Category Archives: Technology

Staying Green

About a month ago in my Sourcing Innovation series, I wrote a post entitled Green with Envy that described the many benefits a buying organization can achieve by “going green“.

It looks like this trend is here to stay. In Wired’s recent article “Carbon Killers”, they point out that for some companies, going green is generating serious greenbacks.

GE has currently pledged to roll back their greenhouse gas emissions 1 percent by 2012 (as compared to a projected rise of 40 percent). Why? In addition to reducing waste, reducing energy costs, avoiding environmental taxes, and reducing production cycles, green policies are starting to pay huge dividends in public relations and marketing buzz. For example, FedEx has announced plans to cut emissions through the use of hybrid delivery trucks. Furthermore, the global market’s appetite for green technology is heating up. If you are a US multi-national, chances are you want to do business in Europe and Asia, regions that have not only accepted, but are enforcing, the limits on greenhouse gases imposed by the Kyoto Protocol. (With 164 countries agreeing to the protocol, it’s not something you can ignore if you want to do business globally.)

After all, with the climate already changing thanks to global warming, as per this recent CNET news article, the smart money eyes climate change. The smart companies are trying to mitigate risk and seeking out opportunities in fields such as clean energy. Climate change and associated policies that arise to deal with it are going to fundamentally alter the makeup of many world economies. Companies that fail to embrace this coming change will probably lose out in the long run, therefore going green now is a good way to ensure a successful future.

Fortunately, going and staying green is becoming a whole lot easier with technologies produced by companies such as Atlanta-based CoalTek Inc.. CoalTek has developed a patent-pending technology that can convert raw-coal into “designer coal”, by way of electromagnetics, that contains less moisture, ash, sulfer and mercury. This allows the coal to burn more efficiently and cleanly, reducing energy costs and pollution. CoalTek is not alone. Denver-based KFx Inc. is also in the clean coal market. Furthermore, earlier this year Southern Co. and the US Department of Energy launched a $557M coal gasification project in Central Florida designed to produce the “cleanest, most efficient facility” in the world when it is completed in 2010.

Furthermore, as the CNET article points out, like health issues related to asbestos and tobacco did in the past, climate change could lead to lawsuits and target companies that either contribute to global warming or did not take sufficient steps to address regulations.

Product Information Management

Product Information Management, or PIM, according to Wikipedia, refers to the providing of product information for use in one or more output media and/or distribution channels, potentially involving multiple geographic locations. It involves ensuring that all of the data in your different systems, and those of the parties you interact with, is synchronous and synonymous. Even though it sounds like an easy problem to solve, just reference a master copy, it is still one of the biggest supply chain challenges. Global Logistics & Supply Chain Strategies on SupplyChainBrain.com magazine recently ran an article entitled “The Long Journey Toward One Version Of The Truth” describing how the inefficiencies in product information management are significant contributors to supply chain inefficiency and that data synchronization, internally and externally, can significantly help companies achieve one version of the truth.

PIM sounds simple enough:

  1. link to third party and legacy applications and import data into a centralized model,
  2. transform data by identifying and resolving duplicates and errors and enrich the data with external info, and
  3. synchronize the data by capturing all updates into the central master and pushing updates to the linked applications,

but when you consider that many organizations have dozen of systems with dozens of data formats and protocols for interfaces, its quite a challenge – especially when your suppliers, customers, and partners use different systems with different data formats and protocols.

I think the future of PIM lies in the exchange – where a third party maintains the master product information on behalf of a supplier and all of the users subscribe to this party to obtain the correct data. However, this does not resolve the integration issue, but I think this issue will eventually go away as on-demand SaaS (Software-as-a-Service) goes mainstream and the True SaaS providers integrate to the exchanges on your behalf.

After all, as reiterated in the article, the benefits are clear and well documented and include increased sales due to faster time to market, improved on-shelf product availability, improved productivity in the maintenance and publication of product masters, fewer errors to reconcile, lower transportation costs as a result of lower error rates, and more tax credits due to the ease in which they can be identified.

Feel free to share your thoughts.

The Elite (Supply Chain Technology) Consolidator’s Menu

Last week, in No Prix Fix Here: A Consolidator’s Menu Part 1 and Part 2*, Jason Busch of Spend Matters, despite his general skepticism of technology acquisitions, outlined a number of opportunities in the spend management sector that might just be “too good to pass up”. As always, most of these were prime specimens. However, I think a few good morsels were left off the consolidator’s menu and think some of the offerings require a better description if the goal truly is to wet the palette.

Jason started of with the amuse bouche and recommended the last remaining stand-alone spend visibility powerhouse, Zycus , a vendor with strong classification, analysis, and services capability (not to mention a good story to tell for SAP customers) . A fine choice indeed, but let’s not forget TrueSource (acquired by Procuri in 2006, Procuri acquired by Ariba in 2007, Ariba acquired by SAP in 2012) even though it appears they may have been ordered already.

For an appetizer, Jason offered a contract management company and a quartet of on-demand offerings. Let’s start with contract management. Although a sophisticated palette might prefer Nextance (acquired by Versata in 2007, a riskier palette might want to try Upside (acquired by SciQuest in 2012, rebranded as Jaggaer in 2017), a new taste sensation from the North. With respect to the on-demand offerings, I think a more refined description is required before a choice can be made. For a light appetite Hedgehog and Iasta (acquired by Selectica, merged with bPack, renamed Determine, which was acquired by Corcentric) are the true choices, having been designed as on-demand from the ground up. However, when comparing Hedgehog and Iasta, it’s like comparing chips and salsa to oysters rockefeller and caviar.  Whereas chips and salsa will leave you hungry for the main course, the oysters rockefeller would be a full meal on its own for many!  Hedgehog has a lightweight auction offering while Iasta has a full end-to-end strategic sourcing offering that covers the full executeable strategic sourcing cycle (at least in my book). VerticalNet (acquired by BravoSolution in 2008, BravoSolution acquired by Jaggaer in 2017) and GEP are much heavier fare, with their on-demand offerings coming later in the game.  Furthermore, with their large customer bases, and significantly higher (venture) capital investments, Vertical Net and Global eProcure may only be tempting to those with heartier appetites.  However, there are still some significant differences between these two players.  Even though Global eProcure has a number of services offices all over the globe (including China and India), they focussed on breadth to Vertical Net’s depth.  Furthermore, the spend and performance management offerings of VerticalNet might be more soothing to those who tend to get heartburn even thinking about global low cost country sourcing.  And for those with a hefty appetite, I’d make it a quintet and add Procuri (acquired by Ariba in 2007, Ariba acquired by SAP in 2012) to the mix as one of the few pure-play on-demand solutions on the market.  Finally, for those with an appetite for supply risk management, let’s add Apexon (acquired and merged with Infostretch in 2022) to the menu in addition to Vendor Mate and JV Kelly.

Now on to the main courses for our potential consolidators.

For Salesforce.com, Jason offered up Procuri and Ketera (acquired by Deem in 2010). Both fine choices, but I have to wonder, given the depth of their competitive offering, why Iasta was left off this menu?

For SAP and Oracle, Jason offers Rearden Commerce (rebranded as Deem in 2012), an exquisite choice for such discerning diners. However, I’d want to insure that meal consisted of one of the on-demand appetizers and was followed by a specialty consulting desert such as Aptium Global to help them weave affordable solutions for the small and mid-size markets.

For Ariba., although Jason is most likely too modest to ever add his own company, Azul Partners (replaced with Spend Matters), to the desert menu (or at least a service company with a similar marketing and messaging focus), it would certainly be the creme-de-la-creme for Ariba, a company that should be dining with a fatter wallet. After all, when research has demonstrated that Ariba users are “out-performing their peers in multiple areas” (link/research no longer available), with the exception of the true on-demand diners (such as Iasta and Procuri) which help buyers get more spend under management more quickly then traditional solutions (see “The On-Demand Supply Management Benchmark Report: Enterprises Turn to the Web and Find Quicker and Better ROI to Help Achieve Supply Management Goals” by Aberdeen), there should definitely be less diners in our elite specialty restaurant, especially in the traditional installed arena.

Finally, for Procuri, I would recommend it gobble up every small on-demand friendly services provider it can afford, for their customer bases, before SalesForce.com decides its dinner time!

* Links no longer available. All articles pre-2012 disappeared with the Spend Matters site update in June 2023.

Another Bite Out of the Apple?

Recently, CNN ran an article indicating that the Next generation of iPods could be delayed, and the iPod nano and the video iPod in particular. The new iPod nano, originally expected this quarter, is likely going to be pushed back to December and the new video iPod may not appear until 2007.

The expected delay on the iPod nano is the result of Apple switching suppliers for an internal chip whereas the expected delay in the video iPod is due to the need to increase screen size and improve battery life. On the bright side, the capacity of the iPod nano is expected to double.

Could this result in yet another blow to Apple, which must be taking a bit of a beating since a recent newspaper article alleged that staff in some of its Chinese iPod factors work long hours for low pay and in “slave” conditions, as summarized in this article . After all, Apple sold one million iPod nano’s in the first 17 days of its release, leading an AMR (acquired by Gartner) analyst to determine it had a “predatory supply chain”*, so any delay beyond the start of the holiday shopping season could be a major hit to the bottom line.

You’d think Apple would be more cautious, considering their recent switch to Intel last year caused them some supply chain problems. (As per an article in IT Managers Journal.)  However, what surprises me is that despite the fact they seem to have their distribution down, using the global logistics powerhouse BAX Global which was recently acquired by Deutsche Bahn AG (and integrated with Schenker), they appear to continually have difficulties getting products out on time.

I’d be curious to know what sort of development methodologies they use, and more importantly, when they involve procurement in the process. According to a recent Aberdeen report#, when procurement is included in new product design (NPD) in the design stages, product development cost is typically decreased by 16 to 18%, overall product cost is typically decreased 15%, and revenue is typically increased by 19%. Furthermore, whereas the majority of companies are not able to consistently hit product development targets with respect to percentage of products meeting revenue targets, cost targets, launch date targets, quality targets, or product development cost targets, the majority of best-in-class companies that have incorporated procurement into the process at the design stages hit these targets over 80% of the time.

Moreover, as I indicate in my Purchasing Innovation series over at e-Sourcing Forum, I strongly believe that procurement needs to be involved in R&D and NPD from day one, as procurement should be the major source of innovation within an enterprise.

* Link no longer available.  AMR was acquired and ZDNet, which had a summary article, is no longer operating.

# Link no longer available.  Aberdeen acquired by Harte Hanks in 2006, then Halyard Capital in 2015.

On Demand IV: And the SaaS Story Continues

Shortly after I finished writing my three part post on On-Demand over at e-Sourcing Forum (The Good, The Not-So-Bad, And the Coming Pretty …), I stumbled across this great article by IQ Navigator’s (acquired by Adecco Group and merged into Beeline) John F. Martin (of Building SaaS fame) called How True Software-as-a-service Delivers More Value over at Supply & Demand Chain Executive.

In this article, he echoes many of the same points that I have attempted to make in my series of posts, and does so brilliantly. He also clearly emphasizes some of the significant disadvantages of legacy enterprise software in relation to True Software-as-a-Service and gives you some rules for identifying a legacy provider with an ASP model trying to disguise themselves as a software-as-a-service provider.

He emphasizes the following five significant advantages of true SaaS solutions as compared to legacy applications that I believe just cannot be stressed enough:

  • no significant technology investments
    with legacy enterprise application solutions, you have to shell out for significant technology infrastructures to support them; with on-demand, all you need is the PC already on your users’ desks
  • no assembly required
    legacy applications require customers to become technical experts in the software: installation, infrastructure configuration, integration, customization, issue diagnosis, and upgrades; this involves significant training, ramp up time, and paying for a large IT staff indefinitely
  • no lock downs
    once customized legacy software finally goes live, it becomes a “strait jacket” that prevents future innovation and improvements for 3-5 more years (as upgrades are deferred as long as possible due to significant costs to re-implement new versions)
  • speedy issue resolution
    with a legacy enterprise application, the software vendor must often replicate a customer’s unique environment (exact production versions of application, database, operating system, hardware drivers, etc.), which can take weeks, only to determine that the issue can not be diagnosed or fixed because (1) it’s due to a customization (2) it’s the responsibility of another software component provider or (3) the version of the software you are running is too old
  • true process expertise
    true SaaS software vendors are experts in the business processes they automate; they can provide ongoing assistance in using new software capabilities, process innovations, and best-practices

And when you consider that Gartner estimates that more then 70% of the total five year cost of ownership for enterprise software comes after implementation, when you consider on-demand is usually significantly cheaper then enterprise software to begin with, this is a powerful proposition.

He also indicates that you can often tell a legacy application on ASP in disguise by noting one or more of the following indicators:

  • a reluctance to pilot
    pilots represent a significant investment to a legacy application provider who will have to configure a new instance just for you; in contrast, a true SaaS solution provider can enter your name and flick a software switch and the pilot is immediately set to go
  • elephant hunting
    (where the salesperson tries to enlarge the deal as much as possible to maximize revenue before you discover the true benefit/cost ratio of owning the software); in contrast, a true SaaS provider will allow you to buy the bare minimum knowing that you’ll want to buy more when you discover how great the service really is
  • reluctance or refusal to discuss revenue
    or the question “what would happen to your profitability if you had no new customers over the coming 12 months?” this would cause a traditional provider serious grief and lead to significant downsizing; in contrast, an established SaaS provider would be able to maintain status quo
  • infrequent or new functionality in any given year
    in contrast, most true on-demand SaaS providers provide regular updates 3 or 4 times a year
  • hosted versions lag new releases
    in contrast, a true SaaS solution is always up to date
  • insistence on single tenant or multiple instances
    in contrast, a true SaaS provider will want to take advantage of the multi-tenant model to save you both $$$
  • delayed or long implementations
    a provider running a legacy application on ASP may require weeks or months before they can get you up and running; a true SaaS solution can literally turn you on the same day you cut a deal
  • simple customizations require single tenant instances
    in contrast, true SaaS implementations are usually built to contain a moderate amount of configurability from the ground up
  • end of contract unknowns
    with legacy in disguise, you never know if you’ll be able to renew, how much it will cost, if you can get your data out, etc.; in contrast, true on-demand SaaS providers will specify everything for you up front, usually in the contract

Remember, as John F. Martin says, “SaaS allows customers to focus on their core competencies and their business processes rather than becoming experts on software internals, technology infrastructure maintenance, or deployment methodologies.”

Yet another take on SaaS can be found in Robert Bois’ recent AMR (acquired by Gartner) article The Rush to SaaS: Making Sense of the New Wild Wild West, where he presents The SaaS buyer’s guide. In it he presents three questions that the buyer should answer before selecting a solution.

  • What’s in an architecture?
    Mr. Bois points out that from a buyer’s perspective, that single tenancy vs. multi-tenancy should not be as big a concern as the pricing model, SLA, and customer support. Although I will admit that the SLA and customer support issues should be tops, I do not entirely agree with the first point. If price is important, then a multi-tenancy model should save both parties money. Furthermore, as Sudy Bharadwaj of Aberdeen eludes in his take of On-Demand Supply Management at e-Sourcing Forum [WayBackMachine], accepting a single tenancy model may cause you to miss out on the community benefits of a multi-tenancy model.
  • What’s the real TCO?
    This is probably the most important question a buyer should ask. If the TCO of an on-demand solution is high, I’d be willing to wager that there is a good chance that what you are actually being offered is a legacy ASP application in disguise, at which point you should refer to Mr. Martin’s indicators to find out for sure. I like Mr. Bois’ cost table, but should point out it is only accurate for the lifetime of your initial hardware and software purchases. The table seems to indicate that there are no annual subscription/license, hardware, or middleware/db license costs after the first year. This is not necessarily the case. If you want upgrades, you will have to pay a maintenance fee. Middleware providers only support their releases for a fixed time frame, and if you do not upgrade on a reasonable cycle, you will find yourself running an unsupported product, which will cost you a fortune if something fails and you need it fixed. Finally, even the best hardware will not last you more then three years without an upgrade.
  • To customize or not to customize? Mr. Bois makes a really good point here: “many companies believe their business processes are more unique than they really are, and they should weigh the advantages to more custom coded logic against the lower maintenance and upgrade costs of using business process tools and configuration instead of customization“.

Finally, I’d like to again point out Sudy Bharadwaj’s “Six Step Framework for On Demand Supply Management”. (login required) Part of Aberdeen Group’s Enterprise Strategies: Insight and Advice for Enterprise Executives, it overviews the Aberdeen PROFIT Framework for Supply Management as a Service (SMaaS). The PROFIT Framework was designed “to aid supply management evaluators in understanding how to deploy an On Demand solution to drive value“. It provides a series of Process, Regulatory, Operational, Financial, Intelligence, and Technology questions whose answers are designed to help you make the right decision.