The Incredibly Shrinking Platform--and Price!
Written By: Ann Grackin
Published On: July 2004
these technology waves occur, at the outset, there is never a "whole solution",
so people have to purchase a cluster of complementary parts to achieve the goal.
Always, the solutions never quite catch up before we move on. As implementations
role out and technology providers can fill out their solutions, the law of natural
selection takes over, with the stronger, adaptable, nimbler and differentiated
surviving and replacing.
Recent Technology Waves...Y2K, The Internet, and...
In recent history, technology and opportunity brought high performance servers that could visualize and solve large enterprise problems, so that APS and ERP could encapsulate a large enterprise. Great, but the acceleration in investment was brought by Y2K. Quickly ERP and APS have become foundational systems. Foundational systems—think infrastructure, think utility—still keep an important place in the portfolio, but they are no longer strategic buys. We went from Neiman Marcus to Macys.
Users can fuss, having been tweaking these technologies for years, as we had with various generations of accounting and MRP systems. But if technology plus opportunity knock, we move to the next wave, keeping our foundation. Yet depending upon the speed with which the next wave hits, users may have to adapt quickly. Premier mental attention units will shift focus on the next wave, as we had with the Internet. CIOs were becoming presidents of Internet start-ups—talk about a heady distraction!
Plus lots of interesting excitement with technologies, opportunities, etc. Marketing messages can get confused with all sorts of players getting in, trying to get a nibble of the action! Users can spend prime time sorting this out.
During the wave, pricing also is premium! We pay more for the technology, as well as for the scarce resources to implement, etc. Sales people have to turn away prospects! Imagine that!
Once a solution is foundational though, the tables are turned with buyers focused elsewhere. Death and carnage, and out of the ashes the adapters—now foundation players—survey. A bit less exciting, but we do need them—but less of them.
where are we now? With the tracks layed-out—fiber, Internet, satellite, etc.,
the advent of pervasive technologies—wireless devices, radio frequency—we are
not only poised, but already in the next wave, SmallSmartFast.
meets opportunity—virtual businesses are information centric businesses! Large
complex deep supply chain processes rely on information, too—the more real time
and accurate, the better. ehubs, ihubs, etc., versus inventory. Enter pervasive
wireless, RFID, etc. there is a reason for the mania—it's not just the Wal-Mart
or Department of Defense mandates. For several years we kind of knew this was
going to pop. One day we informed one of our RFID clients that we knew for several
years, we informed them one day—that they would be the new masters of the universe—for
awhile. Constant pursuit of better data—better intelligence—is the driver, which
has been the obsession of best enterprises.
early in the waves we also have mayhem because of various perpetrators of confusion.
Marketing messages can get confused with all sorts of players getting in, trying
to get a nibble of the action! And users don't really do their homework when
the positive side, it does create an opportunity for older players to create
new solutions. If they don't freshen up their look, they are relegated to the
unexciting backwaters of grueling sales cycles or "the ex-wives club".
session after session, we hear CIOs concerned about shelveware, long implementations,
and risk. They are curious about the on-demand or hosted models that
promise low set-up costs, pay as you go, etc. And these models, which offer
"small" profiles, are gaining popularity.
However, the revenue profile is different, how services are offered are different, etc. (More of these systems in future PVs).
Suffice to say, to be successful going forward, you have to service new requirements. Foundations have to constantly expand—complete the transaction—and continue to add value. All the goodies are not just for new wave vendors.
Foundations are M&A riche harvesting Fields
M&As players like Agilisys, Optum, and SSA, etc., help customers hang on to their installations. Grateful customers of Daly.com, or WDS, etc., tend to be concerned, but happy about these acquisitions. But these deals don't necessarily represent net new business for software firms, unless they understand how to manage the install base.
jump in M&As can help the acquirers "grow", by blending assets and
reducing expenses. But to create true growth, they have to address the value
proposition for these new customers!!!
smart player will get in there—early in the game—and delight the customer with
fresh capabilities. If they play this well, they can significantly expand the
relationship with other modules from their portfolio. Otherwise, over time,
they will just be a collector of maintenance checks. Maintenance is another
slippery game. Witness the restating of revenue and other such issues. Many
users are asking what they get for this annual check and some are willing to
risk going it alone. Or at some point "do the math" and they bolt
to the player who is offering a "new way", e.g. ERP, on demand etc....
The Whole Foundation Stack Gets Cheaper
and demand—less demand, drives lower costs. And in our industry, through finer
and cheaper supply chain management manufacturing of hardware and software (think
Indian software developers), the costs of the whole stack has gotten cheaper.
Ubiquitous Internet has the pipes mostly in place for hosted solutions, subscriptions,
term contracts, etc., etc.
is telling when an organization like Sun states "We now think that network computing
will change the way people will buy technology. Instead of just buying the
technology, they will want to buy the benefits of technology."
That is a signal of the ways we will buy technology and what we will pay for
the services Sun will detail is a subscription-based package of what it calls
preventive services. The package includes more than one hundred services that
are designed to reduce costs and increase service levels in data centers.
At a recent PeopleSoft executive conference, PeopleSoft, in partnership with IBM's SMB group announced an ERP package on the server for $100k!!!
close-to-free operating system, has become highly embraced by CIOs,
and is sold by the big three—IBM, HP and Sun, with all these firms continuing
to drop their pricing on Linux. Software firms report more and more requests
for Linux based ERP, as well.
the Wall Street Journal's mid-year report, it was telling what group
filled the "3 years worst performers" club! Many of the supply chain
software firms are private or just too small to make the top losers list, but
technology infrastructures was clearly the dog. What do you do when you don't
differentiate or live in the foundations? Lower prices some more!
Larry Singer, Executive Vice President SUN Microsystems
and Recommendation: Get SmallSmartFast
firms, like any business, have to address their cost of sales, their cost of
production. Like HP or Dell, as painful as it sounds (to me, at least), they
have to face the realities of outsourcing, off-shoring etc., with all the risks
that entails. (erosion of intellectual property, quality, etc.). Lower your
software development costs, lower services costs, create inside sales! You can't
spend $250,000 on the sales cycle to sell a "connect" at $10,000,
or $50,000 for a software suite.
the five major IT systems that ChainLink uses, four are hosted/on-demand. It
is extremely instructive to us how these organizations sell, service, educate,
upgrade, etc., their solutions. I suggest you take a hard look at this. Many
of your organizations use Salesforce.com, Hoovers, technologyevaluaton.com,
etc. But most of the senior folks never touch these systems. So, software presidents,
I suggest you do so. For me, who spent the first part of my career designing,
building, buying, and implementing systems, and spending hundreds of millions
in the process, it is mind-boggling! No doubt, there are limitations, but it
is interesting to watch these organizations reach for more and more complexity
and customizations, yet scalably.
are three major issues we will discuss in subsequent articles about this new
pricing profiles that will impact all deals—hardware platforms, software,
SmallSmartFast environments work—outsourcing. We just completed a
survey with our manufacturing subscribers and will share with you the results.
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more than two decades, Ann Grackin, Chief Executive Officer,
has been on the frontlines of the Supply Chain Management technology and e-commerce
frontier, leading global strategy and technology implementations in the high
technology, semiconductor, automotive, textile, and apparel industries.
Research is a bold new supply chain research organization dedicated
to helping executives improve business performance and competitiveness.