JDA Portfolio: For the Retail Industry Part Six: ERP Vendors and User Recommendations

ERP Vendors Address the Retail Market

JDA Software Group Inc. (NASDAQ: JDAS), a prominent global provider of integrated software and professional services for the retail demand chain and over 4,600 customers, plans to build upon the collective JDA Portfolio to enable its customers to achieve a new level of operational excellence. The vendor plans to establish this capability as a defining and differentiating characteristic of its next generation PortfolioEnabled solutions over the upcoming months and years. JDA Portfolio 2004.1 software and service offerings are detailed in Parts Two through Four of this note.

One should also never underestimate the threat of traditional ERP providers that have lately made serious strides in the retail sector. For a discussion of the competition from Lawson Software, see Lawson's Approach to the Retail Market. , while for a discussion of the like competition from SAP see SAP's Approach to the Retail Market.

Indeed, the decision to base the enterprise application backbone on an ERP system or piece together a best-of-breed strategy has never been easy in any industry or in any other ERP-adjacent functional area like business intelligence/analytics, customer relationship management (CRM), supply chain management (SCM), product lifecycle management (PLM) and so on, given that there are a number of possible package combinations and alternatives in most of these. Also, the ERP vendors had long ignored the retail sector having only recently moved more aggressively into the wide-open market, striving to provide greater industry-specific functionality, which is key if they are to displace today's still popular approach of opting for integrating best-of-breed software.

This brings us to the fact that many ERP vendors are making their way into the retail market by internally developing, or acquiring point solutions (as in the case of Lawson) or partnering strategically to embed retail-specific functions within their suites. Like in all other enterprise applications markets, eventually, the retail market too will come down to a showdown between the pure retail vendors like JDA, Retek, NSB Software, etc. and the mainstream enterprise application vendors (e.g., Oracle, SAP, PeopleSoft, SSA Global, Geac, Intentia, etc.), which have been striving to bundle more retail-specific capability into their products. As usual, the enterprise vendors will bet on leveraging existing customers who would have deeply invested in them, and have even reorganized operations around their ERP systems.

The promise of retail products from ERP vendors is the link to financial and manufacturing systems (albeit mostly the vendors' own, which is logical at this stage) and include collaborative supplier relationship management (SRM) and PLM capabilities and links to customer data in CRM systems. A single-vendor approach by ERP providers could produce other benefits too, like integrated and consistent processes throughout the supply chain, consistent data-model for the entire enterprise, and easier estimation of overall project cost and implementation management through a primary relationship (similar to a "one throat to choke" analogy). The business opportunity is to move from supply- to demand-driven retailing, via merchandizing, replenishment, pricing, promotions, consumer loyalty schemes and multichannel management systems, all working off the single ERP platform.

For an in-depth discussion of retail see Retail Market Dynamics for Software Vendors.

This is Part Six of a six-part note.

Part One presented the event summary.

Parts Two through Four detailed the components of JDA Portfolio 2004.1.

Part Five analyzed the market impact. recommendations.

Parts One through Five were published December 27th to 31st.

Retail Vendors' Holy Grail

However, the "Holy Grail" of retail vendors has turned into working with information from heterogeneous sources—an order du jour within many large organizations, which often have more than one ERP system or various retail point solutions and legacy systems. This is analogous to the enterprise applications integration (EAI) market, since in larger corporations, customers still may prefer integration vendors with renowned product strength, vertical expertise, financial viability and savvy in XML-based B2B integration, multiplatform integration, and workflow management. The best-of-breed approach could still often provide the selection of a functionally richer system for each business area from a more specialized vendor, elasticity/exit strategy against a particular vendor's failure or demise, and greater flexibility in terms of substitution of individual elements as to accommodate any adaptation needs.

The current retail leaders' superiority, like in the case of the SCM and CRM markets, will eventually diminish as the ERP vendors continue to improve their retail-specific functionality, collaborative capabilities and accessibility, and add universal interfaces, including the new Web service standards to facilitate access and integration of data outside their own environment. Thus, retail vendors need to establish as strong a hold on the market as possible before the enterprise and platform vendors catch up—especially the remaining tier two and three retail point solution vendors. If they cannot gain significant traction and distinctive differentiation, they could find themselves in a position of needing to be acquired or to join forces with a complementary functional or platform technology vendor via alliance or acquisition.

Incidentally, IBM, which has been working with many retail-specific software providers in some capacity, brings its own wealth of experience to the sector, particularly in terms of hardware devices, store systems, enterprise systems infrastructure (through WebSphere-based Store Integration Framework), data management (through recent Trigo acquisition), and professional services. Given JDA's recently espoused orientation to the Microsoft .NET platform, it is likely that the long-term partner IBM will pursue other partnerships even more vigorously now, particularly with its recently expanded relationship with SAP to build more cohesive solutions for retailers that combines the best from both camps.

With nearly every retailer in the world now using something from IBM, SAP, or both, the two vendors intend to initially up-sell to current clients, particularly in North America, where SAP's retail sector presence has been limited. Still, IBM's infrastructure and data management offering might sometimes clash with equivalent offering from SAP (i.e., SAP NetWeaver Master Data Management [MDM]) and Retek (i.e., MDM). In other words, "co-opetition" will be the name of the game and close attention to how these products will interoperate and where each would fit within a proposed solution becomes very important.

To that end, and to fend off retail moves from the common foe, SAP, during PeopleSoft Connect 2004 user conference, PeopleSoft and JDA announced an alliance to develop and market a solution for retailers that will supposedly provide integration between PeopleSoft Enterprise Financial Management applications and the JDA Portfolio Merchandise Management solution, and bundled with the recent strategic announcement between PeopleSoft and IBM, on September 21. Yet, the alliance will by no means solve the above PIM/GDS conundrum, while the cloud of Oracle's potential (and now more likely by the day) acquisition will hover over many prospective customers' minds (for more information, see Not All Acquisitions Happen: JDA and QRS).

Thus, JDA and its retail-specialist brethren will have to further clarify and simplify their integration framework strategies. Data synchronization continues to be a priority for retailers, and JDA must recognize the importance of interoperability with other data pools and exchange platforms if it wants to offer a truly differentiating collaboration product by blending retail execution with collaborative trading partner interaction.

User Recommendations

Prospective and current customers from retail and consumer products segments of all sizes, and who have the need for data synchronization should not expect JDA to offer full-fledged PIM or GDS technology any time soon unless it acquires a point provider rather quickly or unless it (gets over the likely bad blood and) continues to partner with QRS, as to at least leverage the conceptual work it has been done to integrate the products. The users should also be aware of the existence of some other PIM and GDS players like IBM/Trigo, Velosel, FullTilt Solutions and Comergent Technologies that might be a better alternative at this stage than some JDA applications, such as Portfolio Data Synchronization (VistaRetail) technology.

On a more general note, retailers will have to find a fine balance between investments in emerging technologies and their ability to tactically stake out effective competitive differentiation in what seems to be challenging times for all. The winners will be those who can align their investments with the ever-changing preferences of their customers, who may prefer in-store or off-store channels, or both. On one hand, technology investments that facilitate speed of checkout, self-service, multiple sales channels, inventory availability, and personalized content are what will engage customers and make them feel close to being the "only" customer. On the other hand, strategic technology investments in historical data analysis, demand-based forecasting and replenishment (store- and distribution center-level), seasonal profiling, allocation, and space planning, measuring shelf space performance, will be the pedestals on which growing revenue and improving margins will be built.

Whether considering new enterprise applications based on a single-vendor offering or constructing a best-of-breed portfolio of retail applications, prospective users should espouse a consistent technology infrastructure to avoid the pitfalls of too many supported platforms, while ensuring open and broad integration functionality that focuses on common product and pricing data sources and the necessary, ubiquitous connections to trading partners. In retail companies where employees have more autonomy and initiative, a best-of-breed approach will typically let employees work with the best tools for their peculiar needs and talents. On the other hand, the sweeping changes imposed by usually more rigid single-vendor solutions (particularly from unified ERP offerings) may work better in more autocratic companies.

Thus, while the JDA/PeopleSoft combination is promising the best of both worlds, still, even if one neglects Oracle's cloud, users should not expect first integrated applications to be available before some time in late 2005, and should challenge the companies to commit to more certain product development and migration strategy roadmap. Consequently, until that time, users evaluating the above individual products should keep themselves informed, and consider generally available (GA) functionality only.

This was Part Six of a six-part note.

Part One presented the Event Summary.

Parts Two through Four detailed the components of JDA Portfolio 2004.1.

Part Five Analyzed the Market Impact. Recommendations.

Parts One through Five were published December 27th to 31st.

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