Application Software Outsourcing: Buyers Are Seeking More Expertise from Providers

To come up with a short list of the best-fit providers, users need to answer 14 critical questions in TEC’s Outsourcing Evaluation Center pre-screen questionnaire. Amongst these, four questions are related to the providers’ expertise. These areas of expertise are

• system development process expertise,
• application development expertise
• domain expertise, and
• technology expertise.

Of course, TEC’s selection service goes far beyond generating a short list of qualified providers, but the short-listing process is informative enough to provide me with a general understanding of buyer requirements of the above expertise areas.

The sample size of this data is also quite satisfying. There were 2,351, 3,619, and 6,299 comparison projects taking place in the application software outsourcing area in the years 2006, 2007, and 2008, respectively.

The Rankings

The following figures show outsourcing buyers’ requirements in the four expertise areas. In each chart, expertise options are displayed in a descending manner from left to right according to the frequency that they are selected by buyers in year 2008.

Figure 1. System development process expertise.

Figure 2. Application development expertise.

Figure 3. Top 10 domain expertise.

Customer Life Cycle Solutions: Strategic Alliances

Communication enterprises are under intense competition to secure customer loyalty and build greater profitability. Amdocs, a global leader in billing systems, customer care, and support has shifted its strategy, creating a more integrated, customer-centric solution designed to give communication service providers (CSP) a greater competitive edge. Its reinvented portfolio is designed to create an "intentional customer experience," bringing a point of differentiation to the customer life cycle. Amdoc's new strategy involves consultancy services, a unified software platform, and partnerships with industry leaders and it has established a series of new relationships to provide billing and customer relationship management (CRM) solutions to telecommunication companies.

Part three of the Amdocs Overhauls Its Marketing series.

In addition to its new partnership with IBM, (See Part Two) in mid-February, Amdocs and SAS Institute, the world's leader in business intelligence (BI) software, announced that they have formed a global strategic alliance to deliver advanced marketing automation (MA) and decision-centric BI solutions to CSPs. Together, the two companies pledge to enable CSPs to better track and analyze valuable customer data and dynamically present the resulting intelligence via operational systems, such as billing, call center, and ordering.

User companies should thus benefit from advanced customer and market segmentation (a marketing strategy in which the total market is disaggregated into submarkets, or segments, sharing some measurable characteristic based on demographics, psychographics, lifestyle, geography, benefits, etc.), rapid deployment of one-to-one marketing campaigns (a marketing strategy for sending a particular message to a single customer, often assisted by a marketing database) and improved product lifecycle management (PLM) will possibly reduce operating costs, enhance customer loyalty and lifetime value, and increase profitability.

Through a suite of joint solutions, Amdocs' telecommunications industry expertise and established operational applications, coupled with SAS' predictive analytics and profitability software, customers should benefit from a combination of strong analytical software, business consulting, and implementation services, allowing them to unlock valuable intelligence from underlying operational systems.
Available immediately, the first offering from Amdocs and SAS is the Customer Profitability and Segmentation solution, which should allow CSPs to understand the costs associated with doing business with their customers. It will enable them to gain vital insight into their customers' behavioral drivers, and to use that knowledge to make business decisions. Ultimately, this solutions aims to maximize customer profitability and create a highly personalized and differentiated customer experience. Other solutions, such as churn management and predictive modeling, will be rolled out in a foreseeable future.

The product marketing and development deal lets SAS take over the support of Amdocs' current marketing campaign management application, which is largely based on the technology acquired by Amdocs from its acquisition of Xchange. Consequently, Amdocs will encourage its few dozen campaign management customers to migrate to SAS' Marketing Automation 4 offering. Existing Amdocs customers of other modules that were built based on Xchange, including Amdocs Opportunity Advisor, will not benefit much from this partnership, although they will continue to be supported.

Bundled with that, these customers will also be offered access to the SAS Telecommunications Intelligence Solutions, the company's set of prepackaged applications tailored to meet the distinctive needs of carriers. Available since mid-2004, the latest suite release includes the ability to more accurately identify customer, product, channel, and tariff profitability. The application's functionality is based not only on SAS' vast implementation experience, but also on SAS' demonstrated activity-based management (ABM) technology, which is in a great part owing to the 2002 acquisition of the activity-based costing and management functionality of former ABC Technologies. These capabilities provide telecommunication companies with more granular views of cost and profitability throughout the organization, providing information that is essential to driving corporate revenue growth and profitability.

Telecommunications companies have historically allocated costs based on traditional accounting methods, which has often resulted in the inaccurate attribution of costs to products, customers, and channels. By using an activity based costing approach (ABC), carriers should be able to assign values to the actual drivers of these costs. ABC attempts to allocate overhead costs on a more realistic basis rather than focusing exclusively on direct labor or machine hours. It is a cost accounting system that accumulates costs based on activities performed. It then uses cost drivers to allocate the costs to products or other bases, such as customers, markets, or projects. SAS' implementation experience with carriers shows that 80 to 90 percent of profitability comes from 20 to 40 percent of customers. Building on this, the ABC strategy will provide CSPs with valuable information on customers, indicating who has the potential to turn into a revenue maker, who should be kept or let go. The solutions should also identify "who" and "what", and "when" they will be eligible for cross- and up-selling opportunities, of which this is a significant move towards near real-time data capture analysis and reaction.

There is a renewed imperative for CSPs to maximize customer profitability and build win-win relationships that inspire customer loyalty and confound competitors. Amdocs' customers face the common challenge of building stronger, more profitable relationships with their customers, which requires the ability to identify, keep, and grow relationships with their most valuable (meaning, profitable) customers.

Thus, the SAS alliance might be crucial for upgrading and leveraging Amdocs' capabilities through the use of valuable business information accumulated within its still diverse systems. This vital information has rarely been extracted before, although many Amdocs' systems are the only business lifeblood for straddled and struggling customer service operators. Namely, a great deal of business information flows through Amdocs' billing, CRM, orders management, mediation, and other systems, but, without the connection between these disparate data, they cannot be accessed, and are therefore unusable. Cooperation between Amdocs and SAS should make it possible to collect this business information from all these systems, cross-reference it, analyze the cross-referencing, and deliver the resulting conclusions to the relevant decision makers within a fairly short time span.

This valuable information should then be almost immediately converted into monetary rewards for the customer service operator and the company. For instance, among many things, analyzing this information should enable operators to know which services are more profitable versus those which are less profitable; what is the mood among users with regard to demand for new services; whether and how existing services should be changed; which users are on the brink of abandoning their operator, and how they can be kept; and what additional services should be offered to each user.

Further, data collected from the orders management system, should, for example, tell the operator, in almost real time, how many orders are still in the system, how many orders arrive every day, which products were ordered, the speed of the response to the order, when payment will arrive, etc. Collaboration between Amdocs and SAS, if truly committed to by both, should make it possible to collect and analyze information stored in these Amdocs' systems, and deliver the conclusions and recommendations to the operator's decision-makers in the form of graphs and practical reports.

Unified Software Platform

The launch of these new Amdocs consulting services comes on the heels of the second element of Amdocs' marketing overhaul: a first time offering of a unified software platform. In mid-February, Amdocs launched Amdocs 6, a pre-integrated portfolio of modular, billing, CRM, self-service, order management, mediation, and content revenue management software products aimed at easing and accelerating the adoption of the ICM strategy.

According to a recent Amdocs' study, almost 75 percent of surveyed consumers think their CSP only sometimes, seldom, or never understands their needs. Surprisingly, the survey also revealed that 34 percent of women and nearly 20 percent of men would rather give birth than interact with inexperienced or unhelpful customer service representatives. While consumers clearly identified short hold times and friendly staff as key determinants of good customer service, more than 64 percent felt that their providers only improved customer service when faced with the threat of either the loss of business or increased competitive pressure. Quite simply, when offered an ample choice of providers and services, consumers today feel the easiest and best way to express dissatisfaction is to take their business elsewhere.

Therefore, the products in the new Amdocs 6 portfolio are going to be pre-integrated to remove process barriers across the customer life cycle, from targeting, selling, and delivering, to billing and supporting each customer at all touch-points, including the Web, contact center or bill mailing. Technical platform integration aims at reducing implementation costs for service providers and driving a lower TCO. Key products within the Amdocs 6 portfolio include

* Amdocs Billing 6. A fully convergent billing product, designed to meet the evolving needs of the world's largest CSPs prepaid, postpaid, voice, and data billing operations.

* Amdocs CRM 6 . Delivers out-of-the-box solutions to optimize customer-centric business processes.

* Amdocs Order Management 6. A scalable order management product designed to meet the complex ordering requirements of CSPs.

* Amdocs Content Revenue Management 6. Manages the content supply chain from the partner's domain, through the operator's environment, to the end consumer.

* Amdocs Mediation 6. A single converged system that adapts to diverse requirements and executes large-scale service logic to address CSPs' most urgent objectives: reducing TCO and increasing business agility.

For instance, the self-service system that Amdocs will provide as part of the platform will purportedly enable telecommunications subscribers to self-manage their budgets via the Internet. They will be able to order and change services, change their account information, check the status of a service they have ordered, and so forth. This system provides subscribers with what amounts to an independent and automated customer service center, thereby relieving the operator's customer service center of a great burden.

Also, in order to provide customers with integration between systems, Amdocs has also developed an integrated catalogue, in contrast to the separate ones it has previously used for each system. The integrated catalogue is software that enables operators to define the systems and services that they want to order. At the same time, users can still order each Amdocs system separately, since the vendor has found that most of its customers prefer switching to an integrated system in stages.
The third element of Amdocs' marketing revival ploy is a greater reliance on business with industry leaders, which should enable the vendor to better understanding its customers' business needs and provide proactive solutions. For example, in 2004, Amdocs established a new global business relationship with IBM to provide comprehensive, flexible billing, and CRM solutions with an emphasis on telecommunications customers. Under the terms of the agreement, Amdocs and IBM provide telecommunications companies with joint solutions and a range of managed services options based on IBM services expertise, including business process transformation, order management, information technology (IT) management, and additional business process support. The agreement also enables Amdocs and IBM to pursue joint sales opportunities, expand product and services offerings, and share technical expertise.

In addition, new partnerships with smaller niche players, particularly providers of middleware and video services, have helped Amdocs prepare telecommunications companies to sell video services over their IP networks. With these innovative products, Amdocs touts it is ready to help make the triple play (voice, data, and TV) or even a quadruple play (wire line, wireless, data, and TV) a reality for telecommunication companies as they seek to reclaim their leadership in communications. Amdocs believes these moves will help it fend off its chief competitor, Convergys, which in 2001 bought the UK-based billing provider Geneva. Geneva's product remains highly effective in carrying out billing on IP networks, making it one of the world's largest specialist billing companies. Geneva, along with the cable billing operator CSG Systems, are direct competitors of Amdocs. Moreover, many still believe that Convergys might have another edge over Amdocs due to its WIZARD system (which came from the acquisition of former Israeli company Wiztec Solutions). WIZARD does billing for video broadcasts and is aimed at the cable and satellite communications market.

A Tectonic Shift in Communications Customer Life Cycle Management

Amdocs (NASDAQ: DOX) recently unveiled a new marketing philosophy—one so significant that it is touted as the most important development since the company went public in 1998. Amdocs is an Israel-based company that provides billing systems, customer care, and support to communications companies throughout the world. Its corporate paradigm shift aims to give companies stronger, more profitable customer relationships through its comprehensive portfolio of software and services that span the customer life cycle. Boasting an "intentional customer experience", Amdocs claims to help companies cultivate their return on investment (ROI), lower total cost of ownership (TCO), and improve operational efficiencies.

Part two of the Amdocs Overhauls Its Marketing series.

Amdocs, whose revenue was approximately $1.8 billion (USD) in 2004, has created a customer-centric approach in its Integrated Customer Management (ICM) strategy. As communications companies are facing increased competition and price commoditization, ICM offers to further customer loyalty and increase profitability by offering a point of differentiation in the customer experience. To create this offering of expanded services and integration capabilities, the new strategy involves three elements.

1. Consultancy services
2. A unified software platform
3. A greater reliance on business with industry leaders

In mid-March, the vendor announced new business consulting services that should help accelerate the ICM-readiness for communications service providers (CSP). In addition to a current broad set of implementation, integration, and managed services that Amdocs provides to customers, the new consulting services include

* Amdocs ICM Blueprint Framework of Services. An overarching framework that includes the Amdocs ICM Benchmark Service and encompasses a wide range of offerings—from high-level strategy to business process integration, training, and testing. They are designed to help CSPs design, plan, and execute their transformation from a voice service utility to a customer-centric, multi-media retailer.

* Amdocs ICM Benchmark Service. Addresses critical business processes that impact the intentional customer experience: target, sell, deliver, bill, and support. The ICM Benchmark Service ensures a comprehensive cross-silo view of the organization, which is a business imperative for achieving true ICM. As a part of the ICM Blueprint Framework, the ICM Benchmark Service was designed to assess current state versus industry benchmarks and best practices toward achieving ICM. To that end, the ICM Benchmark Service will facilitate creation of an ICM strategy and vision based on the customer's unique situation, taking into account investments, goals, competitive environment, etc. It will define the unique ICM vision and strategy of an CSP; measure ICM maturity versus industry best practices across people, processes, and technology; identify and substantiate gaps; and define, size, justify, and prioritize initiatives that can be improved through the Amdocs ROI Methodology. The service leverages the Amdocs Telecom Maturity Tool developed based on a licensed methodology researched and designed by Gartner, Inc.

* Amdocs Contact Center Optimization Service. Focuses on improving the efficiency and effectiveness of contact center operations and self-service capabilities with the emphasis on designing and implementing a customer interaction strategy that delivers an intentional customer experience. The service considers both efficiency and effectiveness of operations and uses modeling and simulation tools to determine the appropriate cost-to-serve, helps elicit the right customer behavior, and maximizes both the perceived value of the interaction to the customer, as well as customer profitability.

* Amdocs Customer Profitability and Segmentation Service. Helps plan and execute an applied segmentation and customer profitability strategy delivering actionable intelligence at the point of decision, while rationalizing and leveraging past business intelligence and marketing automation (MA) investments. This should give CSPs the power to create better-targeted product offers, communications, bundled services, and support approaches.

* Amdocs Billing Operations Improvement Service. Applies Amdocs' decades of accumulated "best practices" so that CSPs can take steps to improve the effectiveness and efficiency of their existing operations in areas such as bill cycle time, hardware performance, error handling, service time-to-market, customer satisfaction, and quality.

Possibly the most important facet of Amdocs integration services is that the vendor will now also provide integration services to operators that have not purchased its billing or customer relationship management (CRM) system, including software management, checking and testing, and carrying out the changes necessary to prepare the operator's system to go live. The vendor plans to continue expanding consultancy and integration services, and develop them for integrated customer management.

At present, all users have several accounts with the same operator, such as a cable television account, a fixed-line telephone account, a cell phone account, and so on. The idea behind the new concept is that the operator should manage the system so that every user will have a single account. The new consultancy and integration services should also help operators manage the user's account for all types of services—landline communications, wireless, TV, etc. from one central point. Amdocs believes that consulting and integration services should give it an advantage over the competitors at a time when operators and systems are being consolidated, as these services should enable the vendor to advise the operator about the right approach for integrating networks and systems following the merger.

Amdocs Overhauls Its Marketing

Amdocs (NASDAQ: DOX), is a leading provider of billing systems, customer care, and support for the communications industry in North America, Europe, and the rest of the world. A global company with revenue of about $1.8 billion (USD) in fiscal 2004, Amdocs employs over 9,500 IT professionals and serves customers in more than 40 countries around the world.

Headquartered in Ra'anana, Israel, Amdocs has long been the leader in the world of telecommunications billing, by long supplying operations support software (OSS) used by telecommunications service providers to deliver voice, data, and wireless services to their customers. OSS is a generic term for a suite of software programs that enable an enterprise to monitor, analyze, and manage a network system. The term was originally applied to communications service providers (CSP), referring to a management system that controlled telephone and computer networks. However, the term has since been applied to the business world in general to mean a system that supports an organization's network operations. To that end, Amdocs' software includes modules for customer service, billing, sales, and audits, while it also offers sales and publishing software for developing print and on-line directories. It is a technology company that engages in the provision of product-driven information system solutions to major telecommunications companies.

The company's product offerings now include a library of OSS, whose core elements include customer resource management (CRM), order management, call rating, invoice calculation, bill formatting, collections, fraud management and directory publishing services, while its managed services include information technology (IT) outsourcing, application outsourcing, and business process outsourcing (BPO), particularly for customer service and data center operations. In fact, a large proportion of Amdocs' 2004 revenue came from managed services, where the company saw continued strength in its directory services business and enhanced relationships with important existing customers. For instance, following the completed acquisition of Certen from Bell Canada in mid-2003, Amdocs took over the managed services responsibilities for Bell, Existing managed services agreement with Bell extends through December 2010. Amdocs has also continued to develop an integrated billing platform to replace legacy systems built on a product-by-product basis. Thus it has further contributing to Bell's productivity improvement goals and enabling Bell to deliver on its one integrated bill commitment to its customers.
Amdocs Ensemble suite of products encompasses several key customer care, billing and order management systems (CC&B systems) application areas, such as customer care; order management; event processing; invoicing; and fraud management. Moreover, through the acquisition of a former CRM leader Clarify in 2001 (see Clarity of Vision: Clarify Sold to Amdocs by Nortel), Amdocs also became a noteworthy player in the CRM and call center areas, so that, in terms of the OSS side of a communication customer or a CSP, most data of any effect is captured and managed by an Amdocs solution. To that end, Amdocs ClarifyCRM product offers solutions that help companies better perform and manage selling processes across multiple sales channels. The major suite, Amdocs ClarifyCRM Service and Support, offers solutions spanning support centers, contact centers, and self-service solutions, although the product offers certain marketing and analytics capabilities too.

Another related product, Amdocs Enabler, provides flexible, real time rating and billing for all voice, data, content, and commerce services, by offering integrated on-line and off-line charging. It also provides a single product to support both prepaid-postpaid convergence and wire-line and wireless convergence. Enabler is pre-integrated with Amdocs ClarifyCRM, which will coordinate the integration of future product upgrades, since Enabler's functionality can be extended through pre-integration with value-added Amdocs products.

In 2003, Amdocs launched major releases of its flagship products. These releases introduced out-of-the-box, productized billing and CRM integration, enabling easier implementation of the products as well as with third-party and legacy applications. This functionality has provided customers with the potential to achieve integrated customer management regardless of their current operating environment, and these releases also provided additional functionality that allows Amdocs' customers to drive profitability within their businesses. For example, Enabler 5 supports new revenue streams and business models with advanced on-line charging capabilities and it supports multi-market and multi-national operations, all on a single platform. On the other hand, ClarifyCRM 12 introduced advanced user interface (UI) technology that delivers more real time, relevant, and actionable customer information to the service agent's desktop, thereby transforming a high-volume call center into a more efficient and effective multi-channel customer contact center.

Amdocs further evolved its CRM offering in 2003 with the acquisition of the technology assets the bankrupt Exchange Applications Inc. (Xchange, see Xchange Adds to the List of CRM Point Solutions' Casualties). Now re-branded as part of the Amdocs ClarifyCRM suite of applications, the campaign management and real time decision-making capabilities obtained through this acquisition complemented Amdocs' traditional strengths in operational CRM, thereby delivering a more complete, closed-loop customer management.

Even during 2002, while battling to secure new finances, Xchange surprisingly managed to build a real time engine to deliver targeted promotions-based capability to detect important customer events and behaviors from transactional data throughout multiple marketing channels within an enterprise. In early 2003 the company announced the release of its former Xchange 9 browser-based suite that enables marketers to automatically trigger an appropriate communication to the customer immediately after they exhibit a behavior representing a cross-sell, up-sell, or retention opportunity, thus answering the question "when" to initiate a marketing interaction.

Further, the Xchange 9 EDM (Event Driven Marketing) Option allowed users to observe data from multiple sources within the enterprise, look for changes to the "state" of the customer, and change direct marketing via the Xchange 9 platform. This development is in sharp contrast to using traditional data mining tools or writing complex structured query language -based (SQL) queries to leverage historical information and to produce predictive models long after the marketing opportunity has past. Nevertheless, the former Xchange applications have since hardly promoted Amdocs as an integrated OSS for CSPs. The reason being that within the marketing automation (MA) market, Amdoc's capabilities have, at best been, described as only "adequate", not "exciting" or "leading".

Customer Relationship Management: Evolution, Not Revolution

Choosing a new customer relationship management (CRM) solution can be onerous for anyone saddled with this task. But the process of choosing a solution doesn't have to be time-consuming and tedious. Nor should it cause major upheaval in an enterprise's operations, creating significant inconvenience for users. The last thing any manager wants is apathy—or even mutiny—from disgruntled employees “forced” to use an application that doesn't suit their needs or that is too complex to be adopted quickly.

Instead, a CRM solution should be implemented so that users are fully supported and feel that the tools at hand are helping them to get the job done, not adding an extra element of responsibility to their workdays. What you don't want is hand-to-hand combat when trying to encourage employees to use new applications, as lack of user buy-in is one of the most common reasons for CRM project failure.

The application you choose should, in fact, increase efficiency. And hand in hand with efficiency, you expect either a reduction in costs, or an increase in profit. Ideally, you'll get a quantifiable return on what can be a significant investment.

But First, What Is CRM?

CRM is a process of improving a business's relationships with its customers, using software applications that target the requirements of the business's processes. CRM can strengthen these relationships in a number of ways. Typically, CRM applications fulfill one of three key functionalities related to managing customer information: marketing, sales, or service. Software modules are generally broken down into four functional areas: sales automation, marketing automation, customer service and support, and a reporting and analysis tool. Some CRM packages are comprehensive, meaning that they incorporate aspects of all four functions.

So how do you know if you need a comprehensive package?

This partly depends on whether your enterprise is small-to-medium, or whether it is a huge national industry or multinational corporation. It also depends on how many aspects of your customer relationships you think could do with a little revolutionizing—or “evolutionizing.” And finally, it depends on your company's budget.

What Are the Features of CRM?

In order for CRM to effect positive change in your company, its features should speak to all activities involving customer interactions. But don't stop at thinking this means only face-to-face interactions. CRM should include features that take into account all ways the customer comes in contact with the company—before, during, and after a sale. Therefore, advertising campaigns and customer complaints are just as important as that friendly smile offered to customers when they take their purchases and walk out of the store. All activities should emphasize to customers how much the company values them—and, for a more personalized experience, how well the company knows them. So that when you thank customers and invite them to “come again,” there's a much better chance that they will.

CRM can include any of the following features:

* call management
* customer management
* service issues management
* knowledge exchange management
* sales force activities
* marketing campaign management
* sale lead tracking
* marketing analysis and forecasting
* database storage

Packages that are tailored separately for the sales, marketing, or service aspects of CRM have additional features. Customer service and support automation, for example, may have such features as call routing, contact center sales support, and tools for measuring customer satisfaction. Marketing features might detail sales activities and time management, and allow for analyzing and reporting on sales opportunities.

But How Are These Features Going to Benefit My Business?

One simple way to sum up the benefits of CRM is this: better relationships with your customers. But, this is likely self-evident from the very name of the software—though of course “manage” is not necessarily synonymous with “improve.” What you really need to know is how exactly the many features of CRM can restructure and improve your relationships with clients.

Here are some key benefits:

* Data management and analysis tools help you to track customer preferences and to anticipate needs based on individual purchase histories, over time and according to changes in the marketplace.

* Marketing automation helps you create targeted campaigns based on those anticipated needs.

* Costs are reduced as a result of more efficient post-purchase support and service.

* As a stable base of satisfied repeat customers is created, more time can be spent on expanding the client base.

* Profitability and revenue can increase as a result of improved relationships with clients both old and new.

* New software can be merged with a business's existing platform or with other previously installed software applications, such as enterprise resource planning (ERP), sales force automation (SFA), and e-mail programs.

* Operations can be streamlined to increase competitive advantage and to cut costs.

* Customer loyalty is boosted by making the enterprise customer-centric instead of product-centric.

* Customers are able to report on how they experience the enterprise.

And the Number One Benefit of Implementing a CRM Solution Is …

Quantifying all the benefits is the easy part, but the number one benefit is really up to you to determine. What exactly do you want a CRM package to do for your business? It is essential to perform a thorough comparative analysis to find the solution that provides the benefit that best meets your needs.

SSA Global Forms a Strategic Unit with an Extended-ERP Savvy Part Three: Challenges and User Recommendations

Arzoon's unified supply chain execution (SCE) infrastructure, which is used to increase global supply chain velocity and performance, is envisioned to augment SSA Global's existing supply chain management (SCM) solution and strategy, which was, coincidentally or not, announced at the beginning of June as a result of SSA Global's ongoing commitment to address the extended enterprise resource planning (ERP) needs of its customers worldwide. To that end, SSA Global's SCM strategy is "to deliver robust solutions that address the key requirements of customers and prospects at a competitive price, while extending the value of their existing technology investments".

The recent SSA Global's moves may convince many doubters who still tend to dismiss the vendor's recently invented modus operandi of growth by acquisition and of subsequent secured installed base service and maintenance revenue as opportunistic (or even scavenging). Namely, through its recently formed Strategic Solutions team, SSA Global might be showing that it is not just an ERP collector that is living off milking its install base, but rather an extended enterprise applications provider that can appeal both to its current and new users.
However, SSA Global will still have work cut out for itself to create a truly integrated seamless supply chain suite, beyond mere unified SCM re-branding on paper (albeit one is to commend it for doing away with an overwhelming number of individual product brands such as BPCS, Ironside, iBaan, Infinium, CAS, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS, SSA GT MAX+, EXceed, Arzoon, and Warehouse BOSS). With this variety of system architectures to be integrated, it will take some doing to even loosely interface these disparate systems—each with their own different data model and technology platform—via some plausible middleware technology strategy.

SSA Global's apparent strategy is to use its internal integration infrastructure, leveraging profusely the IBM WebSphere technology stack, to link these disparate systems together as a pre-connected suite, but also to allow them to run independently as best-of-breed. This integration architecture runs on a Java 2 Enterprise Edition (J2EE) application server and provides common integration for portal applications to legacy applications, while also enabling integration to SSA Global extended ERP products, other software solutions, and to future SSA Global's product acquisitions. This infrastructure includes the development of an integration broker, which provides an object model, transaction services, and connectors to multiple systems.

Still, recent SCM enhancements to many SSA ERP products might not take off in earnest in the short term until many cross-platform integration challenges are completely solved. Therefore, SSA has pursued a different path from most of its direct ERP competitors, choosing to buy best-of-breed products instead of building them from scratch in-house, with consequent tradeoffs in terms of more universal integration and architecture framework.

Given the fact that it takes excruciatingly painstaking efforts, industry domain knowledge, and resources (often estimated in hundreds of man-years) to devise and build an enterprise system from scratch, it is quite logical for SSA Global to surround its old ERP core products in a wrapper of newer technology, whose goal is to effectively obfuscate the old technology, giving it the latest graphical look, or providing an easier means to access the core business logic and data from other, more-modern systems, devices, or from the Internet. Still, although SSA Global has leveraged the economies of scale when extending several disparate ERP products at the same time (i.e., many steps in the software lifecycle other than actual programming in the source code language, such as design, testing, beta release, documenting, etc., can be shared across the board), adding new Java code around an old technology core inevitably comes with the downside of translation between the old and new layers, data typing, formatting, interface, and performance issues, version compatibility dilemmas, and other subtle problems. For a comprehensive discussion on the effort it takes to devise and build an enterprise system from scratch see "Rewrite or Wrap-Around Old Software?").

On one hand, the continued SSA Global's acquisition spree might result in many manufacturing and distribution global enterprises, currently using a plethora of diverse products, ending up or eventually dealing with virtually only one vendor. Still, the dichotomy is that SSA Global will still have a slew of disparate products in its fold, which are yet to start seamlessly "talking" to each other.

Consequently, SSA Global will sooner or later have to address technology and some possible vertical focus disparities before its users of multiple ERP systems can take advantage of the above SCM add-ons. While this strategy might enable its existing customers, irrespective of which SSA Global or other third-party ERP solution they already use, to utilize its newly added SCM capabilities, SSA must quickly further clarify a strategy for how it intends to rationalize its solution portfolio and how it plans to integrate process flows across its broad SCM applications set.

In any case, SCE installations are expensive investments that customers are loath to ditch or switch particularly during a tight economy. The market is seemingly not yet ready to just abandon well-crafted SCE components for one-size-fits-all suites, for a number of reasons. One would be the mere complexity of warehousing and transportation operations, which has demanded serious customizations of earlier generations of WMS, making upgrades almost impossible. Further, despite the efforts of companies to integrate their supply chains, most still have functional silos between planning and execution, manufacturing, accounting and logistics. Also, while packaged suites may come in handy for highly repeatable, conforming processes in the back-office, that is not necessarily the case for more fluid, customer-specific, distributed processes, like distributed order management across geographic boundaries, which comes into SSA Global's favor.

Still, while the Strategic Unit team formation should help SSA Global to figure out how to fully integrate organizational structure where employees are best integrated, service offerings best coordinated and cross-selling opportunities best tracked and pursued, the vendor must continue to clarify the position and integration of competing and complementary products in its fold, which gets complicated with every new addition to the family.

SSA Global Forms a Strategic Unit with an Extended-ERP Savvy Part Two: Market Impact

On June 14, SSA Global, a Chicago, IL-based extended enterprise solutions and services provider for process manufacturing, discrete manufacturing, consumer, services, and public companies worldwide announced the completion of its acquisition of substantially all of the assets of Arzoon Inc. (www.arzoon.com), a San Mateo, CA-based privately-held provider of integrated logistics and global trade management (GTM) technology. Financial terms of the transaction were not disclosed.

Arzoon's unified supply chain execution (SCE) infrastructure, which is used to increase global supply chain velocity and performance, is envisioned to augment SSA Global's existing supply chain management (SCM) solution and strategy, which was, coincidentally or not, announced at the beginning of June as a result of SSA Global's ongoing commitment to address the extended enterprise resource planning (ERP) needs of its customers worldwide. To that end, SSA Global's SCM strategy is "to deliver robust solutions that address the key requirements of customers and prospects at a competitive price, while extending the value of their existing technology investments".

The recent SSA Global's moves may convince many doubters who still tend to dismiss the vendor's recently invented modus operandi of growth by acquisition and of subsequent secured installed base service and maintenance revenue as opportunistic (or even scavenging). Namely, through its recently formed Strategic Solutions team, SSA Global might be showing that it is not just an ERP collector that is living off milking its install base, but rather an extended enterprise applications provider that can appeal to both its current and new users.

As for the existing SSA Global customers, the above-mentioned extended ERP solutions will be sold through existing geographic and regional sales executives but will be implemented by the Strategic Solutions Professional Services personnel, while other SSA services personnel can be brought in on an as-needed basis. The solutions will be supported by SSA Global OnePoint Support. On the other hand, for new SSA Global customers, the solutions will be sold by the Strategic Solutions Sales Executives, but, as in the case of existing customers, the solutions will be implemented by the Strategic Solutions Professional Services personnel, whereby other SSA services personnel can be brought in on an as-needed basis and the solutions will be supported by SSA Global OnePoint Support.

This has lately been proven as an effective business model, since in a market with a limited few new deals but with still low interest rates for borrowing money and financing, the companies with strong financial backing like SSA Global (which will likely go public soon, following on its recent initial public offering [IPO] intention announcement, and after being for the last few years a privately-held portfolio of New York's Cerberus Partners LP and General Atlantic Partners [GAP] of Greenwich, CT) are not to be blamed for opting to introduce many new products through bargain acquisitions rather than through grueling in-house developments and repeated software testing from scratch.

These "strategic" extension products represent a significant—approximately 20 percent—and rapidly growing portion of the SSA's revenues and with a much larger software license fee component, and hence the vendor's focus, dedication, and commitment of resources. On one hand, these solutions might represent a significant value for the existing customers by eventually delivering extended ERP functionality in a seamless, integrated, and cost-effective manner within a single delivery and support environment. On the other hand, these solutions might also represent a significant value for brand new customers by delivering best-of-breed point functionality in a cost-effective, stable, and financially viable environment.

To give the devil its due, while SSA Global remains relentless in its pursue of profitability, and while possibly in some instances putting architectural or cultural compatibility of acquired companies in the back seat, its solid financial viability and performance have continued unabated even while an industry average research and development spend was maintained (i.e., at 15 percent of total revenues), allowing the vendor to continue to reinvest in its own product offerings. Indeed, the vendor has also been committed to ongoing product enhancements in-house, which should allow the customers to extend the life of their existing technology investments. Furthermore, the recent array of acquisitions such as Arzoon, Baan, Ironside, and EXE Technologies would not exactly indicate acquisition of outdated technologies—although the vendors in case might have experienced financial difficulties, their ability to deliver innovative products has not been much impaired, if at all.

Quite the contrary, SSA Global has seemingly made best-of-breed solutions more attractive and cost effective through economies of scale, eventual standard integration to ERP systems, assured long-termm support, and significantly improved financial viability. Thus, given the continued attractiveness of the SCE market, SSA Global has relatively quickly and cheaply added a strong SCE functionality including warehouse management, fulfillment, collaboration, inventory management, and supply network execution through the last year's EXE acquisition. With earlier acquisitions of Baan, Ironside, and Elevon, also in 2003, the vendor has rounded out its SCM portfolio that now spans from demand planning (albeit this comes from the partnership with Logility), inventory management, order management, production planning, logistics management, to supply planning and replenishment.
Through Arzoon, as its latest acquisition, SSA Global might further bolster its set of best-of-breed SCE technologies combined with specialized industry expertise to support the ever-changing requirements in warehousing, transportation, logistics, and global trade management, since the Arzoon LIFE family of web-based solutions offers functionality in transportation sourcing, optimization and execution, import and export compliance, inventory visibility, event management, reporting and analysis, and freight settlement, and are used by leading Fortune 2000 companies around the world in the above-mentioned industries. Some notable customers include Solectron, Thompson Multimedia, McLane Company (a division of Wal-Mart), Canadian Pacific Railway, and Union Pacific Railroad. We believe that Arzoon has a potential of enhancing the existing supply chain management and execution functionality within the above SSA Global's portfolio of solutions, given immaculate execution of the merger, which is not guaranteed of course.

With this medley of best-of-breed SCE components, such as EXE Technologies, CAPS Logistics (formerly a part of Baan), and now Arzoon, SSA Global may be better positioned to handle complex multimodal transportation and SCE requirements than its still much bigger three rivals in the ERP arena—SAP, PeopleSoft, and Oracle. Furthermore, the vendor might now be able to compete head-to-head even with the best-of-breed SCE powers like Manhattan Associates, RedPrairie, HighJump, Optum, MARC Global, Provia, Yantra, HK Systems, etc. The fact is that most of the above competitors have long lacked strong international trade logistics (ITL) and GTM capabilities, often having to partner with a niche specialist as a stop gap measure, till recently RedPrairie went a bit farther and acquired some of these capabilities through LIS (see RedPrairie to Spread Across Europe through LIS Acquisition). The Arzoon acquisition should therefore strongly position SSA Global with a broad global supply network overview, upon which it can integrate its evolving SCM suite and accommodate the growing trend of outsourcing overseas.

To be exact, and as well-known and publicized, owing to communications and transportation networks that have improved dramatically over the last few decades, even faraway regions and nations around the globe are now within the reach of a mere Internet connection. As a result, companies have jumped into international markets, outsourced their manufacturing and procurement operations to cheaper overseas manufacturers and suppliers, while some have established subsidiaries around the world. The Internet-based e-business promises to further shrink the world into a global village as people research, source, and procure products globally via the ubiquitous Web, buy and sell these via various e-commerce sites, storefronts, and marketplaces, and manage international supply chains with collaborative software and trading exchanges.

However, this kind of e-business has yet to surmount the challenge of global trade compliance and the diverse needs of international customers and trading partners. Namely, while technology may be rendering a world that appears a lot smaller, the very same real-life world has become a lot more complicated in the process, as many barriers exist to conducting international business over the Internet and most businesses are not yet prepared for that. The Internet has enabled a networked world and it has enabled a communication infrastructure and emerging enterprise applications, which have opened the door for international trade in earnest. But not many applications really offer multi-enterprise services and software to automate the transportation and Internet-based logistics management needs of a global trading network. In other words, web-based buy- and sell-side applications fall well short of providing automated GTM and a traditional ITL. For a detailed discussion of the complexity of global trading and compliance, see "International Trade Logistics Challenge Automated Global E-Trading".
The US federal government has since completed its legislative agenda with congressional approval of a series of laws, including the Maritime Transportation Security Act and the creation of the Department of Homeland Security that has realigned twenty-two former federal agencies and 170,000 federal employees. Resulting from this legislation has been a need for shippers, carriers, and ports to introduce technology to better coordinate global trade processes. New transportation and trade security legislation has instituted far stricter compliance and asset tracking requirements, whereby technology has become vital to meeting the demands of these regulations.

For example, the new 24-Hour Rule from December 2002 requires ocean carriers to provide the new Department of Homeland Security, Bureau of Customs and Border Protection (CBP) with a cargo manifest twenty-four hours before a ship sails from its original port to a US port. Given that manual keying of manifest information can take a few days, which in the past would mean the US Customs receiving cargo data only after the ship has sailed, the rule has ramifications on shippers' contract management and streamlined collaboration with customers and delivery scheduling. Namely, while even before 9/11 for shippers it was all about getting as much work done as possible prior to reaching the border, the importance thereof nowadays goes without saying, given that most work now needs to get done before the ship even sails off.

Also, the Department of Transportation and US Customs have launched Operation Safe Commerce, which is intended to enhance security for international container cargo, and which will make global logistics systems even more dependent on timely, accurate data collection regarding shipment contents and movement. Since manual data entry is time-consuming and prone to errors, global logistics systems operate much better when supported by data collection based on automatic identification technologies such as bar code labels and radio-frequency identification (RFID) tags, which can be scanned at strategic locations between point of origin and destination.

Thus, SSA Global too recognizes that RFID is one of the emerging technologies that will drive increased supply chain visibility, control, and compliance. Additionally, the RFID mandate to suppliers from Albertsons, Target, Wal-Mart, and the US Department of Defense proves that RFID will have a significant impact on future supply chain operations (see RFID—A New Technology Set to Explode?). To that end, in response to customer demands, SSA Global pledges to soon, albeit not more precisely specified, deliver RFID solutions for manufacturing and distribution companies, so that its customers will have a viable solution to address these standards.

SSA Global Forms a Strategic Unit with an Extended-ERP Savvy Part One: Event Summary

Just when many might have begun to think that SSA Global, a Chicago, IL-based extended enterprise solutions and services provider for process manufacturing, discrete manufacturing, consumer, services, and public companies worldwide, which had turned into a ravenous enterprise applications market consolidator over the last few years, had finally satisfied its voracious urge, the vendor struck again. To be fair, prior to its most recent acquisition, SSA Global had also done a notable work in making sense out of its slew of earlier acquisitions, which analysis will be the topic of another forthcoming article.

To refresh our memory, the vendor, which was once an object case of poorly managed enterprise resource planning (ERP) company during the late 1990s (see Another One Bites the Dust—SSA Gored to Death), has since late 2001 experienced a dozen or so of consecutive quarters of growth and profitability that are possibly unique in the industry today, but it has also done it while concurrently orchestrating several successful acquisitions, including former EXE Technologies, Inc. (see SSA GT to EXE-cute (Yet) Another Acquisition), Baan, Elevon, and Ironside Technologies (see Baan And SSA GT Merge To Form A Mid-Market Empire With An ''Iron Side''), Infinium Software (see Is SSA GT Betting Infini(um)tely On Acquisitions?), interBiz, the former e-Business division of Computer Associates (see CA Unloads interBiz Collection Into SSA GT's Sanctuary) and MAX International (see SSA Acquires MAX Hoping To Leap From Its MIN). As a result, the vendor now has 121 locations worldwide and its product offerings are used by more than 13,000 customers, some of which represent market-leading companies, in over ninety countries.

While the market has been aware of the vendor still tirelessly eyeing many more acquisitions of ailing competitors with notable products or technologies and install bases, former supply chain management (SCM) leaders i2 Technologies and Manugistics being speculatively mentioned, another acquisition happened on June 14, when SSA Global announced the completion of its acquisition of substantially all of the assets of Arzoon Inc. (www.arzoon.com), a San Mateo, CA-based privately-held provider of integrated logistics and global trade management (GTM) technology. Financial terms of the transaction were not disclosed.

Arzoon's unified supply chain execution (SCE) infrastructure, which is used to increase global supply chain velocity and performance, is envisioned to augment SSA Global's existing SCM solution and strategy, whicch was, coincidentally or not, announced at the beginning of June as a result of SSA Global's ongoing commitment to address the extended ERP needs of its customers worldwide. To that end, SSA Global's SCM strategy is "to deliver robust solutions that address the key requirements of customers and prospects at a competitive price, while extending the value of their existing technology investments".
The SSA SCM solution suite combines best-of-breed functionality with specialized industry expertise added through strategic acquisitions, such as Baan and EXE Technologies. The suite leverages erstwhile proven best-of-breed products and technologies that fuse the demand chain with the supply chain to forecast demand, take an order, give an accurate promise date, manufacture the right goods, position inventory properly, pick, pack and ship efficiently while maintaining optimal inventory levels. Accordingly, the SSA SCM solution offering includes

* SSA Demand Planning
* SSA Inventory Planning
* SSA Order Planning
* SSA Production Planning
* SSA Supply Planning and Replenishment
* SSA Logistics and Transportation Planning
* SSA Warehouse Management
* SSA Transportation Management

During the last several quarters, many companies in various industries have reportedly purchased and implemented SSA SCM solutions, particularly the customers that have chosen to implement supply chain solutions to extend the value of their original investment in ERP. Select customers of SSA Global's SCM suite include Publix, TNT Logistics, Americold, Flextronics, Georgia Pacific, Solectron, Menlo Logistics, NFI Industries, and Vector SCM.

Arzoon brings its n-tier global logistics execution solution, which includes global transportation management, international trade compliance, inventory visibility, exception management, and trading partner management to the SSA SCM portfolio. SSA Global thus believes its customers will gain greater visibility into core SCE processes while reducing transportation and logistics costs, integrating security and trade compliance, and improving procurement, fulfillment, and customer service. The vendor will initially focus on integrating Arzoon into SSA Transportation Management, and by combining Arzoon's functionality with SSA Transportation Management, as well as with SSA Warehouse Management down the track, SSA Global aims at delivering a comprehensive and strategic SCM solution that can help companies move products globally with the lowest possible total landed cost, while also providing visibility into their supply chain movements.
Further, somewhat related to the SSA SCM brand unification, to bring greater focus to its customers' requirements addressed by extended ERP solutions, at the end of May, SSA Global introduced a dedicated Strategic Solutions team, comprised of industry experts solely focused on providing, servicing, and implementing strategic extended ERP solutions (i.e., SCM as well as customer relationship management [CRM], supplier relationship management [SRM], corporate performance management [CPM] and product lifecycle management [PLM] solutions) for current and prospective SSA Global customers. Companies seeking to address current business challenges, gain competitive advantage and extend the value of their existing enterprise systems (e.g., to improve operational efficiencies, reduce time-to-market, optimize costs and increase overall productivity, etc.) can now look to SSA Global's Strategic Solutions team.

SSA Global doubled its market share in 2003 and at the same time selectively integrated best-of-breed solutions into its world-class portfolio. The newly-formed Strategic Solutions team should bring necessary focus to the extended ERP solutions, and will work in concert with SSA Global's account management to reinforce customer engagements that include the extension solutions that the team will focus on:

* SSA CPM, including Enterprise Planning, Enterprise Scorecarding, and Enterprise Business Intelligence (BI), which originate from the original equipment manufacturer (OEM) partnership with Cognos

* SSA SCM, including Supply Chain Planning (SCP), Supply Chain Collaboration and SCE, which originate from former interBiz, Baan and EXE acquisitions, and from the partnership with Logilityfor demand planning

* SSA CRM, including Sales Management, Marketing Management, Enterprise Service Management and Collaborative Order Management, which originate from Baan, Ironside (the order management area), and partly from the recent organic product development

* SSA PLM, which originates from Baan

* SSA SRM, which originates from Ironside, Baan (in the procurement area), and partly from the recent organic product development.

With the formation of a dedicated Strategic Solutions team, SSA Global has put in place experts across all major functional areas including sales, marketing, support and product development to consistently anticipate and deliver against its customers' extended enterprise needs. Jim Handy has been appointed president of SSA Global Strategic Solutions, reporting to Graeme Cooksley, executive vice president of SSA Global, responsible for worldwide field operations, marketing, support, and product management.

J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation

Nevertheless, the acquisition of YOUCentric bears its challenges too. The major one is that YOUCentric has had only a handful of customers that have integrated their new SFA software to an ERP system including J.D. Edwards' one, whereas other CRM modules have yet to create a live reference. As YOUCentric offering is rather a CRM development platform than a well-defined CRM product, it may not have a major appeal to customers that prefer the off-the-shelf product. Therefore, it will take some time for the complete architectural products' alignment beyond the mere integration at portal level as to have an overall market appeal and consecutive impact to J.D. Edwards' top line, despite the products compatible architectures, data mapping technology and therefore potentially expedient integration. There has almost not been articulated industry-specific CRM functionality yet, contrary to the company's espoused vertical focus at the J.D. Edwards 5 level.

Furthermore, in spite of all the a impressive announcements in Part One and Part Two, J.D. Edwards still faces more challenges ahead. Indeed, to put things in the right perspective, one should bear in mind that the company's license revenue in 2002 will still likely be almost 50% less than the corresponding revenue of $419 million in 2000, back when the company was still merely an ERP player, although the total revenue may remain flat or will grow 5% compared to $874 million in 2001 (still being well below the $1 billion mark in 2000).

Figure 1.

Aso, as J.D. Edwards 5 is still an evolving concept and portfolio of applications, SAP and Oracle still feature much broader functionality footprints. To compete J.D. Edwards recently turned to a number of alliances (see Part Two). Nevertheless, with these competitors' impending endeavors to complete re-architecting their products' flexibility, they may be better positioned than J.D. Edwards in the future. To that end, J.D. Edwards 5's actual SRM functionality is still largely a figment of imagination, as in its current state, the SRM solution is on par with a basic e-procurement package for indirect materials.

Product Lifecycle Management (PLM) is another area where the company seems to be trailing the competition. Although there have been partnerships with several prominent PLM suppliers (e.g., Agile, MatrixOne, and PTC), none of these have been vocally touted, which makes one skeptical about the true strength of these partnerships if they are based on serendipitous necessity (i.e., common customers) rather than on virtue of strategic alliance. This, combined with an apparent lack of more decisive announcements by J.D. Edwards in this regards, leads us to the conclusion that PLM product strategy is not a high priority at this stage. Similar situation is with regard to portal solutions and trading exchanges, which, until the IBM deal materializes in earnest some time on 2003, still lack important pieces such s search engine and knowledge management (KM), most of which have been mastered by SAP, PeopleSoft, or Oracle.

Additionally, J.D. Edwards 5 product cohesiveness across the range will have likely been uneven at this stage given higher level of XPI/XPB-based integration between CRM, manufacturing and distribution applications are still in progress, as well as industry-specific XBPs (e.g., real estate, construction, field service, high-tech, etc.). The company will therefore have to articulate more clearly the current state of affairs of its entire portfolio integration (i.e., disclosure of its current and future approaches to application programming interfaces (APIs), with a level of granularity, hierarchy, technical build, and so on), as to avoid any ensuing customers' disillusion and disappointment.

Also, although the company has smartly federated its service-based product architecture in preparation for Web services compliance, there is still a colossal outstanding work to address many aspects of enabling full end-to-end collaborative processes via multiple applications from multiple vendors with disparate architectures, such as language-independent calls to APIs (preferably via Simple Object Access Protocol (SOAP)), publicly available documented APIs (preferably using Web Services Description Language (WSDL)), backward API compatibility for last few product releases, and APIs should be registered in an industry-accepted directory (i.e., Universal Description, Discovery, and Integration (UDDI)).
J.D. Edwards' competition is also growing direct proportionally to its product offering growth, which might become too much to cope with given it has lower license revenue (expressed both as a percentage of total revenue and in raw dollar amounts), market share, global presence, and resources compared to some (albeit not many) competitors. In a pure ERP sense, it competes against SAP, Oracle, and PeopleSoft in the higher-end of the market, while in the Tier 2 range it faces Intentia, IFS, Baan, SSA GT, QAD, MAPICS, and Geac as some of just as fierce competition.

As the company starts to build up its channel market with VARs owing to its strong focus at the small-to-medium enterprises (SME) level, it will inevitably (despite its attempts to downplay the likelihood) face an army of competitors spearheaded by Microsoft Business Solutions' Great Plains and Navision offerings (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again), Epicor, Exact Software, Scala and Best Software to name only few.

Looking further at the SCM market, the company challenges SAP, Oracle, Baan and PeopleSoft and the pure player likes of i2, Logility, and Manugistics. As mentioned earlier, J.D. Edwards also has to be taken quite seriously in the CRM space against Siebel, Onyx, Pivotal, SAP, PeopleSoft and Oracle, while in the professional services automation (PSA), there are again Lawson, PeopleSoft, Ariba, Siebel, SAP, Oracle, and a number of PSA specialists such as Deltek, Niku, Evolve, Novient and Changepoint.

J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation Part 3: Market Impact

This is yet another example of what difference a year can make, and of a vendor taking advantage of a given second chance. A year ago, J.D. Edwards was in a rather self-loathing mood amid sagging sales, massive layoffs and restructuring, and with rumors of a possible buyout abounding as well, all making existing customers quite concerned and potential ones extremely leery (see J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories). Worse than that, there was a lingering general feeling that the company had long been unable to articulate a product strategy that was well-attuned with the market needs/trends. The appointment of the new Chairman and CEO Bob Dutkowsky, from the hindsight, after less than a year at the helm (J.D. Edwards' CEO Retires Again; This Time For Good?), appears to be just what the doctor had ordered, resembling to a degree a feat of the current PeopleSoft's CEO, Craig Conway. Bringing an outsider (even if he/she comes with a pedigree of the closest partner, IBM) at a helm of a company which had forever jealously guarded that position only for its dynasty ranks will have helped bring a new prospective on how to further satisfy the customers, and will have allayed sluggishness and a �not invented here' mentality that typically comes along with ruling too familiar a territory for far too long.

Let's face it, J.D. Edwards is not stampeding like a raging bull amid the bad economy, but the new management team has at least attained many positive changes (including instilling a winning attitude) by leveraging a proven product and its congenial, albeit often ineffective and anemic organization in last few years, and by fathoming how to deliver pragmatic value to a born-again-loyal installed base and to the prospective fertile "midrange to mid-cap" target market, which consists of enterprises that are loath to any radical changes to their business practices, but are rather inclined to improving their businesses incrementally by adding additional functions around their core ERP investment.
First of all, Dutkowsky's natural initial focus on the company's improved financial performance, sales execution and continuation of products portfolio integration will have addressed the following two important issues: 1) the common perception of the troubled company, and 2) the difficulty of regaining confidence. To that end, important operational areas, like pipeline management, cash flow increase, collections/days of sales outstanding (DSO) reduction, margin improvements, etc., have all been improving, while increasing sales to the installed base, expanding the services business, and enhancing the company's market visibility has been happening as well.

While the new CEO has indisputably produced quick results and has boosted the company's posture (albeit he still has remaining work cut out for him), it would be unfair not to give credit to the former CEO for paving the way at least in part. McVaney not only co-founded J.D. Edwards, but he also navigated it through an Odyssey-like transition from solely the IBM AS/400 (now iSeries) platform to UNIX and Windows NT while keeping most customers committed and arguably content. This is in contrast to the experience of many contemporary AS/400-only ERP competitors, with some like SSA and JBA being fatally wounded in the process. McVaney, often disparaged by his counterparts and Wall Street pundits for his unsophisticated but effective managerial style, never managed to create a real software powerhouse though, other than a legacy of honest rather than glitzy competitiveness.

That is exactly what the new management team has finally managed to crack � the company seems to have found its soul, as it has finally pinpointed the right offering for its target market (both geography, customer size, and vertical segments wise), and it also seems to be exuding an air of confidence without arrogance, which had rarely, if ever, been seen in the past. Listening to customers, deploying new emerging technologies, delivering more software in the next two years than it has ever happened in any two-year period since the company's inception, putting the latest version of its products portfolio under the unified umbrella brand (that is also marrying the company's name to the product for the first time, further enhancing the brand recognition), delivering industry-based functionality, renewed commitment to professional services, technology innovations via partnerships, a new modular product delivery approach to make the purchasing and upgrading of its portfolio of applications easier and more efficient for the customer to rationalize and digest — should all be the harmony of the music for the customers' ears.

In a nutshell, J.D. Edwards seems poised to deliver applications within its traditional verticals that are wide-ranging, integrated, and modular (loosely decoupled) at the same time, which is apparently a clearer message and a better business model for the company.
Still, McVaney should feel additionally vindicated by the fact that with him at the helm J.D. Edwards had started to put its house in order. The fact remains that the company had achieved a fair balance between the product functionality scope expansion and the product architecture flexibility still during his tenure (see J.D. Edwards On The Mend; This Time Might Be For Real). One is to expect that Mr. Dutkowsky will continue to emphasize the recently breadwinning products like OneWorld (recently renamed ERP 8) and supply chain planning & execution suite (coming mostly from former Numetrix) and a prospective breadwinner, CRM product from YOUcentric (see J.D. Edwards Fires Siebel, Hires YOU). The focus on industry solutions such as for high-tech/electronics, industrial fabrication & assembly (IFA), automotive, life sciences, and architectural & construction, should continue as well. The J.D. Edward 5 product family featuring solutions for CRM, SCM, supplier management, business intelligence (BI), and Web-based collaboration, as well as an architecture that is evolving to embrace Web services were likely hatched under McVaney's wing as well.

Using a deliberate approach of not jumping injudiciously on every latest technology bandwagon, the company has by and large successfully taken its customers from mainframe-based systems to the Web, without resorting to a �rip-and-replace' strategy (in an evolutionary rather than revolutionary manner), while also delivering an increasingly broad set of solutions.

The following final touches of the new management are apparently what made the long awaited quantum leap possible:

* A new product development philosophy for J.D. Edwards 5, allowing the product to be enhanced incrementally without necessarily requiring customers to update all modules and products at once, and including a stringent software Quality Assessment (QA) process that brings requirements analysis and QA planning much sooner in the development cycle. J.D. Edwards 5 covers the entire suite of products that the company has developed or acquired so far, and going forward, each product grouping will be independently enhanced to meet the demands of customers, while also breaking the applications down into smaller modules should allow customers to purchase what they need when they need them, which is in tune with the current buying market. Despite a depressed economy, enterprises still need to upgrade and enhance those applications required to support collaborative processes for internal users and external trading partners, yet they must be able to prove a speedy return on the investment (ROI). This has proven to be crucial in selling additional functionality into the installed base, but it also gives J.D. Edwards' sales reps "multiple entry points" into new accounts.

* Combined with the above comes the unified brand name and totally refurbished marketing, including a common look and feel to previously disparate literature for an unwieldy myriad of different product names, and more effective communications to the market and press/analysts, all that have greatly lacked in the past.

* Focus on its traditional vertical markets while foraying into new markets that build on the company's known strengths in financials/manufacturing/distribution, such as Real Estate and Construction/Development, and staying away from markets that are the strongholds of some fierce competitors (e.g., SAP, PeopleSoft, or Lawson) and would only dilute efforts, like Federal Government, Healthcare, and Retail.

* A number of fast-tracked integrated releases of J.D. Edwards' CRM product in less than a year, initially focused on Sales Force Automation (SFA) and support for the IBM iSeries platform, which is used by a larger part of its installed base.

J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation

The following recent announcements by, J.D. Edwards & Company (NASDAQ: JDEC), a leading provider of collaborative enterprise software and accompanying consulting, education and support services to mid-sized and larger enterprises, should indicate that a reborn company with a new air of confidence has for some time been putting its house in order, expanding its offerings, conveying a more attuned message, executing a more aggressive sales strategy, and improving its cash situation at a critical time.

On August 21, the company reported upbeat financial results for the third quarter ended July 31, 2002. Total revenue for Q3 2002 was $229 million, a 9% growth compared to $209 million in Q3 2001 (See Figure 1). The license revenue grew 10% to $55 million in Q3 2002, compared to $50.0 in Q3 2001, whereas services revenue was $174 million, up 9% from $159 million a year ago. Actual net income, including acquisition-related and other charges, was $9 million the third quarter of fiscal 2002, compared to a hefty net loss of $186 million, in the third quarter of fiscal 2001.

In addition to a healthy number of new license agreements, the quarter was overwhelmingly marked by a new generation of landmark new products and functionality releases. Possibly the most prominent of these was the May 21 announcement of the general availability of J.D. Edwards 5, touted as a new, comprehensive family of collaborative enterprise software products and services for customers and business partners. J.D. Edwards 5 represents the vendor's fifth generation of solutions throughout 25 years of its existence, as it reportedly draws on the best of these architectures and brings the company's comprehensive set of products under one umbrella. J.D. Edwards 5 should also provide a path into the future for customers using the company's older solutions - OneWorld and WorldSoftware. It features modular, integrated, Web-enabled applications that should assist large- and medium-sized businesses in improving their business performance.

J.D. Edwards 5 includes the following seven product lines:

1. Enterprise Resource Planning (ERP);

2. Supply Chain Management (SCM);

3. Customer Relationship Management (CRM);

4. Supplier Relationship Management (SRM);

5. Business Intelligence (BI);

6. Collaboration and Integration; and

7. Tools and Technology.

Although not currently fully Web services enabled, J.D. Edwards 5 provides the enabling technology for Web services, a rapidly emerging, standards-based paradigm that promises to enable businesses to share data, applications and business processes across the Internet. To that end, the product features software applications developed as reusable components that interoperate with current and legacy technology, enabling companies to match specific software components to specific business requirements while maintaining the value of their IT investments. Combined with a flexible pricing package, this should provide customers the opportunity to purchase software according to their business needs and to evolve and diversify their businesses when they are ready (i.e., "in small bites with a small chew", rather than traditionally "in one big bite and a long chew").
A few weeks later in June, during its annual FOCUS user group conference, J.D. Edwards announced new and enhanced information technology (IT) services offerings as a follow-up to its May 21 announcement of J.D. Edwards 5. The company hopes to swing the industry's approach to implementing software back into balance, with implementation, education and support services that are both cost effective and tailored to the customer's unique needs, but, at the same time, also a repeatable "standard" implementations that yield better costs and predictability, thereby mitigating risk and minimizing total cost of ownership (TCO).

As many IT services vendors have vacillated in recent years between customized "one-off" and rapid "cookie-cutter" implementation approaches, J.D. Edwards is attempting to blend the best of both approaches. From this philosophy comes OneMethodology, an enhanced implementation methodology, which should offer customers an integrated set of consulting and education services based on their specific business and implementation needs. J.D. Edwards' consultants will supposedly dynamically configure an activity-based implementation work plan based on the customer's unique goals, business processes and desired level of involvement using tools built on a knowledge base of 25 years of experience.

J.D. Edwards Education Services, particularly through the company's so called Process Flow Training, also takes a "listen first" policy to ensure the training plan meets the customer's requirements, then works with the implementation team to coordinate, tailor, and deliver the training needed to provide a custom solution. The ultimate goal is to help each customer achieve self-sufficiency with the software, which, however, should not mean the customer has to carry it on alone. As its customers' long-term partner, J.D. Edwards claims to be bucking the industry trend of reducing support offerings to just one or two levels, as it has not only retained its four levels of support (Bronze, Silver, Gold and Platinum), but it also has introduced several advanced self-service support components available to customers and the new Platinum Premier support offering.

During FOCUS, J.D. Edwards further announced the release of ERP 8.0, unveiling significant upgrades to its widely used ERP software as part of J.D. Edwards 5. Companies in the service industries, which reportedly account for approximately one-third of J.D. Edwards' license revenue, should especially benefit from these improvements, which focus on optimizing employee resources and effectively managing high-value assets. In addition, the company announced that its eXternal Process Integration (XPI) integration platform is now enabled to accommodate the rapidly evolving Web services standards. ERP 8.0 incorporates architectural improvements that should supposedly make it simpler to implement, more user-friendly, and easier to manage, scale, and upgrade.

For users, ERP 8.0 delivers the following major new functionality:

* Enterprise Asset Management (EAM) technology typically allows enterprises to maximize the value and productivity of capital-intensive assets, as it can reduce operating costs, increase asset utilization and decrease inventory, resulting in a direct increase in incremental revenue. New EAM functionality in ERP 8.0 includes Resource Assignments, which optimizes staff deployment using human resources calendars to select and assign staff to projects based on their availability, current backlog, priorities and workday schedules.

* J.D. Edwards Workforce Management, on its hand, provides a suite of products that meets a broad range of human resource needs, as more functions are pushed out via the Internet to the employees and managers of a business. Select Workforce Management functionality highlights for ERP 8.0 include Time & Expense Management, and Multi-currency Time Accounting.

* Using J.D. Edwards Project Management, organizations should effectively manage the complex projects with all the detail required to see a realistic picture of a job's progress, as users can track the status of a job, examine contracts and explore scenarios. It also gives companies an integrated view of subcontract activity for multiple projects in order to monitor the combined efforts of all players involved. Select Project Management functionality highlights for ERP 8.0 offer strong billing capabilities, allowing for customized service, timely billing and efficient account management, including Not-To-Exceed functionality, and Contract Retainage processing.

* Finally, announced as part of the rollout of J.D. Edwards 5, J.D. Edwards Real Estate Management should give companies the power to strategically manage property, space and square footage use and increase the visibility into tenant sales to improve revenue potential. Select new features improve retail portfolio management capabilities, including Sales Forecasting (the forecasting of tenant sales information to maximize occupancy) and Lease Option Tracking.

Furthermore during FOCUS, J.D. Edwards announced the updates to its Advanced Planning offering, including significant enhancements to its "Supply Chain Management (SCM)" and "Collaboration and Integration" offering groups within J.D. Edwards 5 for companies in manufacturing and distribution industries. Relevant to both mid-market and larger enterprises, businesses should benefit from new applications and capabilities, including:

Demand Consensus is a collaborative forecasting application that combines human projections with historical data. While statistical forecasting methods can create certain forecast improvements, J.D. Edwards' research indicates that the addition of collaborative human forecasts can improve the accuracy by another 20%. To that end, Demand Consensus is a Web-based application that brings planners, sales, executives, operations, customers, and suppliers together in a collaborative conference room environment to produce better forecasting results. This application shares information with other J.D. Edwards planning applications, such as Demand Planning, which might create a powerful combination of forecasting applications and short-range planning. Significant enhancements to Demand Consensus include:

* A new reconciliation tool that tracks and measures each stakeholders' historical forecast accuracy, weighting more accurate forecasters' projections to generate more accurate forecasts for the enterprise;

* Message board capabilities to collaborate and track forecast changes; and

* The flexibility to import and export data from Microsoft Excel spreadsheets directly into or from the Demand Consensus application

Based on its Strategic Network Optimization (SNO) application, Tactical Network Optimization (TNO) provides a simpler interface to this powerful solution, giving mid-sized enterprises the power to plan and optimize the design of their production and distribution networks, and thereby reduce overall operating costs. By providing a simpler graphical interface, visualization tools, wizards, templates, and removing such complex functionality as scenario planning, J.D. Edwards is again targeting mid-sized enterprises, which need a simpler solution for their limited needs which also tightly integrates to their existing ERP backbone. Using TNO, these businesses should be able to make critical supply chain decisions and increase efficiencies by, e.g.: Visualizing the full supply chain, Optimizing supply chain profit, Viewing supply chain costs in detail, and Examining manufacturing constraints by plant.

New collaborative capabilities in J.D. Edwards' Production & Distribution Planning (PDP) application now allow customers and suppliers to share detailed information over the Internet, as Web access to company supply chain data lets many more partners directly participate in the supply chain planning process. Using PDP, trading partners can review, add or change production schedules as needed, based on their role in the supply chain.

J.D. Edwards Warehouse Management, part of ERP 8.0, provides information about where products are located as well as how they should be moved to reduce costs and maximize space and labor resources. A new workflow engine in Warehouse Management now allows users to optimize and fully automate the product pick-up, packing and shipping process. Appropriate cartons and containers are selected, and optimal shipment configurations are designed, whereas information on the shipment can then be automatically sent to customers, improving customer satisfaction.

J.D. Edwards delivers Collaboration and Integration capabilities with XPI, the company's integration platform that has been enabled to support the evolving Web Services interoperability standards, and with XBPs (eXtended Business Processes), a set of pre-defined business processes designed to expedite the connection with disparate systems and reduce costs. In addition, J.D. Edwards is announcing:

* A new packaged set of XBPs for supply chain integration, providing enhanced real-time order promising capabilities for manufacturers and distributors

* An enhanced package of XBPs for the high-tech and electronics industries, based on RosettaNet standards