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Supply Chain Matters Initial Impressions of Proposed Acquisition of NetSuite by Oracle

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This week the world of enterprise software featured yet another blockbuster acquisition headline, that being Oracle’s planned $9.3 billion acquisition of Cloud ERP provider NetSuite, Oracle’s most expensive acquisition to-date.

This acquisition has an interesting twist in that Oracle founder and now CTO Larry Ellison was already a prominent investor in NetSuite, and the firm’s CEO, Zach Nelson managed Oracle’s marketing efforts in the 1990’s. According to business media reports and an Oracle statement, the proposed deal will close only if holders of a majority of NetSuite’s shares not held by Ellison and his family actually approve this deal. One other possibility is that another enterprise tech provider provides a counter-offer but that seems unlikely.

NetSuite’s primary marketing messaging centers on the claim to be the top dog in Cloud ERP, providing one unified business management suite, encompassing ERP/Financials, CRM and Ecommerce for more than 30,000 organizations. This enterprise technology provider has indeed been on a roll and many of my fellow industry analyst and technology market influencers have been impressed with the firm’s market prowess and management style.  One of the more important aspects of the company’s technology is its appeal to mid-market companies that can little afford expensive and elongated ERP implementations and ongoing support.

Since the window for final approval of this acquisition may well extend itself, we will frame our Supply Chain Matters commentary to initial impressions pending further briefings and information.

First, the financial scope of this acquisition once again reinforces that Cloud computing momentum is a real attraction for both the overall market and for technology providers themselves.  We all collectively anticipated additional, larger and more expensive acquisition moves among the enterprise software players and Oracle was no exception.

Upon scanning other viewpoints, some are indicating that Oracle needed to shore-up its Cloud platform offerings.  That is not how this analyst views it.  By my view, it’s a pure play in seizing market share opportunity, particularly in the mid-market segment beyond current efforts centered on Oracle’s existing JD Edwards suite.  NetSuite’s attraction and market uptake includes some existing SAP customers who elected to augment their corporate backbone IT applications needs with more flexible Cloud ERP in either a two-tier subsidiary ERP or specific augmented business process support option such as CRM. NetSuite’s Suite App extensions further allow for add-on capabilities such as inventory management, basic procurement or Ebusiness support capability.

From a supply chain and product management perspective, there are other interesting possibilities that can come from the combination of NetSuite and Oracle’s existing applications. Oracle currently provides broad SCM and PLM full suite support applications for both traditional license and Cloud based deployments.  We have previously expressed our view that Oracle SCM Cloud provides one of the only broader based supply chain management suites available in a public Cloud deployment option. Here again, the opportunities for augmenting NetSuite with such capabilities opens new opportunities for existing or prospective customers.

An open question in our mind will be how Oracle ultimately positions its current application offerings as well as NetSuite from an overall pricing strategy perspective. There could be some interesting options for added market or industry penetration.

At this point, the dust needs to settle and the approval process needs to complete.  However, the opportunities are rather interesting.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Information Technology Considerations for Supply Chain Wide Visibility

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This commentary represents the third of our ongoing Supply Chain Matters market education series directed at clarifying needs and requirements addressing supply chain wide visibility.

One of the most critical challenges cited by multi-industry supply chain teams is extended supply chain visibility. This challenge is becoming universal as industry supply and value-chain processes continue to become more complex with constant changes in needs for business support. It is consistently cited by many supply chain leaders as a continued perplexing challenge.

As noted in the first commentary of this educational series, supply chain wide visibility often stems from differing business process perspectives or different business priorities that can involve planning, customer fulfillment execution, analytics and business intelligence as well as other more informed and more-timely decision-making needs. Often, this visibility term is lumped into other challenges including supply chain wide traceability, transparency, capacity or inventory management. Thus it is rather important for teams to clarify specific short and long-term visibility capability needs and decision-support requirements from the ongoing distraction of day-to-day symptoms stemming from lack of needed information.

In our second commentary in this series we stated that creating a unified view of important data related to supply chain business processes is not a simple task without first considering foundational strategies. Supply chain data and information is typically spread among multiple systems in both structured transactional or unstructured data and information formats, supporting each of these different processes. Supply chain wide visibility, by our continued view, is not about a rip and replace technology strategy since that would be far too disruptive. That is especially pertinent to disruption of backbone transactional systems. We advocated that visibility should be viewed in the context of building-out enhanced decision-making support capabilities from more streamlined and better accessible sources of existing and future planning, execution and customer fulfillment information.

Within this commentary we address the information technology considerations for supply chain wide visibility. However, before we begin, we need to state up-front that we are advising a cross-functional and cross-business, as well as an IT support audience. Thus our citing of technology will be in the context of the supply chain wide process and business outcome impacts for certain information technology considerations.

To be perfectly frank, from the user lens, significant challenges in creating a unified view of all supply chain data and information remain as unfulfilled. However, new Cloud or on premise in-memory, data visualization and data cleansing information technology tools now coming to market continue to improve and will better assist in this effort. In particular, the combination of advanced in-memory coupled with data visualization and analytics will add augmented computing power and a more enhanced user-interface.

Let’s briefly reflect on the history of past challenges.

Supply chain related information is typically processed and collected among multiple supply-chain software applications. Many of these applications, whether product, planning, procurement or execution related, created their own data store within or directly integrated to the application itself.  The notions of information related to historic performance, current key performance indicators or future resource requirements invariably take on different meanings, especially if such applications were installed at different timeframes of the organization’s existence. They would typically include ERP applications, older legacy or specialty applications, centralized data warehouses or evolving more open standards data lakes. Whereas a newer supply chain planning system may have overcome some of these challenges, the context of other information would be lacking.

Thus, if a user or S&OP team member had to search for combinations of historic, current and future requirements information related to, for instance, planning and execution process needs, the search would invariably involve querying the specific applications as well as the information warehouse. A further challenge relates to making sure that the context for the data and information was framed properly. How many times have teams been frustrated in finally receiving the results of an IT enabled information request only to discover that the information was not appropriate or valid because of either improper context, lack of clean, consistent or complete data, the selection of an improper file or lack of synchronization of master data among different applications.

Is it no surprise that the fallback position was once again, the creation of multiple spreadsheets that end up to be an analysis at a certain point in time.

We continue to advocate that supply chain wide visibility, along with the information and insights garnered from such visibility, is best achieved in an architecture that includes a singular data and information utility. Readers should not interpret this to connote a large data warehouse. Too often in past efforts, such approaches have led to large and expensive data ‘monuments’ where all forms of information were collected without all-important context, and where such information could only be extracted without the direct assistance of IT based data administrators. This often created latency and time delays in retrieving such information.

As noted in our prior blog advisories, whereas in the past, IT teams and data administrators were the prime facilitators of integrated business process information and decision-making insights, today’s business demands require that appropriate line-of-business and supply chain wide functional teams serve as the generator of insights.

Consider the analogy of an information utility platform where key data is automatically ‘streaming’ (vs. statically housed) from various supply chain enterprise and internal software applications. The data is collected, validated, cleansed, normalized and modeled with other key internal and/or external data to form information insights. External reference data could relate to industry operational benchmarks, external transportation, production or inventory carrying costs as well as multi-industry benchmarks related to areas such as sustainability.

The information utility we are describing must be augmented by more user-friendly and user-centric information visualization, dashboard and analytics based tools to reflect more predictive or prescriptive insights relative to what the data and information implies in terms of operational, business, financial customer or strategic outcomes. With user-centric tools, augmented by automated routines once the data is validated, business users can overcome the need for direct IT assistance in specialized day-to-day information requests.

From an overall supply chain business strategy and support perspective, once a supply chain wide information utility we refer to is established, efforts directed at future initiatives related to supply chain control towers or Internet of Things (IoT) enabled process that bring together physical sensor and digital information can be better enabled by leveraging the same platform.

Here’s another caveat. Forget the vendor generated hype terminology of “Big Data’. That is not what supply chain wide visibility should be about. Rather think- ‘smarter data’.  The necessary data required to more intelligently manage and predict required supply chain outcomes.

Again, end-to-end supply chain visibility is a journey. Start with the vision of the end-state, build the foundational business process constructs and the information utility. Then proceed with the usual people and process maturity needs and learning that get your organization to the objective.

Bob Ferrari

© 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Disclosure: This educational series related to supply chain wide visibility is being sponsored by Supply Chain Matters sponsor, LLamasoft.


Contrasting Information Technology Vendor Transitions to Cloud Based Computing Needs

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Supply Chain Matters has continually provided our readers insights relative to the increased momentum and ongoing impact that Cloud based computing has had across multi-industry settings. Such impacts are not only quickly changing ongoing software and IT hardware deployment strategies for line-of-business and cross-functional supply chain management teams, but the financial fortunes of existing high-profile enterprise and IT technology vendors themselves. Cloud computing equates to lower margins but more recurring subscription-based revenues for technology firms and thus the transition has to managed skillfully.

Over the past week, three high profile tech vendors, IBM, Microsoft and SAP have announced their latest financial performance results with contrasting pictures related to transitions.

In in case of IBM, financial headlines from the results from the most recent quarter now reflect 17 continuous quarters of revenue declines. Revenue for Q2 dropped 2.8 percent while earnings fell nearly $1 billion. As readers may be aware, IBM continues to manage an ongoing shift to build new strategic businesses, termed strategic imperatives to drive growth while the tech vendor’s traditional business segment continue to decline.. Strategic imperatives include Cloud computing, analytics, artificial intelligence, security and mobile.

There was some good news however for IBM in that Cloud services revenues reportedly increased by 30 percent in the latest quarter, amounting to $3.4 billion.  An additional 11 acquisitions were closed in the quarter, many focused on analytics and AI based capabilities. Within the supply chain applications segment, previous acquisitions have faltered and some have now been sold-off.

IBM’s former notion of building and deploying Smarter Commerce capabilities appears to be languishing. With the latest financial results, equity analysts and investors seem to be growing weary as to whether or when IBM can fully transition to the new wave of computing and information technology needs and deliver total revenue increases.  In essence, IBM may be in a process of re-sizing itself.

On the other hand, Microsoft’s latest quarterly performance provides a different picture regarding managing the transition from on-premise to Cloud based computing. While total revenues declined a reported 7.1 percent In the vendor’s most recent fiscal fourth quarter, the company posted $3.1 billion in net income. The largest gains originated from Azure Cloud computing services with quarterly revenue amounting to $6.7 billion, growing a significant 102 percent on a year-over-year basis. In essence, as The Wall Street Journal concluded, Microsoft’s Cloud segment is growing while the Windows desktop and phone unit ae declining.

Microsoft is further moving aggressively in strategic partnerships with other technology and industry firms. At its recent Sapphire customer conference, SAP announced a strategic partnership with joint plans to deliver broad support for the SAP HANA® platform deployed on Azure and General Electric recently announced that it will partner with Microsoft in uniting their Cloud computing and analytics technologies in a partnership that will bring GE’s Predix IoT platform for the Industrial Internet to businesses running on Azure.

Speaking of SAP, earlier this week the German based enterprise software provider reported what the company termed as record revenues and profits yet the quarterly numbers seem otherwise. Second quarter total revenues increased 5.3 percent on a year-to-year basis while operating profit increased 81 percent to €1269 million. The company’s earnings news release was quick to highlight strong growth in the Cloud segment, as subscription and support revenue grew a reported 30 percent to €720 million.  Further noted was:  “The total of cloud subscriptions & support revenue and software support revenue reached 63% of total revenue in the second quarter of 2016, up one percentage point.” We portend to by no means be perceived as a financial specialist blog, but it would seem by reading the financial detail that SAP has lumped traditional software licenses and support revenue into a sub-category of Cloud and software that is termed “Predictable Revenue.” Albeit we will leave further interpretation up to the financial experts.

In its earnings press release, SAP indicates that it is significantly outpacing its main competitor in cloud and software revenue. We interpret the unnamed to be that of Oracle, which in June reported both fiscal 4th quarter and full year financial results. In our commentary related to Oracle we noted that Cloud based revenue in the quarter was $859 million, up 51 percent on a year-over-year basis. Additionally, Oracle’s strategies addressing Cloud are from our lens, far broader and currently incorporate not only database, applications and SaaS offerings but platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) services as well.  They include additional IT infrastructure hosting choices, either private (behind the firewall) or public  for businesses in addition to applications. We further reiterate our assessment that Oracle is currently the only enterprise technology provider offering a full suite of supply chain and manufacturing applications available on a public or private cloud platform.

Thus we have different impacts and transitions occurring among enterprise software and technology providers and organizations and businesses need to read between the lines to discern which of these players has the most solid longer-term strategies. That would include support needs of businesses and organizations to seamlessly transform their computing and applications to more affordable and less disruptive Cloud platform choices. In some cases, that has led to aggressive and sometimes expensive acquisition strategies to springboard innovation and availability timetables. The other force is obviously the needs of stockholders and stakeholders to preserve both short and longer-term margins and profits.

In the middle of all of these efforts often resides boasting and marketing hype as to which Cloud platforms and strategies are the best for customers.

The transition and the effects will continue and businesses need to continue to do their homework in market education and vendor intelligence.

Bob Ferrari

© Copyright 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All Rights Reserved.


Supply Chain Matters Impressions of the OpenText Enterprise World 2016 Conference

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In providing our Supply Chain Matters readership with market landscape education regarding technology supporting B2B business networks process needs, we have provided prior visibility to Canadian based technology services provider OpenText.

Last week, this analyst and executive editor had the opportunity to attend OpenText Enterprise World 2016, this vendor’s annual customer conference and we walked away with rather positive impressions regarding direction and services.  OpenText EW 2016 Banner

OpenText has now assimilated technology centered on three focused strategic areas which CEO and CTO Mark Barrenechea addressed in the conference opening keynote:

OpenText Enterprise Information Management (EIM) which is just about everything related to document and content management. Many SAP ERP users may or may not be familiar with the brand, but much of the document content exchanged within SAP applications is powered by OpenText including new iterations of SAP HANA and SAP S4HANA applications.  Likewise, the vendor supports EIM needs for other ERP systems as well.

OpenText Business Network which is a B2B business network platform that supports EDI messaging, supplier and customer onboarding, purchase-to-pay transactional support and other growing managed services. The gem of this network is the 2013 acquisition of the GXS Trading Grid network with its genesis as the prior General Electric Information Services. In June of 2012 this author declared that GXS was the hidden gem in B2B information transfer and software services and that prediction continues to manifest itself.

OpenText Analytics which is the new evolving area for this provider, one that promises to harness insights and business decision support related to both EIM and Business Network operational and business information flows. This capability has become a new strategic thrust for the company, one that by our view can present a more visible player to the analytics and enterprise technology market.

 

Regarding the latter, Barrenechea provided two major product announcements in conjunction with the conference. The first was Project Bandaroo, a technology to be focused on the changing nature of work. It was described as bringing together OpenText Core, the vendor’s core Cloud platform for everything related to EIM, with other elements of social communities, channels, bots and project management. An on-stage demo outlined a scenario of working group interactions and discussion forums centered on specific information needs. From our lens, the concept seems interesting but needs more specifics related to actual business challenges. Timetable communicated was the second-half of 2017.

The second announcement related to Project Magellan which is described as a next generation cognitive platform being designed to integrate voice, video, natural language processing and other content. It was outlined as an open systems based platform that would leverage both the Spark Apache platform along with the analytics capabilities of Actuate, OpenText’s most recent acquisition focused on advanced analytics. Barrenechea was not shy in making a direct head-to-head technology comparison with the IBM Watson Cognitive platform and that his company will compete directly as an alternative platform in the market. From this author’s lens, this was a far more newsworthy announcement and one to keep an eye on in the coming months, especially since such technology can be applied to the OpenText Business Network.  This capability is also planned for introduction in the second-half of 2017.

Regarding the Business Network, much more strategy and information was shared with conference attendees, information that we garnered from an April industry analyst event. Product managers declared that upwards of $7.4 trillion in commerce, the equivalent of 10 percent of world GDP, along with connections to 65,000 partners are currently supported by this network.  Support encompasses 37 data centers across 18 countries and 25 satellites.

In addition to electronic transactional messaging (EDI), support is provided in the process areas of purchase-to-pay (P2P), order and shipment visibility and other business process areas. Evolved capabilities in a series of managed services for specific industries and customers continues to expand with an increase of over 200 customers in this segment alone since the acquisition of GXS. The audience was reminded that OpenText Business Network is currently positioned by Gartner in the Leaders Quadrant for B2B Business Networks.

Our on-site executive briefings not only provided more background to new functionality and services that are enabled by the latest OpenText Suite 16 product release but future capabilities being planned in the all-important area of supply chain wide analytics.  Of further interest is the introduction of what is termed as Supply Chain Activity Index, an analytical based aggregate view of the B2B network, with forms of Business Process Management (BPM) support for processes that span the supply and value chain network. These two areas should really peak interest, depending on eventual design and functionality.

There was additional validation that support for SAP Ariba’s efforts to move beyond indirect procurement and support more direct materials procurement processes such as electronic invoicing and messaging will stem from OpenText Managed Network Services.

Our other impressions from this event include:

OpenText is indeed well on the road towards addressing the complex and fast-changing requirements for supporting globally-extended B2B networks beyond electronic messaging and EDI. Unfolding support in specific managed services and analytics areas are very promising as is the unfolding strategy of leveraging analytical capabilities to support network-wide decision-making.

An open question acknowledged by senior management is whether OpenText remains an infrastructure and Cloud services provider or moves more boldly into applications. This will be an area we keep an eye to in the coming months since there are pros and cons to either.

We are of the impression that OpenText senior management now understands the stand-alone nature and business value of OpenText Business Network in terms of an independent marketing persona of that of EIM that includes need for brand recognition within broader supply chain management functional audiences. Anticipate more concentrated efforts and visibility in this area.

Having the opportunity to attend many vendor conferences in any given year, this author can quickly extract a sense of overall management culture. Having now had direct 1:1 interaction with a number of OpenText senior executives at multiple events, we are impressed with their openness, sensitivity to customer and market needs and desire to make good on commitments. That was supported by some select customer interviews conducted. Once more, the company continues to reach out and hire and retain additional experienced talent. As an example, we were impressed with the technical savvy and communication skills of Actuate executives brought forward from that most recent acquisition.

As always, this analyst will provide continued assessment commentaries related to both Open Text and the broader B2B supply chain business network technology landscape. In the meantime, if readers have specific questions, send us an email or call.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


A Significant Announcement Related to Internet of Things Technology

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There has been quite a significant announcement related to Internet of Things (IoT) and Industrial Internet technologies, one that line of business, product management and manufacturing focused teams should pay close attention to.

General Electric announced that it will partner with Microsoft in uniting their Cloud computing and analytics technologies in a partnership that will bring GE’s Predix platform for the Industrial Internet to businesses running on Microsoft Azure. The parties indicate in the joint announcement that the combination of Predix with Azure will bridge GE’s industrial equipment and digital expertise in industry and manufacturing, and Microsoft’s forte in information technology. From the lens of this analyst, there are far more implications related to the all-important selection of a technology platform to power IoT initiatives.

This latest announcement bears significance because of selection of Microsoft itself. It is no secret that Microsoft technology has over the years become a dominant integrating technology within and across factory floors. Therefore, from my lens, the potential is the ability to link not only physical objects to business and supply chain business processes but further to connect the shop floor and manufacturing applications with operating assets as well. GE engineers and executives do due diligence very well and they are increasingly acted like an information technology provider with deep domain expertise in industrial equipment and expensive physical assets.

SAP focused readers may recall that at the recent SAP Sapphire conference, Microsoft and SAP also announced a strategic alliance to leverage Azure in the future development of more desktop and mobile applications as well as to provide extensibility of SAP applications to desktop, mobile, Cloud and analytics needs.

We believe that readers should view both of these alliance announcements as a strategy by Microsoft via its Azure platform to become a far more pertinent player as an IoT information and analytics platform. It further opens IoT efforts for the scope of mid-market equipment manufacturers where Microsoft technology is dominant.

In prior Supply Chain Matters commentaries we have called attention to GE as a manufacturer that is both a dominant player and first mover in IoT, but also a significant influencer as to which technology players will ultimately be key IoT participants. By recently opening up its Predix platform in its Digital Alliance program, GE is striving for Predix to become the Industrial Internet platform of choice. In our most recent blog related to GE Predix, I have stated:

Make no mistake, the expanded (GE) Digital Alliance program is a wide swath initiative to build extensive influence and critical technology and development mass in the IoT marketspace.”

This week’s GE-Microsoft announcement adds far more credence to this intent. It is sure to invoke other responses from competing enterprise information, business applications and infrastructure technology providers. The announcement is indeed a big deal and this partnership merits lots of visibility and scrutiny over the coming months.

We will do our part to keep readers informed and in helping to connect events and implications. While the IoT focused industry remains in the early stages of more widespread IoT deployments, current actions center on how major enterprise, supply chain, industrial equipment and platform vendors converge on approach, since the current strategy is one of fostering platform and technology dominance.

This is great theatre one that will keep technology analysts busy and engaged in advisory modes. Insure that you acquire multiple opinions and viewpoints to determine how to position your organization or line of business perspectives related to planned  IoT initiatives. Give us a call or send us an email if you require further assistance.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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