Fusion to build on Oracle's E-Business Suite

It's now clear that Oracle's next generation application suite, dubbed Fusion, will be built on Oracle's flagship E-Business Suite (EBS) data model and business rules. Where Oracle does not have functionality that exists in JDE or PeopleSoft, Oracle will treat these as new requirements for Fusion. But in satisfying those requirements, there is no guarantee that the business process flow of Fusion will match that of today's JDE or PeopleSoft.

Oracle is not saying any of this publicly, not wanting to commit to this direction, but in response to questions along this line it is pointing to a Gartner report that says basically what I've stated in the first paragraph.

The implications for J.D. Edwards and PeopleSoft users are important. While Oracle has promised "lifetime support" for JDE and PeopleSoft products, it is not promising to continue to enhance these products as the rate it is doing so today. Essentially, this means that if JDE or PeopleSoft customers want to upgrade, at some point, they will be looking at a migration to Fusion. The fact that there will not be a merging of code from JDE and PeopleSoft into Fusion means that customers will need to evaluate Fusion just as they would a completely new ERP system.

In other words, for Oracle users, a move to Fusion will be like a major upgrade. For JDE and PeopleSoft users, it will be a completely new package.

The implications for prospects considering a new ERP system are also clear. In my opinion, there are very few, if any, cases where a company should consider JDE or PeopleSoft, knowing that these products are slated for retirement. Lifetime support is a good insurance policy for existing JDE and PeopleSoft customers--those that have already made their investment in these systems. But why would a company, not yet committed, make an investment in products that are not the basis for Fusion? As one CIO told me recently, it would be like making a strategic decision today to buy IBM's Informix database. Sure, IBM still supports Informix, but that's not where it's making its major investments.

The JDE resellers may argue. But the fact is that many of them are already selling EBS along with JDE or are planning to do so. There will be a lot of work going forward to support JDE customers--even more work, perhaps, to support those that want to migrate to Fusion. But I expect that new sales for JDE are already tapering off and the resellers know this.

Do you have a different opinion? Leave a comment on this post or email me.

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Oracle's new reseller strategy and speculation on the future of JDE

Infor's support for Lilly Visual customers

A source inside Infor contacted me regarding a post I wrote earlier this month on open source ERP gaining adherents. His issue is not so much with the main point regarding the growing attraction of open source ERP. Rather, he believes that the eWeek article I referenced misrepresents the experience of Lilly Visual customers since Lilly was acquired last year by Infor.

He writes,

The idea that customers are leaving VISUAL software in droves is absolutely inaccurate. In our fourth quarter in the U.S. alone we sold 50+ new sites of VISUAL. It was an all-time best quarter for us at Infor in general. We still support our VISUAL customers as always through our affiliate channel. That has not changed one bit. The core organizational structure in Hampton, the former headquarters of Lilly, is still intact.

The eWeek article references the opinion of one customer leaving VISUAL. It should also be noted that we came out with release 6.51 in January, and 6.5.2 is coming out September 1st. So those who say that there have been no core enhancements have not looked at the two previous releases. We also continue to add integration for point solutions from other products in the Infor line.

I have not had any recent first hand contact with Visual customers to check their experience with Infor's support since acquiring Lilly Software. I've noted in the past that Visual had built out some nice functionality for lean manufacturing and constraint-based scheduling. I would love to hear first hand reports from customers of Infor's continued support and enhancements to the product.

If you're a Visual customer, feel free to email me or add a comment directly to this post.

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Open source ERP gaining adherents
Infor aquires Lilly Software: vendor consolidation continues

Made2Manage marks sixth acquisition with bid for Intuitive

Made2Manage is adding to its portfolio of discrete ERP systems with its acquisition of Intuitive Manufacturing Systems, announced today. The deal is the sixth for M2M since it went private in August 2003.

Although Intuitive is an old name in small and mid-size ERP, it has been rewritten recently and claims to be now 95% based on Microsoft's .NET framework. It has been on a small acquisition binge of its own, having acquired SupplyWorks, a supply chain management vendor, in March, and Relevant, a specialist in aerospace, engineer-to-order, and MRO businesses, which Intuitive picked up in April.

I'm generally skeptical about the value of a vendor rollup to customers of the target vendor. Too often the new parent either scales back enhancements to improve profitability of the maintenance stream or puts customers on a migration path to some successor system. Made2Manage gets a pass, though, in my opinion. They appear to be running each of these acquisitions as a separate organization, for the most part, but introducing some economies of scale and best practices in sales and support processes.

One source of mine, inside Intuitive, is quite positive about the deal, and I don't think he's spinning me on it.

There's more in the press release on M2M's website.

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Making money in software with a niche-industry strategy

Open source ERP gaining adherents

Open source ERP systems--thus far a small slice of the market--are becoming more attractive in light of the rapid vendor consolidation of commercial ERP packages.

At least that's what this eWeek article claims.

The director of operations at Marena Group, a manufacturer for post-surgical garments, [John] Rogelstad had a Lilly Software Associates ERP system in place, but after Lilly was acquired by Infor Global Solutions, he found a dramatic decrease in support. With several big IT initiatives in the pipeline, Marena started to feel uneasy with Infor as a partner. "We felt like since Infor acquired Lilly, they were getting very bureaucratic and disorganized. Our sense was they were more interested in acquisitions than working on their core product or developing a new core," said Rogelstad in Lawrenceville, Ga.

Rogelstad chose OpenMFG, a quasi-open-source system, as a replacement for Infor's Lilly.

The article also highlights implementations of another open source ERP system, Compiere, at Pertronix, in San Dimas, CA, and at e-BuckMail.com, in Hudson, WI.

Although open source applications, especially enterprise systems such as ERP, are not as widely implemented as open source infrastructure software, such as Linux and Apache, the trend does seem to be increasing. Clients used to point to the assurance that commercial software vendors stood behind their products, promising support and investment in R&D. But with the acceleration of vendor consolidation and the sunsetting of products, those assurances aren't what they used to be.

The continuity of support for open source systems, which depend on a network of interested parties, starts to look like a more attractive model.

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Why organizations choose open source software

IT budgets as percent of revenue at highest level since 1997

After six months of work at Computer Economics, we've now released our 17th annual IT spending and staffing study, and the findings are quite interesting.

We found that median corporate IT spending across all industry sectors in the U.S. and Canada has now reached 2% of sales, the highest level this metric has shown since 1997, during the build-up to Y2K, when it hit 2.2%.

The 2% ratio this year is an increase from 1.7% in 2005, as shown in Figure 1.

Effectively, the growth in IT spending as a percent of revenue means that IT budgets are increasing faster than corporate sales. This is confirmed by the study, which shows that the median growth in IT spending on a dollar basis across all respondents this year is 4.1%, outpacing the 2005 U.S. GDP growth rate of 3.5% in 2005.

So what are companies spending all this money on? Our study finds IT staff is not at the top of the list. Although there are more companies adding IT staff than cutting headcount, the median increase in IT staff this year is only 2.0%, about half the rate of the increase in IT spending.

The study found that IT spending growth is strongest in business services, where it shows a 9.7% increase over last year, followed by healthcare, pharmaceuticals and medical devices, retail, and banking and finance organizations. Weakest growth, though still positive, is seen in the process manufacturing, utilities/energy, and wholesale distribution sectors.

The Computer Economics IT Spending, Staffing, and Technology Trends study, now in its 17th year of publication, provides dozens of additional ratios and other metrics for the composite sample, by organization size, and by industry sector. Statistics include benchmarks for IT operational budgets, IT capital budgets, IT staffing, technology adoption rates, ROI and TCO, and outsourcing utilization.

The study is available for purchase from the Computer Economics website.

A FREE 34 page executive summary is available upon request.

Loosening Microsoft's hold over midmarket software vendors

Michael Vizard writes at eWeek's Channel Insider that some application software vendors are growing cool in their attitude toward Microsoft, as the software giant is increasingly moving onto their turf. He says that because the small and mid-size business (SMB) market is dominated by Windows, it has been a natural platform for software vendors targeting that market.

But a curious thing is starting to take shape in the SMB market as the loyalty to Microsoft among ISVs in this space becomes increasingly strained. The process that drove a wedge in that loyalty was Microsoft's decision to acquire a number of companies and begin aggressively marketing applications targeting the midmarket space. This naturally set ISVs on edge, with many of them shifting their stance from being pro to neutral about Microsoft to being neutral or against.

Vizard points to Cognos and Sage Software as two examples of vendors moving away from the Microsoft camp.

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Is Microsoft dying?

CDC Software weirdness

Earlier this month, Made2Manage and Onyx Software announced their agreement for Onyx to be acquired by M2M. Now, CDC Software, a Chinese software company based on Hong Kong is making a third offer to acquire Onyx, after having been rejected twice before by Onyx.

Josh Greenberg writes in Datamation about CDC's difficult-to-fathom behavior:

Onyx’s weird trip started last December, when it received an unsolicited bid from CDC, a Chinese company that previously had bought up two minor companies, CRM vendor Pivotal Software and ERP vendor Ross Systems.

According to filings by Onyx, CDC embarked on a strategy of mixed messages and seemingly bizarre behavior, setting up meetings with Onyx executives and then putting out press releases claiming that Onyx was avoiding CDC. After a few weeks of this kind of behavior, CDC retracted its bid, only to reinstate it in March.

Even at this writing, with the M2M deal looking like it will gain widespread shareholder acceptance, CDC continues its pursuit of a very unwilling Onyx, claiming publicly that the fees Onyx would have to pay to retreat from the M2M deal were "unusually high" and offering to fight the fees in court. Meanwhile, CDC has written to the SEC claiming that Onyx failed to consider other legitimate offers. And so the saga continues.

CRM News has more on the CDC/Onyx drama.

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Onyx CRM to be acquired by Made2Manage

Onyx CRM to be acquired by Made2Manage

Onyx Software becomes the latest catch for Made2Manage, which continues to build out its portfolio of software offerings. Onyx is one of the last remaining standalone CRM vendors.

The deal is worth about $92 million, all cash, and is expected to close in Q3.

In picking up Onyx, M2M is making an exception to its strategy of focusing on niche industry solutions. The deal appears simply to provide M2M with a good horizontal CRM product that it can offer to new prospects or cross-sell to its installed base.

M2M plans to operate Onyx as a separate business unit.

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Making money in software with a niche-industry strategy (overview of M2M's strategy)

Why organizations choose open source software

Si Chen gave a presentation at the Enterprise Open Source Conference in New York this week on, Why Enterprises Are Adopting Open Source Applications. Chen and his firm, Open Source Strategies, are one of the driving forces behind the open source ERP application Open For Business (or, Open4Biz, or OFBiz), so he's well qualified to talk on this subject.

He's also posted his entire presentation transcript along with the slides on his blog. It should be required reading for anyone wondering what open source is really all about.

Chen starts by listing three companies that have adopted Open4Biz and why they went the route of open source:

• Ameniti Travel Clubs, a subsidiary of UAL Corp and a sister company of United Airlines. They chose open source because it is easy to modify and allows them to move quickly with new business opportunities.
  
  
• Snaidero Engineering and Trading, a subsidiary of the Snaidero Group, Italy's number one kitchen cabinet manufacturer. They liked the freedom to customize open source and implement it in many sites around the world without having to pay additional license fees every time they redeployed it.
  
  
• British Telecom, one of the largest telecom firms in the world, which is implementing the Open4Biz application to support catalog management and online ordering for mobile products and services. Chen says, that British Telecom "will be serving all 18+ million residential and commercial customers in the United Kingdom with this system. As such, it is a very large deployment: they are scaling it out to support up to 16,000 simultaneous visitors using a cluster of 72 CPU's."

Concerning why British Telecom chose open source, Chen says,

When we asked British Telecom why they are going the open source route, we got a very interesting answer. The commercial solutions they looked at were expensive, given their volume and growth rate. It would have been several millions British pounds a year. More importantly, the commercial solutions would have still required a lot of coding and development. So it's like spending a lot of money to buy one of those mail order toys, only to get a box full of little plastic parts that you have to paint, glue, and assemble. Not much fun.

Conversely, with open source, they found that it had a reasonably good fit for their requirements. It still needed work, but they thought it was a good strating point because of a "well thought out data model," and it was "easy to change." Best of all, it was free, so the low cost helped as well.

The second part of Chen's presentation focuses more generally on the reasons that organizations choose open source over commercial software. Here he has a balanced view. His basic premise is that commercial software is the best choice when user requirements are generally the same across many organizations, there is little need for customization, and commercial software is not costly.

Conversely, however, when the organizations requirements are unique and there is the need to modify the software and the cost of commercial software is prohibitive, then open source is a good choice.

Although Chen doesn't put it this way, the point I got from this is that open source really shouldn't be viewed as an alternative to commercial software--it is an alternative to in-house custom development. Where companies today are spending much energy and effort to custom develop applications to support unique requirements, they really should be investigating whether there is an open source product that can be used as a starting point. The open source approach gives a head start to the development team and it also has the potential to leverage other development efforts of other organizations that are investing in the same open source product.

Chen has several other good points, which I won't elaborate on here. He talks about how service oriented architectures and the trend toward software as a service are catalysts for open source. He also talks about the current software vendor consolidation trend as reducing the choices in commercial software and thus strengthening the alternative of open choice.

I met Si Chen for coffee late last year and was impressed at the time with his vision for the potential of open source to change how business applications are developed and supported. Now, nine months later, he's still convincing.

Read his whole presentation on his blog.

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Key advantage of open source is NOT cost savings
Open source: turning software sales and marketing upside down
Buzzword alert: "open source"

Linux vs. Windows survey results

At Computer Economics, we've completed analysis of our survey on Windows vs. Linux as a server operating system.

For those that participated in the survey, thank you, and the full report will be coming your way shortly.

An executive summary of the Windows/Linux study is available at Computer Economics.