Microsoft Keeps on Rounding up Its Business Solutions Part Two: Challenges and User Recommendations




Challenges

At the beginning of October, during the annual conference of the American Production and Inventory Control Society, APICS 2003, in addition to Microsoft Corporation's (NASDAQ: MSFT) initiative to avail a majority of its Microsoft Business Solutions (MBS) division's enterprise resource planning (ERP) offerings with long needed pieces of product lifecycle management (PLM) functionality through extension of the existing relationship with Autodesk, Inc. (see Autodesk To Bring Microsoft Business Solutions Closer To PLM), Microsoft also made other announcements pertinent to enhancing and supporting its current line of ERP business solutions and service offerings. Namely, to help its small, mid-market segment and even certain large corporate customers improve the effectiveness of current ERP solutions, MBS announced the general availability of Microsoft Business Network (MBN), and the upcoming delivery of two demand planning modules.

However, the alliance of the respective niche SCM player and the desktop and office networking applications leader does not necessarily create a long term combined ERP/SCM leader. While MBS is a revered ERP competitor, it is still not the functionally strongest or broadest ERP provider, let alone the SCM one. Most other ERP vendors have long at least taken this kind of foray into the SCM arena, while many have gone quite farther down the track, often by providing native extended-ERP applications (see Mid-Market ERP Vendors Doing CRM & SCM In A DIY Fashion). Not to mention the fact that SAP and PeopleSoft (including the recently acquired J.D. Edwards) have overtaken the pure-play SCM players (for example, i2 Technologies, Manugistics, and Manhattan Associates) at least in terms of revenues if not in the functional breadth and depth. Although we expect further bite-size SCM offerings from MBS in areas valuable to small and midsize businesses, the vendor must become more aggressive to offer a more cohesive overarching vision of its SCM solution rather than a number of near-impulse initiatives just to keep abreast of its peer competitors' capabilities (e.g., Sage/Best Software, Exact Software, or ACCPAC). MBS offers only certain demand-planning and finite scheduling pieces of SCM, and it's always adding yet another solution to its already crowded solutions pile rather than demonstrating it understands the entire SCM scope value proposition.

That has been illustrated particularly in its bolstering of the SCM/distribution capabilities of its signature Great Plains product, which ironically has had the weakest distribution capabilities of all the product lines. During its independent phase, Great Plains was toying with the idea of enhancing former eEnterprise and Dynamics (now MBS Great Plains) and Solomon IV (now MBS Solomon) SCM capabilities through a partnership with Logility (see Great Plains Supply Chain Series To Be Powered By Logility), which has meanwhile fallen by the wayside due to the vendors' different target markets (i.e., Logility's larger customers versus the Great Plains focus on small-to-medium enterprises [SMEs]) and given that at least Solomon's customers' needs could often be well met with Solomon's enhanced native distribution capabilities. In addition to the long-belated native blanket purchase order support, inter-site transfers and pick/pack/ship workflow functionality, MBS announced at Stampede 2002 the acquisition of the Myridas Advanced Distribution, Myridas Advanced Picking, and Myridas Available To Promise software modules from its European Solution Developer of the Year, UK-based Trinity Computer Services. These enhancements were part of the generally available Release 7.5 of Great Plains in April 2003, while these modules for Version 6 and 7 have been available directly from Trinity along with the seventeen other Trinity modules for distribution. The partnership with the UK-based Preactor International for its finite scheduling and advanced planning & scheduling (APS) functionality took place early in 2003, just to further complicate the picture.

However, the MBS Demand Planner seems to tackle only the first few planning steps of the complex SCM problem, which should address both the planning and the execution side spanning the "plan," "source/make," and "deliver" processes. In the long term, traditional demand planning and forecasting are not enough in a competitive and collaborative e-business environment, where manufacturers are required to deliver new products faster, cheaper, with increased quality, and with immaculate order fulfillment and after sale service. Customers, the partner channel, and suppliers must be involved in this collaborative effort too, since SCM expands traditional enterprise applications with business processes that stretch further into the enterprise and quite further into the value chain. More comprehensive SCM solutions blending demand, inventory, and replenishment planning, collaboration capabilities, event management, warehouse, yard and transportation management, supplier relationship management (SRM), international trade logistics (ITL), and integration with existing enterprise applications have emerged very recently to enable organizations to fully manage these intricate inter-enterprise processes.

Thus, MBS has to be more aggressive and perspicacious in delivering a sound SCM vision and value proposition if it is to be considered as a serious, leading contender for the mid-market manufacturing and distribution space. As gleaned from the above discussion, SCM entails much more than a data exchange between marketing and manufacturing departments (not that bridging that gap is not an important feat). The fact is that many prospective MBS customers have already opted for some other SCM point solutions to which MBS Demand Planner does not cater (for example, warehouse management, sourcing, and event management), while on the other hand, many TXT users already have instances of other ERP products. The picture gets much more cluttered with many other independent software vendor (ISV) partners' similar solutions. For example, Trinity Computer Services had long been a former Microsoft Great Plains Business Solutions partner dedicated to meeting the needs of the distribution sector, and its Myridas software modules have been developed specifically to add important distribution functionality to former Great Plains Dynamics and eEnterprise products. Through the Trinity Partner Program other MBS partners have had the opportunity to obtain Myridas modules, software development, and consulting services to help their own customers create specific distribution capabilities in their business systems.

Indeed, some VARs (value added resellers) might be in a quandary to justify selling a "classic" high-volume Microsoft or MBS product at a low price with minimal integration, if they could be tempted to sell more substantial and complex products. Many VARs and ISVs have lately felt further squeezed by Microsoft moves to commoditize and control the core application market, i.e., the lower architectural layers that constitute the Microsoft Business Framework. Thus, with more or less candor, MBS has been enticing its partners to focus on providing the application layer, possibly unique to specific vertical markets. However, these partners may feel like being between the rock and the hard place not only that they might be involved in investing in solutions that might compete with those of another partner (not to mention their need to also bear in mind the migration of these solutions onto the business framework in the future), but there is always a danger of MBS entering into a slew of OEM alliances similar to TXT or Preactor, which might cannibalize their current efforts. The scenario of Microsoft acquiring an SCM vendor some time down the track is not far fetched either.

This brings us to the fuzzy area of the nature of the proverbial fickle partnerships a company of Microsoft's stature and attitude earns. Long ago, Microsoft signed a deal with customer relationship management (CRM) vendors Onyx and Pivotal Software, but recently announced its CRM software. Enter former Great Plains' partnership deals with the CRM leader Siebel Systems, e-procurement vendor Clarus (now part of Epicor), ERP vendor Kewill, and supply chain vendor Logility (for more information, see Siebel: Great Plans for Great Plains, Microsoft Great Plains Procures eProcure At Last and Kewill And Microsoft Great Plains To Further Mutually Complement). All of the above alliances have meanwhile become all but defunct, while the VAR and ISV partners have had to adjust their strategies around these announcements. Since for some, particularly smaller VARs it may not always be viable to sell Microsoft business software much of the time, there might be some convert VARs itching to work with the likes of SAP or IBM, given their keen interest in the segment and possibly more generous incentives for VARs and ISVs (see IBM is Serious About SMB and Software Giants Make Courting A Small Guy Their 'Business One' Priority).

This is Part Two of a two-part note.

Part One detailed the events and discussed the market impact.

The MBN and Business Portal

Microsoft seems to have done much more homework when it came to MBN and Business Portal, given that it will use XML, but will also provide built-in support for various EDI standards and EDI data transports, partly by working with Covast, eBridge Software and vSync on EDI and other area of connectivity extension and enhancement. Many large corporations (Wal-Mart for example) have found Internet-based EDI to be productive and cost-effective, and have often even mandated its use to their suppliers. The technology might even help these companies with their more strategic initiatives, such as strategic sourcing and spend management (i.e., how to select and negotiate with suppliers, automate requests for quotes and proposals (RFQ/P), conduct bids and reverse auctions, etc., see The Hidden Gems of the Enterprise Application Space). To do these things effectively, they require a consistent method to capture transactional data for all suppliers and monitor and track supplier performance, which cannot be achieved with antiquated paper processes, but rather in an institutionalized electronic manner where MBN seems to fit the bill.

While some may point out that the adoption of B2B connectivity technology is still largely driven by larger corporations recommending and often requiring that their smaller trading partners adopt Internet EDI technology, at least MBN will come in handy when these small businesses, which might not be proactively pursuing this technology now, will have to act upon their larger customers' mandates for such initiatives. This, however, may again prove Microsoft's astuteness when it comes to technological enablement, but not necessarily when it comes to complex domain knowledge of several industries and their SCM processes.

Thus, many SCM vendors focus on specific vertical industries, and their solutions have been developed to solve the specific needs of those industries. Such would be the case of TXT's expertise within the CPG and Fashion/Apparel industries, which have been constantly adapting to the competitive invasion of imports from the Far East and other cheap-labor regions, to the frequent changes in manufacturing techniques, and to the increased importance of brand awareness in recent years. These industries are also possibly unique for the new product introduction (NPI) having to rely upon attributes such as color, texture, finished garment size, material type, and so on, while collaboration is a must since the materials are sourced from remote locations to meet strict attribute and quality requirements. At first glance, one could notice a good fit between TXT and Navision, which is possibly the most flexible and vertically extensible of the current MBS products.

However, at this stage, it is not apparent what strategy the alliance will apply initially for providing other industry-specific or rather generic demand management solutions for other MBS offerings, given MBS has not been well entrenched within TXT's industries of focus. Again, to avoid having to customize its core software, MBS might try to convince ISVs to build industry-specific applications that leverage the core functionality supplied by its ERP systems, while Microsoft would remain the infrastructure supplier (i.e., of Microsoft Business Framework that includes application functionality, business class libraries, and development tools like .NET and Visual Studio, all running on the Windows OS). MBS will have to energize its resellers about providing industry-specific configurable templates, but that again can only happen once the alliance and the Microsoft SCM strategy are on much firmer ground and with more certain milestones, which might be too much to expect at this stage.

User Recommendations

Small and medium size manufacturing businesses using MBS back office applications that have needs to connect their sales and marketing and manufacturing departments, and which have demand-driven SCM concerns, should react positively to the announcement of MBS Demand Planner. They should evaluate the above potential demand planning functional enhancements as a way to add value to their existing applications although bearing in mind that other ERP or SCM vendors might currently offer more mature and functional products at this stage. These prospective customers should consider adding the announced functionality to their requirements list, as to secure value in terms of both potential cost savings and increased efficiency. Approach MBS to clarify for you its current skills to support your short- and long-term SCM initiatives, as well as a clarified product roadmap. Also, watch for market developments carefully, as the competitive landscape will heat up, and manufacturers will see more choices, particularly those looking for a full suite of functions to manage global supply chains. The prospects with complex SCM requirements should compare the still fairly limited SCM functions of the MBS offering with those of other ERP vendors' mid-market offerings and consider complementing the MBS offering with other best-of-breed SCM components. Enterprises with significant promotional activities and other such events should consider the concept of the demand-driven supply chains. Integrated marketing, inventory, and replenishment decisions clearly holds significant promise for these enterprises.

Also, due to the likely product immaturity, businesses should consider other products until the second-half of 2004. As with all new releases, users should employ a critical approach in their evaluation of the products, and require the local reseller to demonstrate specific technological and functional capabilities. Bear in mind that the first release of MBS Demand Planning and Forecasting will not provide tight vertical focus across multiple industries, and it should not be short-listed by larger or more complex enterprises, with more comprehensive SCM strategies (for example, after-sale services and spare parts revenue stream, sourcing, yard management, task interleaving, event/workflow management), multiple-platform and strong scalability requirements. Discrete manufacturers seeking to facilitate manufacturing coordination across a supply chain, and which have all-encompassing planning and execution needs should keep other SCM providers as the primary choice on their short lists for the time being.

While the smaller businesses must be attuned to what their larger customers/trading partners require, and thus consider MBN as a relatively simple and inexpensive way to support those customers' demands, MBN is only a small part of the trading relationship equation. Since the technology is only an enabler to facilitate changes, for B2B collaboration to be effective, performance measurement and change management will have to be instituted. Thus, true cooperation from suppliers and customers as well as strong support services from MBS and its partners to deal with business-related questions, technical glitches, and data translation issues will be required.

 
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