In conjunction with its Supply Chain Executive Conference being held this week, Gartner indicated that the worldwide supply chain management software market grew a healthy 12.3 percent in 2011, reflecting two years of double digit growth.  This author has been involved in quantitative SCM software forecasting for many years and I can share with Supply Chain Matters readers that this growth in investment is the highest since the boom times of Y2K.  It also provides ample evidence of the fact that many companies are investing in advanced supply chain technology in multiple areas. Another significant takeaway is the uptake in SaaS (software-as-a-service) revenues, which Gartner pegged at a 21 growth rate, contrasted with 15 percent growth associated with perpetual license sales. That implies a higher uptick in SCM cloud growth, in-line with our Supply Chain Matters 2012 prediction related to technology adoption.

According to Gartner, 79 percent of software revenues were generated in Europe and the U.S., however European growth slowed in 2011. Asia/Pacific experienced robust growth, outpacing the market average. We would anticipate that given the current business climate, European based SCM investment will continue to decline in 2012.

Gartner also declared the top five SCM technology vendors by revenue, with SAP leading the list, followed by Oracle, JDA Software, Ariba and Manhattan Associates. We caution our readers to not place significant attention to which vendor is the top revenue generator.  The reason is that many of the enterprise software vendors such as SAP and Oracle do not formally breakout revenue reporting by application type, such as SCM.  Thus, industry analyst firms such as Gartner must estimate actual revenues based on any vendor input, internal analysis and estimates.  Categories of SCM software are also categorized differently, especially in areas of overlap with ERP related software, along with software associated with sourcing, procurement and contract management.

Suffice to state that supply chain software technology vendors for the most part, celebrated a healthy year of growth in 2011.  Many manufacturers and retailers also recognized the importance of augmenting supply chain business processes with advanced technology.

Bob Ferrari

This week, SAP conducted its annual Sapphire customer conference in conjunction with its Americas Users Group (ASUG) among thousands of customers, partners and analyst wanabees.  There are the usual spiffy, industrial strength executive presentations that portend compelling trends in business and technology with customers responding to fluff questions or singing the praises of technology in return for healthy discounts.  However, beneath the glitz is reality, the reality of a technology company that has bold vision but is spread out in too many directions, with confusing messages for its customers.

In their keynote talks, both Co-CEO spoke to mega-trends of business and technology.  Co-CEO Bill McDermott stated that the world will consume everything through mobile devices. Co-CEO Jim Hagemann Snabe spoke to the world of 2052, and outlined his view of the three fundamental paradigm shifts in computing:

1. The rush to mobile computing and mobile access to data. In five years, everything is mobile.
2. Cloud computing adoption is underway, and, in less than 5 years, everything is cloud.
3. In-memory computing, with applications that recognize patterns and predict the future.

These are all compelling trends, those that a Geoffrey Moore, MIT’s Charles Fine, or HBR’s Clayton Christensen can certainly expand upon.  To no surprise, these three same compelling trends also conveniently match up with SAP’s business plans for revenue growth. We expect to hear about these trends from visionaries.  We should expect technology CEO’s to speak to solving customer’s current business problems, both in short and longer-term dimensions. There were some attempts to get to these concepts in the keynotes but SAP missed the mark in not providing a hard-hitting panel facilitator. SAP at its core is an ERP and enterprise technology provider, but those terms seem to become blurred which each Sapphire.

Most businesses and supply chains deal with today’s demanding business challenges of this quarter, next quarter, and the remaining fiscal year. Supply chains are challenged with the complex simultaneous problems of supporting top-line revenue growth, agility, efficiency and managing significant risk. A fundamental shift in the influence of technology decisions is well underway, a shift that favors business and functional teams.  Yet SAP messaging still tends to dwell on mega IT trends.

Supply Chain Matters would surmise that business and global supply chain teams utilizing SAP have their success pegged to near-term information, decision support and software application performance realities. For example:

Mobile Computing and Security- how do we protect and insure that sensitive data residing on mobile devices does not fall in the wrong hands. After all, it is a mobile device.  In his blog posting in preparation for Sapphire, Ray Wang summarizes user questions related to mobility, specifically: Why does it cost more to use SAP’s mobility solutions and why as an SAP customer, I pay twice, and in some cases three times for mobile licenses to access the same system information? In his blog commentary, ZD Net and SAP Influencer blogger Dennis Howlett noted developer consensus that SAP has shot itself in the foot, missing mobile opportunities that are obvious to everyone but SAP. He also points to considerable internal friction among internal SAP teams.

Cloud is certainly gaining interest but business and functional teams need to be provided with a coherent and scalable strategy that can be positioned with senior executive teams. Some have noted that SAP currently has multiple cloud platform offerings including some of the new HANA based applications. SAP’s newly appointed senior executive charged with Cloud strategy, Lars Dalgaard did not help to provide such clarity other than SuccessFactors is the model.

SAP also straddles private vs. public cloud deployment strategies, trying to both satisfy huge enterprise customers along with mid-market businesses.  The current customer adoption among SAP Business by Design and SAP Business One is not exactly stellar at this point, and Business One has just been re-written on the HANA platform. SAP is also just beginning to talk seriously about integration with non-SAP cloud platforms.

In-Memory: Then we have the game changing potential of HANA, which seems to change messaging which each passing Sapphire. Analytics means entirely different needs for different business challenges, and as pointed out by SAP, can span both OLTP (on-line transactional processing) and OLAP (on-line analytical processing) needs.  HANA seems to be evolving to not only solve each challenge, but to serve as the ERP transactional and substitute database platform strategy.  A bold vision indeed, but customers need specifics related to roadmap and impacts to existing upgrade strategies in applications and newer IT hardware.  What about pricing of HANA?  That seems to be something that is reserved for deal negotiations vs. overall planning.

SAP and Oracle are also engaged in public warfare over who has the better collection of technology that can support operational reporting, relational query, OLTP and information discovery needs. Each of these analytical needs requires different technical capabilities and both vendors claim the high ground.  Some credit goes to SAP for trying to take the high ground. Both vendors however, provide important arguments and IT teams need to assess the bottom line implications. The resolution of the debate will ultimately be determined in actual delivery of all of this functionality in a customer-timely, cost-affordable manner. The other reality remains that the majority of SAP existing deployments include SAP Business Warehouse, most likely wrapped with some SAP Business Object s Explorer tools. What’s the roadmap or recommended strategy for this infrastructure?

In his keynote, Hasso Plattner was willing to speak candidly about the HANA roadmap.  Thank goodness for his candor. He spoke of the opportunity to move new SAP applications to the HANA platform, the ability to help customers perform more timely planning as well as simulation, and, as he mentioned last year, the ability to significantly accelerate the performance of SAP APO, SAP’s advanced supply chain planning application. He further noted that IT teams will have to reconfigure their physical systems and applications landscape to be able to leverage these capabilities. But all of this will again take additional time.

Some SAP observers note that the key to HANA adoption is the few killer application use cases that can convince the broader SAP community of the true game-changing power of HANA. For supply chain business process, that opportunity was presented in the recently released SAP Sales and Operations Planning Powered by HANA application. Our Supply Chain Matters first impression was that this was an opportunity to truly demonstrate HANA in a mission-critical supply chain application.  But, an initial evaluation noted incomplete features and limited functionality, along with a small select group of pilot customer ramp-up projects. Bottom line, another opportunity squandered.

As another Sapphire moves into the archives, SAP continues to leave gaps among vision, strategy, confusing internal structure and product execution roadmaps. In the mission critical areas of supply chain, manufacturing, product lifecycle management and procurement business process support, another year passes without transferring the power of potentially game-changing technology to multiple applications in planning, predictive analytics, collaboration and decision-support vs. just a singular application.  What about supply chain applications availability in the cloud, other than SRM?

There remains a need for clear positioning and articulated value for various supply chain business problems, and providing solutions based on customer timetables as opposed to SAP’s timetables and internal business priorities. That keeps the door ajar for systems integrators, best-of-breed technology and other providers to fill the gaps and turn confusion into opportunity.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

We pen this commentary from the JDA’s annual Focus customer conference being held this week in Las Vegas.  Supply Chain Matters provided an initial commentary with some general first impressions garnered from day one of the conference, and this commentary comes at the close of day two.

We previously noted the announced strategic shift in JDA’s product strategy over the next five years, being positioned as JDA Cloud. After some further briefings with JDA senior executives, it is the view of Supply Chain Matters is that this strategy is more to do with providing various options for the hosting of JDA applications, coupled with a variety of managed services that can span specific application expertise to full process management.

JDA has been working with these types of models with approximately 100 customers for the past three years.  Senior management indicates that the company’s supply chain functionally oriented customers are seeking more options for implementing more advanced capabilities but seek more options in terms of the value-proposition for IT infrastructure, planning expertise or other required expertise.  Existing customers are obviously interested in the pricing strategy, and JDA management appears to be favoring the classic capital license pricing model, but are quick to point out that subscription based pricing can be supported if that is what customers desire.  Another important clarification was that the platform is not a single instance, multi-tenant architecture because of a strong belief that customers are still favoring defined boundaries in their hosted instance, literally “hermetically sealed”  around the customer’s data.  This is certain to trigger responses from supply chain cloud based competitors.  Another meaningful statement was that over 90 percent of current JDA applications are already enabled for hosting options. Our recommendation to existing JDA customers is to seek clarification as to your supply chain business outcome needs, and contrast that to the specific buying options that JDA will support.

Another takeaway from Focus 2012 is the progress that has made since JDA’s acquisition of i2 Technologies nearly two years ago, Readers may recall our Supply Chain Matters past commentary when the first i2 deal was announced in 2008, JDA indicated that its plans for i2 included a software sales model reflected as a “CD replication” strategy, meaning that potential customers would receive standard, un-customized software.  That was rather significant at the time, since i2 was known for its industry-centric innovation in supply chain technology, and was quickly transitioning to a customized software and service provider with some rather significant customers.  Two years hence, it is clear that JDA has uncovered the need for differentiation and depth that customers require in their supply chain technology. For its part, CEO Hamish points to a four year roadmap related to assimilation of i2, and that the company is just beginning to leverage new innovations resulting from the capabilities that the former i2 provides for JDA.

A final observation is directed at the current customer footprint of JDA. Surprisingly, over 75 percent of JDA’s existing customers stem from manufacturing-centric supply chains vs. retailer-centric supply chains. In our view, the bulk of the conference messaging was directed at challenges in retail and ongoing revolution within online commerce.  JDA needs to not only direct its efforts on the opportunities of retailers and manufacturers coming closer aligned in supply chain capabilities but also focus on the widening gaps among manufacturing companies that are best-in-class in capabilities vs. those that need to close these gaps.

Bob Ferrari

We pen this commentary from the beautiful Aria Hotel in Las Vegas which is hosting supply chain technology vendor JDA’s annual Focus customer conference for three days this week.   This was the first time since the inception of Supply Chain Matters that we have been invited to attend Focus, and we praise both the JDA social media and industry analyst relations teams for their recognition of the influence of supply chain social media platforms such as ours. By the way, the Aria has some pretty nifty high-tech laden rooms.

We begin our initial commentary with some general first impressions garnered from day one of the conference.

One of the more pleasant surprises regarding this conference was to note the sheer presence of slightly over 2000 attendees at a conference dedicated to enabling supply chain business processes with technology. That should be an indicator that either conference education budgets are far healthier, or that the focus by many businesses on enhancing supply chain capabilities is a lot more focused.  We hope to gain a better sense of this in tonight’s networking reception.  Attendees are reading these commentaries are welcomed to share their motivation for attending.

Another impression to share is the announced strategic shift in JDA’s product strategy over the next five years.  In the opening keynote, president and CEO Hamish Brewer announced to his assembled customers the intent of JDA to move toward a cloud-based solutions provider, with JDA Cloud being positioned as a prime business development offering. Brewer’s message to customers was to not overtly change the current collection of product offerings but to give consideration to moving to the cloud delivery model over the next 3-5 years.  That statement comes with a lot of open questions for JDA as well as its current customer base.  The specifics as to what components are to be included in JDA Cloud seem to be a bit vague after day one.  This author managed to attend a customer presentation delivered by Lenovo’s E-Commerce business, which was an early adopter of JDA hosted systems. While we were able to gain some additional knowledge of what is being defined as Managed Services, JDA will need to get much more specific since the target buying teams now include functional supply chain and IT constituencies.

Late this afternoon, JDA hosted for invited industry analysts, media and influencers a specific demonstration of a rather cool product being termed JDA 3D, which was jointly developed by JDA and Red Dot Square Solutions. Our best description of this product is a combination of simulated retail merchandise planning, retail planogram, and 3D visualization wrapped together in software. The application fuses the needs for retail assortment planning, sales and marketing effectiveness and product demand sensing in a single application.  The application is being positioned to either help consumer goods manufacturers inspire customers to buy their products, help retailers to design a more pleasant and effective floor environment, and allow product development teams to virtualize how a product might fare in the market in a digital simulation.  Lots of possibilities for this application and hopefully JDA will provide more specifics.

Our final observation relates to the conference access that JDA grants to industry analysts and bloggers.  This is one of the very few technology providers that restricts attendance to certain product or customer presentations.  I was informed by long-time industry analyst attendees that the restricted list is narrower this year than in previous years, and thus JDA’s outreach teams should be commended for practicing some internal change management.    That aside, if a technology vendor believes in its products and its abilities to solve customer problems, than it should be willing to be transparent.  Heck, even enterprise vendors SAP and Oracle provide total access to all presentations.

Bob Ferrari

GT Nexus and Kinaxis have announced a strategic partnership directed at providing a cloud-based unified planning and execution platform for enterprise customers and business process outsourcing (BPO) service providers. This partnership is directed at combining the capabilities of both companies – the planning and simulation “brains” of the Kinaxis platform with the inter-enterprise B2B execution network of GT Nexus. The Kinaxis RapidResponse® Control Tower providing supply chain planning, demand management, S&OP, supplier collaboration, is to be coupled with the GT Nexus platform that provides real-time visibility to orders, inventory, shipments and commerce transactions from order point to final delivery and payment.

Kinaxis has been searching for a means to connect this provider’s supply chain planning and response capabilities directly to a B2B network platform and this partnership has the potential to provide broader appeal.

Supply Chain Matters will feature more in-depth commentary after securing more information related to this partnership.

Bob Ferrari

Disclosure: Kinaxis is one of other named sponsors of the Supply Chain Matters blog.

Supply Chain Matters thought it would be great idea to conduct interviews reflecting on the different current perspectives of supply chain control tower concepts.  This Part Two posting is a continuation from Part One.

Our goal is to include technology and service providers, as well as functional experts closest to this area.  To kick off this series, we conducted an interchange with Infosys senior consultants regarding current trends in this area. Participants and prime contributors in the responses were:

Gopi Krishnan GR, Practice Manager – Business Application and Services, Retail CPG, Logistics and Life Sciences, Infosys

 Arun Kumar, Principal Consultant – Business Application and Services, Retail CPG, Logistics and Life Sciences, Infosys

 We continue in this posting with Gopi and Arun responses to two other questions.

 Question 3: Typically, how are supply chain control tower capability needs being expressed:

a.   The need for more timely decision making capabilities or supply chain business intelligence vs. broader visibility

b.   An extension of supply chain planning capabilities regarding the overall picture of demand or supply or products?

c.    An extension of supply execution capabilities regarding purchase orders, replenishment and exception occurrences?

d.   Combinations of the three above?

It is a combination of all 3. In fact, the nearest abstraction would be a flavor of near real-time Business Intelligence (BI) solution. A SCCT is a function of accurate forecasting, rapid execution, and actionable insight that leads to superior decision making. Depending on the level in which you want to expand the SCCT scope, the issues being addressed can be (a)the planning to execution gap (b) the intra-execution gap (between various execution functions) or (c) inter-enterprise gap (in terms of functional flows or handshakes across organizations or entities).

Question 4: What general advice does Infosys share regarding the best approach for undertaking a supply chain control tower initiative.

The primary challenge for organizations today is to lower costs, improve service levels, enhance visibility and effectively synchronize the demand-supply equation. The SCCT is an effective tool to address these challenges. It must however be noted that we continue to advocate a ‘crawl-walk-run’ approach instead of trying too many things at the same time.

 How do we start off on the SCCT journey? A lot of parallels can be drawn to the classic six sigma improvement techniques (DMAIC comes to mind) adapted to the SCM context. The three key pillars for this initiative would be Visibility, Control and Responsiveness.

 Visibility can be attained via streamlining the business processes to address current inefficiencies followed by defining and right-sizing of metrics. Instead of trying to measure, monitor and track everything across the supply chain, the organization could define limited operational KPIs and cross-functional metrics to begin with and expand as they go along.

 At the Control level, the organization is setting up the right metrics and measure/monitor/track key parameters across the supply chain based on critical KPIs that can be expanded as they go along (to include more cross-functional metrics). At this stage, we are still referring to upper or lower control levels for each parameters and the ability to stay predictable.

Responsiveness is where the customers see the difference in terms of enhanced customer experience. These could be events which are routine (like a truck delay) or much broader in scope – even at the level of supply chain risk management as a response to unforeseen and potentially catastrophic events. Thus responsiveness goes beyond actionable insights and can include outcomes from what-if predictive modeling to drive better decision making.

 For each of these steps, organizations can stay within their span of control or expand beyond traditional boundaries to look at the extended supply chain.

 The technology approach for the SCCT logically requires the same four steps to be enabled. The additional – but an overarching requirement – is the design of a scalable and flexible integration platform to extract the necessary information from underlying systems (within an enterprise) and message files (from external partners). This would require harmonization both at a process level and at a master data level.

This concludes part two of this Infosys dialogue on SCCT readiness.  If readers have specific thoughts and/or needs in this area, or if your organization wants to contribute to this education series, please send us an email: info <at> supply-chain-matters <dot> com.

 Bob Ferrari

 Disclosure: Infosys is one of three other named sponsors of the Supply Chain Matters blog.