Enterprise Applications Battlefield Mid-Year Scoreboard Part 4: Other Vendors, CRM, SCP & User Recommendations

Enterprise Applications Battlefield Mid-Year Scoreboard

Part 4: Other Vendors, CRM, SCP & User Recommendations
P.J. Jakovljevic - August 29, 2002

Event Summary

The market has recently witnessed a number of high-profile announcements of stalwart vendors in the enterprise applications space. Given the contrasting nature of these announcements, from impressive to disappointing financial performances on one hand, and from new acquisitions and/or job openings to massive layoffs on the other hand, it becomes painfully obvious that the overall picture largely consists of many shades of grey.

This is a four-part note covering large and small ERP vendors, scoring their progress during these unsettled times.

Part One discussed recent financial results of:

• Microsoft Corporation
  
  
• IBM Corporation
  
  
• Siebel Systems
  
  
• i2 Technologies
  
  
• SAP AG
  
  
• PeopleSoft

Part Two discussed the impact on Microsoft. Part Three discussed the Market Impact on IBM. This part covers the other ERP vendors, CRM, SCP, and makes User Recommendations.

Other ERP Vendors

The "bigger is better" largely applies in the case of pure enterprise application providers as well, since vendors like SAP, Oracle, PeopleSoft and Siebel, with a sufficient number of clients are in the best position to ride out the storm. They can go back to their client base to up-/cross-sell new products, and that is typically a lot easier to do with software than trying to open the door for the first time. With few honorable exceptions, enterprise application vendors are experiencing dwindling revenues across the range.

With any economic recovery sightings now expected only sometime in 2003, application vendors find themselves in a precarious situation where, concurrently with dismal revenue inflow, there is a need for bigger investment in the development of their products. This is especially true for those vendors that are in the process of catching up with a missing functionality and, more important, updating the product technology foundations to be able to communicate in a new Web Services-oriented world. Vendors unable to keep abreast of technology demands of a vertically focused solution that provides tangible returns in ever-smaller project chunks are in a danger of becoming has-beens.

Logically, the best software bets are the clear leaders in their fields SAP in the ERP and as of late in the SCM market, Oracle in the database market, PeopleSoft in the HR market, and Siebel in the CRM market. SAP, although experiencing lower revenues and the challenges of executing better in North America and in the lower-end of the market, with more than 18,000 customers and 36% market share for back-office remain poised well to spar with many difficulties the future may bring (see SAP Keeps Traction On Some Tires Of Its Omni-Wheel-Drive). The similar holds for Oracle, despite the ongoing product quality issues and relentless competition from IBM and Microsoft in the database and application server markets (see Stalled Oracle Fumbling For A Jump-Start Kit).

Very encouraging might be the fact that despite the tough market conditions, PeopleSoft is finding success beyond its proverbial strength in financials and Human Resources (HR) by acquiring more than 110 SCM and over 80 CRM customers lately in an extremely competitive environment. PeopleSoft is also cultivating well its installed base - with 800 customers live on version 8 and approximately 1000 upgrades in progress, PeopleSoft continues to have a good opportunity to sell additional modules when the rest of its base decide to upgrade. With SCM, CRM, and enterprise portals providing a growing percentage of PeopleSoft's revenues, it is commendable that at a time when many software vendors are slashing R&D costs, PeopleSoft seems to be continuing to invest in the future (see PeopleSoft Building Muscles To Overcome The Rough Patch).

Pure-Play SCM and CRM Providers

Consequently, pure-play SCM and CRM vendors (e.g., i2, Manugistcs, Logility, Siebel, Pivotal, Onyx, etc.) may become marginalized by increasingly strong SCM and CRM capabilities of ERP vendors.

i2 Technologies

i2's ongoing languishing phase underscores just how difficult it is for best-of-breed vendors to survive without either a large roster of reference customers to rely on or a broader functional support for the follow up sales process. In the i2's case, the predicament has even been aggravated by rampant imprudent acquisitions during its better days resulting in disparate data models and systems, and a lack of product scalability and depth. As a result i2 now has to achieve three critical goals -- a return to profitability, rounding out an integrated product stack, and an intense focus on customers that was largely neglected in the past (see Nike Blames i2 For Finish In Losers Bracket) all in the time of lost momentum and negative publicity. Identified and set out a few months ago by the management, the goals might be too much too late, as they will certainly take a long time to achieve and will be painstakingly reflected in the company's financial performance, with current hefty cash being possibly insufficient in the long run.

Many complexities need to be managed in the overall customer strategy, such as migration to more standard supportable modules, which would allow i2 to discontinue software that does not have real market potential, saving some R&D and support costs. Although with a fanatical focus on immaculate go-live implementation dates, i2 might salvage its reputation, and thereby acquire new customers and up-sell to existing ones that are satisfied with results, still, i2 is not entirely in control of its execution in this challenging economy.

Supply Chain Vendors

Supply chain vendors, like their ERP counterparts, also need to articulate the value of their solutions. Most vendors have been grappling with figuring out how to include a return on investment (ROI) calculation as a part and parcel (and a catalyst) of the sales cycle. Some of the major supply chain vendors (like i2 and Manugistics) are facing resistance and protracted sales cycles for two key reasons. First, both vendors have built their product portfolios through acquisitions and are still entangled in delivering the components of a truly integrated suite (see Manugistics Indulges In The Open M&A Season). Additionally, there are still significant barriers to an easy deployment of supply chain planning (SCP), as they are based on cumbersome proprietary algorithms and heuristics that take a long time to master and harness to work, forcing the company to have a full-time rocket-science' consultant on the premises to keep the application in tune with the business processes it supports.

Siebel - CRM

Although the CRM market is down too, there is still a lack of penetration in many sub-markets (e.g. marketing and eService) and there is still an ample growth potential in nearly all industries when the market picks up again. Despite the unpleasant quarter, Siebel remains one of the best-managed software companies in the business, still having a strong penetration in all Tier 1 ERP vendors' client bases (except for the SAP's one) and leadership in many verticals (e.g., service industries and insurance). With ongoing prudent management, its large customer base, solid cash position and strong balance sheet will still keep Siebel strong when the market eventually recovers.

It may be quite different situation for its smaller CRM brethren though, which face relegation to their niches, demise and/or consolidation to enhance their offerings. Siebel is also taking the bull by the horns' by acknowledging the integration challenges its customers face, and by addressing that issue, which has been one of the major sales deterrent of late. This has also often been a troubling aspect of CRM implementations in the past, as the only way IT departments can achieve a full view of the customer is by integrating front-end, customer facing applications (e.g., contact management) with back-office systems, such as billing applications and financial ERP modules.

Still, the era of Siebel's uncontested supremacy in the CRM market for the past several years seems to be nearing the end, also owing to both Tier 1 ERP vendors intrusion of the CRM space and to some mid-market CRM vendors coming of age. Siebel's moves towards delivering industry templates and the solutions for mid-market are commendable, as in the current economic climate, Siebel's CRM-centric functionality bells-and-whistles and an adequate Web-enabled product architecture may look ever less compelling even to the higher-end of the market, as enterprises with heavy ERP investments from ERP leaders-turned CRM wannabes might settle for likely less powerful CRM offering of those, in exchange for the potential long-term benefits of extended enterprise applications integration and subsequently lower total cost of ownership (TCO).

The fact is also that the CRM functionality offered by ERP leaders will not necessarily be inferior in every case either. As an example, if the importance of order management and content management in a user's business strategy is great, one should not be terribly surprised if SAP, PeopleSoft or any other traditional ERP vendor outscores Siebel in the enterprise applications selection. This has long begged the question when Siebel would move beyond fancy order capturing, contact management, and/or call center, and take on the user's entire order management process.

Siebel has indeed traditionally shown a little support for transactional and order fulfillment capabilities, whereas many ERP vendors can offer the support for each stage of the customer life cycle engage, transact, fulfill, and service afterwards. In any case, each of these is a critical customer-facing process, and Siebel seems to have excelled only at the first and the last. By acquiring troubled i2, Siebel could avail itself with much-needed back office and supply chain order management capability though, but it might not be that likely due to the unattractiveness of i2's current above-mentioned predicament.

User Recommendations for CRM

Organizations currently selecting CRM solutions should therefore evaluate how the "transact" (order management) and "fulfill" (pick/manufacture/pack/ship) phases of the entire (engage, transact, fulfill, service) customer's experience will be achieved, as there is a true value in tightly coupled CRM/ERP/SCM functionality, without a need for an underlying third-party integration engine . At least, pure-play CRM vendors must provide rich integrations based on sets of commonly-used, pre-defined business process components. To that end, Siebel's idea of its Universal Application Network (see Siebel Rallies Its Integration Alliance Troops) seems innovative and should help the needs of the higher-end of the market, whose paramount concern have been the enormous costs of integration and the general lack of responsiveness by enterprise application vendors to address this issue. Siebel's embracement of standards-based Web services as a technology enabler may appeal to customers that are keen on preempting dependencies on proprietary Application Programming Interfaces (APIs).

Other ERP Vendors

The positive news is by no means limited to the large players only. J.D. Edwards and Lawson Software continue to focus on their traditional verticals and have further rounded out their products. Traditional mid-market vendors such as Made2Manage, Intentia, Lilly Software, IFS, QAD, Exact Software, Scala, and Best Software to name only some remain solid players by staying focused on their roots in manufacturing and/or distribution. Each company has either completed or is in the process of enabling its systems to take advantage of Web Services that will assist in integrating systems and allowing the mid-market enterprises to collaborate with their trading partners and consumers.

SCM Vendors

Due to increasing visibility of supply chain information, the necessity of SCM has also increasingly become the provision of real-time information. Therefore, the use of traditional advanced planning & scheduling (APS) methods that are non memory-resident and latent in itself as a basis for all decision making is becoming increasingly unsound.

The future will thus see a blend of real-time supply chain event management (SCEM) and SCP with its strengths in inventory management and capacity planning. To that end, Adexa has been posting growth and good financial results by providing a homegrown solution that is flexible and integrated on a single data model and can be incrementally implemented as required.

Other vendors still doing well in the SCM space are those that enable companies to manage vendor relations and fulfillment processes.. Companies such as Prescient Systems, Escalate, SoftChain, webplan, VCommerce, Ortems, SeeCommerce, and Teadec in SCEM, visibility, and performance monitoring are able to connect disparate systems to provide all the parties with near-real-time information on current movements and trends. Also, Manhattan Associates' and RedPrairie's (former McHugh Software) ability to expand their warehouse management system (WMS) and supply chain execution (SCE) expertise to address customers' need of fulfillment management has played well to their strong recent performances. In today's depressed market, the message of quick ROI and its direct impact on customer satisfaction resonates loudly enough to nonetheless keep customers buying.

User Recommendations

It is indisputably difficult to select a service provider in markets that are fragmented, immature and rapidly consolidating. The niche specialists should not be downplayed, although it is increasingly sensible to scrutinize their financial viability, particularly in terms of balance sheet, management profiles and customer base. Existing customers of troubled vendors should address their concerns directly with the management and put in place contingent plans for ongoing support. Potential customers should proceed with caution, buying components only in a tactical manner and with a clear quick ROI (in less than a year payback period). In any case, stick to a series of smaller projects targeted at streamlining a specific business process, and keep it simple & smart -- frequent and accurate real-time exchange of demand and supply data can reduce supply chain planning costs without extensive automation or software analysis.

Be aggressive during negotiating risk allocations, price parity and general terms and conditions. Fixed project prices (as opposed to time and material pricing), milestone payment schedules linked to deliverables, and penalty clause for late deliveries (as well as the profit sharing incentive for early completions) should be a matter of course. Also, it might not hurt to consider reviewing your current processes and systems as to find any still undetected malfunctioning practice in accounting and/or financial reporting.

On a more general note, as leading applications vendors have been reaching parity across many CRM areas, new users should base their software purchase decisions on many other criteria like impending integration costs, product usability, product architecture, and TCO. Given vendors' zeal for new license revenue, do avail yourself of vendors' assistance in identifying return on investment (ROI) in the concrete case, in application customization for vertical industries, and in integration to your legacy applications. Also, insist on "scripted business scenarios demonstrations" or "conference room pilots," or even on the opportunity to conduct extensive system tests within your environment. Although the widespread acceptance of Web services deployment is only in its nascence, large global enterprises should still start learning the new protocols, standards and technologies in order to grasp the potential business advantage.

As for Microsoft followers, they should be pleased with Microsoft's partial execution of its Web Services strategy by delivering a production-ready .NET. Microsoft remains a good choice for Windows environments with an abundance of PC desktop-oriented activities, and that are involved in next-generation platform (e.g., .NET and Web Services) development/deployment. Microsoft might not be such good a choice for complex organizations that need solutions for complex computing problems (a high-volume backbone ERP system that uses publish-and-subscribe message-oriented middleware (MOM) and multi-vendor integration projects (hardware, software, services)), solutions where security is of high concern, and projects where cross-platform is a matter of course, and where most application developments are done in Java.

Conversely, IBM is a good choice to deliver solutions for complex/changing computing and IT infrastructure services, particularly on Unix or Intel servers, while it may not be so good a choice for simple computing problems, and small/midsize business (both in hardware, software, and services terms). Despite the PwCC acquisition, IGS might not currently be the best solution for business strategy consulting. While critical to IGS's future, it will take some doing for it to be built up as a core competency. PwCC's existing customers should keep a close eye on the teams working on their projects to make sure there is no an exodus of talented people who are replaced with less-knowledgeable people. Prospective customers of either company in the immediate future should inquire which company will provide the resources and what affect the acquisition will have on their engagement. Also, watch out for engagements involving PwC partners who compete with IBM, such as EDS and HP.

In general, the market should watch out for the honesty and the longevity of the IBM/Microsoft relationship particularly in the Web Services governing organization, as well as for theirs future acquisitions. Also, beware of any vendor that is inclined to create much dependence on its technology, as it leads to unjustifiable price increases, and a declining openness in the future.