Monthly Archives: January 2010

Is The Future of ERP Harmonization?

In a recent article over on CIO.com, Thomas Wailgum suggests that “the future of ERP” might be harmonization, which he defines as the happy middle between new advances in middleware offerings, tools from the big vendors that allow easy integration between core databases and infrastructure, and SaaS apps where appropriate.

Given that, as Thomas astutely notes,

  • for most companies, the pursuit of the single instance dream hasn’t led to success,
  • companies can no longer afford to wait the typical five to seven years for returns on major IT investments (especially when, on average, three new hardware platforms and three new major software versions will materialize in that timeframe), and
  • the worst recession in recent history is causing most companies to ask what the true cost of their ERP is and what the realized value is, especially when most ERP vendors are trying to raise maintenance costs to 22% or more while delivering little or no incremental value.

Given these harsh realities, and the fact that many companies are finding that their time is running out on their antiquated ERP systems such as PeopleSoft, R/3, e-Business Suite, and JDE, this might finally be the turning point where companies stop pumping millions of dollars into legacy ERP systems that, for many organizations, provide little return — especially when enterprise versions of open-source cloud-ready ERP systems like Compiere are available for a fraction of the cost of typical ERP systems. These systems, which can come bundled with support, often cost less than 1/5th of a SAP or Oracle solution and play nice with on-demand middleware and best-of-breed SAP solutions that implement common XML standards. This allows you to quickly assemble considerably more functionality, and value, for an up-front cost that is a drop in the bucket compared to what many traditional ERP systems cost.

In enterprise software, it’s often hard to say for certain what will happen. But I think this is the recession that will finally force the inevitable move away from “sunk cost” IT to “pay for performance” and that the enterprise of tomorrow will be different from today.

I’d also recommend checking out part II of the article on “Making Sense of All That Data” on CIO.com. Regardless of your viewpoint, Thomas makes some interesting points, especially with regards to the “Super Vendors” and the forthcoming consolidation in the traditional ERP space (which always occurs at the end of a recession when the rich buy the poor).

Share This on Linked In

What Impact Will the BI Megatrends from 2009 Have on Next Generation Spend Analysis?

An article in Intelligent Enterprise last year outlined the “Nine BI Megatrends for 2009” that the author expected to reshape business intelligence and information management in the year(s) ahead. Since spend analysis is a major component of business intelligence in supply chain, one has to wonder what impact these megatrends will have. But first, let’s address the mega-trends presented in the article.

  • Open Source
    Low TCO, mature development stacks such as LAMP (Linux, Apache, MySQL and PHP, Perl, or Python) [or MAMP if you prefer the Mac which, being built on Unix, is fully compatible thanks to Xcode], and new open source offerings from players such as Pentaho are making open-source platforms and foundations attractive, and providing pressure on commercial vendors to bring down the TCO.
  • BI is becoming less isolated
    Many users are now employing reporting, access, and analysis tools that come with functional applications, forcing suites to break down silos to offer value.
  • Users are demanding a richer experience
    The days of simple, canned reporting are finally slipping into the past. BI portals are starting to become richer, more flexible, and more powerful. They’re using Rich Internet Application (RIA) technology to improve the user experience and incorporating mash-ups to allow users to better visualize the data.
  • BI is starting to focus on relationships
    BI used to focus on reports that did not provide any flexibility when it came to investigating data relationships, but new tools are giving users the ability to define their own relationships, cubes, and reports and dive into the data in new and innovative ways and find relationships that, classically, would take weeks of specialist data mining or statistical analysis to uncover.
  • Business Modeling meets MDM
    Master Data Management and emerging semantic models, which could serve business modeling in the same way that data models, schema, and metadata served extract, transform, and load (ETL) tools, are enabling some vendors to create tools that improve business modeling and its data modeling relationship using graphical interfaces that allow analysts to create their own data models without having to learn specialized languages or methodologies.
  • MapReduce meets Large Scale Data Analysis
    Although the most famous implementation belongs to Google, it’s also available in the open source Apache Hadoop framework, and allows organizations to build parallel, virtualized architectures based on server farms using commodity hardware which can analyze more data simultaneously than ever before, allowing for the discovery of new relationships that can prove very insightful to BPM.
  • Column-oriented databases are attacking performance woes
    Some of the leading column-oriented database technologies are employing advanced compression technology and large memory algorithms that is changing the game for BI and data warehouse architectures, allowing complex queries to be answered in realistic amounts of time.
  • Event Processing is opening up new analytical possibilities
    Emergent applications in healthcare, telecommunications, intelligence, IT management, gaming, and web analytics are capturing events and correlating them with analytics from BI tools to give organizations actionable insight.
  • Too Big to Fail
    As more and more queries are run against multi-billion row tables in data warehouses managing hundreds of terabytes of data (and growing daily), we’ll see more and more BI implemented to improve BI.

So what does this mean for spend analysis? With the exceptions of MapReduce and Column-oriented databases, not much. The reality is that It’s the Analysis, Stupid and anything that doesn’t simplify analysis while increasing the analytical power available to the user won’t stay on the radar very long. That’s why I’m pleased to inform you that Eric Strovink’s new series on Spend Analysis starts within a week. As I’m sure it will be as informative and forward looking as his last two (linked in Spend Rappin’), I’m certainly looking forward to it!

Share This on Linked In

Nearsourcers – Is Brazil in Your Future?

I’ve been on a nearsourcing kick for a while now because I never really believed in the outsourcing craze (and the outsourcing craze to China in particular) as it’s just not rational that it should be cheaper to source the vast majority of products from half way around the world. Now, it was for a while, but I’m blaming that on ignorance and incompetence and not what pseudo-economists like to call “market reality”. Let’s face it, fuel is expensive. Labor is expensive … and if you need trucks, boats, and trains to ship your product, that requires lots of extra labor to load and unload. And lead-time is expensive. Who knows where the market is going to move during the 35 days it takes the product to reach your warehouse? You might end up with a lot of unmoveable inventory and that’s going to cost you. (So unless you can air-freight affordably and without a lot of environmental damage, and unless the other factors Dick pointed out in his recent post on Nearshoring are met, outsourcing half-way around the world just isn’t a good idea.) And if we’re as smart as we’re supposed to be, we should be able to innovate a way to produce the (vast) majority of products more cost effectively close to (if not at) home. (If we can’t, shame on us.)

Now, my thoughts were that the rising cost of oil and the rising cost of labor in the former “low-cost” countries would push us back to Mexico — which received a lot of investment before the China craze, which has a lot of excess capacity, and which has a good understanding of our needs — but after reading this recent special report on business and finance in Brazil in the Economist, I’m wondering whether or not Brazil should be getting more attention.

For what might be the first time in modern history, Brazil is democratic, experiencing economic growth, and realizing low inflation. If the trend continues, it could be one of the world’s five biggest economies by the middle of the century. It’s already self-sufficient in oil, it’s government paper is classified as investment grade by all three of the main rating agencies, it is now lending money to the IMF (which was wary of lending to Brazil but a decade ago), and FDI in Brazil is up 30% year-over-year while the FDI global average is -14%. Plus, GDP outpaced inflation in Brazil in 2006 for the first time in over 50 years.

Most economists are pegging its expected growth in the 4-5% range, which is pretty damned good considering the current global economy. Furthermore, this growth should pull its higher-than-average interest rates down to normal levels soon, which will make Brazil a fertile ground for (new) business expansion.

All-in-all, Brazil is looking like a very good location to be near-sourcing from.

Share This on Linked In

Trade Extensions Demonstrates Optimization is Not Just for the Private Sector

As I just finished my recent series on The Role of Optimization in Strategic Sourcing, I wanted to run a few recent case studies to demonstrate the power and benefits of optimization to make it clear just what you’re missing by not using this wonderful piece of sourcing technology. Since I talk with some of the people at Trade Extensions regularly, I decided to ask them since it seemed like the quickest (and easiest) way to get what I wanted.

Now, I must say that I was a little surprised by what I received, and you might be as well. Now, many of you probably know that Trade Extensions powers BidSmart by Schneider Logistics, that it is used by A.T. Kearney in many of their high-profile consulting engagements and that, like their peers, they have several of the largest Fortune 500 companies in the world as clients. What you may not know is that they also have a significant number of public sector clients in Scandinavia, including the cities of Stockholm and Gothenburg, Greater Stockholm Public Transport and The Swedish National Traffic Agency. The case studies I received detail just a few of their successes within this sector.

Even though optimization isn’t restricted in terms of applicability, when you consider that:

  • most public sector operations, at least in North America, are woefully behind the private sector
  • most public sector operations, at least in North America, require the “lowest bidder” to win the award, no matter how unattractive their bid might be or how poor their past performance was
  • most public sector operations, at least in North America, have so much red tape and politics at play that getting the cross-functional team on-board necessary for success is a pipe dream

the last thing I was expecting was a set of public sector case studies.

So what did optimization do for the very forward-thinking Swedish public sector?

  1. It reduced the cost of cleaning services by over 6%.
    This amounted to a savings of over 200,000 Euros of up-front saving plus considerable on-going administrative savings as the ability to accept a package bid reduced the number of contracts that had to be administered from 42 to 1!
  2. It reduced the cost of bus services by over 1,000,000 Euros.
    While the average cost reduction was only 2.4%, in the public sector where union wages rise every year (with the cost of petrol [gas])), that’s pretty good — especially when the routes for a bus service are fixed!
  3. It reduced the cost of road resurfacing (while reducing the risk of possible collusion between suppliers) by over 1,000,000 Euros!
    Again, while the average cost reduction was only 2.7%, since union wages and the cost of materials rise every year, this is also quite good! Also, the design of the event (a large number of contracts were split into 2 separate contracts, one for the production and delivery of asphalt to a specific site, and one for the laying of the asphalt) had the desired effect in terms of allowing smaller suppliers to participate in the event.
  4. It reduced the cost of domestic travel (w.r.t. flights) by over 55%!
    Before the Trade Extensions event, which allowed bidders to submit bids on single contracts or a combination of contracts, the average contract cost for the Swedish National Public Transport Agency for the long distance public transport system was about 13,500,000 Euros a year. After the combinatorial event which considered 27 bids from 8 bidders, the cost was reduced to about 6,000,000 Euros a year! Incredible!

If you want more information, feel free to contact Chetan Raniga, Business Development Manager (Americas) at your convenience. He’ll be happy to discuss these, and other, sourcing categories (and case studies) with you.

Share This on Linked In

New and Upcoming Events from the #1 Supply Chain Resource Site

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis — and it will continue to do so.

The following is a short selection of upcoming webinars and events that you might want to check out in the coming weeks:

Date & Time Webcast
2010-Jan-19
14:00 GMT-05:00/CDT/EST		 Get the Most from your Plant Assets
Sponsor: Infor
2010-Jan-19
11:00 GMT-07:00/MST/PDT		 Cost Modeling: Going Beneath the Price Tag (Censeo Consulting Group)
Sponsor: Sourcing Interests Group
2010-Jan-20
14:00 GMT-08:00/AKDT/PST		 Spend Analysis: A shot in the arm for (better) sourcing
Sponsor: Zycus
2010-Jan-21
11:00 GMT-05:00/CDT/EST		 Supply Management Excellence – Using Supply Base Manager
Sponsor: RockySoft
2010-Jan-21
14:00 GMT-05:00/CDT/EST		 Learning to Use Value Stream Maps Webinar
Sponsor: AME
2010-Jan-21
14:00 GMT-05:00/CDT/EST		 The Power of 10 in 2010: A Webinar Series
Sponsor: IQ Navigator
2010-Jan-21
14:00 GMT-05:00/CDT/EST		 Securing Federal Information Systems: Privileged Identity Management
Sponsor: Lieberman Software
2010-Jan-21
14:00 GMT-05:00/CDT/EST		 European CPOs: Capitalizing on the Best Opportunities
Sponsor: Ariba
2010-Jan-21
14:00 GMT-05:00/CDT/EST		 Best Practice Strategies for Contingent Workforce Management in 2010
Sponsor: IQNavigator

Dates Conference Sponsor
2010-Feb-8 to
2010-Feb-10		 The 4th Annual Front End of Innovation Europe
Amsterdam, Netherlands, Europe (North-America)		 PDMA
2010-Feb-11 to
2010-Feb-14		 International Outsourcing Forum 2010
London, England, UK (Europe)		 Arena
2010-Feb-15 to
2010-Feb-17		 The 2010 Outsourcing World Summit
Lake Buena Vista, Florida, USA (North-America)		 IAOP
2010-Feb-17 to
2010-Feb-17		 2010 National Electricity Forum
Washington, D.C., USA (North-America)		 U.S. Department of Energy
2010-Feb-21 to
2010-Feb-23		 Supply Chain Forecasting & Planning Conference
Phoenix, Arizona, USA (North-America)		 IBF
2010-Feb-21 to
2010-Feb-24		 Logistics Conference 2010
Orlando, Florida, USA (North-America)		 RILA

They are all readily searchable from the comprehensive Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know you were looking for!

And continue to keep a sharp eye out for new additions!