In my Part One posting, I shared commentary on the changing business model of providing industry analyst services catered to global supply chain process and technology selection needs.

In this posting I will focus on various implications for Gartner’s integration plans involving AMR Research and what they may mean for your firm’s specific supply chain research needs.

 Gartner’s Integration Plans for AMR

Specifics as to how Gartner will ultimately integrate AMR into its existing business model will not be completely clear until the acquisition agreement is consummated.  A Gartner webcast directed to the AR was held this morning and did shed more aspects to Gartner’s intent going forward.  There are many in the blogsphere who are speculating on how the integration model would evolve. I tend to believe Gartner would not be prudent in deciding to phase-out the AMR brand, and that was clearly stated by two of the Gartner senior executives participating in this mornings briefing.

AMR’s greatest asset is its 45 analysts, the actual core of its intellectual capital. Gartner executives will very clear this morning in stating their firm’s greatest respect for the AMR brand and unmatched research directed at supply chain functional audiences.  In my view, they acknowledged that dedicated research advisory services targeting you, the global supply chain community has definite value.  My takeaway is that at least in this point of time, Gartner’s strategic intent is to operate AMR as a separate boutique-like research company operating under the Gartner umbrella of research services.  The acquisition in essence will allow Gartner to leverage the AMR brand through its globally based sales and services platform. What that will mean to the long-term pricing of these services is an obvious open question.  Supply chain professionals should look to those responsible for industry analyst relations to try to assess long-term pricing implications

The notions of integrating research among Gartner’s existing combined ERP and supply chain practice which currently contains approximately 25 analysts, with AMR’s existing ERP and supply chain analysts was also addressed and somewhat put to rest.  Gartner’s senior vive president of research. Peter Sondergaard stated Gartner’s clear intent is to retain all of AMR’s research analysts and to maintain the AMR research as a separate and distinct research organization. Gartner executives also noted that the AMR office in Boston will remain.

Another area of concern would be AMR’s current coverage of supply chain strategy challenges with specific industries, for instance high tech, consumer electronics or life sciences.  That seems to be very unclear at this point, since Gartner’s industry research model is focused more to the IT community.  .

AMR’s other noted value was its high-touch client model, where clients could gain timely access to an individual analyst. My own experiences as a product marketing executive in dealing with Gartner analysts, or attending a Gartner conference along with thousands of other attendees, are that one-on-one analyst contact is a rather difficult challenge, and when you do get that access, the analyst is often under enormous time pressures to get to the next appointment. Gartner acknowledges this as a best practice, and at least at this point is willing to explore this as a continuing aspect of the AMR business model. Gartner executives also acknowledged the value of AMR’s dedicated supply chain conferences, and flatly stated that the AMR 2010 Spring Supply Chain Conference will continue as planned.  There were additional statements noting that there may be discussion to replicate the dedicated supply chain conference model for European and Asian audiences as well.

Gartner’s press release outlining the acquisition specifically notes that one of the attractions of this deal was the opportunity to both upsell AMR clients with broader Gartner services, and cross-sell Gartner’s existing clients with specialized manufacturing and supply chain services.  This obviously implies maintaining the AMR brand, but I wonder how many existing AMR clients, whether sole AMR or already existing Gartner clients, will take kindly to a barrage of up-sell or cross-sell thrusts. I tend to agree with Lighthouse in the notion that some existing Gartner clients who are AMR clients will initially demand AMR services be bundled and not incremental. Exiting AMR clients, who’s contracts expire in December, may have to determine whether renewal to lock-in the 2010 AMR pricing makes business sense, or wait until the acquisition closes to leverage both services.

Acquisitions are also motivated and fueled with the need to garner additional cost and efficiency savings. One can speculate that back office editorial and office services staff will be targeted for consolidation, and AMR analysts will be asked to do more.  The differences in corporate culture are stark, and take it from me, analysts do not take kindly to compromising the quality of their research or access to clients.  If existing AMR analysts later decide to move on, than the depth of the IP for manufacturing and supply chain may well be compromised.  Gartner had better pay close attention to making this integration a win-win for all.

Again, if your firm is an existing AMR client, or both an AMR and Gartner client, insure that your analyst relations or product marketing teams are paying due attention to how this integration is progressing, and who analyst are reacting to the change.

And as always, you can continue to turn to blogs such as Supply Chain Matters for timely information and viewpoint. In our Part Three posting, we will share comments on evolution of new advisory models.

 Bob Ferrari

I wanted to post a follow-up to my recent Supply Chain Matters commentary regarding whether CEO’s were currently positioning more for market dominance or re-building value-chains for post recession recovery.  My initial commentary reflected on contrasting the $38 billion in acquisition activity during just the past three months, and whether such investments were strategically positioned to gain market share or ramp-up value chains.  A CEO advisory panel statement lamenting that U.S. job growth is hindered by access to capital was what motivated my posting, and my arguments had context to what was motivating current acquisition  vs. hiring activity. You can view the entire posting and share your own views.

Last week however, the Wall Street Journal featured another article (subscription required) providing a somewhat different angle, namely that recent acquisitions amount to “vertical integration” of value-chains.  Specific examples cited were Oracle‘s acquisition efforts directed at Sun Microsystems, ArcelorMittal, PepsiCo Inc., General Motors and Boeing, but with varied reasons.  They included more control over raw materials (ArcelorMittal), added control of distribution (PepsiCo Inc), or assuring reliable quantity or quality of component supply (GM and Boeing). The premise left for the reader to conclude is that vertical integration has returned in a more nuanced form- acquiring key portions of a value-chain to achieve opportunistic business needs.

I do not subscribe completely that this is a sole vertical integration premise.  My view is that actions to date have had more to do with business events and markets vs. overt strategy.

Boeing and GM were compelled to act to ensure reliable supply because each of these companies had major interruptions or snafus in supply, either brought on by the cumulative effects of the global financial crisis or supplier-related and other failures encountered in their original outsourcing strategies.  Supply Chain Matters has featured multiple posts regarding the outsourcing breakdowns involving Boeing and others. These were not pre-planned acquisitions, but rather responses to mitigate critical supply risk.  Likewise the example cited of Johnson Controls taking a 70% stake in the business of a bankrupt supplier.

The noted example of ArcelorMittal moving deeper into previous raw materials businesses might well meet the criteria of vertical integration.  A noted blogger focusing on the metals industry, Lisa Reisman, noted recently in the MetalMiner blog that there is indeed evidence that vertical integration is alive in the metals sector. I respect Lisa’s knowledge of that sector.

The example of Oracle is the most interesting to reflect upon.  The article quotes statements from Oracle CEO Larry Ellison as indicating he wants to sell “complete systems” made of chips, computers, storage devices and software, in essence the former IBM business model of T.J. Watson. The WSJ reporters were savvy enough to also point out that Oracle’s original intentions back in March were to just acquire the software aspects of Sun, but when IBM neared a deal to potentially acquire Sun, the deal expanded to all of Sun. Also noted was Sun’s previous reliance on a vertical integrated value-chain and its failure to keep-up with innovation and changes in its market.

Obviously, there is a lot to ponder regarding positioning a value-chain strategy in this post-recessionary environment.  Supply Chain Matters and others have raised arguments for firms focusing too much on seizing market share at the expense of value-chain capability, being compelled to mitigate supply risk because of value-chain interruptions or the need for being more strategic in value-chain positioning. 

What does all of this discourse have to do with your role as supply chain professionals?

It implies that you can no longer view the upcoming era of business from just a functional stovepipe viewpoint.  Supply chain capability and performance have indeed become much more critical to the overall success of the brand and the business.  Sourcing of suppliers or production must include reliable and consistent supply along with competitive cost. Outsourced design or production must always be grounded in continuous innovation, competency and protection of the brand.  Decisions must be made with information capabilities that focus more on what will or can occur vs. what has occurred in the past. Cost and headcount cuts can yield targeted savings for the overall business, but there comes a point where you hit the marrow of the supply chain’s ability to adapt to changed business needs or new business models.

In the “new-normal” of post recession recovery, customer, market ,and industry forces will continue to cause change at a much more rapid pace, and supply chains will be involved in many aspects of these changes, both positive and negative in nature. Roles in the extended supply chain will require more broad based collaboration, with cross-functional, IT, risk management and geographic based knowledge.

CEO’s and senior management will make rational and sometimes non-rational decisions, but hopefully an informed voice of value-chain capability and knowledge will also be at the decision table. 

Your role and mine is to insure that we become a part of that voice.

 Bob Ferrari