Thursday, May 30, 2002

If most public e-marketplaces fail, why do some succeed?

Over the past two years, most public e-marketplaces never left the runway, for several reasons, as this short article in Business Week indicates: inability to achieve critical mass of buyers and sellers, lack of technical readiness of the participants, lack of incentive for major players, and difficulty in normalizing data content such as product nomenclature and pricing across trading partners. Although Business Week mentions only Covisint as an example of a successful marketplace, we would also point to Transora, the Worldwide Retail Exchange, E2Open, Omnexus, Exostar, and others as having good prospects, and it is instructive to see what these have in common. In most cases, successful e-marketplaces begin as a consortium of major players, so that critical mass is easier to acheive. And except for commodity markets, most are moving beyond mere automation of buy-sell transactions to a richer value add. Therefore, companies considering a strategy for participating in e-marketplaces should look for those that have moved beyond transaction automation. Look for those that offer value by offering complementary transactions, such as credit and financing, escrow, logistics services, and payment processing, as well as providing a platform for collaboration, either in terms of supply chain planning or product design and development.

Wednesday, May 29, 2002

Data clean up a key prerequisite for e-procurement benefits

This article in Internet Week points out that data quality is a serious problem in companies seeking benefits through e-procurement. Data inaccuracy not only hinders realization of benefits, but it hinders the amount of spending analysis that can be done to estimate benefits in the first place.

I have observed for years that the quality of data in many purchasing systems is poor, with duplicate vendor numbers, obsolete items, incorrect category codes, and so forth. The problem is often worse on indirect items, where many companies begin their e-procurement efforts. As long as informal, paper-based systems are the norm, buyers know how to work around data inaccuracies. But once the system goes electronic, all the data issues become serious impediments. This article recommends that companies apply serious data quality efforts to purchasing data that are similar to those used in data warehousing, such as data extraction, cleansing, and normalization. Although I don't think most companies will need to go this far, it might be warranted in companies doing many acquisitions, where the acquired companies need to merge existing data into a central purchasing system.

Cultural issues are main obstacle to e-procurement

Although technology sometimes comes up short, the main barriers to success in e-procurement are organizational, an online poll of Internet Week readers found. Although I am generally skeptical of online polls because of their lack of statistical controls, I find the reader comments accompanying this poll to be insightful. Readers pointed out issues such as a general lack of discipline in procurement processes, underestimating the amount of organization change and acceptance needed, and the need to deal with thousands of suppliers that are not ready for e-business.

SCM survey shows flat to increased spending by industry

A recent survey by Bear Stearns indicates that in spite of the slow economy, investment in supply chain systems is holding up and even increasing. The study notes, "Shippers may be more open to the idea of ramping up their supply-chain expenditures in an uncertain economy." Among the results, 70% of respondents indicated no change in planned spending levels on SCM, a number which is little changed over the past two quarters. Surprisingly, 9% indicated they would spend more, up from 3% in Q4 2001. Other responses indicate that although companies are holding steady or increasing spending, they are doing so in smaller chunks, which would indicate a trend toward smaller incremental investments. Although the study will be encouraging to SCM vendors, I notice that it is based on 80 companies that responded out of a pool of 1000 solicited. I suspect this group is somewhat self-selected according to their interest in the subject of SCM and may be painting a more rosy picture than is really the case.

Monday, May 27, 2002

Sell-side e-business vendor pricing is in freefall. Just when it appeared that there might be signs of an upturn in the economy, AMR is reporting that "aggressive price cutting is taking its toll on [sell-side e-business vendors], with discounting for the first 5 months of this year averaging only 50% of average deal sizes from the first half of 2001." AMR is predicting a major shakeout in six months or less. Sell side applications allow customers to enter sales orders and check order status over the Internet. Some prominent niche players in this space include Ironside, Spaceworks, OrderFusion, and Blue Martini, as well as the ERP and SCM vendors that offer such modules as part of an integrated suite. AMR recommends that clients increase their due diligence on viability of the niche players in the coming year.

Thursday, May 23, 2002

The real problem with password security. Read this article in CNET and you'll stop complaining when your IT department forces you to use strong passwords and change them frequently. Calling passwords "the weakest link" in enterprise security, the article shows how easy it is for a hacker to crack a significant percent of user passwords in large organizations. As more industries such as health care move to electronic records and electronic signatures, companies will not be able to rely upon passwords as the sole means of authentication. The answer? The article points to strong password policies enforced by automated security management tools, plus double or even triple authentication schemes including passwords, digital tokens or smart cards, and biometrics. However, physical tokens and smart cards can be expensive to implement on a wide scale, and as we pointed out earlier (May 16th entry) biometrics are not always fool proof. So, our advice would be to design the technical solution based on the risk and implement tools to monitor potential breaches in addition to measures to prevent them.

Wednesday, May 22, 2002

Oracle responds to client dissatisfaction with 11i

Computerworld reports on a recent AMR study on Oracle Applications User Group (OAUG) satisfaction with Oracle E-Business Suite 11i. It doesn't look good for Oracle. Some statistics: only 60% of OAUG members are satisfied with Oracle as a company. Only 16% of OAUG members are live on 11i. But for those who are live on 11i the upgrade on average cost 43% more and took 39% longer than expected. To be fair, Oracle has just announced several quality initiatives including creation of a QA process organization, standardizing QA processes, and offering automated testing and patch analysis tools to customers. As one user says, "The signs are there, but you want to see it continue over an extended period."

AMR sounds a more hopeful note and gives more detail on the steps Oracle is taking.
B2B exchanges morphing into enterprise system vendors. In this article in CIO Magazine, Mohanbir Sawhney, argues that for most companies, e-commerce efforts are best spent on automating and optimizing business processes with individual trading partners, as opposed to participating in large anonymous trading exchanges that are struggling to achieve liquidity. Therefore, B2B service providers should "build their business one customer at a time, instead of building marketplaces with no customers." Indeed, the only sector where pure electronic trading exchanges seem to be successful is in financial exchanges and commodity markets. Sawhney observes that some B2B providers -- such as Celarix in logistics services and Instill in the food service industry -- are transitioning from their original vision of setting up trading exchanges to offering software and services to enterprises for optimizing existing trading relationships. To us, it is becoming clear that in formulating e-business strategy, companies should focus on specific, practical, capabilities that add value to existing relationships, not some futuristic vision of anonymous abstract electronic marketplaces.

Tuesday, May 21, 2002

Hold the bells and whistles, just give us stability! Computerworld reports that users of Oracle Applications are getting fed up with product instability and weak support. As one consultant says, "a lot of users would be willing do without the functionality if the suite could be more stable." Anyone who has been around enterprise software in the past decade knows that Oracle is far from alone in the tendency to sacrifice stability and reliability in the rush to push new features out the door. And this won't change until more buyers start making the vendors' track record in software quality a top criterion in the selection decision.

Monday, May 20, 2002

B2B Evolution, not Revolution. In this article from CNET, entitled "Can B2B recover from 1999?" Terry Baker points out how much real progress in e-business is being made incrementally, with a hard look at ROI. Lessons learned include wisdom such as "the true value of any B2B commerce effort is extracted from integration and automation, not simply creating new sales channels," and "transactions are the currency of B2B commerce; if the transaction flow isn't there, neither is the value."

Friday, May 17, 2002

Shifting Pricing Strategies of Enteprise System Vendors. The article is in CRMDaily, but the observations apply to many sectors of the enterprise system market. Vendors today are becoming very creative in how they determine price. As one analyst says, "Every vendor has its own pricing agreement and these can change by the day." The article has four recommendations for buyers, including establishing a special group in purchasing to handle technology contracts. However, companies that are not large enough for such specialization in the procurement function should look for outside help.
The Art of ROI. In the current economic climate, buyers of enterprise systems are most interested in short term economic payback. And software vendors are responding by focusing their sales effort on return on investment (ROI). This article in Line56 shows how both buyers and sellers manipulate ROI calculations and assumptions for their own purposes. If you are a buyer of technology solutions, take vendor data but make your own assumptions and do your own calculations.
Nestle's ERP Odyssey. CIO Magazine this week has a long detailed case-study about Nestle's six year, $210 million project to roll out SAP in all operating companies in the US. So far, the effort is being called a success, but not without a number of mistakes along the way, especially on the side of people, culture, and change management. As Nestle CIO Jeri Dunn says, "no major software implementation is really about the software." Save this one in your lessons-learned file.

Thursday, May 16, 2002

Drawbacks of Biometrics. While we're on the subject, check out this earlier article by Bruce Schneier where he clearly points out two drawbacks to biometrics: 1) although they are unique identifiers, they are not "secrets" and 2) once stolen, a biometric cannot be "re-issued." For enterprise systems that require a high degree of security, such as patient medical records or open systems in FDA-regulated industries, biometric methods should be combined with a second form of authentication, such as digital keys.
Biometric Security Less Than Meets the Fingerprint. Apparently, biometric security systems using fingerprints for authentication may not be as secure as generally believed. Bruce Schneier, well-known cryptographer and security consultant, points out in this Counterpane newsletter article that Tsutomo Matsumoto, another cryptographer, has successfully breached a number of these systems using artificial fingers made from easily obtained materials such as silicon and gelatin. To see how he did it, including pictures of the fake fingers, check out the presentation slides. Companies that have mandatory statutory requirements regarding information security, such as HIPAA covered entities and FDA-regulated firms, should especially take note of the potential vulnerabilities of such systems and not take vendor claims regarding such biometric systems at face value.

Wednesday, May 15, 2002

Show Me the Value. This must be the week for discussing business value of IT. Jack Brennan, CEO of the Vanguard Group, gives an interesting perspective on assessing IT value from the points of view of four distinct groups of stakeholders. Customers see IT value in making your company more easy to deal with. Employees see value in IT automating routine work. And shareholders see economic value by improving quality, cutting costs or increasing revenue. Brennan's examples from his own experience at Vanguard provide real-life application.

Tuesday, May 14, 2002

The Fuzzier Side of ROI. Good discussion by David Joachim in Computerworld regarding the difficulty in measuring the ROI of some IT investments. In my view, some projects such as those undertaken for productivity improvements need a strong ROI. But other projects, such as infrastructure projects, should be justified in terms of the flexibility they give the organization to undertake future initiatives. Understanding the difference between foundational investments, transactional systems, informational systems, and strategic investments makes the distinction clear. For more on this matter, see "Leveraging the New Infrastructure" by Weill and Broadbent.
Why hackers are a step ahead of the law. Security is the Achilles heel of Internet commerce, and this article on CNET indicates that the situation is probably worse than you think. "A Gartner study also shows that 5.2 percent of online shoppers have been victimized by credit card fraud and 1.9 percent by identity theft." And the specific incidents listed probably represent the tip of the iceberg, since many companies are reluctant to publicize breaches of security. Companies executing, or planning to execute, transactions over the public Internet need to make information security a high priority or risk significant loss of business and damage to their brand.
ERP vs. Best of Breed rages on in CRM industry. Study by AMR "shows that many of the largest enterprises continue to turn to their ERP vendors for CRM applications." This article, in CRM Daily, indicates that at least for, the momentum is with the large ERP vendors. Once a client has invested in a major ERP infrastructure, it is difficult to not stay with that vendor for additional functionality, such as CRM.

Monday, May 13, 2002

CRM: the ties that bind

Line56 has some good commentary on the impact that enterprise integration tools are having on the CRM market.

For many years, the ERP vendors have argued that their enterprise wide integration gave them a competitive advantage when competing with solutions made up of several best-of-breed vendors. However, using integration tools such as webMethods, Seibel and other best-of-breed vendors are beginning to claim the ability to integrate without a long process of custom development. If successful, this may offer users the best of both worlds: best-of-breed functionality along with comprehensive integration.


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