“I read your blog, and was struck by some of your comments on Forbes,” stated the email. “Could we arrange a call?”
“Sure,” I said, and the call was quickly arranged.
As I answered the phone, I heard the voice of an aggressive investor in supply chain technology software. He seemed very certain in an uncertain market. I scratched my head because I question how anyone can be this “sure.” Since more and more equity groups are reading this blog, and sending me questions, this post is for them.
I have been writing on what I term the “Third Act in Supply Chain Planning Software.” I believe that we have seen two prior evolution periods of supply chain planning software and we are entering into a third period. I am excited about this evolution and eager to share my opinion.
Here are the questions I am getting most often:
What does it take to be successful in the supply chain planning market? I look for three basic factors. Leadership by the CEO, understanding of the business problem at the product marketing/management level, and the ability to build software. Many companies are missing one or two; while sadly, some are missing all three.
So, you write that SAP will struggle and then recover, but Oracle will not do well in what you call the “third act” of supply chain planning software. Yes, I say. This is the beauty of being an independent analyst and having the ability to call as spade a spade. I find too few analysts are able to speak the truth. They are hamstrung by their organizations.
I think that SAP has great talent to write software, but their current focus is on the analytics technology market. They put supply chain into a traditional framework of CRM, SCM and SRM and the world has moved past this. I think that SAP lacks focus and a basic understanding of the business problem.
Most of the work on SAP APO is currently focused on sales-driven initiatives or maintenance work, and as a result the company has struggled to bring supply chain innovation to market. SAP SNC has been disappointing, as has their work on inventory optimization and demand sensing. I don’t think that they understand the basic concepts of being demand-driven enough to bring new solutions to market to solve the problem. We see in our benchmarking work that SAP APO takes three times longer to install and has a lower ROI than best-of-breed software.
Oracle is different. Their solution is based on acquisitions. They have not been successful in building a cohesive architecture. While there are pieces of the software like transportation planning or trade promotion planning that are promising, today it is piece parts.
They are in worse shape than SAP. With the turnover in the organization, they are missing all three of the elements that I look for in a successful supply chain company. I just don’t see the leadership, the understanding of the problem, or the technology skills to evolve the product. The rewrite of the Numetrix and Peoplesoft supply chain planning products has been disappointing for business users.
What about JDA? Using the same model, JDA has the ability to write software, but they come up short on the other two factors. There is a shift in leadership along with turnover of talent, and both are a barrier to success. Their current struggle is to bring together different views. Some folks within JDA want to solve the problem like it is an i2 problem, while others approach it from a Manugistics viewpoint, and others from a Red Prairie perspective. None of the three views today is visionary; and it is hard for them to get a clear vision of what to build and how to go to market in the manufacturing space. As a result, we see them on-again and off-again in the market. They need to jumpstart their thinking; and no, I am not optimistic about flowcasting. I think that it is problematic for many reasons.
Which companies do I think are interesting?  I like the movement into Software as a Service deployments. I also like B2B networks. So, my list of interesting vendors in this space includes: Kinaxis and Steelwedge for SaaS; GT Nexus, GHX, Elementum, Elemica, E2open for B2B networks; Logility and Terra Technology for demand and inventory management; Quintiq and Solvoyo for concurrent optimization; Llamasoft for network design; and Enterra Solutions and ToolsGroup for Cognitive learning. I also like what Infor is doing on visualization, S&OP and collaboration.
What do I tell SAP clients? I advise clients to take advantage of their current architectures. Stabilize the investments in ERP. If the company has SAP APO, I advise them to maximize the integration capabilities of the CIF interface and then augment the platform to compensate for the lack of depth in the SAP optimization engines.
I hope that this helps. For line-of-business supply chain leaders, we will be facilitating a session at the Supply Chain Insights Global Summit on September 10th-11th to enable supply chain leaders to talk to each other about this topic in a room with no vendors or consultants. It is an informal networking session to discuss alternative strategies to build technology architectures as we transition from the second to the third act. We hope to see you there! Reserve now, because the room block is up on August 8th at the Phoenician, and there are only 48 seats remaining in the audience.