Supply Chain Matters was invited to attend Oracle’s Industry Connect Conference held in Boston at the latter part of March. The conference drew a large compliment of attendees, featured three industry tracts, along with a focus on program management. We enjoy attending industry focused events because they provide a keener sense of industry-specific challenges, viewpoints and perspectives. We encourage technology and services providers to host more such events.
Due to a commitment to attend another event, we devoted the majority of our limited time focused on the Retail industry tract of speakers, but did manage to catch a cross-industry panel discussion featuring the theme of the Customer Experience. One clear theme brought out by this panel was that nearly every industry sector is adjusting to more demanding and more personalized experience factors concerning customers. Healthcare consumers now have many more choices for an healthcare provider and with a new emphasis on wellness, consumers have higher expectations as to the healthcare experience. Retailers are of course, continuing to deal with the shift of information power to the side of online and mobile-based consumers. Fellow blogger and panelist Vinnie Mirchandani pointed to the trend of mass customization of products as the antidote to commoditization.
We attended a Retail focused panel discussion of executives representing Deckers Outdoors and Scheels moderated by Susan Reda, Editor-In-Chief of Retail Stores Magazine. One statistic shared was that 73 percent of shoppers want an empowered shopping experience. A retail presence provides the opportunity to connect the passion of consumers with the passion for brands. Both retail executives provided clear examples of how their retail brands concentrate on the consumer experience, community outreach and provide a focused destination for consumers. As an example, Scheel’s is a sporting goods chain that features a ferris wheel, deli restaurant or fudge in any one of its 25 retail outlets. Community outreach includes sponsorship of local athletic or recreation events. A further common theme was a recognized need for the creation of a singular leader for Omni-Channel operations that span both brick and mortar and the online customer fulfillment experience.
Another insightful session titled How to Counterbalance Instinct with Data-Driven Insights, delivered by John Bible, Senior Director of Retail Data Sciences at Oracle, contrasted two distinctly different approaches to retail. Bible contrasted Amazon’s retail strategy initiatives as those posed as a software engineering problem contrasted to brick and mortar retail brands whose retail strategy focuses on the retail experience and destination. We found that comparison rather insightful. Consumers have tendencies toward cognitive biases and have tendencies shop based on existing beliefs and group dynamics such as consumer feedback on products. The notion of the “wisdom of crowds” is a rather real consideration. An important conclusion was that decisions supported by time-series forecasting and planning can no longer keep-up with constantly changing buying trends. Instead, decisions need to be supported by more-informed insights
Continuing on today’s theme of advanced technology supporting product innovation and management, another interesting announcement came to our Supply Chain Matters awareness.
Oracle announced today a new application termed Oracle Innovation Management, reportedly designed to help organizations make faster and more informed product management decisions.
According to the product announcement, this application was designed to support both bottom-up innovation and top-down financial impact and strategic fit analysis. The tops-down aspect comes from analysis tools directed at product innovation compared to stated business objectives such as revenue, profit or resource constraints. It was further designed to integrate with this ERP provider’s existing Oracle Agile Product Lifecycle Management, to provide needed integration to product management planning and controlled release to manufacturing, and will be a resident application within Oracle Value Chain solutions. Oracle, along with SAP, has PLM technology position under the broad umbrella of supply chain management focused applications.
Supply Chain Matters has not had the opportunity thus far to review this new application and we hope to do so in the coming weeks and add more detailed perspectives in a follow-on commentary.
Supply Chain Matters does not elect to echo technology vendor announcements unless we feel such announcements should capture the attention of our readers. This week, B2B procurement platform provider Ariba, now an SAP company made a rather noteworthy announcement in conjunction with this provider’s annual Ariba LIVE customers’ conference being held this week.
The announced application is targeted at managing supply chain risk, and adds predictive analytics capabilities that extend beyond typical B2B supplier management or procurement spend analysis applications. Ariba developers teamed up with Supplier InfoNet, another SAP company to allow users to capture many forms of structured and unstructured information to develop a risk profile among key suppliers. All of the data and information is captured on an SAP HANA© database platform.
Such information is that currently provided on the Ariba platform that includes structured vendor master data, supplier key performance indicator data, along with financial profile data from external sources. Augmented additional support for capturing unstructured data related to specific suppliers is provided by Supplier InfoNet. That would include news filters involving 160,000 news wires along with social media extracted and other focused unstructured information. Supplier InfoNet’s leveraged use of the SAP HANA platform provides additional for additional capabilities for predictive analytics to be layered across these combined information streams, allowing for a form of machine learning relative to patterns of information that would correlate with expected outcomes, such a supplier major disruption or failure. The important benefit for Ariba and SAP centric procurement teams is the ability to capture a much broader array of data and information across multiple systems landscapes with the ability to be more proactively alerted to risk conditions among multiple tiers of the supply and value-chain.
In a brief briefing by Ariba and Supplier InfoNet executives, Supply Chain Matters ascertained that to gain this new supply chain risk mitigation capability, customers will have to incrementally license Supplier InfoNet if they have not already done so. We were additionally informed that no separate licensing of HANA is required for this functionality. Further, the widely speculated transition of the majority of Ariba functionality to the SAP HANA platform will take far more additional time, with Ariba reluctant to commit to hard timelines. That is not surprising given that a significant amount of existing customers support the Ariba Network with non-SAP databases such as Oracle. However, it seems clear that Ariba’s strategy is committed to gradually transition its data and informational compute functionality to SAP HANA, starting with Ariba Spend Visibility.
Ariba further announced today that AribaPay, a cloud-based B2B payments application, jointly unveiled last year with Discover Financial Services will be offered for general availability in the United States during the second quarter of 2014. The application combines Ariba pre-settlement business collaboration with Discover’s global payments infrastructure to effect supplier payments. Arlington Computer Products is featured as a lighthouse go-live customer.
April 7, 2014 Readers Note: The below posting has subsequently been edited from its previous appearance because of communication received from Gartner, Inc. Office of Ombudsman regarding Gartner Copyright and Quote Policy.
Last week Industry analyst firm Gartner released its 2014 Magic Quadrant for Supply Chain Planning System of Record technology. We compliment Gartner for somewhat more rigorous ranking criteria in the latest iteration.
From our Supply Chain Matters point-of-view, there is an important takeaway concerning this year’s rankings of vendors. Four of the total five vendors ranked in the upper right-hand quadrant, those that Gartner ranked as leading on completeness of vision and ability to execute, are all termed best-of-breed vendors in supply chain planning. If one adds the three other vendors ranked high in completeness of vision (lower right-hand quadrant), there are seven of eight best of breed vendors listed.
Common themes were broad vision, completeness of functionality in terms of supply chain process maturity and the quality of customer references and satisfaction rankings. Another important aspect to the rankings was customer’s use and dependence on a single planning platform. Much of this is reinforced in the individual listings of individual vendor strengths. These overall strong rankings of best-of-breed SCP vendors reinforce that product innovation, attention to customer process needs and overall solution value for the customer remains an advantage for this family of vendors.
For non-subscribers to Gartner’s supply planning research, a summary of this report can be viewed at this web link.
Industry Analyst firm Gartner has issued a new advisory, namely that CIO’s and their IT teams must take action to address the fast-approaching reality of ‘legacy ERP’. According to Gartner’s latest prediction, by 2016: “heavily customized ERP (Enterprise Resource Planning) implementations will be routinely referred to as ‘legacy ERP. CIO’s and application leaders must take action to address the fast-approaching reality of ‘legacy ERP.’”
Pause for a moment and reflect on the above statements. The analyst firm that first introduced the applications IT market to the concepts and benefits of Enterprise Resource Planning systems along with the rating of capabilities among ERP vendors so many short years ago is now raising warning flags for technology end-users. A Gartner Vice President observes: ”The need for agility and responsiveness has led highly customized ERP implementations to an impasse, creating a subset of legacy ERP installations that must be dealt with constructively.” Similarly, analyst firm IDC has been strongly urging IT vendors to concentrate all future applications development on the so-termed “Third Platform” namely cloud, mobile and business intelligence enabled applications.
From our experience within the industry analyst world, that is the clearest acknowledgement by the traditional analyst firms that traditional ERP platforms and applications are struggling to keep pace with supporting required business change utilizing legacy behind-the-firewall applications. Keep in mind that these same analyst firms garner significant revenues from ERP vendor clients but must advise multitudes of end-users.
Most in the supply chain and B2B fulfillment community who have had any experience with information systems or transformation initiatives have long discovered the obstacles and pain levels associated to highly customized ERP systems. Customization becomes a significant obstacle to timely business process innovation not to mention the heartburn for streamlining information flows and decision-making. Legacy ERP was constructed with the design principle of inside-out control, but today’s businesses are faced with the challenge of outside-in information, planning and decision-making needs.
IT leaders who follow Gartner’s research may recall that a couple years ago, the analyst firm articulated three layers of systems innovation:
Systems of Record (presumed to be legacy ERP systems)
Systems of Innovation (presumed to be best-of-breed or cloud-based point solutionbs_
Systems of Engagement (presumed to be extensions social based systems in the concepts of Facebook, Linked-In, Twitter and others)
A new reality is occurring however, at a far more rapid pace. Business and supply chain functional teams are stepping-up to accept more time-phased accountability for delivering required business outcomes or dynamically responding to ever changing business process requirements. Accountability includes more responsibility in IT applications funding and selection. The CIO and his/her IT teams have similar strategic needs to accelerate the pace of business innovation but also reduce the legacy IT infrastructure costs.
As noted in Prediction Ten of our 2014 Predictions for Global Supply Chains, the fate of technology investments now rest in the hands of business and supply chain teams, with the counsel and assistance of IT. The days of multi-year, highly disruptive IT transformation has been subsumed by highly targeted business process initiatives directed at phasing-in continuous improvement capabilities toward a desired business end-goal.
Gartner, IDC and indeed ourselves in our advisories are acknowledging the reality of today’s IT landscape, namely that continuous innovation and faster time to business value dominate the C-level agenda. Leveraging the technologies of cloud and mobile computing, deeper business analytics and faster decision-making processes are increasingly looked upon as systems of innovation and engagement enablers.
Need more evidence.
SAP, a major player in ERP, announced to its investors that it has elected to forgo previous profitability goals for the next two years in order to accelerate development efforts to transform its business suite of applications to better leverage cloud platforms. Co-CEO Bill McDermott told investors: “we have bold ambitions in the cloud.” Bloomberg reports: “SAP is searching for a balance between expanding cloud-software offerings and safeguarding its mainstay license business.”
Similarly, Oracle has been aggressively investing in cloud offering through both acquisition and internal development as are many other ERP providers.
In today’s new normal of business, industry competitiveness is predicated on seizing market, product and services opportunities quicker and faster than competitors. The new realities of business imply a globally based supplier and trading partner ecosystem bringing increased dimensions of complexity, scope of control and risk. The IT applications landscape supporting end-to-end supply chain business process innovation will benefit from the rapidly changing applications development trends being enabled by today’s cloud, mobile and analytics technologies.
Heed the growing evidence that highly customized ERP systems are headed toward legacy status and systems of innovation, engagement and deeper supply-chain-wide intelligence and insights should be your organization’s priority.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Last week, enterprise software vendor Oracle reported slightly increased revenues and profits for its fiscal Q2 financial results, and the implication remains for much higher Wall Street expectations for the company.
Revenues for the November ended fiscal quarter climbed a mere 2 percent while net income declined by 1.1 percent.
All-important software license and cloud subscription revenues slightly declined by 0.4 percent, which now reflects nearly 8 quarters of less than 5 percent revenue growth. However, Oracle management indicated that bookings for cloud-based applications actually increased by 35 percent and that the cloud-based provider will continue to compete aggressively among rivals in this market segment. To support that claim, the company forecasted between a 2 percent and 12 percent revenue increase from new software sales and subscriptions in this current quarter, which overlaps with customer’s calendar year closing quarters.
Prior to the earnings announcement, two Wall Street research firms, Jeffries and RBC Capital, released bearish comments regarding Oracle, lowering full year revenue forecasts for the company. The firms question increased competition in the database segment as well as increased competition from cloud providers Salesforce.com and Workday.
Supply Chain Matters is of the viewpoint that competition in the entire enterprise software and cloud-based software segment will greatly intensify in 2014 as the larger vendor’s battle for all-important market-share dominance. They all need to convince investors of the long-term growth and profitability aspects of this business model, especially in the light of the billions spent on acquisitions of multiple smaller cloud-based providers. IBM, SAP and other enterprise vendors have not exactly impressed investors with blowout revenues and earnings.
Last week, Oracle additionally announced that it had acquired email marketing automation provider Responsys Inc. for $1.5 billion, at roughly a 38 percent premium over the then current listed stock price. There has been strong speculation that other vendors including SAP were also looking at the company. Oracle had previously acquired Eloqua, another cloud-based player in the marketing automation segment.
As a whole, the large enterprise software vendors need to step-up their game in integrating all of their cloud-based acquisition prizes into the most attractive value-proposition for customers. That may include aggressive pricing and discounting to gain market-share hold.