The Incredibly Shrinking Platform--and Price!

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When 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.

The 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.

So 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.

Figure 1

Technology 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.

But, 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 acquiring technology.

On 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".

SmallSmartFast Means That

In 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, 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.

The 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!!!

Figure 2

The 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

Supply 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.

It 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 it.

Among 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!!!

Linux—the 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.

In 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!

[1] Larry Singer, Executive Vice President SUN Microsystems

Conclusion and Recommendation: Get SmallSmartFast

Software 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.

Of 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, Hoovers,, 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.

There are three major issues we will discuss in subsequent articles about this new SmallSmartFast wave:

  1. New pricing profiles that will impact all deals—hardware platforms, software, and consulting.
  2. How SmallSmartFast environments work—outsourcing. We just completed a survey with our manufacturing subscribers and will share with you the results.
  3. SmallSmartFast technologies

More to come.....

This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.

About the Author

For 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.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.

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