Oracle today announced the availability of Release 6.2 of both Oracle Transportation Management and Oracle Global Trade Management.  The significance of this release is that Oracle continues to broaden both TMS and GTM from a singular applications platform, with built-in integration to the existing Oracle E-Business Suite 12.1. Also unique is the ability to have both TMS and GTM functionality available on a singular platform, which is not always the case among various technology vendors.

As noted in the Oracle press release, Release 6.2 of Oracle Transportation Management provides functionality enhancement in the areas of transportation sourcing, private fleet management, transportation planning and business intelligence. Release 6.2 also adds support for Oracle Data Integrator, which better facilitates the ability of customers to add any number of additional transportation costing or business intelligence data attributes for costing analysis.  Readers should take further note of the continued enhancements in small parcel and rail transportation rating, tracking, freight payment and audit which have previously been the purview of best-of-breed vendor offerings catering to high tech or industrial manufacturing clients.  Supply Chain Matters believes that this is further evidence that Oracle intends to be a serious competitor in the TMS area.

The additional functionality within Oracle Global Trade Management Release 6.2 that now features built-in integration with Oracle E-Business Suite 12.1, now includes the ability to conduct trade or denied parties screening for various sales orders within the order processing workflow, to conform to trade compliance needs in international sales. Unfortunately, this integration does not include Oracle Fusion integration components at this time. Also included is somewhat sophisticated functionality that supports product classification of items based on parent/child relationships of an item’s bill of material or sub-component configuration which should help in determining the optimal product classification for global trade reporting and duty considerations.

In our briefing with Oracle management, pricing and reference customers for the 6.2 Release was not disclosed.

Bob Ferrari

Oracle is taking advantage of the International Supply Management (ISM) Conference being held this week to showcase the availability of both Oracle Supplier Lifecycle Management and Oracle Supplier Hub. Both applications are part of the Oracle E-Business Suite Release 12.1.2, being offered as Supplier Management support.

These applications were designed to be complimentary to each other and are being offered to companies who have a large number of suppliers to support.  They were designed to support needs for improving overall supplier visibility and to overcome supplier data fragmentation.  Oracle Supplier Lifecycle Management is positioned more towards business process applications needs, supporting supplier discovery, qualification, contract compliance, scorecarding and self-service registration and applications needs.  Oracle Supplier Hub is positioned more as a master data management hub to consolidate, cleanse and share supplier data with other applications.  The application creates a blended supplier record from multiple sources and supports a cross reference to each connected application. It further supports the importing of data via multiple means, including XML or spreadsheet uploads.

Interesting enough, Patni Computer Systems partnered with Oracle to jointly develop both of these applications is an unusual occurrence for Oracle. I was informed by Nagaraj Srinivasan, Oracle’s Vice President of Supply Chain and Procurement Applications Development that Patni will be a prime, but not exclusive implementation partner. 

Oracle is targeting a broad swath of vertical industries with these applications, to include not only manufacturing and retail, but communications, financial, insurance and public sector.  The common denominators are companies that must manage and support a very large number of suppliers at any given time.

 Bob Ferrari

ERP software customers have gained a renewed sense of power with last week’s announcement from SAP AG that the company would step back from its previous plans to move all customers to Enterprise Support contracts priced at 22%.  According to an article featured in InformationWeek, SAP will instead adopt a two-tiered system that reintroduces a Standard Support option priced at 18%, which is 1% higher than 2008 rates. 

This move is a victory not only for SAP customers, but others as well, including Oracle’s ERP customers.  The issue of increased maintenance fees concerning SAP dates back to a July 2008 decision to increase software maintenance fees to 22% over the next five years.  SAP’s European customers, specifically Germany and Austria were the first to cry foul, and ever since, more and more of the worldwide SAP customer base have been pushing back.  The revised plan is to gradually increase support rates starting in 2011.

The current challenging economic times have forced many companies to slash costs and preserve cash.  While most employees and suppliers were often asked to give concessions, the major ERP providers persisted in raising overall software maintenance fees.  As most IT professionals would explain, software maintenance is double-edged. Companies must not only pay the annual fee, but must also expend efforts to remain current with new software releases or upgrades, or upgrade IT headcount and infrastructure to maintain current release levels. What can be even more frustrating is when the ERP supply chain module is not even being used, or lies “on the shelf” because functional teams have lost interest or focus in the application.

To present both sides of the issue, the ERP providers argue that maintenance revenues provide the means to keep new enhancements and technology flowing to installed base customers, along with insuring that the software will be supported when a problem occurs. Those arguments do not hold much value with today’s more empowered customer base.  To no surprise, companies are also turning to other non-ERP technology alternatives including hosted or software-as-a-service providers, or even third-party maintenance providers.

I agree with the consensus that credit should be given to SAP for biting the bullet and finally listening to the voice of its customer base. 

In April of last year, Supply Chain Matters called attention to an open letter blog entry penned by Bob Evans of Information Week, which at the time was directed to Oracle CEO Larry Ellison.  That letter challenged some fresh thinking regarding Oracle’s 22% maintenance fee.  Evans correctly noted that rather than a fee, the name should be changed to “innovation and development funds“. Others chimed in, utilizing other terms such as “M&A capital raising activities” or “user tax”. With this development concerning SAP support, Oracle customers should feel more empowered to exert their voice of protest as well.

A lot of commentary regarding the new decade reflects on the notion of “reset”.  In the case of ERP and perhaps the entire installed customer base of enterprise-level software, that reset is underway.

Bob Ferrari

Last week I was invited to attend Oracle’s Supply Chain Executive Briefing.  This is an annual event that brings together various supply chain industry analysts to meet and dialogue with the senior management team involved with Oracle’s supply chain management applications. Through my persistence and prior relationships with the Oracle industry analyst community, I’ve managed to be the one and only independent supply chain blogger invited to be a participant in this event, for which I am honored.

The agenda included a review of 2009 for Oracle SCM, as well as some interesting dialogue related to the challenges and successes of selling supply chain management software in such a tough economy.

The most interesting agenda item, however, was a live panel where select Oracle SCM customers talked about their deployments of Oracle’s various supply chain software offerings.  There are not many software vendors who have the courage to conduct an unrestricted live customer panel before an audience of industry analysts, and Oracle should be complimented for its openness to provide such a panel.  There were many nuggets of learning and common themes that came from the panel which I will share in this posting.

The panel was balanced among CIO’s and senior functional business analysts.  Industries represented included a rather large and well known food cooperative, a medical device manufacturer,  a manufacturer of printing devices and a generic pharmaceuticals manufacturer.  Each panelist described his/her business along with the significant supply chain challenges that needed to be overcome. 

Challenges were those rather commonly reflected in this economy, mainly to solve a particular burning tactical problem:

• Getting more intelligence on product demand and incorporating a demand signal repository
• Adapting more readily to a rapidly changing supply chain environment
• Improving fill-rate performance
• Enhancing the Sales and Operations planning with broader access to upstream and downstream information
• Transitioning from low volume-high mix to higher volume-low mix supply chain
• Incorporating more offshore manufacturing in overall planning processes

Lessons learned and what would you have done differently statements were the biggest nuggets of all.  They were:

• Get the most from the technology you already have. If you don’t have the technology, select a technology vendor that can provide the complete capability.
• Insure that vendors demonstrate proof-of-concept with extracts of live data.
• Target 2-3 months for initial implementation; minimize any disruption to the business.
• Scope the implementation to what you can initially manage, move on from the baseline in 6-12 week cycles.
• Determine if the vendor has done the heavy lifting in insuring manageable integration to existing applications.

What I continually find in these customer panels is that technology does add value for supply chain management, and  you, the consumers of this technology are getting much savvier in evaluation, selection and deployment of technology. 

Oracle’s SCM executives noted that in 2009 sales cycles were very elongated.  The reason is somewhat obvious.  In today’s economy, where cost is critical and resources are perilously lean, a decision to bring in additional technology to address a burning tactical or operational problem had better be right.   Technology buyers are much more knowledgeable about their business process and information technology deployment plans, and vendors are responding. 

 Bob Ferrari

Information Week‘s Bob Evans penned on his blog a somewhat provocative open letter to Larry Ellison, CEO of Oracle.  In essence, the letter challenges Mr. Ellison to facilitate some fresh thinking concerning the 22% annual “maintenance” charge that customers are required to pay to continue utilizing their enterprise or technology software.  Mr. Evans suggests that name should be changed from maintenance fee to “innovation and development funds”.  In these rather challenging times, companies are desperate in finding ways to save money or preserve cash, and the perceived notion of paying an inflexible annual “fee” gathers lots of attention.

This letter has garnered some commentary within the blogsphere.  Brad Kenney, Contributing Editor of IndustryWeek, wrote on his Mfg 2.0 blog that Oracle is not the only guilty party in the enterprise software universe.  His other premise is that in Oracle’s case, the maintenance fee should be renamed to “M&A capital raising activities“.

I’d like to take a supply chain view of this discussion.  Irregardless of what the real name and purpose of this annual fee may be, it should address some specific goals, namely to:

• Insure that technical support and knowledge is available when the software does not perform
• Further insure that the software is updated and made available to the latest functionality release
• Insure the fee is more equitable in terms of scope and usage.  If my supply chain application has a mere five users, vs. 500, it should be reflected in maintenance. Conversely, if my application plans hundreds of line items vs. millions of line items, there should be a difference.
• Maintain a development schedule that supports a timely process of continuous innovation or enhanced functionality, whether through internal development or external acquisition. If the application is static, tahn why should customers need to pay continuous maintenance?

In the specific case of Oracle, one can argue that their suite of supply chain applications has continuously been updated, and that M&A activity has been targeted toward enhancing the supply chain family of applications.  Certain other supply chain applications providers may or may not have met the above listed criteria.

One other thought, least my readers believe that I’m taking the side of software companies.  The severity of this economic downturn has caused structural changes to occur across many industries, and many companies have had to change or revise their pricing strategies, whether they wanted to or not.  CIO’s and senior supply chain executives have been challenged to be bold in rethinking the way they operate their services and support. SAP made maintenance support concessions to specific customers in Austria and Germany after they rebelled against the new maintenance structure.

Every customer has to challenge service providers for enhanced value, including those that were once “accepted norms”.  Software providers should not be immune to this challenge, and should rise to the occasion. It should be no surprise therefore that certain software-as-a service and cloud computing application alternatives are gaining interest in the SCM space.

What’s your view?  Have supply chain software providers generally been flexible in their maintenance fees, or has your company chosen a strategy to push-back on such fees?

Bob Ferrari