Wal-Mart pulls back from RFID push in its distribution centers

Wal-Mart, under scrutiny for not meeting its goal of installing RFID in 12 of its distribution centers, is now shifting its focus for RFID to the store level, away from its distribution centers.

Two years ago, the world's largest retailer set a goal for 12 of its warehouses to be RFID-enabled by the end of 2006. But it only reached this objective in five of those centers.

Now Walmart is claiming that its focus for RFID isn't at the warehouse level--it's the store level. In a Computerworld article, Simon Langford, head of Walmart's RFID program comments on the retailer's current efforts:

"We’re focused on the store level," said Langford. "If we focused internally [at the distribution centers], it would provide no value to our suppliers. When we set out on this journey, we really focused on the collaborative benefits; we wanted what was going to drive sales for our suppliers and to get product on the shelf, where it needs to be for our customers to buy."

Langford credited the use of RFID technology with cutting the incidence of out-of-stock products by 30% while improving the efficiency of moving products from backrooms to store shelves by 60%.

"RFID in our stores is going to drive the initial value," he said. "We see distribution centers as coming onstream a bit later."

It would be nice if, somewhere in his comments, Langford would admit that RFID has been more costly, less reliable, and more difficult to implement than Wal-mart originally planned. The 600 Wal-Mart suppliers who were forced to adopt RFID technology under the gun of Wal-Mart's mandate, know this all too well.

Wal-Mart's shift in strategy is symptomatic of a larger slow-down in the adoption rate for RFID in supply chain applications, although the technology appears to be gaining ground in selected uses, such as asset management. For more on this subject, see our recent analysis at Computer Economics on the RFID implementation slowdown.

RFID adoption rates slow

Over at Computer Economics, we've completed our analysis of the current stalling of RFID adoption rates. Thanks to those that answered our call for feedback on this issue. This feedback is consistent with our own survey results.

The good news is that, although RFID implementation is having a slow go in many applications, there are several industries and environments where it is quite successful.

The full analysis is on the Computer Economics website. There is also a free executive summary.

Former i2 CEO learns crime does not pay

Actually, it's worse than that. Former CEO Greg Brady will have to pay $8.3 million in SEC fines to settle charges that from approximately 1998 to 2002 he plotted to overstate i2's revenue by $1 billion. Former CFO William M. Beecher has already agreed to pay more than $2.1 million in a similar settlement. i2 itself paid $10 million in fines back in 2004.

CFO.com has the full story and background on Brady's penalty.

Update, Feb. 18: In the comments, George points out that i2's situation today is entirely different than it was in its dark years early this decade. To be fair, I should point out this recent post where I comment on i2's business today.

i2 innovates with hosted vendor-managed inventory services

Rumor mill: Oracle to acquire SAP

Apparently, the investor community has been abuzz all this week with the idea that Oracle is about to launch a takeover bid for SAP. The gossip even comes with an offer price: 38.5 euros/share ($49.78). The whispers led to some see-sawing of SAP's stock price, though it ended the week lower than it started.

The speculation was fueled by SAP's disappointing financial results earlier this month, though the disappointment was with SAP's failure to meet its own aggressive plans, not with any fall off in its business. SAP's license sales are still growing: last year they rose by 11%.

So, I wouldn't put any credence in the story. Oracle had to fight hard enough to get its PeopleSoft acquisition past the antitrust division of the U.S. Justice department. A bid for SAP would give the combined entity more than 70% of the worldwide enterprise systems market, depending on how you define it. It wouldn't fly in U.S. courts, and it certainly wouldn't be approved in the EU.

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Lawson and IBM team for ERP sales to mid-market

Lawson and IBM announced an agreement today whereby IBM will co-develop, sell and implement Lawson's products specifically for small and mid-size companies in the banking, insurance, fashion/apparel, and food/beverage sectors. Read Lawson's press release for more details.

This is not the first partnership between the two firms. Lawson already has significant connections to IBM in Lawson's Landmark development platform, which relies heavily on IBM's Websphere. The new arrangement brings IBM's services arm into the mix to promote Lawson in these key industries. If embraced by IBM's sales force, it will greatly increase the number of feet on the street pushing Lawson's products.

What's in it for IBM? Pull-through revenue from hardware, tools, and services.

The market is reacting positively to this announcement, with Lawson's stock price up over 5% today. I would wait a few months, however, to see whether this agreement amounts to anything. IBM has made similar arrangements with other software vendors in the past. For example, I recall a partnership between IBM and J.D. Edwards in the late 1990s, where IBM's resellers were authorized to sell JDE to the mid-market. I may be wrong, but I don't believe the program was terribly successful. In a more recent example, IBM and Intentia (coincidentally, now merged with Lawson) formed a similar arrangement in 2003. The press release is still on Lawson's website. But that relationship didn't seem to kick start Intentia sales.

So, I think the partnership is a good idea, but it will take more than an announcement to make it productive. It will be interesting to follow up in a few months to see what percentage of deals in Lawson's pipeline are connected to IBM's sales efforts.

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Oracle does the right thing with open source acquisition

Back in October 2005, Oracle acquired Innobase, the developer of InnoDB, an open source database engine. At the time, I wondered whether Oracle's intention might be to interfere with Innobase's relationship with MySQL, an open-source database product that uses InnoDB as its engine for users that need that want high concurrency, row-level locking, and transactions in MySQL.

At the time I wrote,

The open source community is not quite sure how to interpret Oracle's move. Is it a further endorsement of the open source movement? Oracle has been a huge supporter of Linux, an open source operating system. But Oracle doesn't sell operating systems. Oracle sells databases, among other things. And InnoDB is at the heart of the open source database movement.

The more cynical view is that Oracle is buying InnoDB in order to divert its five (yes, just five) developers away from supporting open source development and the MySQL relationship. The InnoDB/MySQL agreement is up for renewal next year, and Oracle's press release says they expect to see it continue. But who knows?

Well, it's now been over a year, and the outcome so far is encouraging. Zack Urlocker from MySQL writes to me that Oracle has been very good about continuing to develop Innobase and that Oracle renewed Innobase's agreement with MySQL with no changes.

He writes:

Oracle continues to fix bugs and release updates [to InnoDB], which is good. It has been pretty much as before which is in some ways surprising because many expected Oracle to go off in some other direction. But we were very happy to renew the agreement with them under the same terms as before, ensuring that InnoDB is supported as a top notch engine for many years to come. (And that's one of the reasons we made Oracle "partner of the year" at our conference last April.)

So while I think some folks were initially spooked by Oracle's moves into open source, at least on the MySQL front, things have been "business as usual" for us.

But we also recognize that it's good to have other storage engines out there, so there's a growing ecosystem that includes several partners and open source projects, described at www.mysql.com/engines. And we've also launched an alpha of our own "Falcon" storage engine which is targeted to transactional web sites and embedded applications.

Oracle is really being a good citizen in its relationship with MySQL, at least so far. Oracle, like Microsoft, is an easy target, and I've given Oracle my share of criticism from time to time. So, I want to be sure to give Oracle credit when it does the right thing.

Update, Jan. 31: Computer Business Review has more on MySQL and its plan to go public.

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The disruptive power of open source

Zack Urlocker, from MySQL, an open source database developer, called my attention to his blog, where he has been discussing the open source business model as disruptive to traditional software license vendors.

His first post is a good basic explanation of the definition of a disruptive technology.

What makes something disruptive is making it more convenient, simpler, more flexible and sometimes, making it cheaper. Often, for a business to be disruptive it requires a different business model. Sometimes the business model itself is the source of the innovation. The idea of getting DVDs in the mail may not seem radical today; but if you're Blockbuster and you've built your entire revenue on thousands of retail stores, its hard to wrap your head around using a web site to send DVDs out by mail.

In his second post, he goes on to discuss disruption in the software industry, specifically. I agree with everything Zack as written, but I found his comments regarding MySQL, specifically, to be noteworthy:

[MySQL] gets deployed on a lot of niche applications, like web sites, ecommerce, data warehousing, reporting, custom applications and telecommunications infrastructure. And those niches are growing faster than the rest of the database industry.

Typically, MySQL does not replace the existing legacy databases in organizations. In fact, many of our customers are also users of Oracle, SQL Server and DB2. But they use them in different areas. As Charles Phillips from Oracle said a while back: Oracle and MySQL are both in the transportation business. But Oracle is a 747 and MySQL is a Toyota.

He goes on to discuss some specific innovations taking place now at MySQL:

At MySQL, we have long focused on using disruption as a way to make our customers' lives easier. The first stage focused on making developers' lives easier with a no-nonsense database that was easy to use, reliable and fast. The second stage was the introduction of MySQL Enterprise and the Monitoring & Advisory service that makes the DBA's life easier. And now the third stage is to make the IT Buyer's life easier. We are doing that by announcing today something we call MySQL Enterprise Unlimited.

For $40K (the price of a single CPU of Oracle) you can get an enterprise wide use of MySQL Enterprise, with production 24x7 support and unlimited use of the MySQL Network Monitoring & Advisory Service for a year. For customers that are used to spending $1 million or more on closed source licenses, this is a heckuva good deal.

It will be interesting to see how the major software vendors, such as Oracle, view MySQL's further incursions into the enterprise space. One of the characteristics that Zack doesn't mention is that incumbent providers typically don't take the threat of disruptive providers seriously. At first, their technology is viewed as primitive, or even as a toy (think of the Radio Shack TRS-80 PC that first started popping up here and there in corporate settings). The disruptive technology, at first, is only of interest at the low end of the market, the segment that the incumbent vendor has the most difficult time servicing and is the least profitable. But over time, as the disruptive technology improves, it begins to move up-market, eating into the segments where the incumbent vendor really makes money. This has certainly been the case with Linux, which at first was viewed as a hobbyist operating system and now runs enterprise applications. The same thing, hopefully, may be happening with MySQL.

Zack makes good points. (His blog is also a good example of what other software vendors--open source or traditional--should be doing with blogs to better communicate with their customers and the general technology community. Tone down the PR-speak, and just talk to people.)

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New faces at Lawson

It's always good for a company when top executives are coming rather than going. So, I made note this morning that Lawson has picked up three new senior members for its management ranks. Scott Swoish, formerly of PeopleSoft/JDE, is coming in as senior VP of sales operations; Fady Sfeir, formerly of Oracle, will become VP of indirect channels in EMEA, and Barry Wilderman is being named VP of business strategy.

Barry's announcement is most interesting. I met Barry a couple of years ago at an industry conference. At that time, he was a senior analyst at Meta Group, and he had authored one of the best reports I've ever seen on the ERP marketplace. That report, based on a survey of actual ERP implementation experiences, compared the total cost of ownership of SAP, Oracle, J.D. Edwards, PeopleSoft, QAD, and Lawson. As I recall, QAD and Lawson came out the clear favorites in terms of TCO.

According to Lawson's press release, Wilderman "will lead initiatives that link Lawson's overall business strategies and value stories with the organization's sales objectives." His previous work at Meta is certainly consistent with the story that Lawson will want to tell.

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Unlocking value within legacy software vendors

With so much news about vendor consolidation, one might imagine that in a few years the entire market for enterprise software will be owned by SAP, Oracle, Microsoft, Infor, and a handful of other players.

But that won't be the case. The software market is far more fragmented than most people realize. There are thousands of vendors of business applications. Most are small and privately-held, and they are not household names. But they serve real needs, and millions of customers rely upon them.

If you were to plot all business software vendors individually in order of declining revenue, you would see a few tall bars representing the big vendors, such as SAP and Oracle, and then a long, long series of bars tailing off to the right, representing the thousands of software vendors that serve niche industries and business functions. For example, the Open Directory entry for agriculture and forestry software lists nearly 50 vendors, and the page for veterinary business software shows 20 vendors. And that only includes vendors that took the time to get listed.

Functionally adequate but technically dated
So, who are these developers? Some of them are new companies, using the latest software platforms to provide leading-edge applications or serving new markets. But many of them have been in business long enough to have fallen behind the technology curve. They still have customers, even satisfied customers--business users can be notorious for sticking with obsolete technology, such as client-server or even mainframe platforms, as long as it works. But the vendor's business may be stagnating, as new prospects are reluctant to go backwards in terms of technology.

I'd been thinking for some time about the future of vendors that have good solutions and an established customer base but not the resources to bring their products up-to-date in terms of technology. What is the future for such packages?

A new investment approach
Last week I met an associate who has started a private equity fund to specifically address this need. The idea is to acquire such vendors--not to consolidate them or squeeze out costs--but to upgrade their technology and increase their value to existing and new customers. Such an approach may be attractive to private owners who don't have the resources to reach the next level or who are simply looking for an exit strategy that continues to do the right thing for their customers and employees.

If you know of someone who might be interested in more information on this investor, let me know and I'll pass on his contact information.

It's an interesting investment approach and one that recognizes that there is value in legacy systems beyond merely milking the client base for recurring revenues. It will be interesting to see whether other investors begin to recognize these opportunities.

Philly pulls plug on failed Oracle project

For Oracle, Philadelphia is not the city of brotherly love these days. The fifth largest municipality in the U.S. has just killed a project to implement Oracle applications in the city's water department. Furthermore, Oracle has agreed to forgive or pay back a whopping $6.9 million in fees.

The Oracle project was put on hold in October 2005, after the city had spent $18 million with nothing to show for its time and effort. In its place, the city has launched a new project to implement Basis2, a utility billing system from Prophecy International Pty., an Oracle business partner in Australia. The new system will run on an Oracle database and will interface with Oracle E-Business Suite products that the city runs for financial applications. Oracle itself will play no role in the new project.

What went wrong?
There are several hints in a Computerworld story on the situation, concerning the root causes of failure in Philadelphia.

First, it appears that the city did not appreciate the magnitude and difficulty of managing a project of this size, at first putting it entirely under the direction of the users. In light of the fact that their IT experience was limited to a legacy application using punched cards (!), one assumes they were ill-equipped to manage an Oracle implementation.

In contrast, the new project is being jointly managed by the users and the city's IT group. The city's new CIO, Terry Phillis says, "I know it's second-guessing, but the city suffered somewhat by not maturing the organization to care for a project like this." Under the joint-responsibility arrangement for the Basis2 project, he said "We're getting along terrifically. We're singing 'Kumbaya' -- not well, but we're singing it."

Second, the original project included quite a bit of custom software development. Custom development greatly increases the risk in an implementation, especially a large project such as this one, magnifying any deficiencies in project management. In contrast, implementation of Basis2 will require no customization. One wonders why the city didn't try harder in the beginning to find a system that better fit its requirements.

If these are the root problems, then Oracle shouldn't be blamed entirely for the failure, although a give-back of nearly $7 million suggests that Oracle made its own mistakes on the engagement. One suspects that the city had some strong terms and conditions in place for Oracle's performance. If so, at least the city did one thing right.

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