Last week, I pondered over business media reports that indicated that ad sales surrounding broadcast television were decreasing at a considerable rate. The reasons are somewhat obvious; more people are turning away from broadcast networks with a preference for online digital platforms for entertainment and news. I can observe this trend succinctly in my extended family and friends.
Digital platforms provide for more audience segmentation because we as consumers and customers seek out specific online sites that provide value as well as entertainment. This applies to both personal and more and more, business and personal career needs as well.
Marketing teams within B2C customer environments are certainly well aware of these trends as they continue to shift significant aspects of marketing spend towards more focused online channels. I wonder, however, if B2B marketing teams, especially those firms offering supply chain, procurement, manufacturing and product lifecycle management technology and services have truly internalized these same trends.
It is too often in my observations and associated conversations with technology marketing teams that I note that a high percentage of their marketing budgets are allocated to sponsoring attendance at industry or trade events. Why? Because their direct sales teams constantly seek venues to meet and mine “prospects”. However, in the case of supply chain focused events, there is the brute reality of far too many events chasing limited demand.
If your email is like mine, a day does not go by without multiple notifications of upcoming supply chain focused events. Professional organizations pay to play conference firms, trade and media publications, industry analyst firms and technology providers themselves barrage industry professionals with conference attendance opportunities. But, the obvious reality is that anyone in a supply chain or manufacturing focused position is far too occupied in getting his/her job accomplished on a day-to-day basis to find the time to attend multiple events on a year round basis. If they do attend such events, it is often a regional or trusted event requiring manageable justification and opportunities for networking with peer professionals vs. technology focused salespeople. Once more, in this era of globally focused supply chain networks, people are constantly mobile, traveling on business or visiting remote locations. Hence, they have learned that seeking supply chain information and insights can be selectively accomplished online. Yet, marketing teams continue to shell out thousands and thousands to support an annual trek of conference events, hoping that their sales team will find that one golden prospect.
The coming few weeks are the period where marketing budgets for the coming calendar year are compiled, reviewed and approved. We continue to advise that the same current realities of online apply to supply chain, manufacturing, procurement and product management communities. Why cast a wide net when online properties provide the segmented audience your products or services require? Why ignore the compelling benefits of social media and digitally-focused inbound marketing based initiatives that provide constant, around the clock brand impressions as opposed to a singular one-time event where conversion rates are questionable?
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Business and social media is abuzz with today’s announcement that two long-time rivals, Apple and IBM, are teaming-up in an alliance to create simple business apps on Apple’s iPhone and iPad devices. As pictured in the Times Square featured announcement, both CEO’s are pictured in a casual and friendly stroll.
The obvious question is which of the vendor’s benefit the most from the proposed alliance. Another question is the potential impact on supply chain and B2B business network technology deployment. In this Supply Chain Matters initial viewpoint commentary; we briefly dwell on both questions.
Under the alliance, IBM will create what is termed as “simple” business apps leveraging the respective Apple mobile devices. IBM employees will further provide on-site services and support for Apple mobile devices. Of more interest is the report that IBM is planning to make 100,000 employees available to the Apple imitative, which is rather significant. Both alliance CEO’s made themselves available for a joint media interview. IBM CEO Virginia Rometty indicated: “This is just the beginning” and Apple CEO Tim Cook indicated: “This is really a landmark deal”. The apps themselves are reported to draw on IBM’s computing services including security, device management and big-data analytics. Apple and IBM engineers will jointly be developing more than 100 new business applications tailored for specific industry needs. The apps will begin arriving in the fall and IBM will resell iPhones/iPads containing the apps to its business enterprise customers.
The initial online consensus is that both vendors will benefit from this alliance and this analyst shares that opinion. Apple has struggled to penetrate the coupling of its mobile devices with business enterprise applications since the market continues to perceive the company as just a consumer electronics provider, albeit with elegant offerings. Security of mobile based information remains a big concern for both supply chain and IT teams. IBM with its deep ties to C-Suite and IT teams has been struggling with the need for more positive revenue momentum. A late entry and lack of momentum in supporting cloud-based and mobile computing needs has not helped. Thus, benefits and rewards loom large for both vendors under this alliance. They just need to collaborate and execute.
As for the potential impact for supply chain and B2B business network technology support, it’s too early to tell. As we have noted to our readers, IBM has amassed a broad suite of end-to-end supply chain, B2B, customer fulfillment network, service and business analytics capabilities that can all benefit from further leveraging of mobile-based applications. The open question remains on IBM’s track record of delivering on broader supply chain process integration in a much more time-to-market manner. We anticipate there will be opportunities to enhance mobile-based apps in Emptoris Supply Management Suite, Sterling B2B and online fulfillment network as well as end-to-end supply chain focused analytics. Customers will just have to wait and see what develops in the coming months.
A further implication of this alliance announcement will be how other business enterprise vendors such as SAP, Oracle, Google and Microsoft eventually respond. Each has positioned the leveraging of mobile devices within business applications from a multi-vendor perspective in an effort to support multiple brands. This week’s announcement may prompt a re-visit of these strategies, and consumer electronics providers Samsung, Lenovo or perhaps HP, could benefit with enterprise software vendors again seeking deeper development alliances.
Bottom-line, our community can well anticipate some benefits of the Apple-IBM alliance along with the competitive response from other competitors in the market. IT teams will be able to rest more easy knowing that burden of integrating application with mobile device will be assumed by alliance partners.
The open question however is how mission critical supply chain and B2B mobile computing needs will be viewed in the light of implementing other more simplified apps that meet alliance objectives for total apps availability.
We all need to stay tuned.
On Monday, Gartner announced that worldwide IT spending is on pace to a level of $3.7 trillion in 2014, a 2.1 percent increase over 2013. However, that number is a full percentage point lower than Gartner’s 3.2 percentage growth forecast in April. According to the Gartner news release: “The slower outlook for 2014 is attributed to a reduction in growth expectations for devices, data center systems and to some extent IT services.” A Gartner vice president further indicates: “Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook.”
We call Supply Chain Matters reader attention to the Gartner revised forecast for a couple of reasons. Keep in mind that a downward adjustment of a full percentage point in just a couple of months alone is a rather significant indication that IT market dynamics are changing rather quickly. First, it is an obvious indication that despite a healthy IT investment climate, competition among vendors and services providers is driving down pricing, especially when it relates to cloud based offerings.
Second is the profound impact that cloud-based computing options are having on current IT spending. This is reflected in data center systems spend where Gartner points to: ”lower-cost alternative architectures and cloud-based storage” as driving constrained spending. In the Enterprise Software segment, despite a rather hefty 6.9 percent expected growth rate for 2014 for this segment, Gartner points to slighter lower growth expected for applications software and rapid move to cloud-based offerings by many organizations. These market realities have manifest themselves in recent revenue and financial performance from both SAP and Oracle, both of which have been obviously impacted from the quicker movement toward cloud-based enterprise software alternatives in the market. By contrast, cloud ERP providers have seen dramatic growth rates. Workday, a cloud-based HR and Financial Applications software provider announced that its total revenues increased 74 percent in its first fiscal quarter. Subscription revenues increased 80 percent from same period last year. As another example, Salesforce.com’s fiscal first quarter total revenues grew 37 percent while subscription revenues grew by 34 percent.
Third is the clear indication, now acknowledged by Gartner, that individual lines of businesses have garnered more influence on technology selection while the role of IT is shifting from “purchaser to coordinator”. That is a profound statement coming from the research firm that has catered primarily to CIO and IT audiences. The shift of technology buyer is clear and is being reflected in market forecasts.
In May, Gartner reported that the worldwide supply chain management and procurement software market grew 7.3 percent in 2013. All indications from the Gartner Executive Supply Chain conference held in May were that such growth will continue this year. With the shift of buyer influence toward lines of business, and with the increased attractiveness of cloud computing alternatives, we expect best-of-breed cloud providers catering to supply chain, B2B business network and supply chain business process intelligence needs to also demonstrate market success.
For technology selection and approval teams, be aware that heightened competition and more attractive and less disruptive IT software and infrastructure options are turning in your favor. There is little need to tolerate the past arrogance of your friendly ERP sales person who peddles the notion that cloud-based solutions will come to market in the coming months. (Perhaps longer) The market has come to the realization that there is no need to wait for unfulfilled promises.
©2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
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This week, the Institute of Supply Management (ISM) released its December 2013 Semiannual Economic Forecast, which serves as an outlook for U.S. manufacturing and supply chain activity in the first-half of 2014. This is ISM’s supplemental reporting to its monthly PMI reporting, which is very closely watched by Wall Street and business media. The report provided some noteworthy indications of what manufacturers are planning for in the New Year.
Expectations for 2014 are positive as 69 percent of survey respondents expect revenues to be greater in 2014 than in 2013. Respondents are planning for manufacturing revenues to increase 4.4 percent in 2014, almost a percentage point higher than consensus economic forecasts of global growth of 3.5 percent.
ISM reports that manufacturing employment is expected to increase by 2.4 percent which is a sign of continued confidence. Respondents report operating at 80.3 percent of their normal capacity, up slightly from 80.2 percent reported in April 2013. Capital expenditures are expected to increase by 8 percent in 2014 over 2013.
Of most interest were responses to a special question focused on expected supply chain improvements planned for 2014. Supply chain and B2B technology and services providers, please take note.
The report indicates that 69 percent of respondents are planning improvements to supply chain processes, which is a rather strong indication of aggressive investment and renewal plans. Areas of investments were described as strategic sourcing, supply base rationalization and supplier relationship management on the procurement side of supply chain. Other areas of cited investment were inventory management and control, which we presume is supply-chain and multi-tiered in scope, along with improved cross-functional planning and scheduling. It would appear that manufacturers have internalized the need for supply chain to have a more outside-in focus, with emphasis on proactively identifying risk, while deepening relationships with key suppliers. Enhancing cross-functional planning is a sign of more closely aligning both planning and fulfillment execution processes into a singular management control process.
Thus, from the lens of U.S. manufacturers, optimism is running high for a banner year and renewed investment in 2014.
Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide our series of predictions for the coming year. These predictions are provided in the spirit of advising supply chain organizations in setting management agenda for the year ahead, as well as helping our readers and clients to prepare their supply chain management teams in establishing programs, initiatives and educational agendas for the upcoming New Year.
In Part One of this series, we unveiled the methodology and complete listing of our 2014 predictions.
Part Two in this series summarized Prediction One related on what to expect in the global economy and Prediction Two, what to expect in procurement costs.
Part Three summarized Predictions Three, continued momentum associated with the resurgence in U.S. and North America production, and Prediction Four, talent recruitment and retention as a continued challenge.
Part Four addressed some unique industry specific supply chain challenges in 2014.
Part Five predicted increased implications regarding current supply chain social responsibility strategies and practices.
Part Six explored the implications of increased supply chain risk on global sourcing strategies in 2014.
Part Seven dived into Prediction 8 related to expected global transportation consolidation developments, along with Prediction 9, our forecast for increased momentum in the “Internet of Things”.
In this final posting, we dive into our final prediction regarding what to expect in the information technology and services market arena next year.
Prediction 10: Continued Technology Investments in Cloud Computing, Predictive Analytics and Select Supply Chain Services.
As noted in Prediction One, barring some ongoing remaining uncertainty, global economic growth in 2014 is forecasted to grow at a minimum of one percentage point from 2013, a number expected to be 3.6 percent. That is a significant and long anticipated movement.
Industry supply chains will thus continue to turn their attention to increased business process and technology investments in 2014 to support business needs for increased top-line revenue and profitability growth, even more heightened industry competition, and enabling supply chain teams for more responsive to events. At the same time, continued uncertainties that abound in certain geographic markets and significantly increased risks associated with supply or value-chain disruption will place much more emphasis on more predictive planning that is closely integrated with customer focused fulfillment and execution process needs. The current explosion in Multi-channel and/or Omni-channel fulfillment capability challenges outlined in Prediction Five will further drive increased technology investments in that area.
We believe that the prime areas for added investment will include:
- Enhanced sensing of product and specific geographic regional demand.
- Deeper and broader supply and value-chain visibility, including identifying and mitigating risk areas within lower tiers of the supply chain.
- More predictive analytics and supply chain wide intelligence. That would include the overall integration of predictive planning capabilities that span supplier sourcing, ongoing supply and demand network design and/or reconfiguration, multi-tiered inventory optimization and multi-channel fulfillment management.
- More emphasis on leveraging a single B2B network platform, connecting all key suppliers, with needs for integrating value-chain wide planning, team collaboration and customer and supplier fulfillment execution needs.
We concur with other industry analyst firms such as Gartner and IDC that the ongoing shift of influence and the ultimate decision in technology buying continues away from IT and towards the business side, with the continued counsel of the CIO and IT teams. The fate of technology investments to enable expected and more timely business outcomes now rests in the hands of business and supply chain teams.
The days of huge multi-year technology transformation initiatives will continue to shift toward targeted, tactical business process change initiatives of an average 3-6 months duration that phase-in capabilities toward a desired end-goal. The main focus will therefore continue to favor the Geoffrey Moore definitions of “systems of Innovation” and “systems of engagement.”
Hence, cloud computing and/or cloud-based applications technology options will continue to gain added attention across supply chain and B2B fulfillment areas because of needs toward quicker time-to-value. Because so many supply chainand customer fulfillment processes are deemed to be mission critical for the business, B2B platform vendors will need to continue to enhance data security management and control practices, especially in the light of continued incidents and threats of data breaches across multiple industry networks. We continue in our belief that augmentation of cloud computing with managed services will be an attractive alternative for some select product or service management focused supply chains. We additionally believe that in 2014, supply chain teams will tend to hold favor toward private-based cloud options for the more mission critical aspects of product fulfillment, but will be somewhat more open to either hybrid or public cloud options supporting deeper analytics, value-chain wide collaboration or business intelligence.
In the area of predictive analytics, we predict 2014 will begin the emergence of a broader set of technology or services vendors offering deeper, cloud-based analytical capabilities in analyzing structured and unstructured data. These capabilities will have a strong dependence on supply chain wide event-driven data planning and execution streams. Predictive analytics will thus move toward more sense, predict and respond forms of approaches, including managed services of data scientists. This will afford the opportunity for supply chain teams to springboard capabilities in this area beyond the timetables of in-house development and better enable the foundations for supply chain control tower capabilities. Additionally, vendor marketing strategies that hype “Big Data” enablement will meet the reality of what teams really require, namely smarter, highly focused and more predictive data and insights that enable much more timely decision-making.
Finally in 2014, we anticipate broader consideration and evaluation of private and public social based interaction technologies to supplement existing product sensing and demand planning process needs, strategic vendor collaboration and broader external interactions within Sales and Operations Planning (S&OP) processes. While a limited amount of supply chain teams explored this area in 2013, primarily on the sensing of product demand, we anticipate broader business process explorations and pilot capabilities occurring in 2014.
Ladies and gentlemen, it’s a rap, and that leads us to the conclusion of our series of ten predictions for the upcoming year.
We trust that these predictions and insights will help you and your organization prepare for personal and organizational team initiatives in the coming year. Once again, readers are encouraged to provide feedback or add your own view of what to expect in 2014 in the Comments section below each of our eight postings.
Throughout 2014, Supply Chain Matters will be providing periodic updates regarding these prediction areas and our research services arm will additionally feature some select research reports that dive even deeper into some of these supply chain management areas.
Our complete research report, 2014 Predictions for Global Supply Chains will be available for no-cost complimentary download via our blog Research Center in early January. In the meantime, if you desire to receive a personal copy via direct email, please send your request to: supplychaininfo <at> theferrarigroup <dot> com. Please include your name, organization, title and email address in the request.
We extend to all of readers and followers our best wishes for a productive and rewarding New Year along with continued personal success.
Executive Editor of Supply Chain Matters, Managing Director, The Ferrari Consulting and Research Group
©2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.