SIDEBAR: Their Software, Your Problem
Why the big enterprise vendors are not (and probably won't be) riding to the supply chain rescue
Some CIOs, according to Beth Enslow, senior VP of enterprise research at Aberdeen Group, seem to be waiting for their enterprise vendors to solve their supply chain technology problems for them.
They could have a long wait ahead of them.
On-demand supply chain applications just aren't their ERP vendors' core competency. "PeopleSoft, even with 300 different software modules, did not have an EDI translations software suite," says George Muller, VP and CIO of Imperial Sugar, who uses Sterling Commerce's services for order management and inventory. "PeopleSoft would handle everything very well within [our] four walls, but outside the four walls, PeopleSoft was behind the curve."
A possible reason for ERP vendors' reluctance to develop tools to integrate their customers' systems with their suppliers' and customers' systems is that it would impact their business model: selling on-premises software to a captive customer base. With the new, hosted model, customers of the enterprise software vendors could conceivably "turn off" the connection and go to someone else if they chose.
Representatives from SAP and Oracle, the biggest enterprise systems vendors, say that they are following the on-demand, hosted SCM market with interest, but, so far, don't have anything to offer. "We are looking at the demand for this market, but we are not yet offering an on-demand model with these kinds of solutions," says Hans Thalbauer, VP of supply chain management solution management at SAP.
"When you look at that opportunity space, that is not a service that Oracle has much interest in and competency in," says Julian Trotman, director of enterprise integration applications development at Oracle.
However, both point to their companies' fledgling on-demand CRM offerings to illustrate their technical capabilities within the on-demand model. "It's a model that we've tried to hone over the last three to four years," says Trotman. "It's going to be a large part of our business going forward."
As for the rise of the on-demand SCM vendors, SAP's Thalbauer doesn't seem too worried about E2open, GXS and the others. "I don't view them as a threat," he says.
SIDEBAR: Trust, but Verify
Should you open your kimono for your suppliers and customers? It depends on how well you know them
The age-old issue of trust rears its head once again as the hosted supply chain model allows - and encourages - enterprises to let their suppliers and customers look behind their collective firewalls. According to Noha Tohamy, Forrester Research supply chain and pricing solutions analyst, most companies feel that multi-enterprise integration is the only way that they can improve their supply chains "but when the rubber meets the road, companies are very cautious about what information they will share with their trading partners, and certainly what, if any, type of integration they are willing to have directly between their and their partners' systems".
Ranga Jayaraman, CIO of Hitachi Global Storage Technologies, agrees that these issues must be smoothed out before the real benefits of supply chain integration can be realized. "The trust between companies has to be there," Jayaraman says.
One way to decide how far to go with suppliers and customers is to analyze the nature of the partnership and make some hard decisions. Is it a small supplier that you can afford to lose? - in which case you might consider dropping it rather than getting stuck dealing with its manual entry work - or is it your most important supplier? - in which case you may do everything short of paying its monthly bills to get it to use your hosted service. Is the supplier's facility totally dedicated to your company, or does it supply other customers from which it draws higher margins on its products? - in which case it may be more resistant to your blandishments.
For example, Imperial Sugar VP and CIO George Muller is trying to help one of Imperial's biggest customers get up and running on some basic EDI transactions (as well as with its ERP rollout), which will lessen manual work for both companies and lay the foundation for an integrated supply chain with Imperial in the future. Because this is such an important customer for Imperial, Muller says he's putting in the hours and providing his expertise for his customer's benefit, doing everything he can to make it work. If the customer were not so important, Muller might not be extending himself to that extent.
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