Analyzing MAPICS' Further Steps After Frontstep Part Two: More Recent Events

For the last several months MAPICS has shown both the signs of significant changes and the persistence of a number of its historically recognizable invariant tenets of operation. Following the acquisition of its former competitor, Frontstep, (see MAPICS To Leap Forward In A Frontstep Way), MAPICS, Inc. (NASDAQ: MAPX) became possibly the largest global provider of extended enterprise applications for solving the challenges of discrete manufacturers.

MAPICS has never departed from its conservative approach of delivering practical innovations and bulletproof applications for its customers, nor from its proverbial fiscal discipline. The Frontstep acquisition has obviously provided MAPICS with a boost in terms of product choice, having solutions on both leading platforms—Microsoft and IBM. With MAPICS SyteLine 7, the vendor now boasts a notable application built on a .NET architecture. However, the loyal AS/400 install base should rest assured of MAPICS' continued support for the platform. The big news on the MAPICS ERP for iSeries product side is that version 7.3, which is slated for December, will feature Double Bytes support, and expanded Java 2 Enterprise Edition (J2EE)-based client technology.

Other developments detailed in this note are:

* MAPICS Field Service and Support (covered in Part One)

* A Global Partnership with Systems Union (covered in Part One)

* Primus Knowledge Solution Results
* Certified Partner Program

* Pacejet Logistics, Inc. is a Certified Partner

* A Revised Sales Strategy

What has not changed at MAPICS either is its traditional internal emphasis on providing top-notch customer satisfaction. To that end, in May, Primus Knowledge Solutions (NASDAQ: PKSI) announced that MAPICS has reported measurable return-on-investment (ROI) results from Primus technology after successfully implementing the Primus eServer knowledge base and Primus eSupport within its customer support organization and on its support web site. Since implementing Primus knowledge management software, MAPICS has reported a 10 percent increase in customer care specialist productivity, 40 percent reuse of documented solutions-reducing call escalations from level one customer care specialists, 70 percent usage of the knowledge base by customer care specialists on customers' calls, and rapid acceptance of the self-service option.

MAPICS solutions are in use today at more than 10,000 customer sites in 70 countries and available in 19 languages. These solutions include professional services and software implemented on the two industry-leading technology platforms—Microsoft and IBM—including extended ERP, customer relationship management (CRM) and supply chain management (SCM). The company claims it had three key business issues to solve when it selected Primus as its knowledge management partner:

1. Capture and easily manage knowledge in the workflow from every MAPICS customer care specialist

2. Empower MAPICS customer care specialists with the confidence to broaden their areas of expertise by enabling reuse of documented solutions

3. Create a foundation for MAPICS' self-service strategy by providing customers and affiliates 24x7 access to the knowledgebase


Further, in May, MAPICS announced its certified partner program as part of its enhanced strategic alliance and partner strategy. The program consists of application, hardware, and technology companies that have worked to develop offerings that are complementary to core MAPICS solutions. These partners will continue to offer selected products, interfaces, support, and services directly to MAPICS customers, while MAPICS and its certified partners will continue developing solutions that include industry-specific business processes, which leverage best practices gained from customers' experience. Through partnerships, MAPICS will attempt to make it possible to build complementary, targeted solutions and strategically bring them to market more quickly through multiple channels.

The certified partner relationship should provide value to the partners by giving them the ability to stay closely aligned with MAPICS and to differentiate themselves from other vendors looking to sell solutions to MAPICS customers and prospects. Companies will receive assistance from MAPICS including development, support, sales, and marketing—all coordinated by a dedicated program manager within the MAPICS partnering organization. In order to be considered a certified partner, vendors must demonstrate that their applications have an interface to or can integrate with MAPICS solutions on the IBM or Microsoft platforms. There are many companies already enrolled in the MAPICS certified partner program, providing offerings that complement the MAPICS solutions with advanced capabilities in areas such as electronic data interchange (EDI) transactions, document management, payroll, and personnel management.

The most recent to join the list was Pacejet Logistics, Inc., a provider of Web-based logistics resource management (LRM) software applications and services. Together, MAPICS' ERP solutions and Pacejet's LRM solutions will enable MAPICS' customers to accelerate and streamline outbound and inbound logistics and distribution business processes to lower operating costs while improving customer service. As a MAPICS Certified Partner, Pacejet will provide its Pacejet Transportation Management application to MAPICS' customers as an integrated extension to MAPICS' ERP solutions. Pacejet Transportation Management provides a Web-based solution for full truckload (TL), less-than-truckload (LTL), and parcel shipping with advanced capabilities such as load consolidation, route and rate optimization, and Web/EDI tendering that can help MAPICS' customers run their logistics operations efficiently. Pacejet also offers Pacejet Distribution and the Pacejet Advanced Commerce Catalog as part of its complete LRM solutions. Pacejet solutions include transportation management, distribution, and supply-chain event management (SCEM).

Analyzing MAPICS' Further Steps After Frontstep

For the last several months, MAPICS, Inc. (NASDAQ: MAPX), possibly the largest global provider of extended enterprise applications for solving the challenges of discrete manufacturers following the acquisition of its former competitor Frontstep (see MAPICS To Leap Forward In A Frontstep Way), has shown both the signs of significant changes but also a persistence of a number of its historically recognizable invariant tenets of operation. The former steadfast IBM iSeries (formerly IBM AS/400)-based ERP supplier to mid-market manufacturing companies, MAPICS, has since indeed become quite a larger vendor and with a wider choice of products, having recently acquired a Microsoft .NET-based competitor. However, as the customers from both camps have been uncertain of their provider's strategy, given that bigger size brings about the need to rationalize multiple products in the same marketplace, after a few months period of buried heads and brainstorming sessions, MAPICS has lately been engaged in explaining its rationale, as to set many customers' minds at ease.

At the same time, the vendor has continued with a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends. The process had started well before the Frontstep's acquisition, during which time in early 2002 the company was energized with a new functional structure and an expanded executive management team. During the same period of time, MAPICS had evolved its marketing and revamped its solutions to focus on business issues and specific discrete manufacturing verticals and to thereby appeal to existing and prospective customers. Pre-Frontstep MAPICS, indeed, had not been sitting still, as the company had made every effort to avert the relegation to �legacy Atlantis' as often speculated by some, and it has therefore lately rebuilt its technologies, reviewed its implementation partners, and thus shored up a notable customer base, and retained profitability and security while doing so (see MAPICS Moving On Pragmatically).

Therefore, MAPICS has never departed from its conservative approach of delivering practical innovations and bulletproof applications for its customers, and from its proverbial fiscal discipline. To that end, on July 31, MAPICS reported GAAP (Generally Accepted Accounting Practice) net income for its third fiscal quarter ended June 30, 2003, of $3.0 million, including an income tax benefit and restructuring costs, compared with GAAP net income of $7.5 million, for the same period in fiscal 2002. More importantly, this was the first quarter that included Frontstep revenues and costs, in which case the return to profitability and reduced and stabilized expenses bear even higher magnitude. Moreover, total revenue for Q3 2003 increased by 51% to $47.1 million versus $31.3 million a year ago, while license revenue was $13.6 million, up 44% from $9.4 million in Q3 2002 (see Figure 1). This was in a sharp contrast to previous MAPICS' quarterly reports featuring flat or often depressed revenues (see Figure 2).

Figure 1

Figure 2

* Primarily represents a goodwill write down of the PivotPoint acquisition


While the majority of revenue continues to come from the loyal existing customers, the vendor has processed nearly 400 license transaction during the quarter, which is threefold the average volume for MAPICS without Frontstep over its last four quarters. Nearly 60 new MAPICS SyteLine (formerly Frontstep SyteLine) customers have reportedly contributed $2.8 million in license revenues. The company still has a comfortable cash amount of nearly $22.6 million, and maintains its acquisitive stance.

The Frontstep acquisition has obviously provided MAPICS with a boost in terms of product choice, having solutions on both leading platforms -- Microsoft and IBM. With MAPICS SyteLine 7, the vendor now boasts a notable application built on a .NET architecture. However, the loyal AS/400 install base should rest assured of MAPICS' continued support for the platform. The big news on the MAPICS ERP for iSeries product side is that the version 7.3, which is slated for December, will feature Double Byte support, and expanded Java 2 Enterprise Edition (J2EE)-based client technology.

Other developments detailed in this note are:

* MAPICS Field Service & Support
* A global partnership with Systems Union
* Primus Knowledge Solution Results (to be covered in Part Two)
* Certified Partner Program (to be covered in Part Two)
* Pacejet Logistics, Inc is Certified Partner (to be covered in Part Two)
* A revised sales strategy (to be covered in Part Two)


Further proving its commitment to delivery of enhancements, in August, MAPICS announced the general availability of its new, integrated MAPICS Field Service & Support solution, aimed at helping manufacturers better manage after-market services personnel, materials, and information, as well as offer customers post-sale support that increases customer loyalty and retention. The new field service solution relies on critical business information resident in MAPICS ERP for iSeries to ensure that users have access to the single master source for order, product and customer information. Integrated to the MAPICS ERP for iSeries solution, Field Service & Support users should benefit from the current business processes associated with materials, resources, contracts, and financial information. The MAPICS Field Service & Support solution consolidates the management of service contracts, warranty claims, task assignment, technician scheduling, Return Material Authorizations (RMA), and service variance analysis.

Hence, this new offering extends the capabilities of the core MAPICS application suite, to encompass manufactured products throughout their life. MAPICS' new Field Service & Support solution creates a comprehensive after-sales service infrastructure to handle a number of service and customer management tasks with inherent benefits, including:

* Automating the administration of service contracts and warranty claims.

* Tracking time and materials contracts for equipment repair not under warranty or service contracts, providing more accurate data for invoicing.

* Integrating service-related material management, financial management, and billing processes, translating into faster service to the customer and maximized uptime on their equipment as well as better-cost control and analysis capabilities for the service provider.

* Providing integrated incident tracking, tech support, and RMA management, improving service efficiency for the customer and at the same time providing data to manufacturing engineering to drive product and process quality improvements.

* Initiating easy remote access capabilities to manage work order information flow to and from remote work locations, speeding repairs.

* Consolidating management of the services resources; people, tooling and parts, to speed the completion of work in the field.


As for bolstering the other part of its bifurcated offering going forward, in June, MAPICS announced a global partnership with Systems Union, provider of SunSystems, one of the leading international financial and business management solutions. The partnership will enable MAPICS to leverage SunSystems' infrastructure to integrate exclusively with the MAPICS SyteLine ERP solution, which should facilitate increasing global access to valuable financial information. SunSystems is the core product range of the Systems Union Group plc, which is quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. The company is one of the largest business software houses in the world, with 21 offices worldwide and some 200 Channel Partners in 76 countries. Products within the SunSystems range are available in 30 languages with over 18,000 customer sites, and 250,000 customer seats in some 194 countries. The software solutions are used extensively by multinationals, whose offices worldwide require an international product with global support infrastructure.

MAPICS and Systems Union plan to integrate their technologies to deliver enhanced global financial management solutions for manufacturers in industries such as industrial equipment, electronics, fabricated metals, automotive, and furniture & fixtures. The integrated enterprise offering this partnership provides should allow MAPICS to better address the ever-increasing financial issues that large multi-national manufacturers face, while continuing to solve their complex manufacturing requirements.

Financial data flow throughout an organization is the livelihood of a company's success and has a direct effect on the bottom line. Large, multi-site and multi-national enterprises that capture financial data using SunSystems have reportedly been better able to make more informed decisions based on immediate access to information. Thus, integrating with SunSytems should allow MAPICS to add commonality and higher value to financial management processes such as accounting, corporate collections, invoicing, reporting and budget management across a manufacturers global operation, through the use of a single tightly integrated solution.

Should You Consider Deltek? Well it Depends

Based on Deltek's responses to the Technology Evaluation.Com (TEC) request for information, TEC determined what sort of customer could make good use of the type of solution Deltek provides. This analysis is useful to both Deltek in determining the prospects likely to benefit from Deltek's solutions and to companies looking for the type of solution Deltek offers.

The ideal candidate for Deltek's Costpoint solution will need a high-level of financial management support. This candidate will also require support from all the other modules, though not necessarily at such a high degree. Finally, this candidate will need a full feature-set from certain manufacturing management areas, but not necessarily need every possible feature that could be provided.

All the data used to compose our graphs is directly from Deltek's responses to the TechnologyEvaluation.Com (TEC) request for information. We measure the vendor's level of support for over 3,000 criteria and then compare these, from a high level, to see what sort of customer could make good use of the type of solution Deltek provides.

There are two types of information that we graph for each of the high-level criteria TEC uses to analyze a product. One type of graph is a baseline graph. In the baseline graphs, we normalize all criteria to an equal relevance, which allows you to see how a vendor's product scores on its own merit and without regard to any one module taking precedence over another. By comparing a graph of the vendor's supported functionality against a normalized baseline, you can see the modules the vendor most emphasizes.

In the other type of graphs, we prioritize by adjusting the baseline to correspond to the vendor's focus. You can see if the functionality you need in an ERP solution is equivalent with the areas in which the vendor focuses. In the prioritized graphs, Deltek's strengths visibly stand out against its weaknesses.

From the high-level view, most of the modules in Deltek's Costpoint solution provide a nearly equal level of functionality. Deltek's highest rated functional area is its financials module but as we examine the other areas more closely, their differences surface. The areas that, at first glance, appear to contribute the least to Deltek's scores are its manufacturing management module and the product technology support. Deltek's solution is not necessarily weak in the manufacturing management area; it has several points that are very strong, such as its product costing and product management. The company however, relies mostly on third party customization to support its field service and repairs, and product/item functionality.

The following graph (Figure 1 below) shows the high-level ratings of Deltek's modules against a baseline that has equal weight given to each module. By examining this graph, one can see that if every module is equally important, Deltek Costpoint would fare closely in accord with the baseline for almost every area. This graph however, is not the most useful for discovering how well your company's requirements might match what the Deltek product provides. To see if your company's requirements match well with Costpoint's features, we need to look at the graph that is prioritized to show the strengths and weaknesses of the product.

Figure 1.


In Figure 2 we've modified the graph's baseline so that it follows the strengths and weaknesses of Deltek's Costpoint product. The blue-block line now follows the solid line, which means that in the financials module, for example, as an area with very strong functionality, the module receives a higher weight, or contributes more to the product's functionality in relation to the other modules. In adjusting the product's scores this way, we match areas that contribute a lot to the product's functionality to what a company would most need from its implementation. Essentially, the graph shows that if your company has strong requirements for financials, purchasing management, and inventory management, you would want to look more deeply at the Deltek solution.

Figure 2.




Let's consider the criteria in more depth. We'll start with financials since it stretches the furthest to the edge of our graph (see Figure 2). The reason Deltek's financials module is so strong becomes clear when we see the financial criteria graphed on their own. In this case, just about every group of criteria in the module is well supported. Upon adjusting the baseline to fit the product's levels of support, we can see that most of the groups of criteria come equally close in their contribution to the module's overall strength. Figure 3 shows a bar-graph view of only our adjusted global priorities for the criteria, and this is matched with the actual functionality in Figure 4.

Figure 3.

The only noticeably significant changes are in the cash management and accounts receivable criteria groups. In this case, cash management is simply not an area with many criteria so its score does not contribute much to the graph. Deltek, in fact, supports eleven of our sixteen criteria for scoring accounts receivable. Remaining criteria, such as calculation of expected cash resources and uses, the company makes available mostly through modifications.

Accounts receivable however, holds a large group of criteria that contribute to the graph and Deltek does support most of these criteria. The one area that affects the vendor's slightly lower result in this particular group is its lack of support for various credit and collections management functionality. According to Deltek more than half of the criteria in this section will be included in a future release.

Figure 4.


Like a number of ERP solutions, human resources (HR) functionality is not an area that the company emphasizes the most. Nevertheless, Deltek does support quite a few features for human resources. If your company requires certain HR functionality such as benefits, personnel management, payroll and data warehousing support, the Costpoint product would provide your required features. All things being equal, let's check, in Figure 5, on the areas that Deltek supports.

Figure 5.


Costpoint's results are high in a few areas, for example, it supports almost every criterion in the payroll group and anything not supported outright, Deltek can provide in the form of a modification.

One area that contrasts against Deltek's other modules, is in the manufacturing management group of criteria. This group contains a variety of features with fluctuating ranges of support. Deltek emphasizes some features—but to the other extreme the company does not support certain groups of criteria at all. See Figure 6 below:

Figure 6.


We see a good deal of support for product costing and project management. The area that weakens the Deltek manufacturing management module's contribution is its lack of support for a product/item configurator. A product/item configurator would include functionality to ask, define, and then populate the attributes of a product for an individual customer. If your company needs to be able to determine if it can satisfy a customer's "to-order" requirements using a software tool during the order-entry process, this would present a problem for the Deltek system. It may not be important to your set of requirements, though another area that is not a strong point for the Deltek system, field service and repairs, might be important to consider.

Our group of criteria in field service and repairs covers a range of features, including call management, service order management, field service management, service contracts management, processing and statusing, and finally service training management. Of these groups, Deltek does already offer some service order management support and plans to increase this feature-set in a future release. You can expect the product data management group of criteria to increase its contribution toward the graph results in the future. Deltek is working on supporting many of the criteria in this group for a future release and those that are not currently supported are mostly offered through customization.

One of Deltek's strong points in its manufacturing management module is its product costing functionality. Costpoint has a strong purchasing management module. In fact, Deltek supports forty-seven of the forty-nine possible criteria we use to measure the module's functionality. Its reporting and interfacing functionality, in particular, would be well-suited for a company with such requirements.

Figure 7.


The main area in the graph (see Figure 7) that lessens some of the module's contribution to Costpoint's resulting scores is the repetitive vendor procurement group. In this case, Deltek has scheduled the criteria for support in a future release but it does not currently support that functionality.

SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan Part Five: Challenges and User Recommendations

At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US), SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies, with the aim of extending its leadership as a provider of solutions for an even broader range of companies, from small enterprises via mid-market companies to the world's industry leaders.

Part One and Part Two of this note details the announcements. Part Three began a discussion of the market impact by looking at SAP's answer for small and medium businesses (SMB) and focus on penetrating the US SMB market.

Challenges

Still, the ride to SAP's SMB success will not go that smoothly, given that managing three different product lines may go outside of the vendor's forte so far. Also, in many aspects within the market segment, such as brand recognition, install base and channel size and so on, SAP is still coming far from behind, which is quite opposite an mindset and the position for the otherwise undisputed market leader. SAP has no choice but to painstakingly continue to make the market aware of its continued presence and of a slowly increasing success in the SMB market segment.

The challenge of recruiting new partners and of getting them up to speed with new, still relatively unknown, albeit simple product, also remains because of the wait-and-see attitude of some resellers about SAP's true commitment to channel. Also, how far the product will scale upward as a user's business grows also remains unclear. With no intermediate solution to grow into, mySAP Business Suite remains the only alternative, which might often be a too steep an undertaking. The migration path between mySAP All-in-One and mySAP Business Suite may not be much clearer in certain cases either, despite the products' architectural compatibility, given so many changes will have been done by partners to accommodate the micro-vertical requirements. It is not completely clear how transferable and necessary these will be in the case of migration to a full-fledged mySAP Business Suite instance. To be fair, in general, adding capabilities from mySAP Business Suite (such as mySAP Enterprise Portal, mySAP CRM, etc.) to a mySAP All-in-One is not much different than adding those capabilities to any other configured mySAP Business Suite implementation. In fact, many of the mySAP All-in-One partners already package additional capabilities like CRM or a portal for later phases with a mySAP All-in-One customer, while the capabilities delivered in mySAP All-in-One stay with the system as additional or newer mySAP Business Suite components are implemented.

Still, given a lesser technological similarity between SAP Business One and its two bigger siblings, we believe the SAP Business One initiatives will still take a couple years to materialize in earnest. The best near-term opportunity for SAP is still to sell to existing large customers for deployment in smaller subsidiaries and divisions, since these products provide viable options for staying with a single vendor corporate-wide. There are some mid-market vendors with impressive global reach,localized products, immaculate vertical focus and knowledgeable channels that offering a very flexible modern product. They are well attuned for local regulatory requirements of several dozen countries and support well over thirty languages, such as Scala (see Scala Shows Far More than a Bit of a Backbone) and Systems Union/SunSystems, via its recent partnership with MAPICS (see Analyzing MAPICS' Further Steps After Frontstep) have long devised predatory strategies at the large company subsidiary market, and SAP will need to move quickly to shore up its own installed base.

SAP and SoftBrands still have much of outstanding work to do before the SAP Business One channel partners and both vendors' field organizations can be effective with this upcoming product. In addition to product training, many unequivocal decisions about positioning, pricing, contracts, and support are not yet fully resolved. While we tend to believe in SAP's genuine intentions about this alliance, SAP nevertheless has a tainted partnership track, often utilizing competing ISV's as a transient solution while its native capabilities have been developed, i2 Technologies and Commerce One being some examples (see Gosh, They Kill Partnerships, Don't They?).

On the other hand, while former Fourth Shift had long grasped its target market's requirements of competitively priced functionally adequate products, easee of use and modification, short implementations, and strong service and support, during the late 1990s, however, it, somewhat painfully like many of its peers, realized that its target market needed more than an inexpensive and easy-to-use back-office system. To that end, the company has gradually introduced or incorporated, in an "embedded approach" OEM fashion, a line of integrated e-business, CRM, and advanced planning and scheduling (APS) components within its core ERP solutions. The vendor has been known for adroit blending of third-party products with its own and delivering the combination as a tightly integrated unit, transparent to the user, which was likely a major factor in SAP's decision to partner with.

Consequently, the original Fourth Shift product version leverages APS, product configuration, and extended financial functionality through strategic partnerships around the world. Given SoftBrands intends to continue promoting its own version of Fourth Shift, the ironic possibility of it competing with its SAP Business One "mutant" is not that far-fetched. That is at least likely to happen in China, where SoftBrands has a strong infrastructure, while SAP leverages partners like Han Consulting, Hand Enterprise Solutions, Sparkice, and Youngsoft, some of which have their own ERP product, just to further spice up the competition.

At least in the upper-end of the mid-market, SAP may compete with another SoftBrands' extended-ERP (enterprise resource planning) product named evolution (formerly Aremis Enterprise), which is a highly configurable ERP and business-to-business (B2B) solution, built on Windows NT and Unix server and Oracle database platforms, and therefore more amenable to larger mid-size manufacturers. Its deep functionality embraces applications for the Internet, information publishing, connectivity, and multisite operations, with core applications being production, planning, sales, inventory, purchasing, and financials as a large number of loosely coupled, configurable components. The product is especially strong in dimensional and converter manufacturing environments such as textiles, apparel, food and metals, by featuring functionality for dimensional slitting, cutting and rolling, lot tracking, product configuration, plant maintenance, engineering change control (ECC), quality management, distribution and multi-plant planning and project control.

Still, for the time being, the commitment to the alliance remains firm, especially given the SoftBrand's April 26 announcement of the formation of a new business unit to pursue global market opportunities which resulted fromits recent announcement of its intention to enter a partnership with SAP. Thus, the vendor established the Fourth Shift Manufacturing strategic business unit for SAP Business One and announced the appointment of long-time industry executive, Phil Moen, to lead the unit as vice president and general manager. Moen will be responsible for Fourth Shift's worldwide operations for the Fourth Shift Edition for SAP Business One, including product launch, sales, services, and the alliance relationship with SAP America and its global network of channel partners for SAP Business One.

Nevertheless, on SAP Business One side, some work-in-progress is still outstanding such as a mobile client has long not been available in the US preventing traveling salespeople from remotely accessing the software. SAP claims a mobile client is being developed by partners to cover common remote tasks like contact management, warehouse management, and CRM capabilities, with first remote devices available at the end of 2003, while remote synchronization is planned for early 2004. In fact, SAP Business One partner Sybase has already demonstrated this capability at industry events, like CeBIT, in February 2004. The product does not include a native payroll application either, and its human resource (HR) module is used as a collection point for global employee data. The HR module thus offers a number of interfaces to local popular third party payroll systems, such as Best's Abra, ADP or Intuit's QuickPay. Finally, while SAP Business One includes an embedded e-mail server, it had not initially integrated with large e-mail products such as Microsoft Exchange/Outlook and Lotus Notes. SAP is well aware of the need for these enhancements, and integrated e-mail has just become available as of April 2004.

Despite the challenges, with its ever-sharpening focus SAP has raised the bar in providing solutions for smaller enterprises, and tier 2 and tier 3 vendors should be in for a tough battle to defend their turf, especially as they are concurrently trying to expand and modernize their products with ever diminishing resources and disconcerted prospects. SAP has stated that it intends to grow its small and midsize business from the current (approximately) 7 percent of license revenue to 15 percent by 2005, and that means finding and closing thousands of new customers. SAP has acknowledged its competitive situation in the market segment, and it usually does not overstate its expectations. Despite Microsoft and Sage's likely dismissal of the imminent threat, they will watch carefully and will have to make appropriate moves (and concessions to their partners and users) even while putting their brave faces.

SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan Part Four: SoftBrands

At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US), SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies, with the aim of extending its leadership as a provider of solutions for an even broader range of companies, from small enterprises via mid-market companies to the world's industry leaders.

Part One and Part Two of this note details the announcements. Part Three began a discussion of the market impact by looking at SAP's answer for SMBs and focus on penetrating the US SMB market.

To that end, SoftBrands should be pleased by becoming one of a few strategic partners for SAP Business One. Conversely, SAP Business One, despite notable introduction and attention grabbing, has,not suited manufacturers so far as it lacked native manufacturing resource planning (MRP) and many other manufacturing-oriented capabilities. For that reason, prospects have still been required to consider the higher-priced and more complex mySAP All-In-One or mySAP Business Suite alternatives so far. This will have only defeated the purpose and it may not have helped much in preempting the intrusion of some competitors that specialize in plant-level manufacturing systems (such as QAD, Ross Systems, Agilisys, SSA Global, SYSPRO, MAPICS, Epicor, etc.), despite SAP's dominant presence in manufacturing industries. To that end, Fourth Shift adds proven manufacturing functionality and, in the longer run, provides some novel capabilities to support lean environments.

While some may be surprised by SAP not opting to leverage its existing and very deep manufacturing-focused functionality of mySAP Business Suite again, the reasons for opting for the incumbent tier 2 or tier 3 vendor's capabilities could be the following—time-to-market expediency, price adequacy, and simply another admission of mySAP Business Suite's inappropriateness in the SMB arena. In any case, we commend SAP for forming this partnership to address the tier 3 manufacturing sector, which again speaks volume about the vendor' true commitment to the sector in a manner different than to simply water-down its unsuitable large and complex application. SAP's cited reasons for partnering with Softbrands include SoftBrands' brand recognition in the target market, its existing customer base and global reach; large accounts potential; and fully integrated functionality with SAP Business One at the user interface (UI) level.

SoftBrands indeed brings a solution with multilingual capabilities and a broad customer base, many of which are smaller divisions or plants of large global corporations utilizing SAP at the corporate, white collar level, e.g., Eastman Kodak, Gillette, and Unilever. Fourth Shift product remains a major breadwinner for the SoftBrands Manufacturing division (approximately 65 percent of its revenue), being a web-enabled product for different manufacturing mid-markets (available in seventeen languages) spanning across sixty countries with more than 4,000 customers, some of which are the fastest growing manufacturers and global enterprises from the Global 2500 including Eastman Kodak, Unilever, Bosch, TTK Prestige, and Electrolux.

Fourth Shift product covers many bases with nearly fifty integrated application modules handling order entry, accounting/finance, inventory control, manufacturing, executive decision support/ BI, engineering, purchasing, and shipping, along with the adaptable web-based supply chain visibility modules that communicate through portal technology. The product has traditionally been very strong in terms of transaction entry and reporting and tactical level production status visibility, lot traceability, cost control and work in progress (WIP) management, rendering it well suited for order-ship-bill operations within make-to-stock (MTS) and configure-to-order (CTO) manufacturing environments. Through the integration with DemandStream there is support for lean manufacturing, although that provision specifically is not included in the recent announcement with SAP.

The technological compatibility between Fourth Shift and SAP Business One seems to be there too. By embracing concepts of component (modular) technology in designing its product, Fourth Shift has been providing a great number of middleware interfaces (APIs) for interconnectivity among its own and third-party components, also providing for flexibility and incremental deployment. Fourth Shift 7 provides connectivity to other applications based on the Microsoft standards like .NET and XML, which is considered quite appropriate for its target niche.

Having long acquired a reputation for quick and inexpensive implementation and excellent service and support, during the mid-1990s, in an effort to expand up-market from its traditional small, single-site enterprise stronghold, former independent Fourth Shift embarked on harnessing advanced technology (i.e., featuring object-oriented, Windows NT/SQL Server-based, productivity enhancing graphical user interface) by introducing OBJECTS Enterprise Software in 1997. This was an intended upgrade of its former outdated MSS product (which was written in 3GL C code, and featured a batch process architecture and non-relational proprietary database) that was supposed to enable users to link to multiple sites using the Internet or wireless technology. Disappointing sales sent the company back to the drawing board, where it combined OBJECTS with MSS, releasing MSS for OBJECTS in 1998, soon after to be renamed in Fourth Shift Software System.

In 1999, Fourth Shift began developing a further set of applications to enable its customers to conduct B2B and business-to-customer (B2C) e-commerce by acquiring underlying technology for these applications through the purchase of Computer-Aided Business Systems (CABS), a Colorado-based (US) developer of workflow-based e-business solutions. The CABS' acquisition has much improved the company's plant execution and multisite product functionality, which had been mediocre or non-existent before, by providing VisiBar and VisiWatch applications. VisiBar is a data collection and workflow application that accepts input from multiple sources (e.g. bar code scanners, sensors, digital scales, relays, and other software applications) and allows users to create scripts to transfer, manipulate, analyze and act on the collected data, enabling thereby the organization to, for example, automate plant floor, materials transfer and warehouse operations.

VisiWatch is a transaction monitoring application that can be set up to "watch" for specified events and then take a predetermined action, such as sending an automated e-mail message, generating a report, making a change in another database, or synchronizing the info with another enterprise system. VisiWatch is a Visual Basic for Applications (VBA)-programmable software application, a sort of a "silent assistant" designed to monitor and react to any of the following seven kinds of events: transaction event, time-based event, startup event, file event, e-mail event, transmission control protocol (TCP) event, and object linking and embedding (OLE) events. Thus, Fourth Shift could be regarded as one of the first proponents of emerging business activity monitoring (BAM) applications (for more details, see Business Activity Monitoring—Watching the Store for You).

This partnership provides SAP with the opportunity to further extend its reach within its large corporate customer base by serving the needs of their distant smaller plants and divisions dispersed around the globe. Thus, SAP should hereby have the wherewithal to defend its major accounts from encroachment by the above vendors touting low-cost, astute plant systems that "happily co-habit" with SAP. For more food for thought on this topic, see Standardizing on One ERP System in a Multi-division Enterprise. There should also be interest in this product combination from smaller independent manufacturing sites.

On the other hand, the Fourth Shift product will get the marketing support of SAP, as well as access to the SAP global VAR channel, which should help improve its dwindling visibility, particularly after the near death experience following the AremisSoft stint. To refresh our memory, early in 2001 Fourth Shift Corporation, a former prominent mid-market ERP provider for manufacturers, became part of then AremisSoft, another diversified but quite obscure ERP provider, and has unfortunately all but fallen into oblivion due to the alleged criminal activities of its new parent company towards the end of 2001. Namely, AremisSoft, with the accusations of reporting fictitious revenues, the ensuing Security & Exchange Commission (SEC) investigation, a shareholders' lawsuit, and the company's consequent bankruptcy filling, became a harbinger of an Enron-like trend.

Amid the turmoil, a part of AremisSoft spun off from the old corporation with its clean books, and renamed itself into SoftBrands Inc., which has been operating as a privately-held holding company and has since taken over the responsibility of its products and customer base hoping to shed its tainted past, to return to its enterprise software roots, and leverage its large installed base of more than 5,000 users in 60 countries. At the end of 2002, SoftBrands announced a new $20 million (USD) round of financing that put it on a firmer financial footing with working capital and a war chest to continue strategic acquisitions as a stated strategy for the company. SoftBrands believes the spin-off action has completely distanced it from AremisSoft's Chapter 11 filing, and has allowed it to move on unfettered by past difficulties. It has spent the past year also sensibly re-aligning itself with significant changes in the overall IT market, such as the demands on enterprise applications providers to deliver better ROI, their increasing need to balance skill shortages and the escalating costs of new product development between certain regions. The new organization seemingly has since been seeking to advance its two flagship ERP products—Fourth Shift and evolution—as well as its add-on DemandStream solution, which addresses lean manufacturing and execution.

However, the company has lately been quite subdued, with very few new contracts for its flagship ERP systems, except for some emerging markets like China, where it has more than one hundred employees in four offices and several hundred customer installations, and in India, where it has eighty staff members and thirty installations recently. As a whole, the company also now has over 500 employees, which has dropped from 700 in 2002 and its revenues are at best at the same level like the revenue for 2002 of approximately $80 million (USD). A silver lining for this company is its DemandStream suite for lean operations, including support for kanbans and outsourced processes, allowing companies to preserve their ERP rather than to replace them, which goes well within the current economic milieu.

Thus, SoftBrands will get an immediate shot in the arm in terms of market visibility for Fourth Shift, followed by a possible significant increase in license revenue as it begins to capitalize on SAP's channel and brand recognition. SoftBrands can also excite its existing customers with a compelling upgrade path to the future SAP Business One/Fourth Shift combination. This should not only prevent any erosion in the installed base but it should also open up the possibility of expanding into additional sites or divisions.

SAP also gets a product that should be appealing in new, emerging manufacturing markets, such as China, India, and Eastern Europe, which SAP has been keen on penetrating. Fourth Shift was one of the first ERP systems ever sold in China a decade ago, and SoftBrands has become quite established there, with offices in Beijing, Shanghai, Guangzhou, and Tianjin and with 400 customers. If one could extricate at least one benefit gained from former AremisSoft, it could be its early astute moves in terms of rejuvenating acquired software largely by shifting its developments offshore to India, and then to China owing to Fourth Shift's strong presence in the market. This coincides with SAP's recent efforts in China with SAP Business One, and the fact that SAP has also teamed with Sybase, which has a very strong foothold in the Chinese market, all which makes SAP a very strong player in China as well.

The offshore development remains a significant part of the new company's strategy, since product development for evolution is done in India, and for Fourth Shift in China. SoftBrands was indeed one of the first vendors that fully incorporated offshore development into its research and development strategy in a more than a casual manner, the trend that has recently taken hold market-wide. SoftBrands Manufacturing boasts to run its "software factory" in much the same manner that many of its customers handle production operations—by doing its design and engineering in the West, whereas the development and maintenance work is done offshore in China and India. The product comes back home for quality assurance, final assembly, and release. Much of manufacturing is moving that way, like it or not, and the vendor believes it has an advantage of understanding the dynamics and the requirements of doing business with an extended supply chain that includes offshore production resources.

SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan Part Three: Market Impact

At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US), SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies, with the aim of extending its leadership as a provider of solutions for an even broader range of companies from small enterprises via the mid-market to the world's industry leaders.

Part One and Part Two of this note details the announcements.

The fact that the lower-end of the enterprise applications market is the next frontier and a promised land for all small, medium, and large enterprise vendors alike, has long not been news. During economic slowdowns, the larger corporations will likely curb their IT spending to a degree, whereas their smaller counterparts will all but completely recoil from any spending. However, with a recovery in the offing, one should expect a built-up need for enterprise systems from these companies that will have weathered the storm and that now need to bolster their competitiveness and agility in the market. Still, the willingness of smaller enterprises, which as a rule lag behind their larger brethren in technology innovation, to go for more sophisticated technology that is beyond the rapidly outmoded two-tier client/server architectures in the best case scenario, or, in the worse case scenario, beyond the all-too-common dispersed islands of information on Microsoft Excel or other spreadsheets, Access-based reports and queries, or managers' notepads and "post-it" notes, does not guarantee any vendor an easy ride. For a detailed discussion see Cookie-Cutter Solutions Won't Cut It with the Mid-Market.

For that reason, SAP has responded by acquiring a more suitable, genuine product for the segment, while it is not unlikely to see the other ERP giants follow suit in the future. This latest SAP announcements should be regarded as sensible moves, although somewhat belated. Nonetheless, these moves should confirm SAP's commitment to smaller customers through the unrelenting focus and repeated attempts of delivering better-attuned offerings. A less known fact might be that almost two-third of all SAP's installations are enterprises with less than $500 million (USD) in revenues. Given SAP's predictions of a healthy revenue streams from all the sectors including SAP's sweet spot of large corporations, we tend to believe that SAP SMB drive is a well thought-out, proactive drive into a new market rather than a knee-jerk reaction to a slumping stronghold market. Over last year or so, SAP has not only formed a division dedicated to SMB, but has also created the analyst relationship and public relations team that focuses only on informing the industry influencers about SAP's relevant initiatives in the segment. During the same time period, the marketing budget for the segment has increased tremendously, which also vouches for a long-term endeavor.

Also, having resorted to an acquisition, which has not been a common SAP practice in the past, may mean the admission of failing to first successfully capture the global SMB market , SAP will have "killed two birds with one stone" with SAP Business One. First, an acquisition typically shortens the time-to-market, as proven by a number of functional scope enhancements in a short time frame, and second, SAP will have tackled the small business market with a product designed specifically for that market instead of repeating its previous attempts of fitting a "square peg into a round hole," with functionally-depleted versions of mySAP Business Suite or by even using the older R/3 suite or their pre-configured templates.

Furthermore, SAP Business One provides a simple product that can be more easily sold and supported by SAP's channel partners, particularly by being technologically advanced from the ground up and unburdened by the need for migration paths from its former incarnations. Before SAP Business One, there had hardly been a differentiating product among the likes of Microsoft Business Solutions (MBS) Great Plains, MBS Navision, Best Software's MAS 200 or Exact Macola, to name a few. While the advantage of these products is their longevity in the market and large install bases, the liability are their numerous little idiosyncrasies, which make it more difficult to bring the technology forward for these vendors, users and resellers alike. Further, SAP channel partners will also benefit from touting SAP's leadership position, brand recognition, and viability, albeit this will become more handy when competing with other mid-market incumbents other than MBS and Sage/Best, whose viability and recognition remain spotless.

However, where SAP will challenge or at least make things more interesting for these SMB juggernauts is their vulnerability in terms of integrating disparate product lines (i.e., general ledgers) on disparate technologies. Neither of these solutions is functionally complete enough at this stage, and the customized code for extension is often not owned by the vendor but rather by the partner, which SAP tends to avoid with the more complete, from the ground up designed SAP Business One solution. Microsoft will additionally have to deal with users' wariness of the technology lock-up bundled with ongoing security issues andd unresolved licensing and upgrades issues, which may eventually decide to diversify their product portfolios.

Further, as a new paradigm shift, SAP Business One software features natively the SAP Enterprise Portal's drag and relate capabilities obtained in its acquisition of TopTier in 2001 (see SAP Acquires TopTier To Further Broaden Its Horizons). A user is, for example, able to add a data field to an invoice, and then drag and drop the newly created data field into another part of the system, which should be able to produce new reports based on the data field. Another example would be selecting an available item from the inventory list, and then dragging and dropping, for example, its description field to the "Accounts Payable Invoices" function within the "Purchase" module. The resulting new pop-up window will list every invoice from every supplier of the item so far. These examples of instant analysis and reporting, easy access to real time business data and proactive business management are a quantum leap compared to the above traditional accounting solutions that have been written for accountants by accountants, and where other "non-bean-counting" staff members have a hard time discerning useful information without a serious training and familiarity with pesky reporting facilities, or, worse, needing to export inordinate amounts of data to Excel, and trying to make sense out of tweaking it.

The product also features embedded business process management or improvement (BPM/BPI) integration to mySAP Business Suite products (e.g. BI, Portals, Exchange Integration), and an SDK facilitating integration of third party software and services with SAP Business One, since it utilizes SAP Business One business logic and has the ability to read and write to and from each object in the system, and a simpler development and maintenance of integrated processes. It also provides analytical tools to gain insight into an organization's operations, online alerts for collaborative event tracking and problem solving (via a "management by exception" approach that relies on predefined business rules, and which monitors data for certain conditions, such as, a minimal allowed profit margin for a sales quote), and customizable reports that give companies the information they need in a format that allows them to brand their business. These reports solve the drag and relate queries' shortcomings of not being able to be saved and reused later, instead serving as a good starting point for more detailed reports.

Therefore, the solution is not a reconfigured or "watered-down" version of its larger sibling mySAP Business Suite, but rather it is based on TopManage, a product developed and marketed by the former Israeli software company TopManage Financial Solutions LTD, which SAP acquired in March 2002 and integrated into its business unit for the SMB market. At the time of its acquisition in 2002, TopManage had nearly 800 customers in Europe, and it offered financials, distribution, and CRM functionality and supported English, Spanish, and Hebrew versions, along with the updated pertinent figures for the SAP Business One successor that were mentioned earlier. The still newcomer product in the US has for some time been successfully sold in the lower-end of the European market, since it provides small and medium businesses with an integrated family of enterprise applications tailored to the specific needs of sales-driven companies, while the manufacturing prospects will be addressed through the SoftBrands' alliance. For details on this alliance, see Part One of this note.

All the above facts might lead to an enthusiastic and stronger channel that eventually will provide SAP with a product to sell to divisions of large global companies with mySAP Business Suite used at the corporate level, by reducing the potential of eroding divisional account control to another more nimble, more vertical or plant-level focused ERP vendor's offering. The fact is that a high percentage of SAP's customers outside the US are small and mid-market companies. One can wonder why that is still not the case in the US. In addition to SAP's US-based competitors' good job with propaganda (mainly by exploiting some well-publicized SAP implementations' flops in the US), a major reason is still the nascent indirect channel. Having currently only about 100 certified partners for the entire US market sounds rather nascent compared to the several thousands that Microsoft or Best Software cite, or several hundreds touted by Lilly Software, SYSPRO, or Intuitive Manufacturing Systems.

So far the direct sales approach has often proven inappropriate for the market segment. It is much a different case when a local partner, well versed with the issues and fears of the customer (and who can even strike a cultural rapport with them, being a native of the region) represents SAP, particularly if the partner specializes in the customer's industry. The fact that SAP has had a strong channel-driven SMB business in the rest of the world may prove the point, given its better success therein. Therefore, increasing indirect channels bundled with vertical industry and geographic coverage specialization, either in original or a "private label" form, remains a necessary step for positioning SAP as a relevant provider of solutions to this increasingly important market segment.

SAP seems to have grasped that the key to success in the SMB market is brand awareness, since SMBs are looking for support from incumbent vendors with intimate knowledge of their vertical and business processes; ample local resources; and the commitment to support them both off and on site to achieve value over a long-term relationship. SAP realizes it will likely never match the channel size of established players such as MBS and Sage/Best Software that already have large channels (over 6,000 and 20,000 respectively) starting with CPAs and independent resellers and independent software vendors (ISVs). Thus, SAP does not seem inclined to recruit en masse the formalized small local resellers and value-added resellers (VARs) that have so far dominated the low-end application market.

Therefore, we expect that SAP will make other channel deals in the future either with other very large companies like American Express, IBM, and HP that are already serving small businesses and are looking for additional products and services to sell, or by cherry-picking certain group of disgruntled, neglected or simply disconcerted resellers of MBS, Best or Epicor, particularly after recent Microsoft's restructuring of its global partner channel, which still leaves many answers in the air. In turn, this smaller but high-quality, high-touch SAP reseller channel will be developed by SAP global development support, product training and marketing and sales support, including pre-sales support and lead generation, whereby SAP willl provide:

SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan Part Two: SoftBrands

At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US) SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies, with the aim of extending its leadership as a provider of solutions for an even broader range of companies, from small enterprises via mid-market companies to the world's industry leaders.

As for the lower-end of the market, SAP has designed SAP Business One to meet the core management needs of dynamically growing small and midsize businesses, and is moving to better address the specific needs of small and mid-sized manufacturers through a planned strategic solution relationship with SoftBrands (www.softbrands.com), an established privately-held global leader in manufacturing management systems for small and medium businesses (SMB), whereby the two vendors have initiated efforts to integrate SoftBrands' leading manufacturing software product Fourth Shift with SAP Business One. Fourth Shift is a renowned mid-market, web-based manufacturing management solution that has broad functionality and that facilitates many critical business functions including manufacturing, operations, financials, and customer and supplier relationship management (SRM).

See Part One of this note for details on the approach to the higher-end of the SMB market.

On the SoftBrands' side, the Fourth Shift product line will still be available as a separate system and will continue to be developed as the vendor remains focused on the hospitality and manufacturing industries. With more than 5,000 customers in over 60 countries now actively using its manufacturing products (i.e., Fourth Shift, evolution, and DemandStream) and hospitality products (i.e., PORTfolio, Medallion, and RIOGrand), SoftBrands has established a worldwide infrastructure for distribution, development, and support of enterprise software. The company, headquartered in Minneapolis, Minnesota (US) has over 500 employees with branch offices in Europe, Asia, Australia, the Middle East, and Africa.

At the end of 2003, SoftBrands announced the highly anticipated release of Fourth Shift 7.30, which should confirm the company's continued commitment to its customers and products, since over seventy of the enhancements in Release 7.30 have been delivered at the request of customers. At Release 7.30, Fourth Shift significantly broadens accounting capabilities as well as other key areas of business operations. Customers are also afforded improvements in the web-based application of the Fourth Shift product, My Fourth Shift Workplace, while tighter security and easier retrieval of data are also hallmarks of this release.

In a continuing move to provide products and services on the latest Microsoft technology, which has been hinted after the release of Fourth Shift 7.20 in 2002 (see Fourth Shift's evolution Within SoftBrands' DemandStream), release 7.30, introduces FSTI (Fourth Shift Transaction Interface), which provides a common transaction interface to Fourth Shift business logic in the .NET environment resulting in an interface that is easier to use, more reliable, and easier to administer.

At the about the same time, the vendor announced that DemandStream, one of the leading best-of-breed lean enterprise automation solutions, has been integrated with the Microsoft Business Solutions' (MBS) enterprise resource planning solution Axapta. Axapta is gaining market acceptance in the US and by integrating with DemandStream, it will provide its customers a toolset for their journey to "lean" manufacturing, since economic conditions and global competition have led manufacturers to look for an alternative to "push" manufacturing. Still, although lean manufacturing is gaining wide interest and acceptance as the next big event for the manufacturer, traditional ERP systems typically revolve around push manufacturing and leave little capability to manage the lean manufacturer (see Pull versusPush: a Discussion of Lean, JIT, Flow, and Traditional MRP).

Thus, SoftBrands claims DemandStream's integration to Microsoft Axapta and other various ERP systems now provide the manufacturer with a true lean ERP system. According to the vendor, DemandStream is the "lean conversion kit" that allows customers of Axapta and other ERP systems, to preserve their existing ERP investment while providing a lean (pull) based capability. That is done by deploying kanban management by cell in a "real time" environment. DemandStream provides factory floor management of dynamic kanbans, lean material flow management, and supply chain material/demand signals with visibility to both vendors and customers.

To that end, DemandStream provides back office integration tools for importing data using Import Wizards into the Shop Floor Module from a back-office system, and for inputting data using extensible markup language (XML) messages generated by the Shop Floor module back into a business system. Applets are included that generate manufacturing orders and purchase orders, item changes, bill of material (BOM) changes, and non-replenishable kanban.

The product delivers the following four important capabilities to manufacturers:

1. Dynamic Kanban: Enables kaban sizing and re-sizing to be synchronized with the demand pattern of the business. This allows lean manufacturers to achieve improved material flow and reduce overall production leadtimes.

2. Lean Scheduling and Demand Smoothing: Balances customer demand smoothly to the shop floor for timely and efficient execution. DemandStream delivers visualization to traditional Heijunka smoothing techniques and drives the execution data all the way to the cells for execution without the challenges of manual techniques.

3. Supply Chain Planning and Execution: Supply Chain Execution is an interactive Web-based application that enables the shop floor to interact with suppliers through the Supplier Kanban Board. Features include interactive shipping and an enhanced XML messaging system, while reports include Projected Usage and Vendor Performance Statistics.

4. ERP System Transaction Automation: Manual lean implementations are still relying on ERP systems to process transactions. This burden often times off-sets significant portions of the gains realized by adoption of lean practices. DemandStream's Back Office Integration capabilities will automate or eliminate most of the ERP system transaction processing effort.


Consequently, the product should allow manufacturers to leverage their investment in ERP systems and at the same time embrace lean manufacturing methods, and thereby improve productivity, competitiveness, and profitability, all being a must in current difficult economic times. Available off the shelf, DemandStream is able to interact with most ERP systems including Fourth Shift and evolution and thereby bridge the chasm between companies that are heavy planners, and those that must respond to constantly changing demand on the fly. SoftBrands claims that the integration with Axapta took less than 3 weeks, owing to DemandStream's architecture and the advantage of the latest technology using Microsoft's .NET platform. DemandStream is expected to release a number of other ERP integration platforms in early 2004.

SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan Part One: Event Summary

At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US), SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies with the aim of extending its leadership as a provider of solutions for an even broader range of companies from small enterprises via mid-market companies to the world's industry leaders.

SAP's two-tiered product offering for small and medium businesses (SMB)—SAP Business One and mySAP All-in-One solutions�aims at addressing the diverse IT and business requirements of manufacturing companies of varying sizes, resources, and complexity. Both solutions for SMBs are designed to be competitively affordable and easy-to-implement for adequate enterprises, and are delivered through SAP's partner network. While SAP Business One is designed for smaller companies with less complex business processes, SAP also offers its partners mySAP All-in-One turnkey solutions to meet the industry-specific needs of more sophisticated companies. Namely, this is for the "sophisticated" or the upper echelon SMBs with a high need for individualization and industry-specific functionality. SAP is globally expanding its existing strategy of offering industry-specific SMB solutions ranging from automotive supply to food processing. These are based on the flagship, top of the range mySAP Business Suite product and are tailored, configured, and complemented by SAP channel partners, and are also available on a fixed-price, fixed implementation time basis.

To that end, in 2003, SAP and its network of qualified business partners reportedly introduced 120 new manufacturing solutions, including such specialized offerings which range, for example from fabricated metals, construction equipment, and civil works to agro-products companies. SAP and its partners currently offer 180 mySAP All-in-One solutions for manufacturers globally, based on industry best practices from SAP's more than thirty years of experience serving the world's leading businesses. For example, to meet the needs of custom manufacturers, US-based N2 Consulting has leveraged its expertise as an SAP consultant to develop FastTrack, a pre-packaged, fixed-price and implementation timeline mySAP All-in-One solution that can be implemented in as few as sixteen weeks. Spanning the engineering, quality, sales and service, and finance functions for small and midsize companies, FastTrack is touted as an end-to-end, complex manufacturing solution to manage processes such as make-to-order (MTO) with product configurator, engineer-to-order (ETO), engineering change management (ECM), service management, and make-to-stock (MTS).

Other additional new mySAP All-in-One solutions would include BDO para Agroalimentos, offered by SAP partner BDO for agro-products companies in Mexico. The solution helps companies manage purchasing, production, bulk delivery, and sales administration processes specific to the manufacture of products for the agricultural industry. Last but not least, for high-tech and electronic manufacturers, South Korea-based BizTech Consulting Co., Ltd., has introduced the BizExpert solution, with industry-specific capabilities such as electronic manufacturing system management, bin management, and multiple planning scenarios.

As for the lower-end of the market, SAP has designed SAP Business One to meet the core management needs of dynamically growing small and midsize businesses, and is moving to better address the specific needs of small and mid-sized manufacturers through a planned strategic solution relationship with SoftBrands (www.softbrands.com), an established, privately-held, global leader in manufaccturing management systems for SMBs, whereby the two vendors have initiated efforts to integrate SoftBrands' leading manufacturing software product Fourth Shift with SAP Business One. Fourth Shift is a renowned mid-market, web-based manufacturing management solution that has broad functionality and that facilitates many critical business functions including manufacturing, operations, financials, and customer and supplier relationship management (SRM).

The integration of Fourth Shift Manufacturing Edition with SAP Business One is scheduled to be released in two phases beginning in July 2004. It should give small manufacturers fairly comprehensive but easy-to-use capabilities for managing a variety of manufacturing processes to replace dated legacy systems and manual processes. The combined solution should enhance capabilities in SAP Business One to serve repetitive, batch, MTO, discrete, and mixed-mode manufacturers, as well as those that are on the path to lean or demand-driven operations. Namely, further down the track, the relationship with SoftBrands will also extend SAP Business One with Fourth Shift's DemandStream Lean Enterprise Automation integrated module, a specialized solution for managing lean manufacturing operations. The combined solution will be offered through SAP Business One partners worldwide, while SoftBrands will continue to support manufacturers in its key worldwide markets, including the US, Europe, Middle East, Africa, China, Asia Pacific, and India.

Prior to this announcement, in November, SAP announced the US launch of enhancements to SAP Business One that combine broader customer relationship management (CRM) capabilities and comprehensive business management tools in a single software solution. SAP Business One was originally launched in the United States in March 2003. The solution's award-winning Drag & Relate data navigation system, which encompasses good traits (i.e., "the best of both worlds") similar to both Microsoft Excel Pivot Tables and to typical report writers' querying capabilities, has since provided users with intuitive data access simply by highlighting and dragging pieces of information on the screen. Additionally, the product features strong integration with desktop applications, since users can drag information between different data sources and link them on the desktop. It also has integrated customer relationship management (CRM) system for pipeline tracking, opportunity management, strategic selling, and contact management, while other initial key functionalities also include comprehensive financial management, with multi-currency, budgeting, and bank reconciliation; a well-rounded inventory management system, with kitting and multilevel price lists; and a comprehensive reporting module that allows easy access to any data.

The solution initially supported only the Microsoft SQL Server database and the Microsoft Windows operating system, which was recently extended with the support for the Sybase database. Its open architecture has reportedly allowed integration with the flagship mySAP Business Suite giving companies the adaptability to scale their applications with the growth of their business. In addition to the US, SAP Business One has meanwhile become available in twenty-six countries and twenty-five languages as of first quarter 2004, and the product has nearly 3,000 customers and over 500 partners worldwide. The newest version of SAP Business One is available to SMBs in the US, through SAP AG's subsidiary SAP America, Inc. and its SAP Business One distribution partner channel.

With these most recent enhancements, SAP Business One has made CRM functionality an intrinsic and fundamental part of core business automation, as opposed to a discrete silo of customer information in the shape of a customary add-on module. This relieves small businesses of the need to purchase separate products; maintain costly, patch-work integrations; or utilize different user interfaces (UIs). The vendor believes it is important that small businesses view CRM not as a mere mechanism for increasing front-office data gathering but as a core part of their business system, targeted to immediately improve the company sales and service performance. To that end, the new version of SAP Business One provides built-in CRM functionality across the entire spectrum of business information. In other words, information from customers, the sales force, suppliers, and business managers is tied to other business information, so that chief financial officers and other managers can drill down into sales information; a sales person can avoid risks by exploring customers' debt; while buyers can plan purchasing according to real demand, based on the sales opportunities managed in the software.

Thus, within a single application, SAP Business One allows business managers to run their entire business from their desktop, viewing customer, partner, sales, and inventory information as they relate to other business activities and not merely as a freestanding silo of customer preferences.

Further, the new version of SAP Business One now offers service management capabilities that provide support for company service operations, including service contract management, service planning, tracking of customer service use, and support and management of service sales opportunities. In addition, new employee relationship management (ERM) capabilities should strengthen a company's ability to manage employees by providing efficient tools to track information about employees, their roles and activities. The ERM capabilities should also allow companies to organize information on service technicians, such as their labor rates, in order to support field service management activities.

Also, new contract management capabilities track customer equipment, service contract agreements, and customer use, since SAP Business One automatically updates customers' equipment records upon purchase so that users can track whether products are under warranty or special service contracts. Finally, the embedded knowledge management (KM) offering should help customer service representatives by recommending solutions to service call issues and greatly reduce the training and ramp-up time of new customer service personnel. These enhancements build on the solution's original CRM capabilities, which, as mentioned earlier, enable business managers to track sales opportunities, view pipeline opportunities, and follow customer activity.

With the above new features of SAP Business One, SAP believes small businesses can now address most of their business needs in one out-of-the-box solution. And for those businesses hoping to integrate SAP Business One with additional systems, or to add functionality to the system, SAP is now offering the SAP Business One Software Development Kit (SDK), which is touted as one of the most advanced development environments available in the SMB space that will allow SAP partners to facilitate SMB requests such as connecting to a third-party system, extending the capability of SAP Business One by integrating a very specific functionality or integrating to other company-specific software. The development environment of the SDK will supposedly allow partners to create custom solutions for customers in a timely and cost-effective way. The SDK supports all commonly used development languages, including Java and Microsoft .NET, allowing partners to migrate their solutions quickly to the SAP Business One environment.

Consequently, at CeBIT 2004, which was held in Hanover, Germany, March 18-24, SAP announced that its solutions for SMBs were gaining market traction as large companies in numerous industries seek the advantages of transparency, real time reporting and business process integration with their subsidiaries, trading partners, and suppliers. Namely, companies around the world have recently entered agreements to deploy mySAP All-in-One or SAP Business One solutions at operating affiliates across the globe, such as BioMer C.V., B�roring, Clever Stolz Lebensmittelwerke, Dongguan Jin Yuan Electronics Co. Ltd., Edding, Endress+Hauser, Hangzhou Hualong Technology, Heicko Schraubenvertrieb, IBS Filtran, Kohler Company, Lapp, Metro Richelieu, Oase, OMYA, Rosenthal, Schaap & Citroen (part of Vendex KBB), Sigma Kalon, Sparkice Inc., Super Bright Photo Electrics, and VEKA AG.

As there is still a significant percentage of small and midsize businesses that are affiliated with a parent company, while others engage with larger companies as customers, partners or suppliers, SAP believes its value proposition emanates from the fact that its solutions for SMBs integrate fully with the solutions of mySAP Business Suite and other SAP solutions used by more than 21,600 SAP customers, enhancing reporting and information sharing; streamlining business operations; and increasing efficiency between parent companies and their operating affiliates. This seamless integration becomes an increasing competitive advantage as businesses demand more transparency across their operating networks to meet new regulatory reporting requirements and seek enhanced collaboration and efficiency with their affiliates, partners, and suppliers to achieve growth.

Service Supply Chain Strategies to Increase Corporate Profitability

The last decade has witnessed a substantial shift in emphasis on the part of many OEM manufacturers, from a focus on the products they produce to a concentration on their customers and the value that their customers derive from ownership and use of these products after the initial product sale. The importance of service is made clear in a recent AMR survey1 of manufacturing companies which revealed that service represents 24 percent of their revenue and 45 percent of their profit contribution. With only 20 percent of IT spend allocated to service, there is indication of value in increasing corporate attention to the service area.

With an increasing awareness of the strategic value of service, companies are beginning to focus on their service supply chains, which can be defined as the network of resources that includes the appropriate service parts, customer engineers, and infrastructure for material movement and storage, repair, transportation, information systems, and communication.

This shift toward a service-centric strategy represents an important aspect of firms' efforts toward enhancing overall revenue and profitability, customer acquisition and retention, and competitive differentiation.

In this paper, we describe the unique challenges of the service supply chain, and a framework for understanding the service management decision hierarchy. Most importantly, we highlight the dramatic value proposition available to companies that deploy advanced service strategies and decision-support tools to address these challenges. Brief case studies from leading service organizations Cisco and KLA-Tencor describe examples of successful deployments of service supply chain strategies that leverage this approach.

[1] J. Bijesse, M. McCluskey and L. Sodano, "Service Lifecycle Management (Part 1): The Approaches and Technologies to Build Sustainable Competitive Advantage for Service," AMR Research Report, August, 2002.

The mechanisms required to design, produce, and deliver service products in a cost-effective and competitive manner are quite different than those used to manufacture goods and to procure direct materials. Significant assets must be dedicated toward service delivery. The task of effectively deploying these assets across a wide network of locations and fulfilling demand which is driven by infrequent service events is a daunting one. Figure 1 shows a representation of a typical multi-echelon service supply chain network, and the resulting material flows required to supply material and to fulfill demand.

As a specific example of a service supply chain, consider Cisco Systems Global Product Services, which manages a complex supply chain consisting of the following elements:

* Over 10 million service contracts defined in terms of specific customer performance targets (i.e., high priority with 2—4 hour response time guarantee, 8—12 hour response time and next business day response time), with thousands of service contract transactions per day.
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* 3—5 echelons consisting of nearly 750 stocking locations (including a central depot, regional warehouses, local warehouses, and forward locations positioned at or near major customer sites) required to position inventory close to the customer to support rapid response.
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* Hundreds of supported products that are mission critical to customers (e.g., net servers, communication systems), with more than 100,000 part numbers supported throughout the service supply chain. Most of these parts have very infrequent demand, with global demand rates of fewer than ten hits a year not uncommon.

Figure 1. Multi-Echelon Service Supply Chain Material Flows

While not all manufacturers face this level of complexity, it is not surprising that performance metrics are vastly different from the production supply chain, as indicated by a recent Wharton benchmark study that showed that inventory turns of one to two are common for providers of same-day service agreements2, even for manufacturers whose production supply chains show turns of fifty to one hundred.

[2] Morris Cohen and Vipul Agrawal, "After-Sales Service Supply Chains: A Benchmark Update of the North American Computer Industry," Fishman-Davidson Center for Service and Operations Management, The Wharton School of the University of Pennsylvania (August 1999).

Given the complexity of the service management problem, it is appropriate to decompose it into a collection of interrelated decision problems. Figure 2 illustrates the levels of managerial decision making that we have observed in many service supply chain environments. Each of the following components corresponds to a different period of the planning horizon, over which managerial trade-offs and objectives must be considered as the relevant decisions are made.

Budget Planning is in the longest decision timeframe, with a planning horizon typically measured in months or years, where decisions that determine specification of the overall service strategy are made. Such decisions can include design of the products being supported, the design of the "service products" that are offered to customers in the after-sales market, and the design of the infrastructure used to deliver these service products.

Strategy Planning decisions are made in shorter timeframes, typically weeks and months. At this level, management is concerned with the forecasting and strategic positioning of its material and human resources in anticipation of the need to meet customer service demands in a manner consistent with the response, and cost entitlements as set out in the warranty and service agreements. These strategic resource deployment decisions give rise to a challenging optimization problem that must be solved periodically if the service strategy is to be implemented in a cost-effective manner.

Tactics Planning decisions are made at a nearer-in planning horizon (weeks, days, or hours), and include the redeployment decisions that are associated with repositioning resources within relevant lead times to meet the service objectives and resource levels defined in the strategic plan. This includes generation of orders for service parts allocation (from a central to field location in the network), replenishment (from the network to external sources of supply for repair and new buy), and transshipment (across parallel nodes in the network).

Figure 2. Interactive Decision Hierarchy

It is important to note that all of the resource decisions described in Budget Planning, Strategy Planning, and Tactics Planning must be made prior to the occurrence of a particular service event whose fulfillment will require use of those resources. Hence these decisions are based on estimates of future resource requirements along with visibility of all of the events that affect supply and demand of such resources that have occurred throughout the service supply chain prior to the occurrence of the service event in question.

Given the random nature of service events, it is clear that demand uncertainty cannot be eliminated through forecasting, and hence, trade-offs must be evaluated on the basis of future risk assessments captured by estimates of the demand probability distribution relevant to specific customer products and locations at particular future points in time. The decisions made at all pre-event planning levels, (Budget, Strategy and Tactics), thus constitute an exercise in risk management.

Event Management is the "last mile" of decision making in the planning horizon hierarchy which concerns fulfillment after service event-based demands for resources have been made (e.g. part failure). This is where the service product is actually "produced" to meet the goals of customers. Intelligent decision making here can improve the performance of the system by allowing managers to make the best use of current and projected resource deployments throughout the service supply chain. This framework has a global perspective which has implications for the organization, tools, and processes to effectively deliver a service strategy

Should interBiz Mean Intelligence And Prediction Beyond ERP?

In October and November, interBiz, the eBusiness applications division of Computer Associates International, Inc. (NYSE: CA), expanded its back-office solutions with the announcement of product enhancements and a free benchmarking service. The announcements were:

* A free benchmarking service for businesses in durable goods industries

* General availability of MK Manufacturing version 8.4

* Premium Services Plans which provide maintenance for modifications and the migration of modifications to new versions of interBiz software applications

This, Part Two of a two-part note, discusses the Challenges faced by interBiz and makes User Recommendations. Part One discussed these announcements and their Market Impact

However, while espousing a prudent e-business strategy in line with post- ERP inter-enterprise realities and the need for interconnectivity, and while adding new functionality, interBiz has had an uphill battle to allay the perception of poor marketing owing to problems stemming from ongoing re-branding of the collection of older generation ERP products that includes MANMAN, PRMS, CAS, and MAXCIM.

While the BizWork initiative has breathed a fresh air into venerable but almost antiquated applications, interBiz must rebuild somewhat lagging momentum by attracting new users. Playing to its strengths by capitalizing on CA's huge investment in enterprise infrastructure management and business intelligence component, including predictive and pattern matching intelligent technologies makes sense. Additionally, BizWorks ability to integrate both interBiz and third-party applications across the supply-chain becomes a compelling extended-ERP tack. Unfortunately, the effort of tying these technologies back to a fragmented set of ERP applications has been colossal, likely marginalizing CA's ability to become a prominent market player.

Continuation of an unfocused, multi-product and multi-technology strategy in the markets with diverse dynamics typically multiplies and overstretches sales, R&D, and service & support resources jeopardizing the chances its products could stand a chance of long-term success in their respective niches. Geac, Epicor, Ross Systems are examples of companies where this strategy has failed: all have had to resort to divestiture and to a focus on core competencies.

While the announced premium service plans certainly give customers peace of mind and raise the bar for competitors' service & support value propositions, interBiz should consider making some bold decisions on the level of integration of the applications, possibly with a plan for developing a cross-application backbone (foundation set of common components). The market typically prefers a total solution to a "sum of the parts".

On the Postive Side

Nevertheless, InterBiz remains one of the most widely used of the upper-mid-range ERP vendors. Although it could have leveraged much better its infrastructure customer base to promote its enterprise applications (like Oracle or IBM have done in their respective database, server and middleware strongholds), interBiz has done much more to rejuvenate its acquired enterprise applications arsenal than, e.g., Geac has done to its. The job of disseminating a clear message which market the combined set of products has been targeting, as well as of delivering a strong CRM and private trade exchange (PTX) offering remains notwithstanding.

InterBiz's ERP systems are basically more suited for discrete manufacturing companies with versatile manufacturing styles (mixed-mode), although PRMS and MANMAN exhibit a good fit for some process manufacturing enterprises. The company targets high-tech/electronics, food and beverage, pharmaceuticals, mechanical engineering and distribution industries. Multi-national companies needing software to address mixed-mode manufacturing (Engineer-to-Order through Repetitive), projects and contracts, and service management, with strong logistics and warehousing requirements may want to include interBiz on an initial list of vendors for a particular ERP software selection.

The companies that may benefit the most from evaluating interBiz are upper mid-market companies with over $75 million in revenues that are not seeking to implement a strong CRM product, but are in need for SCM, e-procurement, workflow, business intelligence and key performance indicators (KPI) reporting capabilities.

Existing interBiz customers with installed financial management, logistics, HR, manufacturing, or banking applications should review the above-mentioned enhancements, as well as the BizWork framework with their local representative in order to extend the value of existing applications. interBiz customers with custom systems or products from other vendors should exercise the privilege of the offered premium service & support contracts in order to preserve data integration between their various systems and future painless migrations.

We also encourage existing and potential users to familiarize themselves with the company's e-business products offerings, since we believe that they will be in a position to better leverage their negotiating position with all vendors involved in a particular selection exercise. One should inquire with interBiz which 'wrappers' for which popular business applications are available. Adding new interBiz applications to an enterprise that already uses Unicenter TGN infrastructure "plumbing' will likely require no significant effort. Users will benefit from approaching interBiz and informing themselves about what the company plans for future service & support (or divestiture and/or product stabilization?) of its individual ERP products and what the ramifications of migrating (or not) to its new product offering and service plans would be.

The customers that need information visibility within the value chain should carefully define what they need -visibility of exceptions only, of all events, or of entire business processes, in real-time or batch mode, and from what data sources (internal, external, or both). If fully automated resolution is required, question whether the product has a business process integration system embedded. Otherwise, look for one that can reach people through multiple communication channels and has a built-in escalation process.

As for Neugents, some artificial intelligence (AI) sources warn that they work well but are limited in accuracy by the amount of historical data available to 'train' the neural network. As long as there is a representative sample of data containing all the possible fault conditions then the detection engine should work satisfactorily. Also, as these can only detect problems that have been present in the past, new problems could go undetected or unclassified, requiring occasional user intervention.