Whew! It Is Finally Happening.

by Lora Cecere on March 12, 2014 · 2 comments

I am an old gal. In six months, I will raise a toast to my sixtieth birthday. It is hard for me to believe that I am that old and still working. Many of my friends are retiring. The industry is in flux. Daily, I get notices from Linkedin of job changes. Sometimes, I ask myself, “Where has time gone?” Other times I celebrate how much I have learned.

It will be a long time before I retire. I have a long memory. It is good today to celebrate something that I wished could have happened 14 years ago.

Today, I want to celebrate progress. As an analyst, I watch trends and the progress of technology adoption. Many times it is slow, and I get frustrated. However, today I am currently involved in a research process where I am seeing fast and demonstrable results. It is the adoption of new forms of B2B networks for supply chains.


Let me start with some history to provide context. As background for the new reader, I have been an analyst in the supply chain management market for 12 years. First I was employed by Gartner Group and then by AMR Research. This was  followed by a short stint at Altimeter Group which led to starting-up my new company Supply Chain Insights. My research projects have been many, and I love new technologies. I often find that new technologies are overhyped and underdeliver on promises. I pride myself on cutting through the hype and getting to the facts. No fluff from me… I am known for telling it straight.

As we emerged from the Y2K cloud, there was exuberance about e-commerce and the promise of Business-to-Business connectivity. I actively followed the emergence of marketplaces and watched e-commerce blossom and B2B stagnate. In the period of 2000-2002, when I was at Gartner, I watched the evolution of a model that I violently disagreed with. It was the premise of ERP II. I could not condone investment in ERP as the path forward to building end-to-end value chains. I did not believe that it could happen from the inside-out. Instead, I felt that it needed to happen from the outside-in (from the network or channel back.)


Figure 1.

When Gartner Group bought AMR Research, I could not go forward. I had left Gartner because I did not feel that they were as serious about supply chain research as I wanted them to be. I wanted to write about cool technologies for the line of business buyer. I wanted to be uncorked and out of the control of dominant players in the market to write the unabashed truth as I see it. This journey has taken courage. It is tough to take a hard stand. Today, I want to take another one.

Celebration of the Evolution of B2B Networks

I am currently working on a series of reports on the state of Business-t0-Business Connectivity. The first published this week, and the second will publish next week in our newsletter. 

While many companies wax eloquently on the concept of building the end-t0-end value chain, I find that they are not clear on the meaning. It is often stated as a goal in meetings, and I see it used in many strategic plans. However, what I observe is continued investment in the automation of enterprise practices. We are busy working on process iterations and continuous improvement programs that I think only inch us towards business transformation. I am excited to state that today, I think that we finally have B2B Network alternatives that work. I am also excited to state that I think that they are one of the disruptive technologies that can help us get unstuck in delivering on corporate performance.

It is important. As we have outsourced logistics and manufacturing, I firmly believe that we need to get more serious about the building of Business-to-Business (B2B) networks. These are one-to-many and many-to-many architectures that connect logistics providers, contract manufacturers and suppliers into true supply networks. There is a community layer, an application layer, and a connectivity layer. In our recent research reports, line-of-business users are using these networks for 7% of their flows. The primary methods of connecting with trading partners are spreadsheets and EDI.

It is easier said than done. We have been at it for over a decade, and I see real progress in the evolution of these technologies in the last two years. An image representing this type of connection is shown above. (I use it courtesy of GT Nexus.)  Here is the essence of what I have found out:

  • Confusion reigns. The term control tower confuses the market. It is used by Kinaxis in a one-to-one model and by E2Open in a one-to-many model and by GT Nexus in a many-to-many model. What I think that we are seeing is the evolution of different types of supply chain visibility as outlined in Figure 1. To solve the problem, we have to be clear on the type of connectivity that we are seeking. When people use terms loosely, we need to ensure clear definitions.
  • Why business networks over EDI Vans? In the words of one of my reference calls last week, “They work.” While EDI providers do point-to-point integration, the connections are fragile. Every time that there is a software upgrade at a point in the node, the connections break. This is not the case for the B2B business network provider. EDI VANS have consolidated and stagnated, but B2B Networks are maturing. It is for this reason that you should choose GHX over GXS if you are in healthcare or GT Nexus over Descartes if you are in logistics/commerce.
  • The answers are not coming from ERP players, and will not in the short-run. Yes, I know that SAP bought Ariba, and that they are hard at work on the integration of SAP APO, SNC and the Ariba business network. I just do not see that it will be a viable alternative in the short-term. (e.g., …less than five years.) Why?  It lacks the community infrastructure and the depth of application. However, it is important to note that SAP is trying. Oracle is not. As a result, I would invest my money in E2open, Elemica, Exostar, GHX, GTNexus, or iTradenetworks in the short-term. The specific choice depends on the requirements at the application layer and the desired community. But, look for more on this next week.
  • The business networks have evolved. I am impressed by the evolution of canonical models in these business networks. We have come a long way from the failed start-ups of over 300 marketplaces in 2001-2005. I am also stoked to see the use of non-relational databases and cloud-based computing to make B2B business networks for supply chain a reality. They have come a long way in the past two years. In fact they had matured faster than I had given them credit for. So the next time that you see an analyst compare an EDI VAN and a B2B Business Network on the same model, throw up a red flag. It is obvious that they just do not know what they are talking about. They are very different solutions with far-reaching implications.
  • We need to get on with connecting the value chain. The traditional roles of buyers and sellers make it difficult to get past traditional buy/sell relationships and start the work of building value networks. Less than 1% of companies have a resource aligned to drive this work. It is a gap. I think that we need to just get on with it.

So in closing, I would love to hear about your experiences with the Business-to-Business Supply Chain Networks. It will be a long weekend writing my report, so I look forward to your emails.

On a side note, if you enjoy our research, we would love to have your help on several of our open surveys. It is a good chance for you to benchmark your processes for free. And, as always, if you fill out a survey, we keep your name confidential and report in aggregate. In return, you get a copy of the summary document and a one-hour phone call to educate your team on the findings.  We also share these in monthly webinars and will showcase the findings at our Global Supply Chain Summit. The essence of open research is you raising your voice and letting it be heard. While I know that your time is valuable and you are busy, and that you might not have time for a lot of surveys, I am hoping that I can talk you into taking at least one.

When you give to us, we give back to you. That is our mission. The active surveys in the field are listed below:

Supply Chain Risk Management

Corporate Social Responsibility and Supply Chain Alignment

Digital Manufacturing

Vendor Managed Inventory

Use of Downstream Data

Planning Software Implementations and Success Rates

The websites are swept clean. The messages are honed. The Wikipedia pages are aligned. The E2open marketing machines are spinning. The blogs, social media networks, and pundits are whirring with predictions and accolades. I watch with a bit of amusement, and want to offer a bit of caution.

Let me start with a disclaimer. The Shaman is a curmudgeon. She cannot count the number of SCM software  acquisition announcements that promised 1+1=10. In short, this never becomes the reality.  Very few software acquisitions reach their potential. The ones that do can be counted on one hand. However, I like this acquisition. It will make E2open more relevant and could accelerate the evolution of a new form of marketplace offering. The supply chain management market is troubled and needs some excitement.

icon-scm was founded in 1992. The product, a licensed offering, was designed to enable a “rapid response” of what-if analysis in material-centric discrete supply chains. The company partnered with SAP to launch a product offering, SAP Supply Chain Response by icon-scm, in 2010. SAP company passed on a thirty-day period of first refusal to acquire the asset allowing the purchase by E2open on July 31st, 2013. This licensed software offering was purchased at slightly under 3X revenues. In 2012, icon-scm had revenues of approximately $10 million. The product was used to improve supply chain decisions in discrete manufacturing companies like Avnet, Hewlett-Packard, Pratt & Whitney, and Western Digital.

Based in Germany, icon-scm and the company leadership team was driven by a very product-based mentality. The company was never good at marketing. The company name is hard to say and for client’s to remember. < I liken it to the Johnny Cash song, A Boy Named Sue. The company was born into the world with a tough name and faced a tough uphill battle. The founders bet the future of the company on the SAP partnership. The results were disappointing for both parties.>

Over the last decade, the German-based company was never able to successfully compete with the more aggressively marketed Kinaxis solution. There was a strong preference in the market for a Software as a Service (SaaS) offering, and Kinaxis was quick to claim that position. SAP’s marketing of icon-scm was one of the most confusing marketing positions in the history of supply chain software. The tension between the SAP sales team to position SAP APO and SAP Supply Chain response by icon-scm was always tough.

With all of this as a preamble, and background, let me share five reasons why I think that you, as a supply chain leader, should care:

  1. Execution is key. E2open users need to get involved. When the hype settles, it will be all about execution for E2open. With all software acquisitions, there are trade-offs. The E2open client base is a very loyal long-term user base. Now is that time the E2open client base needs to get very involved with E2open management to ensure that product roadmap trade-offs are in their best interest. Act now to avoid a surprise. I expect E2open to continue to acquire additional assets and built a stronger presence in the supply chain market.
  2. Marketplace offerings are gaining steam. The race is on. A new form of marketplace offering is emerging.  The battle lines to build inter-enterprise supply chain solutions are drawn. SAP is betting on the Ariba platform. Elemica, E2open and GT Nexus are improving their solutions, working on aggressive product solution platforms to provide new value.  Each has a different, and improved, position to improve value chain network visibility and analytics. My bet is on the evolving best-of-breed provider landscape. <I find it hard to see the value in using the Ariba network that was designed for indirect procurement to seize this market opportunity.>
  3. Validation of Rapid Response as a market is good news for Kinaxis. The Canadian planning vendor, Kinaxis, pioneered the concepts of Rapid Response early in the decade. They were one of the first SCM vendors to move to a SaaS model. It was a gutsy, but right, move. The company has waged a tough market battle for recognition. The acquisition of icon-scm by E2open now makes them official competitors and validates the space. The building of icon-scm functionality into the E2open platform should be a wake-up call for Kinaxis to move quickly to evolve their strong cloud-based architecture to a one-to-many and many-to-many data model to serve the emerging marketplace opportunity. It is my hope that they get more serious about their relationship with GT Nexus.
  4. SAP partnerships have less meaning. icon-scm and SAP partnered in 2010. It was a “preferred partner” with formally announced intentions to incorporate the Rapid Response functionality into its supply chain management capabilities as an SAP Solution Extension Partner. The partnership was on the official SAP product roadmap. It drove the buying decisions of many a CIO.  While the press will say that SAP will continue to support this application, over time, clients will have to rethink their platforms to migrate to E2open or to embrace Kinaxis. SAP is betting on their new solutions based on the Ariba Network.
  5. SAP loses momentum to drive value for supply chain leaders. The right acquisition would have been SAP’s acquisition of E2Open and public disclosure that SAP APO and SAP SNC have not lived up to their promise. In my opinion, the SAP teams need to rewrite their applications to meet clients’ needs. They are losing market relevance.