22, 2004

Solving the four problems with ERP

I received quite a bit of feedback on my post last week regarding the four problems with ERP. Most of the responses were quite positive, but some did suggest that I missed some problems, such as, "quality of the systems integrator," "turnover of user personnel," and "lack of user ownership." However, my feeling is that these all may be legitimate causes of ERP problems, but they are not separate categories or types of the problems themselves.

There's nothing wrong with looking for causes. Good problem solving techniques from six sigma to the theory of constraints teach us to fix the root causes, not just treat the symptoms. But if we don't understand the nature of the problem itself, how on earth will we ever find the cause? Too many managers immediately want to jump to solutions, without really understanding the nature of the problem.

So, I believe that my list of four types of ERP problems is an exhaustive list of the nature of all ERP problems. You could have dozens of possible causes, but the problems themselves only fall into these four types:
  1. The system itself is bad

  2. The system is good, but it's set up incorrectly

  3. The system is good, but it's not being used

  4. The system is good, but it's being used ineffectively
Now, having said that, one reader did suggest that it would be best not to just categorize the problems but indicate how to solve them. Fair enough. Once you understand the nature of the problem or problems with an ERP system, how should you go about finding solutions? Of course, each company will have different problems, different causes, and different solutions. But there are some common approaches that you can take:

1. If you've got a bad system...
You need to ask, can the system be fixed (e.g. is there a newer version, a vendor patch, or a modification you can make?). Can you work around it (i.e. can you use a procedural method to bypass the system problem)? Can you use some other piece of software instead of the part of the system that is bad? Or, should you replace the system?

But too many executives ask that last question before asking any of the others. Just because a system is bad doesn't mean it needs to be replaced. It depends on how bad it is, and whether the bad parts are fundamental or superficial.

For example, a system might have an unfriendly order entry screen. Perhaps the order entry screen could be modified to remove unneeded data elements, or it could be reconfigured to be more natural to the way your company takes orders. If the rest of the system is good, it would be foolish to replace the entire system just because of an isolated user interface problem.

On the other hand, if a company operates on an actual cost basis, and the system only supports standard costing, it is unlikely that the system could be fixed, or a work around would be viable. Or, if a process manufacturer finds itself stuck with an ERP system that is designed for discrete manufacturing, it might be advisable to bite the bullet and get a system that works for the process industry.

2. If the system is set up incorrectly...
I find it most helpful to find out why the system was set up in the way it is. That will lead you to the possible root cause. Was it just ignorance of the original implementation team? That would point to a need for training on the system. Was it because the company was trying to make the new system look like the old? That would point to a need for business process redesign, or at least to address assumptions about how the business should operate.

Recently I saw a company that was having a hard time keeping up with inventory transaction volumes. We found that the problem was that the system had been set up to serialize each unit of finished production. The company thought that this was necessary to provide full traceability of products for FDA regulatory compliance. Of course, it also exploded the number of transactions that would need to be entered every time a finished product was transacted. When we investigated, we found that the system was fully capable of providing traceability by means of lot or batch numbering, which would greatly improve productivity while maintaining compliance. We then asked why the system had been configured for serial unit control, and we found that it was because that was how the previous system had done it. When management understood the weak basis for the original decision, it was a simple matter for everyone to agree to change it.

3. If the system is not being used...
Again, you have to ask why. Is it because parts of the old system are still in use, in parallel with the new system? A client once brought me in to determine whether their new system was in fact the right system for them. Users had many perceptions about the inadequacy of the new system, most of which I suspected were incorrect. Soon I found the reason. The old system was still running for many functions that the new system could have performed. As long as management was not committed to abandon use of the old system, which users had grown accustomed to, there was no hope that they would learn to use and appreciate the new system.

There can be any number of reasons that a perfectly good system is not being used. It could be a lack of training, or a lack of resources to do the implementation, or resistance to change. I have seen cases where certain users prefer their little Access systems, Excel worksheets, or cumbersome manual systems. Why? Because those little informal systems represent job security. As long as the company depends on those users for their personal knowledge of "how things get done around here," those users are unlikely to embrace an ERP system that promises to formalize and make transparent the business process.

4. If the system is being used ineffectively...
You need to do more analysis. In this category, I like to group problems into four sub-categories.
  • Data problems. For example, inventory inaccuracy can make MRP systems all but useless. There are dozens of other examples of how data problems can undermine ERP systems and force users to work around the system. Many companies I visit have problems with duplicate part numbers, duplicate vendor numbers, and inaccurate costing data. All of these make ERP ineffective.


  • Discipline problems. Invariably, organizations making ineffective use of their ERP systems have poor or nonexistent disciplines in engineering change management, inventory control, and planning. Procedures may not exist, or if they do exist they are not followed. I once saw a company where users were complaining that the planning system didn't work. Later I found out that the VP of Sales routinely called the plant and forced them to change the day's production schedule when an important customer had a rush order. The planning system was being used, yes. But it was being used ineffectively because of poor disciplines in planning and scheduling.


  • Integration problems. Enterprise systems by definition are integrated systems. But the organizations that implement them may not be integrated. Rather, there may be a strong functional orientation that creates isolated "silos" with walls between departments. ERP systems work best when they automate cross-functional processes. But if sales does not talk to production, and production does not talk to engineering, it is unlikely that the ERP system will be used effectively.


  • Measurement problems. Too often companies ask managers to do one thing but measure them on something else. If you ask a factory to ship product according to customer delivery dates, but you measure the plant on "tons produced" each month, it is likely that the plant will maximize tonnage by shipping the largest orders first, instead of the ones with the earliest due dates. Yet, it is easier for management to blame the system instead of their own out-dated measurement systems. There are dozens of similar examples.
Making effective use of ERP generally mean solving problems with business processes and organizational design. This can take you far outside of the IT department and deep into change management in user functions. Although such change can be difficult, the pay off can be huge.

Over the past 15 years, many companies have made enormous investments in enterprise systems. Yet many are unhappy with the results. The temptation is to blame the system and even entertain the thought of replacing it. But, as we have seen, good systems can be saved, as long as management is willing to face the nature of the problems.

Related posts
Four problems with ERP

by Frank Scavo, 5/22/2004 07:57:00 AM | permalink | e-mail this!

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Thursday, May 20, 2004

ERP market on the rebound

In another sign of recovery in the enterprise software market, IDC is forecasting a 7% growth for ERP sales this year, to $26.7B. Actual growth in 2003 was 5%, and in 2002 sales were flat. IDC points to the mid-market, government agencies, and certain industries such as health care as the main driver for growth.

Interestingly, IDC points out that ERP market is increasingly being dominated by the largest players. In 2002, the top 10 vendors held 46% of the market, and in 2001 they held 44%. The top five vendors are identified as SAP, PeopleSoft, Oracle, Microsoft, and Sage.

CNET has a short summary.

Related posts
High tech job market perking up
What exactly is the market for enterprise systems?

by Frank Scavo, 5/20/2004 05:56:00 PM | permalink | e-mail this!

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Thursday, May 13, 2004

Four problems with ERP

Recently, a company asked my firm to do an evaluation of its ERP system. Users had become increasingly unhappy with the system, and management wanted an independent assessment to determine whether they had chosen the wrong system.

After a couple of weeks of interviewing users and studying the many complaints about the system, we sat down and analyzed the causes of each problem. In the past I have found it most helpful to group ERP problems into four categories.
  1. You've got a bad system. This category includes lack of needed ERP functionality, system performance problems, lack of scalability, system bugs, and ERP processes that don't match business processes. For example, the system might lock up whenever two users attempt to update the same customer master record. Or, the company might be a process industry manufacturer that is trying to use a package that was developed for discrete manufacturing. These problems are usually quite easy to spot. But although they can be serious, they do not always mean you'll need to replace the system. Sometimes a software or hardware upgrade will do the trick, or a customization may be possible.


  2. You've got a good system, but you set it up incorrectly. These problems include incorrect configuration settings and other problems with how the implementation was performed. For example, users might be complaining that product costs are not accurate, but the company has not set up the system with cost elements that are detailed enough. Or, users might be complaining that inventory counts are inaccurate, but the system has been set up with one big "four wall" inventory bucket, instead of bin location level tracking.


  3. You've got a good system, but you aren't using it. Examples could be that the original implementation was incomplete, or that the implementation was broken into phases and Phase II was never started. Other times, the problem is ignorance. It's surprising how often companies don't know what features they have in the software they already own. I have seen companies buy additional point solutions, or modify their systems, all the while their original system could have provided the same functionality, if they had just looked for it.


  4. You've got a good system, but you're using it ineffectively. In this category, I lump together all kinds of problems with business practices, such as data inaccuracy, lack of user procedures, lack of training, lack of discipline, and organizational problems. The system never has a chance to perform well, because the business is not using it effectively.
Back to my client. When we looked at this company's problems, we found that out of 15 major problem areas, the breakdown by category was as follows. (Most problems had multiple factors, so the total adds up to more than 100%):
1. Bad system:27%
2. Set up problems:33%
3. Non-use of the system:73%
4. Ineffective use:40%
As can be seen in this company, only 27% of the problem areas involved problems with the ERP system directly. The bulk of the problems were simply that the company was not using the system. For example, users had come to the belief that the system was mainly an accounting system, that it had been selected by the accountants, and that it was not a good manufacturing system. However, a quick look indicated that most of the manufacturing functionality had not been implemented! Ironically, the system had been originally selected because of its strength in the type of manufacturing that this company does, not because of its accounting functionality. In fact, as an accounting system I would rate this ERP package as just average.

How did the company get into this position? In this case, it was due to the fact that shortly after the system was selected the company entered into a period of severe financial difficulty, causing them to short-cut the implementation. Many system features were simply never implemented. Now, several years later, as the company is in a stronger financial condition and growing, new employees are surprised to see how poorly the system supports the business. So, their first inclination is to say that "the system stinks" (or, something to that effect). But as we just saw, the main problem is that the original implementation was never finished.

As a result of our assessment, the company has now launched a series of projects to finish the implementation and get the benefits from the system that they already have.

ERP systems are an easy target for blame. Executives would do well not to let users take the easy excuse that "the system" is the problem but look at all the factors that are required to make ERP effective.

Related posts
Business changes needed to ensure enterprise system success
Large system implementations require organizational discipline
Data clean up a key prerequisite for e-procurement benefits

by Frank Scavo, 5/13/2004 08:46:00 AM | permalink | e-mail this!

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Wednesday, May 12, 2004

Oracle's stand depends on where it sits

Dan Gillmor thinks that Oracle is hypocritical in joining the Association for Competitive Technology (ACT), an organization it formerly tried to discredit when ACT backed Microsoft against the Justice Department's anti-trust lawsuit. Now that Oracle is on the receiving end of an anti-trust lawsuit, Oracle doesn't seem to have any problem with taking exactly the opposite position.
Oracle's turnabout on ACT highlights the technology industry's frequent indifference to principle on public policy issues, at least when principle conflicts with the bottom line. Larry Ellison and his troops wanted antitrust laws to be enforced when enforcement might hurt a foe and help Oracle. Now that enforcement might work against Oracle, whoops, this is a terrible, terrible thing. (No wonder Washington finds the tech industry so shallow.)
Gillmor also takes issue with academics that parrot the story line of PR firms to the press.

Related posts
Quick look at DOJ's complaint against Oracle

by Frank Scavo, 5/12/2004 06:44:00 AM | permalink | e-mail this!

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Tuesday, May 11, 2004

India losing its cost advantage

Last month, I noted that the pendulum may be starting to swing back on offshore outsourcing. Now, there's more evidence. The New York Times is reporting that, as a center for outsourcing, India may be losing its cost advantage. The problem? Demand is pushing up wages and outsourcing firms are poaching employees from each other, with attrition rates now at 50-75% per year in some sectors.
The data from India show that, to some extent, the offshore outsourcing phenomenon may be self-correcting. Though outsourcing shows no sign of fading, rising wages and rapid turnover in Indian hubs may reduce the savings American companies reap when they send work abroad.
After reading this article, I remembered a phone call I received last week from a consultant, an Indian national working here in the U.S. on an H1B visa. His firm, which is composed of nearly all Indian H1Bs, is finding that the market is so hot in India that it wants to send most of them back to work in India rather than continuing to hunt for projects in the U.S. The problem, however, is that after living in the U.S. my consultant friend doesn't want to go back.

So, if the job market in India is so hot that even the H1Bs are being called back, how soon can it be before the Indian cost advantage is completely gone?

Related posts
Pendulum swinging back on offshoring?
Productivity risks in offshore outsourcing

by Frank Scavo, 5/11/2004 06:57:00 PM | permalink | e-mail this!

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Monday, May 10, 2004

Intentia reaches for revival

Swedish ERP vendor Intentia is making a series of management changes intended to kick start growth, which has been languising the past few years. Björn Algkvist is moving out of the CEO slot and is limiting his role to board activities. He will be replaced by Bertand Sciard, who comes from GEAC. In addition, Henrick Billgren will take over R&D, and Lars Procheus will serve as Chief Marketing Officer.

Intentia certainly needs to do something. I've short listed Intentia several times for clients in the past, and I always like what I see. Its Movex product is strong--the most recent version is 100% Java, the only ERP vendor to make this claim. Yet, growth has been lagging the rest of the ERP industry. Furthermore, Intentia has been slow to gain a foothold in North America, although it has been trying to do so at least since 1997, as I recall. Although the company has broad functionality, in the U.S., it has been focused on a few verticals where it thinks it can win: food and beverage, and apparel.

Recent discussions with Intentia personnel indicate frustration with the situation. I hope the new management team is successful.

Related posts
Intentia wraps its apps around IBM--is there a Linux connection?

by Frank Scavo, 5/10/2004 07:16:00 AM | permalink | e-mail this!

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Thursday, May 06, 2004

Ross riding high

They say a rising tide lifts all boats. So, its no surprise that another ERP vendor is enjoying strong financial returns in the rising market for enterprise systems. Ross Software announced this week a 20% increase in quarterly revenue, to $13.7 million, including an outstanding 56% increase in software license revenue. That latter number is generally considered most indicative of overall health of the business because it pulls along maintenance and services revenues in future periods.

In a press release, CEO J. Patrick Tinley said, "Contributing to this quarter’s software license results were particularly strong increases in new customer licenses of the iRenaissance Suite of enterprise applications in North America as well as continued customer purchases of Ross' Internet Application Framework (IAF) which provides browser capabilities that increase user productivity. We are also very pleased with the revenue growth of our Supply Chain Management products. Our continued focus on the process industries including life sciences, food and beverage, chemicals, metals, and natural products has continued to generate our revenue growth."

Tinley said also that there has been an increase in demand from the food industry, due to concerns related to food safety.

This will probably be the last full quarterly report for Ross as an independent company. The firm is in the midst of being acquired by CDC Software, a unit of Chinadotcom.

Update, May 14: Ross CEO Tinley now says that the Chinadotcom acquisition of Ross is being delayed by a "routine" SEC review of Chinadotcom's business. As a result, the two firms have now extended the close date for the deal to September 1.

Related posts
Chinadotcom rolling up enterprise system vendors?
Ross Systems gets "Shanghai'ed"

by Frank Scavo, 5/06/2004 04:13:00 PM | permalink | e-mail this!

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Wednesday, May 05, 2004

Putting a little public relations into IT

Yesterday, I had a discussion with a CIO about the need to put a little more effort into his public relations. The gist of the discussion was that if the IT group doesn't communicate its successes, who will? On the one hand, the IT group gets plenty of free negative publicity when systems fail to meet user needs, or projects go south. But when the IT group does something right, the word doesn't get out with nearly the same velocity, if at all. It's not a matter of promoting one's self. It's a matter of promoting the benefits of good systems. If using a new system is in the best interest of the organization, shouldn't the CIO should talk about it? If a CIO doesn't believe in his own systems enough to talk about them, why should anyone else?

Shortly after this conversation, I noticed an article in CIO Magazine that says basically the same thing. In a series on running IT like a business, there is an article entitled Internal Marketing: The Secret Weapon. It says,
"Marketing is absolutely critical to being internally successful," says Stephen Norman, COO of Merrill Lynch's technology group. "We live in a world where by and large our customers don't understand what we do. So we need to market internally to have a shot at building partnerships and avoiding surprises."

Steve Sheinheit, CIO of MetLife, agrees. "That we have to communicate and market is a fact of life," he says. "If you want to get resources and support, you have to sell your message. Marketing and communications is a natural part of doing business."
The article goes on to talk about crafting a thematic message, writing marketing collateral, and even developing a brand for the IT group and individual projects.

One word of warning, however, is that you've got to back up the message with reality: "Be forewarned. Marketing will come off as a lot of hot air—and could even damage IT's reputation—if CIOs haven't built an organization that can consistently deliver the goods."

Check out other articles in the CIO series:
How to run IT like a business
IT management best practices

by Frank Scavo, 5/05/2004 06:37:00 PM | permalink | e-mail this!

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Monday, May 03, 2004

Wal-Mart launches RFID pilot, but will privacy concerns stall adoption?

Walmart is on track with its Radio Frequency Identification (RFID) initiative, having started its pilot test at the case and pallet level in Dallas last week. The pilot is intended to demonstrate the efficiency of using RFID tags in place of bar-codes. In addition, Walmart hopes the pilot will encourage adoption of the electronic product code (EPC) standard under management of EPCglobal that is part of MIT's AutoID Center.

Walmart's RFID pilot test so far is limited to several SuperCenters and one regional distribution center in the Dallas/Fort Worth area. The eight consumer products manufacturers participating in the pilot include Gillette, HP, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestle Purina PetCare Company, Procter & Gamble, and Unilever. The next milestone is in January 2005, when Walmart expects its top 100 suppliers to be including RFID tags on all cases and pallets shipped to Walmart in the Dallas area. CNET has the details on the pilot test.

As I have written previously, adoption of RFID will require major IT infrastructure investments at all levels of the supply chain for those industries where it is implemented. In addition to the retail supply chain, led by Walmart's initiative, RFID efforts are also underway in the government contracting supply chain, led by the U.S. Department of Defense, and possibly the pharmaceutical supply chain, encouraged by the U.S. Food and Drug Administration (FDA). Although the cost is significant, the potential benefits are huge in terms of improved productivity, better supply chain coordination, and ultimately lower costs to consumers.

There is, however, one issue that may stall the effort to spread RFID--concerns over consumer privacy. A lot of fear, uncertainty, and doubt is being spread about RFID tags at the individual product level. I have tried to understand the exact nature of the concerns, but I'm finding it difficult to see what Walmart would do with RFID tracking that it can't already do with bar codes. Consumers give up an enormous amount of information about their shopping habits every time they use a club card in their local supermarket, but few individuals find that enough of a problem to give it up.

On the other hand, I suppose that if Joe buys a pair of underwear at Walmart, embedded with an RFID tag, it might be possible to capture Joe's identification at the point of sale and then associate Joe with the RFID tag number in some central database. Then, whenever Joe is wearing those underwear, Walmart could track his entering and exiting various Walmart stores in the future. But that's pretty unlikely, by any stretch of the imagination. And what exactly would be the point for Walmart to do that? And what if Joe was buying those underwear not for himself but for his son? I don't get it. Nevertheless, unless privacy concerns are addressed, no matter how far-fetched, they may become a significant impediment to adoption. Case in point: the California state senate has just voted to approve a measure, introduced by state Senator Debra Brown, that sets privacy standards for use of RFID in stores and libraries. California often leads the way with this sort of thing, unfortunately.

Update, May 13
Here's an RFID position statement from a group of so-called consumer advocates, describing in detail their RFID privacy concerns. After reading this entire paper, however, I still say, I don't get it. Nowhere do the authors address my point that it is the product that is being tracked, not the consumer.

Related posts
Users should push forward with RFID, despite issues
RFID coming to the pharmaceutical supply chain
Details on Wal-Mart's RFID specifications
RFID spreading to the auto industry, but competing standards threaten adoption
U.S. DoD mandates supplier adoption of RFID

by Frank Scavo, 5/03/2004 07:01:00 AM | permalink | e-mail this!

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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.

Frank Scavo 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.

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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
Si Chen's Open Source Strategies
diginomica
CISO Handbook


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