Are Spend Management (or SRM) Apps Suited for the Mid-market? – Part 1

My previous blog entry about procurement commandments in a down economy also made me think about whether there are different priorities for the chief procurement officer (CPO) during prosperous economic times. Or, how different are (or should be) the CPO’s strategies in good versus bad times?

Well, the CPO’s fundamental objectives do not change: procure the physical goods and services needed by the company at the best possible mix of price and performance (non-price features). The focus can shift at times from operational streamlining to new product introduction (NPI) to supplier rationalization.

In lean times, however, there will be pressure to do even more with less, postpone large expenditures, and get additional concessions from suppliers (e.g., better shipping rates, rebates, discounts, or better payment terms, etc.). Amid all of this, the CPOs must provide high-quality service guidelines to their employees to encourage the proper use of systems and policies, and to reduce maverick purchasing practices.

Universal Supply (Chain) Issues

I could think of at least the following five key issues and challenges that in turn lead to tremendous opportunities to save money, time, and bolster the bottom line of companies of all size.

Issue #1 is excessive spending for direct and indirect goods and service
—i.e., more than a company should for it needs. The opportunity here is to reduce the company’s spending by minimizing maverick purchasing practices, reducing transaction costs, and leveraging the aggregated (collective) purchasing power of the enterprise to negotiate more favorable pricing, service, and contractual terms and conditions.

Issue #2 is a lack of visibility and accountability. Many companies are not exactly sure what they are currently spending their money on. The pertinent historical and snapshot data is lacking and is likely inaccessible. Questions like, “How much are we spending? With what suppliers? On what categories? Who is spending it? How long does the approval take? Are we within the budget? What suppliers are (or are not) fulfilling orders on time? Should we rationalize our supplier base? Are there spikes or trends in our spending patterns that require action?” and so on require constantly changing answers.

The opportunity here is for all managers and executives to monitor spending (via personalized interactive analytics and alert messages) by category, location, cost center, department, project, you name it. These metrics should be known/viewed as transactions are happening, instead of only after they are booked to the general ledger (GL).

One way to solve this conundrum could be via procurement data marts that provide prepackaged spend analysis over a few dozens metrics and dimensions for fast answers to the above questions. These answers should be based on fresh (real-time, or close to real-time) data rather than on “rearview mirror.” This hindsight speed-of-thought spend analysis should measure and optimize savings via packaged buyer analytics, key performance indicators (KPIs), and proactive control and supplier collaboration.

Thou Shalt Remain Under the Budget

The feature that also gets the attention of prospects and customers is Epicor’s capability around “budgets and commitments.” This feature, which was breifly mentioned in Part 1, captures commitments not only from the Procurement module, but also from other sources of spend, including A/P and general ledger entries.

The Budget and Commitment Checking feature may deserve an article on its own. In a nutshell, the capability continually accumulates commitments from multiple sources that come from (not necessarily Epicor’s) procurement, accounting and supply chain management (SCM) modules. An administrator can configure which sources to include as a commitment (against accounts) according to their business requirements.

The company can create business rules to define what exact transaction states constitute commitments. For some companies, perhaps a purchase order is not a commitment, but goods received but not yet invoiced are commitments. For others, perhaps only invoices are the first establishment of a commitment.

A raft of the budget control settings allow companies to specify what requisitioners are allowed to see in budget numbers. For their part, budget override authorities by title, similar to spending limits, determine “how high” in the hierarchy one has to route a requisition for approval based on how much a budget has been exceeded.

My intention in providing this level of detail is to point out how sophisticated and comprehensive this Epicor SRM capability is. The process is comprehensive, much more than a high-level integration between Procurement and GL/AP, and it is done in a way that allows for budgets or commitments to come from non-Epicor sources too.

To the end of the important premise of spend management (i.e., to stay under budget), the Budget View provides approvers with the opportunity to perform “what if” scenarios with all orders pending their approval to determine the optimal combination of approvals and disapprovals to meet budget control objectives. Last but not least, and also related here, Epicor SRM also features strong spend analytics capabilities.

The Current State of Affairs

As with all Epicor solutions, the sweet spot for Epicor Procurement and Epicor Sourcing is the midmarket, where efficient management of corporate spend and automation of internal processes are significant competitive advantages. Epicor Procurement has been licensed by over 140 companies (not all of them have implemented it yet, though), while Epicor Sourcing has been licensed by about 20 companies. The number of Procurement users per customer ranges from 20 to 3,000.

Epicor’s SRM solutions are truly horizontal, and applicable across various industries. The majority of Epicor SRM customers are in North America, although each global sales region has Epicor SRM on its price list. Epicor Procurement is currently available in English, French, and Spanish, whereas Epicor Sourcing is available only in English.

Currently, Epicor does not actively market Procurement as a standalone solution, but has gotten a few deals that way anyway. The Epicor SRM sales pattern has shown a steady upward trend from 2003 right through to now. Since most of the low-hanging fruit in Epicor’s customer base have licensed Procurement in the 2003-2007 time frame, one could attribute the continued steady product sales to the vendor’s ongoing education of the midmarket about the importance and opportunity of spend management and related best practices.

Epicor SRM is most often sold as part of the complete Epicor solution. Thus, about 95 percent of customers that purchase Epicor SRM are buying it as part of the overall Epicor ecosystem. The fact that the vendor offers an end-to-end solution is one of the key value messages for its target market.

According to the vendor, in the midmarket the biggest competitor for Epicor Procurement is “doing nothing.” If a current customer is interested in procurement, the company almost never looks beyond Epicor. If Epicor is engaged with a prospect, then procurement is most often part of a bigger deal that includes a full ERP system.

In those cases, Epicor usually competes against Lawson Software, Oracle, SAP, and Microsoft. The Microsoft Dynamics ERP products do not have their own strong procurement capabilities. Thus, they have to bring in a third-party solution, and that plays to Epicor’s benefit. Lawson, Oracle, and SAP do have their own procurement capabilities, but feature-for-feature Epicor Procurement can win.

In general, Epicor plays Procurement as a strong differentiator for a total Epicor ERP decision. When Epicor is competing in standalone SRM/procurement deals it faces off Ariba and some vertical niche players. The company has also occasionally sold Procurement into accounts that are running SAP, Oracle, Microsoft Dynamics GP, and other ERP systems, where Epicor Procurement was evaluated to be a superior solution.

Product’s “Order Winner” Traits

Packaged integration to Epicor Financials and Epicor SCM solutions and to other ERP systems results in the inherent ability to handle internal inventory orders and perform three-way matching in accounts payable (A/P). Other differentiators include configurable, point-and-click purchasing workflow automation (with no programming required), a patently simple user interface (UI), the ability to approve orders from a mobile device, “Tap Outs,” “FreeForms,” and a “360-degree” budget and commitment checking process.

To explain some esoteric terminology, “Tap Out” is Epicor’s term for what Ariba and Oracle call “PunchOut” and SAP calls “Roundtrip.” It is the ability to leverage suppliers’ e-commerce sites during the search, select, and shop experience as an alternative to managing supplier catalogs locally.

Are Spend Management (or SRM) Apps Suited for the Mid-market? – Part 3

Epicor Software Corporation is a global company dedicated to providing integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), and professional service automation (PSA) software solutions to midmarket companies and divisions of the Global 1000. Founded in 1984 and headquartered in Irvine, California (US), Epicor serves over 20,000 customers in more than 140 countries, providing solutions in over 30 languages. For more details on the company’s offerings, see my blog series on Epicor in early 2008.

The Epicor SRM suite stems from Epicor’s acquisition of certain assets of formerly Atlanta, Georgia (US)-based Clarus Corporation in October 2002, as part of its strategic initiative to offer a comprehensive and integrated enterprise solution. For more information, see TEC’s 2002 article entitled “Epicor Picks Clarus’ Bargain At The Software Flea Market.”

The acquisition brought an initial set of SRM solutions covering Web-based procurement, sourcing, online invoice presentment and payment (settlement), and the ePortal Supplier Pack for secure supplier access to relevant information. Then there was View BI, a business intelligence (BI) module for spend analysis, and finally eTour, a training and reference application available 24/7 through a Web browser.

eTour has since been retired, since it was underused and too expensive to maintain. For its part, View BI has meanwhile been replaced with Epicor Enterprise DecisionStore for spend analytics. The invoice presentment and payment module was never really completed by Clarus, and Epicor chose not to invest in it because the company felt that procurement, sourcing, and spend analytics were the most important and most value-add midmarket SRM solutions. Indeed, electronic invoice presentment and payment (EIPP) solutions have long been offered by Ariba, Basware, and J.P. Morgan Xign.

Product Development Goes On

Since 2002, Epicor has delivered three major releases and several minor releases, especially of the Procurement module. These enhancements have all required internal development, since there have been no other SRM-related acquisitions. In late 2003, the vendor announced the release of Epicor eProcurement 7.3, a purchasing management solution that provided a connection between buyers and suppliers for the purchase of direct and indirect goods and services within the framework of defined business rules.

New in eProcurement 7.3 was the integration of inventory management and back-office purchasing modules (e.g., with the back-office purchase order approval routing and end-user requisition capabilities). Blanket purchase orders and releases was another major group of capabilities within the 7.3 release.

For example, permissions to create blanket purchase orders are configurable, and blanket orders can be used for either private or public consumption. Blanket orders’ characteristics (or specification of the goods or services that the order covers) can be specific items and quantities, a monetary amount of one or more product categories, or a general monetary amount, regardless of items or categories. Blanket orders also support effective dates and consumption priorities, while order releases can be done individually or on a schedule.

Furthermore, the proxy effective dates and organization requisition proxy group capabilities in Procurement 7.3 are associated with the ability of one user to assign another user as a proxy requisitioner or proxy approver for a specific date range. Other nifty features that were introduced at that time included one-click order copy capability, the ability to link e-mail approvals directly to the purchase order, the ability to approve from an order’s line detail, the ability to create a catalog item from a non-catalog item, and the ability to add attachments to extensible markup language (XML)-based purchase orders.

APICS 2009 Webcast Session 3: Lean for Materials Managers

In the forthcoming 2009 APICS International Conference and Expo, many educational tracks will be covered by industry leaders, and lean is one of them. Since we are in a global economic crisis where every manufacturer, supplier, and producer is trying to reduce cost and minimize waste while increasing production or throughput, I am particularly interested in the “lean” educational track to hear what the experts are saying. Recently, I had the privilege of attending the preview of “Lean for Materials Managers” by Bill Kerber, President of High Mix Lean.

In his presentation, Bill explained “Lean Material Planning and Control Charts” to guide us through the proper procedure when implementing lean material management. He also mentioned the process to further streamline material planning by using the Kaizen concept. Later in the presentation, he talked about the four important concepts for material managers: leveling production, flow, pull systems, and interval to determine lot sizes within production. Even though all four concepts are crucial in today’s economy, in my opinion it will be beneficial if each concept can be integrated within the software already used by organizations. This will bring the concepts, processes, and technology under one umbrella.

Bill talked about how leveling production can be achieved for small to large manufacturing organizations. He also provided his expert advice on waste types (Muri, Mura, and Muda) and their respective reduction concepts. Another important topic he covered was buffering strategies. In my opinion, many organizations do not understand the importance of buffering strategies and they are beneficial if applied accordingly. He also spoke briefly about the four types of buffering strategies: finished goods, back log, capacity, and hybrid. He provided relevant examples on how to use these strategies to maximize production while minimizing waste and delays. In my past experience, organizations using a combination of these strategies are making the most out of their lean/buffering strategies.

Later, he shared his knowledge about flow, an important concept for a lean production environment. He explained how the increase in flow will reduce lead time and waste while increasing production. He also shed some light on a pull system, and compared the old and new logic which helps us understand and implement lean processes. Some of the other important material management topics he covered were lot sizing and interval which also leads towards reducing waste. In my opinion, Mr.Kerber should have mentioned the benefits of using Six Sigma methodology and statistical data because it helps management drive lean concepts throughout the organization (not only in material management).

Even though this webinar was of an advanced level, Bill covered all the basis of material management in a lean environment and also provided comparison with traditional processes along with advantages and drawbacks. In my view, if you have a basic understanding of material management and planning you can benefit from this session.

Vendor Rating Updates: Learning, Distribution ERP, Financials, CRM

Oct
22
Vendor Rating Updates: Learning, Distribution ERP, Financials, CRM
Filed Under (Inside TEC) by Josh Chalifour (see bio)


Take note if you’re evaluating software for any of the following types of systems.

* learning management
* POS or merchandising
* financial software
* CRM
* distribution-oriented ERP

We recently published updated ratings on a number of vendors’ products. Individual reports are available for purchase, or better you can review the ratings in-depth using a free evaluation centers trial. Here’s a quick rundown of the updates.

Knowledge Management Solutions’ KMx product, which is an integrated e-learning package, is up-to-date as of its 4.3 version in the Learning Management Evaluation Center.

Retalix targets companies with retail and distribution requirements. Depending on what your company does, you can view its products’ functionality based on our ERP - Distribution, SCM, Merchandising, or POS models of enterprise software.

Two significant updates in the area of enterprise financial software are online for comparison. One is for the Lawson S3 Finance system and the other is for Microsoft Dynamics GP.

Finally, the latest information on Sage SalesLogix is available in our CRM Evaluation Center. It covers a 30% change from the previous ratings and shows new or increased support for over fifty features.

The Intricacies of Global Retail Sourcing

A few major (and often conflicting) objectives have been driving retailers to turn to information technology (IT) to streamline their sourcing and logistics processes. One objective is the pursuit of lower prices, which often involves excessively extended supply chains to remote, lower cost regions. The other is the quest to shorten cycle times, which is essential—but so is having quality control to ensure that companies get their merchandise on time and according to the exact specifications. With suppliers on the other side of the globe, it can be hard to check to see how things are going, and one typically finds out about problems after the fact, when the goods arrive. Therefore, although some vendor relationships are smooth and run on "automatic pilot" (for example, companies might simply casually monitor purveyors of office supplies for best prices and basic service requirements), a much deeper and more involved relationship is essential for strategic vendors such as retail goods suppliers, who must deliver to specifications, on time, and at the right cost. These vendors might be evaluated on many key performance indicators (KPIs) in a holistic scorecard-based fashion, such as on-time delivery, quality, innovation (organizational health and technology), responsiveness and customer service, security, social compliance, and so on.

Part Two of the series The Gain and Pain of Global Retail Sourcing.

Certainly, even without IT deployment, retailers must become more agile, efficient, and timely with product development, planning, procurement, manufacturing, and execution (logistics and transportation) if they are to maximize benefits from their private-label strategy and opportunistic buying. While technology plays a major role, organizations must better coordinate activities and bridge handoffs among product design, sourcing, and logistics groups to shorten lead times and ensure that "hot item" goods are on the shelf exactly when the customer wants them. Still, global sourcing is substantially more complex than domestic sourcing, and should not be attempted without adequate technological support and business process controls. Executive global sourcing mandates that are not supported with such tools to execute typically either fail or do not meet expectations. For further discussion, see The Gain and Pain of Global Retail Sourcing.

The ideal situation would be for a retailer to establish a collaborative trade platform that offers the tools, content, community, and business infrastructure to support global commerce communities and a transparent trade process. Yet, many realities typically entail the politicization of global sourcing by polarized functional and infrastructure camps inside the organization, which hampers the ability of the organization to produce necessary strategic changes. There is also little opportunity to train buyers, partners, and suppliers across an extended supply chain within such infrastructures. Ironically, control over the extended supply chain should be driven by the common need to impact delivery before the production begins, since on the tactical level, a lack of visibility results in costs becoming multiple times higher to fix problems onshore (when the goods have already arriived) than offshore.

Come with Some Inevitable Pains

Yet, the savings from global sourcing come with possible steep expenses elsewhere, since a company must find qualified factories, solicit bids, place purchase orders, inspect the factories, monitor quality, handle logistics, customs, and duties, and so on, all on its own, which is not a small feat. Any merchant nowadays has to manage numerous details on how private label brands are sourced, produced, and delivered, which can be quite daunting to deal with, especially when trading partners are scattered all over the world. The momentum of private labels in the retail industry (from grocery stores to major apparel stores) is driving even more opportunistic contracting with small and unknown suppliers in remote countries, which requires buyers to really take a chance when ordering from unfamiliar suppliers in the hopes of keeping total landed costs to a minimum.

This requires a timing mindset change, given that most issues with domestic suppliers can be resolved right away (or at least within a week, in the worst case scenario). Internationally, though, even for bordering countries, it might take a more particular purchase order even several weeks to be confirmed, let alone processed and delivered over oceans and through customs and duties. With global sourcing, the challenge has become how to communicate from a swanky domestic office in a Group of Eight (G8) country with a factory as far away as Africa or the Far East. The challenge is also how to assimilate and communicate multiple data points effectively into a unified operation on a single screen. After all, in the manufacturing process, communication necessarily takes place among retailers, manufacturers, brand managers, contractors, agents, brokers, and logistics providers. Many still share product information over the phone, or via email and faxes, or through physical communication, and the difficulty is thus to consolidate all these diverse data points.

In a more sophisticated scenario, though, all the members of the supply chain communicate through a Web-based system, which means that when a vendor makes a change in the status of a product, for example, everyone in the supply chain will see the change too. The key in global sourcing today is to minimize the overall cycle and disruptions, and the most important way to do that is to have live, accurate, immediate information. New Internet-native sourcing software applications should give users visibility throughout the world of current product or order status at any point in time, and eliminate almost all duplication of information, thereby allowing all trading parties to collaborate on more rewarding issues, rather than constantly fighting fires.

For instance, prior to implementing a contemporary Web-based automated solution, contacting multiple vendors at once for pricing would be a tedious and pedestrian manual process for the sourcing group. On the other hand, by using a Web-enabled infrastructure, user enterprises should be able to better integrate globally with their supply base, and broaden the scope of vendors they can locate. Such technology has lately streamlined the ability of many retail firms to get estimated pricing from several vendors simultaneously. Also, when the design team comes up with a new fashion concept and wants to get a sample of that concept, such a system allows the information that they have designed to flow into the sourcing organization, which then allows the sourcing team to start getting estimated costs, as well as time-and-action (meaning normalized or synchronized calendars within the entire production cycle) information. Then the team can better determine where it wants to place the production, depending on volume—possibly also integrating with the merchant organization to give them a feel for how much product the firm will be sourcing of a given style, so that they can look at capacity constraints. The next step could be to use the software tools to break style data down by more variables, in preparation for placing the purchase or production order. For instance, this might provide suppliers with answers to several questions: How much does the retailer want to order by color and by size? What is the final pricing? What is the final time-and-action calendar?

Increasingly, the standard order confirmation and customary advance ship notice (ASN) procurement practices cannot provide sufficient guarantee that everything is going smoothly with any placed order. This is particularly the case for the internationally sourced, custom-made purchases that are common in the consumer goods manufacturing and distribution industries. Here, the difficulty of communicating across time zones, along with long lead times, make for lengthy recuperation periods (if it is even possible to recover) when problems occur. That is why buyers should benefit from visibility and event management systems that would inform (or alert) them that, say, their orders were (not) started on time, or were (not) placed on the boat on schedule; or whether the design team has meanwhile (yet again) changed specs on color or fabric for a paarticular planned merchandise; or that the order was (not) properly documented to clear customs without a glitch.

Potential Global Sourcing Gains

In a nutshell, companies source globally to differentiate their products, gain competitive advantage with reduced price points, and realize margin improvements. On average, many contemporary analyst studies, surveys, benchmarking reports, and so on, have concluded that a well-devised and well-executed sourcing strategy can produce margin improvements up to 2 percent (through a more efficient trading partner collaboration); reduced cycle times by up to 30 percent; up to 5 percent in reduction to the cost of goods sold (COGS); and up to a 15 percent increase in gross margin (through increased international sourcing on low labor and supply costs from East and Southeast Asia, Eastern Europe, and South America). Sure, expectations are usually much higher than these figures, since initial savings may provide false gains. And with many costs and risks being hidden (such as logistics complexity and increased lead time ramifications), one should always take a long-term view and analysis. For more information, see Understanding the True Cost of Sourcing.

What also contributes to the popularity of global sourcing today might be the fact that for years, only larger companies had the wherewithal to operate complex and pricey import/export software systems. Today's technology, conversely, has leveled the playing field for international trade, given that inexpensive Web-based systems—designed for simplicity and more easily deployed—can now enable much smaller companies to engage in global sourcing with a wide range of suppliers. The unstoppable march of the Internet and the growth of online shopping and other transactions mean that we are all operating in a new electronic real-time world (the global village), with inherent visibility into important events. These new systems make it possible for a small retail company to engage even just once—opportunistically if needed (as in a "one and done" manner)—with a supplier, to still record a profitable and efficient transaction. This has brought about what some experts call the "great leap" in global sourcing: it is no longer the privilege of only a few humongous and mighty companies, but is becoming a viable strategy for almost any company.

In addition, trading quotas and other barriers have been disappearing (or are being reduced) globally, while the expansion of the European Union (EU) eastwards opens up potential new sourcing countries along with new potential markets. With the end of apparel import quotas, this sector is growing rapidly in India and the Far East, while the passage of the Central American Free Trade Agreement (CAFTA) promises to bring additional activity into Central America as well. Today, on average, retailers are consequently following the top executive mandates to increase imports (of both raw materials and finished goods), even up to a quarter of total purchases (from a current level of 5 to 12 percent).

There is also a growing trend towards offering private labels or brands, and a consequent fundamental reassessment of the structure of global sourcing. In other words, the question now is whether to use agents or other middlemen at all, if via Internet trading exchanges (and the like) companies can now increasingly work directly with manufacturers. Therefore, given some reported examples of success with lower-priced house brands, retailers in several segments, including fast-moving consumer goods (FMCG), consumer electronics, and apparel, are increasing their focus on private-label merchandise to take advantage of margin improvements, improved quality consistency, and brand loyalty. For more information, see The Fragile Consumer Packaged Goods Market and Private Label Products and A Unique Product Lifecycle Management Tool for Private Label Retail.

The Gain and Pain of Global Retail Sourcing

For anyone who has not spent the last several years hibernating or stranded on a remote island, it has become apparent that supply-side control is more important than ever for overall business success. This is due to globalization (meaning new potential markets, but at the price of growing competition too), low-cost country sourcing (and even outsourcing of some, if not most, manufacturing or service operations), continuous cost pressures (shrinking margins), and other driving forces which have combined into a "perfect storm." Global sourcing (the process of identifying appropriate domestic and far- or near-shore suppliers of goods and services—preferably from countries with significantly lower cost bases—and then ordering the goods and arranging for payment and delivery) has thus become a way to go for many. In fact, this has lately become an increasingly important corporate strategy (and often an executive mandate for buying departments) that is rapidly becoming a survival strategy too, in sharp contrast to the stepchild and "ugly duckling" perception of supply-side control in previous decades.

Part One of the series The Gain and Pain of Global Retail Sourcing.

In fact, there is today a growing imperative within organizations to source directly from an ever-expanding global universe of prospective vendors. Indeed, according to the World Trade Organization (WTO), about 55 percent of all raw materials for American manufacturing are now being sourced outside the US, which compares to about only 12 percent in the 1980s. As another example, the Wall Street Journal last year reported huge volume increases of Far East imports through the port of Savannah, Georgia (US), where the cargo container volume of 1.7 million per year has tripled over a decade ago, as an US east coast alternative to the clogged and constrained (in terms of labor and capacity) west coast ports (which are the logical, shortest-path destination for Far East goods).

CA Unloads interBiz Collection Into SSA GT's Sanctuary Part 3: Challenges

One can always wonder if SSA GT, which has its own share of trouble, will be able to achieve success with such an unwieldy set of disparate products, considering that a vendor of CA's stature was not able to do much with them. SSA GT took a long time to put its house in order and to upgrade a single product. What are the chances that it will repeat this success for almost a dozen products, some being of vintage '78 or '82 tag (which some may refer to the medieval era of computing)? 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, and SCT Corporation are recent examples of companies where this strategy has failed: all have had to resort to divestiture and to a focus on core competencies.

The management's rhetoric might even suggest that SSA GT is banking its future mainly on its installed client base. The possibly insufficient revenue stream might, therefore, require some additional downsizing in the future as well as the R&D programs cutbacks. Any attempt to increase revenue by, e.g., bloating significantly support & maintenance fees, may backfire in customers' defections to the competition. Additionally, SSA GT has an inordinate scope of functionality to cover through external partnerships.

While the best-of-breed approach has its merits and is a necessity for some plant-level applications that ERP vendors do not typically provide (e.g., data acquisition), it inadvertently leads to additional integration costs and complicates service & support arrangements. Interfaces between disparate applications like ERP, CRM and/or e-business usually require significant tailoring, which should now be multiplied by the number of newly acquired products and their different product versions. This can be a barrier to future changes as further modifying already modified code is notoriously time consuming, costly, and risky.

Also, the profit margins for third-party products are typically lower than for natively provided functionality, which again lessens the bottom line. Vendors such as IFS, J.D. Edwards, SAP, Oracle, Intentia, Baan, QAD, Navision, Ross Systems, Geac, SCT, IBS, MAPICS and many others that offer more unified solutions running on many platforms, and that have strong vertical presence, may therefore give SSA GT's prospects a value proposition that can be difficult to decline.

More importantly, except for Cognos and SynQuest or Manugistics (for an advanced planning & scheduling (APS) product add-on), the above partnerships, which have certainly made a splash, are either in their infancy or are just another bite at the cherry. For partnerships to solidify and result with a true commitment and solid products, one needs time and significant user acceptance (read sales), both of which have yet to happen in earnest.

Also, while embracing the IBM WebSphere platform for e-procurement, CRM, and other components integration strategy cannot be debated, the caveat lies in the fact that the company has done it only very recently. To that end, much more aggressive interaction with the analyst community and more perspicacious explanation of positioning of its Semantic Message Gateway (SMG) and Direct Data Gateways (DDG's) interconnectivity technologies would be important. There have been indications that SMG's had exhibited poor performance, hence the addition of DDG's. However, the DDG's have reportedly only been tested once for an adapter for SynQuest integration. There are no performances statistics/benchmarks available, and there have been no other DDG's officially announced, which may ominously resemble the experience many interBiz users have already had with their systems.

While SSA GT plans to keep previous BPCS versions (e.g., V4.05CD) alive was prudent and necessary as to avoid an adverse revenue shortfall, the need to make any new functionality backward compatible and to devise an enterprise architecture to tie multiple versions together with a common portal (and even as a commercialized Private Trading Exchange (PTX) further in the future) will likely impede the speed of delivering these. The story seems to be quite compelling although one should be cognizant of the magnitude of the efforts to execute it. This may also mean that users of the most current product versions will see their annual maintenance revenues being dissipated to enhancements for V4.05CD (and now to possibly a dozen of interBiz products) and not to the current versions. Furthermore, the company's silence about MAX product it acquired not so long ago (see SSA Acquires MAX Hoping To Leap From Its MIN) might indicate that it was an impulse purchase and that the company has not many ideas as what to do with it, since MAX essentially competes with its own BPCS NT product. It is not that difficult to imagine the possible magnitude of confusion, products' overlaps and conflicts with a slew on new products in the picture.

The above challenges may impede SSA GT's ability to leverage its existing client base and channel, as illustrated in the fact that more than 3,000 BPCS users, and a few thousands of interBiz users have yet to be possibly reinstated with maintenance contracts. Also, SSA GT has only recently delivered a Web Browser Interface in V8 product release that is browser-based, which makes it quite behind its competition regarding e-business capabilities, and consequently vulnerable to their attacks. Portal solution, however, is only envisioned with versions 8.2 and beyond. As a summary, while SSA GT's gallant attempt to regain credibility in the industry is noteworthy, it still has much more catching-up to do, with the market keeping a close eye on its execution. Time will tell whether it is possible to mate two old horses in the same stable in order to produce stallion-like offspring.

CA Unloads interBiz Collection Into SSA GT's Sanctuary Part 1: Recent Announcemen

SSA GT has pledged continued support for the interBiz product lines, along with assurance that it will enhance the applications. Furthermore, in some instances where it will make sense, there will be an effort to integrate the products as well as provide a migration plan for products using discontinued technologies, such as the HP 3000 platform. Through the transaction SSA GT hopes to achieve the following:

* Offer customers added support through an expanded global network; additional revenue to spend on research and development and expanded Global Guide Groups to understand customer, industry and market demands

* Provide the critical mass to re-position itself as a leading vendor in specific vertical markets, expanding its global capabilities, resources and customers

* Leverage the company's global service and support functions

* Underscore its business model, and financial viability

* Strengthen organic growth in its key vertical markets - automotive, fast moving consumer goods (including food, beverage and electronics), general manufacturing and pharmaceutical industries;

* Expand its commitment to deliver more opportunities for customers' e-commerce and collaboration initiatives

* Add experienced management and IT professionals in the U.S. and International markets.

Over the past year, SSA GT has been reengineering its company to deliver a solution strategy that involves e-commerce and collaboration with BPCS, its core ERP product. SSA Global Technologies will apply its business model and solution strategy to the newly acquired products. For customers utilizing the interBiz brands, this strategy will give them new opportunities to benefit from e-business and collaboration solutions. Products covered under this transaction include CAS, interBiz Logistics, interBiz Online, interBiz Reports, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS and Warehouse BOSS. A fully integrated organizational structure is in place for SSA GT where employees are being integrated, service offerings are being coordinated and cross-selling opportunities pursued.c
In a nutshell, the good news is - a foster home has been found for interBiz; but there is the bad news too - the room space might be insufficient to accommodate all of the orphaned products. Nevertheless, SSA GT is, for a number of reasons, possibly the best place where most of interBiz products will continue to be kept on a life support. There are seemingly many synergies that could exist between the two product lines/organizations, including the cited closeness of product codes (considered ancient by many, as they go as far back as COBOL or FORTRAN) at the base level and both camps' heavy reliance on mature IBM iSeries (formerly AS/400) platform. These sorts of blessings in disguise could still allow SSA GT to build on its core ERP transactional capabilities while being able to offer extensions to the core products, something not many other ERP vendors that are relying heavily on the latest 'hot button' technologies (e.g., Java or .NET) would be willing to undertake. Also the companies have similar corporate cultures and have long been competing in the same or similar markets. They both have extensive worldwide coverage, and both companies' staff members have extensive manufacturing and distribution industrial experience.

At a first glance, one can even notice a complementary nature of some products. Some of the interBiz products may indeed still provide a 'kick for a buck' proposition. For instance, PRMS is still a well respected manufacturing ERP offering and a formidable competitor to SSA GT's BPCS, although it is perceived as ancient in the market and has been confined to the IBM iSeries platform. The product supports manufacturing, distribution, financial, and warehousing capabilities for discrete, repetitive, process and co-existent manufacturing and distribution enterprises.

Another manufacturing-related product that might functionally attract new customers would be MK Manufacturing - a versatile Unix and NT-based ERP solution that supports make-to-order (MTO), configure-to-order (CTO), and make-to-stock (MTS) discrete manufacturing requirements. The caveat, however, is that SSA GT remains focused mainly on IBM platforms and web server technologies (iSeries and WebSphere). Moreover, the interBiz ERP products are backed up well with Warehouse BOSS, a rules-based stand-alone warehouse management system (WMS) and interBiz Logistics, an e-fulfillment distribution management package. Warehouse BOSS, as a matter of interest, exhibited functionality several years ago that many leading WHS vendors have only recently incorporated. Furthermore, the MasterPiece financial management and HRMS product might significantly enhance SSA GT's financial and HR modules' functionality, which have not traditionally been BPCS' strongest area (if not a wide functional gap).

While mergers and/or acquisitions in the mid-market in the recent times are no surprise per se, SSA GT's action might have an additional meaning. Although the acquisition of interBiz by SSA GT should have minimal impact on the global market in the short run, it might have an important psychological effect on existing SSA GT's and interBiz' customer bases. On its hand, the erstwhile SSA has suffered, over the past several years, a tremendous loss of market share and customer confidence, while its channel also dwindled during the same period of time.

Revenues for SSA GT, which is now majority (~60%) owned by a $6.5 billion high-tech venture capital firm Cerberus and ~20% by Gores Technology, were $126 million for fiscal 2001 ended on July 31, 2001, with an undisclosed profit. It is still only a fraction of once SSA's over $450 million turnover in the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy and rebirth initially under the Gores Technology in 2000, remains within Top 20 ERP vendors, steeply down from once being neck to neck with J.D. Edwards.

The vendor has undergone considerable turmoil even post-purchase, with new management teams' rotations, a new owner and considerable staff departures, and consequently, a loss of some of its customer base to competitors. But that base remains large with 6,500 customers running on BPCS, evenly divided between North America, Europe and Asia-Pacific, although around 3,500 of these are not still currently paying maintenance.

Can You Bring Cost Down through Better Inventory Management?

In my previous blog I discussed two approaches to bringing down your cost: cost cutting and cost reducing, with regards to the overall supply chain network. The most effective way of cost reduction in supply chain is through the collaborative effort of the whole organization. As discussed previously, the supply chain has various areas where cost reduction can be done, but for this blog, I want to focus on cost reduction with better or best inventory management processes and practices.Basically inventory can appear in a variety of forms, such as raw material, goods in process, and finished goods. And each form represents funds (money) that are tied up until that inventory is “used up” by company as sold goods. Similarly, in retail stores, any stock on the shelves represents dollars tied up until it sells. In other words, inventory is anything holding up operating funds.

The main objective of a supply chain is to have the right inventory, at the right time, at the right location with the right quantity. To achieve this objective, it’s key to have a proper inventory management process in place within the organization. There are numerous ways to achieve this without driving up the cost of operations or the cost of inventory. Most importantly, such strategies will help the organization reduce the cost associated with inventory. There are some common techniques and some unique business processes which can be implemented to achieve cost reduction and help with the better management of inventory. Many organizations should implement the following ten practices to reduce inventory costs:

1. Conduct periodic reviews and audits of various inventories being held in-house.

2. Analyze the usage and lead times of on-hand and order book inventory.

3. Reduce safety stock based on customer demand.

4. Use 80/20 rule (ABC approach) for inventory control.

5. Improve cycle counting techniques for inventory management.

6. Use vendor managed inventory or implement vendor stocking programs, which means supplier are managing inventory with the organization.

7. Use collaborative planning and replenishment (CPFR) business processes and IT standards to collaborate among multiple parties in the supply chain network.

8. Improve the forecast of each product at the item level, i.e. use a variety of demand forecasting arithmetic models. No single set of algorithms fits all customers’ forecast or product families.

9. Communicate demand/hard orders to suppliers for better delivery of inventory.

10. Implement new inventory software which uses inventory quality ratio methodology and multi-echelon inventory optimization tools.

Many inventory management teams have ideas and strategies in their minds, but no time to bring them into action. That’s why when implementing any inventory management best practice, it’s important to have upper management’s support. Additionally, any process improvement should be in-line with the corporate objectives. Regardless of what size the organization is, any of the above inventory management best practices can be used to gain extraordinary results for the organization’s bottom line.

As organizations have an overall objective to put best practices into its supply chain management, supply chain managers need to start by looking at each process within the supply chain. Each activity needs to be mapped to understand where a best practice can be implemented, and where standard cross-functional processes can be set up. Every process and activity has owners who need to be in-line with the overall best practice implementation. For every process, it is crucial to have performance measurements which will create accountability and allow users to focus on the continuous improvement of process.

To achieve cost reduction in the supply chain, it’s imperative to have these inventory management strategies extend out to the organizations suppliers as well. By doing so, organizations will streamline processes internally and externally, and integrate will with the overall business objectives.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 2

Accommodating “Generation Y”

Let us not forget about the looming demographic shifts, given that the baby boomers are on their way out. One group that has been receiving a lot of attention is the so-called Generation Y: the group mostly in their 20s that has recently entered or is about to enter the workforce. These dudes and dudettes haven’t just adopted the use of the Internet – they have grown up with it, and they rely (live and breathe) on it.

A key characteristic of basically all Gen Y candidates today (which might belong to earlier generations, like the Gen X) is that they are keen consumers of Internet technology. They are accustomed to using websites such as Amazon.com, Google, Facebook, Ask, LinkedIn, Twitter, Travelocity, and eBay (to name but a few), often on a daily basis, to buy what they want, go where they want, stay in touch with their friends and family, get their work done, and do it all and more with ease.

So, when it comes to looking for a job, they transfer their job-seeking experience to the corporate brand, and they draw on their consumer web experiences to set their expectations for their online job seeking experience. There are a number of characteristics associated with a technologically savvy generation of job seekers. These characteristics include:

* The ability to do job hunting, in a 24×7x365 manner;
* Expectations of instantaneous responses coupled with a short attention span (”That was so yesterday!”);
* Desire for immediate feedback and rapid results (“Dude, where is my offer/promotion?”);
* Demands for flexibility (often to be able to work in pajamas and sleepers, or at least to bring their pet iguanas to work);
* Assumed free exchange of information/access to more information for decisions (e.g., “A mate just sent another job opportunity via Facebook to my iPhone.”);
* Tendency to migrate towards better opportunity and growth (vs. loyalty); and
* The attitude to move back with parents and volunteer for a “higher cause” than to work for a jerk.

It is thus small wonder that recruiters are increasingly use LinkedIn and Facebook in their efforts, while talent management software providers begin to offer the integration to these social networking sites as a matter of course.

Talent Management and HCM Defined (Sort of)

The phenomena and factors outlined both here and in Part 1, coupled with every company’s need to align people directly with corporate goals, are forcing human resource (HR) departments to evolve from policy creation, cost reduction, process efficiency, and risk management (i.e., all those “paper and pencil pushing”) tasks to driving a new talent growing mindset in the organization. One important distinction is the evolution of the difference between tactical and administrative HR and strategic talent and human capital management.

In a nutshell, transactional HR activities are administrative overhead, whereas talent management is a continuous process that should deliver the optimal workforce for the company’s business. In this new model, instead of being the owners of mundane processes, forms, and compliance, the HR staff should transform into the strategic enablers of talent management processes that empower managers and employees while creating business value.

First of all, there is confusion about whether HCM and talent management are the same thing, or perhaps one area is bigger and broader than the other. I, for one, personally tend to believe that HCM is the broader concept that includes both the administrative HR & payroll functions and talent management as the strategic component. However, as it typically happens in this industry, the talent management’s scope of applications (that are needed to support HCM processes designed to manage a company’s greatest asset, i.e., people) is defined differently by industry analysts and consultants.

Still, most define talent management to include the following: recruitment, performance management, competency management, succession management, career development, and incentive and compensation management (ICM). Other talent management modules can include: workforce planning, learning management systems(LMS), as well as workforce analytics, portals, and dashboards.

Talent Management Software Examples

As an illustrative example, Taleo’s on-demand talent management applications suite currently comprises solutions for companies to assess (including workforce planning and analytics), acquire (i.e., source, select, and onboard), develop (i.e., manage performance, manage career, and plan succession), and align their workforce for improved business performance (via goals management, internal mobility, and reporting).

As another example, the Authoria Talent Management suite is also an integrated, on-demand solution that addresses the strategic talent management lifecycle, from hiring through compensation, performance, benefits communication, and succession planning. Also, by delivering role-based dashboards with analytics and workflow tools, the vendor aims to help managers improve business performance through better people performance. Authoria’s “plan-attract-review-reward-develop wheel” of applications involves the following modules:

* Authoria Recruiting drives the hiring of top talent;
* Authoria Performance aligns employee actions to company goals and captures performance against competencies. Managers are given coaching in-context to ensure standardized, best practice performance appraisals. Besides coaching, the competency support enriches the entire talent management lifecycle;
* Authoria Compensation comprises Authoria Incentive, which automates incentive compensation, and Authoria Salary, which improves accuracy, auditability and cycle times of compensation management; and
* Authoria Development & Succession leverages performance data to identify and develop top talent.

Let me for example flesh out the succession planning and employee-development module capabilities that allow line-of-business (LoB) managers and human resource (HR) professionals to assess bench strength, and fill critical roles with high-potential, top-performing employees. This latest functionality, which Authoria showcasing at the recent HR Technology Conference & Exposition, empowers LoB managers and HR professionals with:

* Talent Pools – Whereby employees with high-leadership potential can be identified for critical roles, since managers and HR professionals have access to performance, education, work history, and other relevant information on potential successors;
* Succession Slates – Can be developed and maintained to readily identify high-potential employees to fill key roles;
* Succession Organization Chart – The availability and readiness of successors to key positions can be viewed directly from actionable org charts; and
* Bench Strength, Bench Health, Diversity, and Utilization Analytics – So that managers and HR professionals can view the slate of potential successors, and evaluate the readiness and flight risk of those people.

As the underlying technologies, Authoria’s role-based dashboards allow managers and employees to access reports and track workflow. The dashboards serve as a common starting point for a consistent and integrated approach to all aspects of talent management. Finally, Authoria Communications, the company’s original product, provides personalized benefits and policy communications to employees, with the idea of reducing costs and improving value.

Similar definitions and portfolios of talent management applications would come from Halogen Software, Kenexa, Lawson Software, SucessFactors, Oracle PeopleSoft HCM, Ramco Systems, Softscape, Workscape, Kronos, and so on. In the recently unveiled “Integrated Talent Management Practices Study” by IBM Global Services and the Human Capital Institute (HCI), the survey was based on the following six talent management dimensions:

1. Develop Strategy — Establishing the optimal long-term strategy for attracting, developing, connecting and deploying the workforce;
2. Attract and Retain — Sourcing, recruiting and holding onto the appropriate skills and capabilities according to business needs;
3. Motivate and Develop — Ensuring that people’s capabilities are understood and developed to match business requirements, while also meeting people’s needs for motivation, development and job satisfaction;
4. Deploy and Manage — Providing effective resource deployment, scheduling and work management that matches skills and experience with organizational needs;
5. Connect and Enable — Identifying individuals with relevant skills, collaborating and sharing knowledge, and working effectively in virtual setting; and
6. Transform and Sustain — Achieving clear, measurable and sustainable change within the organization, while maintaining the day-to-day continuity of operations.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 1

Sure, by now most of us have heard about the importance of strategically managing talent and human capital, but how many of us are convinced that companies truly buy into those lofty concepts in droves? Some of us will even have read McKinsey’s now classic study from the late 1990 that coined the term “the war for talent.”

In other words, now in the new millennium, we find ourselves in the talent age. The article’s authors claimed that in an environment where competition has become global and capital is abundant (well, at least it was 10 years ago, well before the recent collapse of banking investment giants, and the US and German government interventions), “…all that matters is talent. Talent wins.”

Conversely, during the agricultural and brick-and-mortar age of the 19th century, the economy was based on land, and on truly physical and very tangible assets, whereas people were regarded as a mere labor expense. The industrial age of the 1930 followed with a manufacturing-driven economy and a need for specialized workers. Then came the automation age of the 1960 that introduced the concept of human resources (HR) management. Still, higher business performance was derived through the most effective use of factories and distribution networks, i.e. physical assets, much more than via staff.

The knowledge age of the 1980s moved the basis of economic value to information and knowledge assets through integrated communications and computer technology. That era introduced the concept of “knowledge workers” and people being regarded as “assets” (rather than a necessary evil and expense). Now, post Y2K, the competitive battlefront is for the best people because they are the true creators of value. Nowadays, we are in the age of talent management and human capital management (HCM). Right?

Well, during these days of Wall Street crumbling and “main street” companies struggling to compete globally, it is easy to be cynical about concepts like HCM, while watching on cable TV how ten thousands of former employees are carrying boxes and vacating once coveted premises. Moreover, many of us have also in the past worked for (and with) jerks and felt unimportant and unappreciated by our employers.

How believable are then these platitudes about “people (or their skills, at least) being the most valuable corporate asset?” Yeah right!

True Mavericks Do Succeed

But, like mediocre individuals, mediocre and average companies resort to the usual “hire-and-fire” practices (not to use the currently politically loaded “more of the same” mantra). One such all-too-common practice is to layoff a number of folks in a knee-jerk fashion (many of whom might be potential talent gems) during the tough times, based on outmoded thinking that equivalent replacements will be readily available in the job market when times improve.

Little do these companies know (or think about) whether they have ever properly aligned their strategic business objectives with the current talent pool and employees’ performances. Do they know who the best performers are (and why, based on which metrics?), and who can smoothly replace whom in case of a departure (as a way of life)? Moreover, workforce planning at such organizations is based on past staff profiles, without the ability to project the needed skills’ requirements and shifts in the future. This makes forecasting workforce supply and demand almost impossible (if even intended).

On the other hand, analyst research has time and again proven that organizations using talent management strategies and solutions exhibit higher performance than their direct competitors and the market in general. For instance, Taleo’s own research shows that from Fortune 100 global enterprise recruiting and performance management to small and medium business, leading companies invest in talent management to select the best person for each job because they know success is powered by the total talent quality of their workforce.

According to Taleo Research and the Human Capital Institute (HCI), over the past two decades, the enterprise value vs. book value of publicly traded companies has increased fivefold. This value “delta” can be justified by the value of their brands, but also by the value of their assembled workforce. At the same time, the tangible vs. intangible assets ratios changed from 62/38 percent in 1982 to 15/85 percent in 2002.

Many of us have heard stories about the hipster companies like Google or Apple nurturing and pampering their talented employees in order to get the best innovativeness out of them. More examples of such environments can be found in William C. Taylor and Polly LaBarre’s acclaimed book entitled “Mavericks at Work”. Perhaps the maverick concept could also work in politics too, but let’s first discern who the real maverick is? But I digress…

Anyway, for ordinary mortals, the chance to work at such a privileged company seems equal to their chance of dating a movie star. Therefore, it is easy to go back to being cynical and dismissing HCM and talent management as just the latest fads.

The Need for Talent Management Seems Real

But, at the recent Taleo World 2008 conference, I was able to witness first-hand that the talent management is a vibrant enterprise software market, and a battleground for both software providers and user companies (employers). In fact, the extraordinary (maverick) companies do not look for ordinary mortals but rather for a talent that is hard to find.

According to sources like The Gallup Management Journal, the United States (US) Bureau of Labor Statistics (BLS), the United Kingdom (UK) Chartered Institute of Personnel and Development (CIPD), Hewitt Associates, and Taleo, there are many challenging workforce issues confront HR departments, including:

* Heightened competition for skilled workers — sure, there is a record high unemployment figure in the US these days, but some sectors have severe shortages of skills such as nurses, petrochemical engineers, renewable energy (green) experts, or stem cell researchers, to name a few. Some stats are showing the figure of 10 million more available jobs than available skilled workforce in highly demanded sectors;
* Impending retirement of the “baby boomer” generation — the folks that are 65 and older, whose number is expected to double in a few years time from currently 35 million to 70 million. While this could be a good sign for senators McCain or Clinton’s voter constituency down the track (in 2012, say), it is definitely not for the US economy and innovative companies hungry for talent and knowledge;
* Low levels of employee engagement – with only 14 percent of employees being highly engaged (feeling fulfilled by and keen on their job), 62 percent moderately engaged, and 24 percent actively disengaged from their job (i.e., looking for something else, while this mundane job beats unemployment and helps with paying bills). This is not surprising, since acording to research published in 2005 by business management scientists and balanced scorecard pioneers David Norton and Robert Kaplan, a mind-boggling 95 percent of employees don’t understand the strategic goals of the company that employs them;
* Acknowledgement of the high cost of turnover – with a whopping 40 percent in the US, whereby 23 percent belongs to voluntary departures. Some stats show the cost to replace an employee going up to one and half of the employee salary. In fact, I recently learned that Starbucks could save US$120 million a year if it could only reduce employee turnover by 10 percent. Now I know what else contributes to my coffee drink price (besides the fair trade beans and employees’ benefits), and will start paying attention to see how long my neighborhood barristas stay at work;
* Arduous demands of managing dispersed global workforces, bundled with offshoring and outsourcing trends; and
* Importance of succession planning, which is a consequence of many other abovementioned issues.

Talent (Human Capital) Management and Sports? Sign Me Up, Please! – Part 3

No Laughing Matter, Indeed

The discussion so far has ascertained that talent management, as a strategy, requires both appropriate systems and an organizational commitment to attract, acquire, manage, and measure the talent needed to achieve a company’s business objectives. Without the alignment of business and talent management systems and processes, and without closing the gap between workforce strategy and execution, companies will sub-optimize their benefits and put their goals at risk.

Going hand in hand with strategic alignment is another significant trend in recent years, which is the recognition that automating transactions in silos (within only, e.g., recruitment, performance, compensation, succession) is not helping the human resources (HR) department. It is indeed difficult to expect any strategic alignment between business and the talent roster with fragmented data, applications, and talent pools, where data is often lost, and there is consequently no single view (or single version of truth).

Hence, fragmented islands of information render HR departments’ decisions after-the-fact and reactive at best, whereby the system is used only a few times a year, while the information technology (IT) departments remain complex and inefficient. The company’s execution is thus inhibited, since it is difficult for its top managers to determine next year’s talent needs, identify top performers, keep good talent from leaving, find more quality people, and, at the end of the day, help drive business forward.

Moving toward an integrated approach means that all of the talent management functions can be accessed from one dashboard – and the data is shared for the benefit of aligning with business objectives. But more importantly, the unified talent management platform supports a third key trend, which is to promote the line of business (LoB) manager into a key constituent and decision maker.

However, as Sherry Fox’ blog post depicts it so well, it is not easy to be an HR staffer these days. Let’s imagine the life of an HR manager, when early in the morning he/she learns about the resignation of the top few performers, and later in the morning he/she reads the report on declining retention numbers, and learns about some hiring managers rejecting many potentially good candidates.

Of course, around lunch time, the chief operating officer (COO) will summon an impromptu meeting on why the company’s best people are leaving, while after the lunch break (if any), there could be some compliance complaints (e.g., on some diversity, age, handicap, privacy, and whatnot discrimination). Just to add the “icing on the cake” for the day, in the afternoon he/she learns that the top candidate was taken (since the offer came too late). Later in the afternoon comes a report on the sales folks missing their numbers due to still too many open positions.

What might go through the HR manager’s hectic mind (other than some suicidal thoughts) could be frustrations for not having the help of unified IT systems, his/her inability to read the hiring manager’s mind, the inability to obtain valid data to predict corporate talent vs. business gaps, and ultimately, the inability to move fast enough.

What Would Nirvana Be?

So, what could the unified talent management platform change and how? Well, in a hypothetical case, the unfortunate HR manager could instead see, first thing in the morning, a report saying that the retention numbers are at an all-time high. This would be credited to the new succession and career planning initiative (backed by equivalent software) that has lately placed 100 top performers in new jobs.

In mid-morning, the chief executive officer (CEO) might announce a new initiative in Europe, where he/she desires 50 managers with European experience, 200 employees who speak a European language, 300 employees with international career plans, and an external general manager (GM) candidate. Instead of being dumbfounded, the HR department is now able to swiftly send a European talent request to the executive staff worldwide.

In addition, with the help of a nifty recruitment application, the HR folks can launch a tailored European career site under the corporate brand. Soon after, resumes start flooding in, and based on a well thought-out success profiling and interview scheduling system, 75 ace candidates are invited in to interview.

In late afternoon, when CEO calls a follow-up status review on the European initiative, the HR manager gladly reports that he/she has mobilized the talent, whereby both top internal and external talent has been identified. It might turn out that, e.g., 32 percent of the existing global workforce has European goals, and the onboarding process is thus now live in dozens of countries.

The bottom line: mobilizing talent should help companies drive the business. In this case, the sales folks might just “blow out” the quarterly figures due to the high productivity of newly recruited reps that were immediately up to speed.

Sport Teams Championing Talent Management

But, nothing can be better music to my ears than marrying enterprise applications with sports. To that end, as to prove the concept of talent management, one of Taleo World 2008’s presenters pointed out Major League Baseball (MLB) team, the Oakland Athletics (A’s). In fact, the A’s GM Billy Beane’s executive talents and the organization’s baseball philosophy were the subject of Michael Lewis’ acclaimed book entitled “Moneyball: The Art of Winning an Unfair Game.”

In other words, by paying close attention to the main pillars of talent management (i.e., recruiting, performance management, and compensation), and by aligning them to the overall business strategy of being competitive at a modest payroll expense (and budget), the A’s have managed to change the relentless game of baseball, and compete with the rich “evil empires” of the New York Yankees and the Boston Red Sox. Namely, for the most recent several years (not counting the dismal losing 2008 season), by using facts (stats) to supplement instinct, the A’s have achieved about the same number of regular season wins, about 730. This figure is about the same as those of the Yankees and Red Sox, despite the A’s being outspent multiple times (four times by the Yanks, and threefold by the Red Sox).

While this example has certainly convinced me of the importance and general value proposition of talent management, I, as an avid Red Sox fan (Go Sox!), have to add some additional facts, starting with the one that the A’s haven’t had much success in the postseason (playoffs). The Red Sox have also seemingly implemented the same pillars of talent management, but with the overall strategy of not necessarily skimping on the players’ pay, and of paying-for-performance (of course, in accordance with the MLB regulations and players’ union).

Maybe that hefty payroll (but still lower compared to the reeling Yanks) can be credited with the two World Series won in four years, and reaching five playoff contests in six seasons? When it comes to recruiting, the Red Sox’ farming system, combined with occasional free agent acquisitions, seems to be doing well. But it is the astute implementation of performance management and compensation that does the job and closes the loop.

Namely, instead of valuing the sluggers’ figures for home runs (HRs, not to be confused with human resources!), stats like on-base-percentage (OBP), number of pitches to strike out at bat, batting average (BA), number of strikeouts, etc., play a much more prominent role in evaluating the player. The same goes for pricey pitchers: instead of judging their mere number of wins, the stats like the number of walks, the number of strikeouts, the number of pitches per game, the number of innings per game, earned run average (ERA) etc., are even more critical for evaluations.

Switching sports, the New England Patriots would be another good example of exceptional results in the 2000’s being delivered by balancing talent with a limited payroll, due to the National Football League’s (NFL) salary cap imposed onto all teams (which is not the case with MLB). The Patriots would be an example of a team of virtually no star players with so much success in this decade (three Super Bowls in four years, and six playoff contests in seven years).

Even Tom Brady, who has meanwhile become a star on his own (in part owing to his “extracurricular” activities), would be a good example of recruitment and succession planning. Well, at least till this very recent season-ending (possibly even career-ending) injury…

In any case, I now subscribe to the “war for talent” motto from Part 1, much more I mean. Make no mistake, I doubt that the above sports teams use the solutions from Taleo, Halogen, Kenexa, Lawson, Oracle, SuccesFactors, Ultimate Software, Agresso, or Authoria, since in this field, the recruiting of players and coaches follows different paths (certainly not via resumes on Monster.com or LinkedIn, but rather via a close-knit network of agents, scouts, etc.).

Still, there might be some connection between sports and enterprise applications, since, prior to going public, NetSuite added Beane to its board of directors. Curiously, NetSuite’s on-demand software is used in the A’s sales and marketing department (after all, these teams need to sell us tickets and merchandize, and they need corporate sponsors).

Vendor Rating and Certification Updates: BI and ERP

It’s mid-November and time to tell you about some of the new product ratings and certifications that we’re covering in our research. TEC analysts recently completed certifying products from BatchMaster and Targit.

Each vendor successfully demonstrated how its product addressed a script of functionality as identified by TEC analysts. (Look for products proudly wearing the TEC certification badge in our evaluation centers and vendor showcase.)

* The Targit BI Suite, with its “few click” approach is covered in our BI Evaluation Center.
* The BatchMaster Enterprise solution focuses on the requirements of companies in the process manufacturing industry, as covered in our ERP Evaluation Center.

In addition to those TEC certified products, we also published new data about the following products.

* Newly revised data on the OpenAir professional services automation suite.
* Webcom joined our Business Process Management (BPM) Evaluation Center with the submission of its ResponsAbility product.
* Software development and QA company, Technosoft, joined our outsourcing evaluation center.
* TEC published newly revised data about Microsoft Dynamics SL. The product’s ratings in our evaluation centers (accounting, ERP for service industries, project portfolio management, etc.) correspond to its recent version 7.

The Wizardry of Business Process Management – Part 1

The business process management (BPM) market is sizzling hot, with Gartner Dataquest estimating its compound annual growth rate (CAGR) at 13 percent in 2009. In fact, almost all leading BPM vendors have been buzzing about their unprecedented growth and profitability, especially amidst the ongoing economic drought.

It is truly difficult to argue against the need for companies from all walks of life to improve their business processes. Doing “better, faster, and cheaper” is the “slogan du jour.”

In his keynote presentation during the recent Lombardi Driven Online virtual conference, Lombardi Software’s CEO Ron Favaron referred to BPM as “Business Pressure Management.” That pretty much says it all. Logically, to the end of managing business pressures, Lombardi offers its broad BPM suite called TeamWorks Enterprise Edition [evaluate this product].

I also recently attended a Webcast by Appian Corporation, possibly the first BPM company to deliver process, knowledge, content, collaboration, and analytics capabilities in a comprehensive suite, Appian Enterprise [evaluate this product] and its software as a service (SaaS) counterpart Appian Anywhere. I particularly liked one slide in the presentation deck wherein the eight bullet points’ first letters cleverly spelled out the mnemonic REMEMBER (why to deploy BPM now) as follows:

* Retain customers
* Enhance standardization (and consistency)
* Measure business performance
* Evaluate components of processes (subprocesses)
* Manage all elements of the business
* Bottom line improvements
* Eliminate bottlenecks
* Rapidly deploy new services (and processes).

Indeed, these are some of the typical benefits of deploying BPM systems, but the trouble, called the lack of clarity and consensus, starts with the quandary about what exactly constitutes BPM, and what exact parts and capabilities of BPM help achieve those benefits? In other words, are there more important and better BPM suites and/or components vs. those that are of less importance?

In plain English, BPM entails all methodologies and tools that help businesses improve their processes. Depending on the context, BPM can be regarded as a management discipline, a technology, or even both. If one defines BPM as an approach to methodically design, implement, execute, control, and improve business processes, then one can argue that it is a management discipline. In addition, there exists a raft of accompanying IT tools to support this discipline in all of its abovementioned stages.

Extreme BPM Definitions

Simple as that, right? Well, not really, and my concern with the BPM word-use is semantics. Namely, so many people might still mean “business process modeling tools to help us with radical business process re-engineering (BPR),” which was all the rage back in the early 1990s. Indeed, this erstwhile people-centric approach of managing the overall business, independent of the specific technology or tools that are used to support it, has since gone out of fashion.

Namely, the problem is that the abstract world modeled in modeling tools often has not much to do with real-life business processes and typically cannot be implemented. If a business process analyst models a company all the way in, e.g., IDS Scheer AG’s ARIS tools, by the time he or she is done the model might already be obsolete.

And by the time the company implements the model, the dynamic economic environment will have already changed. Yet the model on paper (a bunch of flowcharts) must be deployable, usable, and maintainable in production. Business processes are about dynamics (or business agility, if you will) and a drawn flowchart is anything but dynamic.

On the other hand, the purely integration-centric approach of providing a way for software to communicate and execute automated workflow to accomplish discrete tasks via integration and process orchestration is not nirvana either. Many other vendors might mean that BPM is “an effective way for us to re-package our traditional enterprise application integration (EAI) tools under the guise of a service oriented architecture (SOA) orchestration project.”

IBM’s BPM suite, Fujitsu Interstage, TIBCO Software, Software AG (formerly webMethods), SAP NetWeaver BPM, and Oracle BPM come to mind here. These integration-centric BPM providers have often been accused by pure-play BPM suite providers of primarily targeting IT departments to try to sell BPM as a matter of service orchestration.

Yet, the true value of BPM should be to empower business users. To be fair, these larger companies have recently acquired companies that provide BPM software aimed at business users, and I imagine the competition from larger companies will only intensify.

For instance, zooming in on Oracle’s BPM product strategy, the idea here is to offer a complete and integrated BPM platform that caters to system-centric, human-centric, document-centric, and decision-centric business processes (workflows) in a single runtime environment. The suite is aimed at business owners and developers to collaborate, to define processes across systems and lines of business (LoBs), and to improve business process efficiency by modeling, executing, monitoring, analyzing, simulating, visualizing, and optimizing business processes.

But, by digging deeper into the Oracle SOA Governance suite and Oracle BPM suite, it is possible to note so many identical components, differing mainly in the fact that Oracle BPM has to also accommodate human interventions. The Oracle BPM suite can be bolstered optionally with the business process analysis (BPA), design, and modeling capabilities via the partnering IDS Scheer’s ARIS tool (e.g., for achieving Six Sigma compliance).

IDS Sheer’s blog post recently tried to demarcate the line between BPA and BPM suites as follows:

“The primary purpose of Business Process Analysis (BPA) tools is to visualize, analyze and improve business processes. BPA tools help translate every day business complexity into structured models (scope: from business to model). They provide insight into an enterprise’s structure – i.e. how strategy, products and services, processes, roles, information and systems are related and influence one another. By creating a single point of truth, BPA tools strive to improve the communication between various stakeholders in a company, safeguard corporate knowledge and support decision-making and change management. Most notable user groups are business managers, process owners, quality managers, business analysts, risk & compliance officers and enterprise architects. BPA tools have rich semantics in order to fulfill a broad information need. They enable users to visualize and analyze the enterprise from different point of views, e.g. from a performance-, risk & compliance- or architecture perspective.

Business Process Management Suites (BPMS) on the other hand serve a different purpose and target a different audience. While they do offer modeling capabilities, their primary purpose is to automate, execute and monitor business processes based on technical models (scope: from model to execution). Notable user groups are business- and information analysts, process engineers, software developers and system administrators. BPMS do not offer such rich semantics as BPA tools in the sense that their metamodel does not comprise concepts for performance management, risk & compliance management or architecture management. Then again, these concepts are not required to automate processes.”

A Fragmented and Crowded Market

Thus, the market for BPM software and related implementation, consulting, and training services is intensely competitive, rapidly changing, and highly fragmented. Every BPM aspirant likely encounters competition from internal IT departments of potential or existing customers that may seek to modify existing systems or develop proprietary systems in a do-it-yourself (DIY) fashion.

The process improvement adoption has started lately in many IT departments via implementing a set of concepts and policies for managing IT infrastructure, development, and operations. Some of these sets and disciplines are Information Technology Infrastructure Library (ITIL), IT Service Management (ITSM), and Control Objectives for Information and related Technology (COBIT).

Moreover, there are a number of enterprise-wide initiatives around process improvement disciplines such as Lean manufacturing, Six Sigma, Total Quality Management (TQM), etc. These frameworks of concepts and policies often require IT support in order to make operational best-practice workflows, while the linkage to business users is critical.

The market consists of a number of established BPM suite providers such as Appian, Ascentn Corporation, Cordys, Global 360, Lombardi, Metastorm, Savvion, Pegasystems, and Ultimus, to name some. In addition to the abovementioned SOA middleware and enterprise architecture (EA) providers, internal IT departments, and BPA and process mining vendors (e.g., IDS Scheer or Pallas-Athena respectively), BPM suite vendors also compete with companies that target the customer interaction and workflow markets, and companies focused on Business Rules Engine (BRE) such as Corticon Technologies, FICO (formerly Fair Isaac Corporation), and the ILOG division of IBM.

Competition additionally comes from professional service organizations that develop custom BPM software in conjunction with rendering consulting services. To further muddle the picture, there is a number of Enterprise Content Management (ECM)-based vendors such as the Documentum division of EMC Corporation, FileNet, the division of IBM’s Information Management Group, Adobe LiveCycle, Oracle Stellent, and Autonomy Interwoven, to name but a few.

What Constitutes a Full-fledged BPM Suite?

BPM suites’ scope can be sliced and diced in many ways. For one, Part II of my 2008 five-part blog series entitled “It’s About Process (or Ability to be Responsive)” outlined the necessary BPM suite components. But if one is to look at BPM suites through the lens of the Plan-Do-Check-Act (PDCA) loop, one could think of covering the following three necessary activities (within the feedback loop):

1. Business process modeling and analysis, which were explained earlier on;
2. Business process automation or execution; and
3. Business activity monitoring (BAM), measuring, process mining, and so on, as parts of continuous business process improvement efforts.

Most of the abovementioned contemporary BPM suites have a comparable basic functionality set, which has been specified as the desired capabilities of a BPM suite in Gartner’s 2008 report entitled “Four Paths Characterize BPMS Market Evolution.” These capabilities are:

* Model-driven development environment (with model-driven process execution rather than source code-based one). Processes can be changed bi-directionally, either in the design or execution stage (each impacting the other), and with an audit trail of changes;
* Process component registry or repository management;
* Document management and ECM systems;
* User and group collaboration;
* System inter-connectivity;
* Business event management, business intelligence (BI), and BAM;
* Online and offline process simulation and process optimization;
* Business rules management system (BRMS);
* System management and system administration; and
* Process execution and a state management engine.

While most of the leading BPM suites would address this prescribed broad functionality set by and large, they have some intrinsic differences that make them more suitable for one usage scenario versus the others. This difference often comes from the underlining architecture and the genesis of a particular suite. It may also be a consequence of the key customer segments that the vendor targets.

BPM practitioners understand some of the common usage types of BPM systems, often referred to as “human-centric business processes,” “system-centric (integration) processes,” and “document-centric processes.” Most of the real-life business processes have all of three elements in them, but some are heavier on one versus the other two.

In its whitepaper entitled ”Understanding Usage Scenarios An Enterprise BPMS Must Support,” Savvion identifies and describes four other equally important usage scenarios that are not very well understood. These are: case management, rule-based (decision-intensive) processes, project-oriented processes, and event-centric process management. Savvion claims to currently be the only BPM provider that can accommodate all of these seven usage scenarios.

What About Accommodating Change (We Can Believe In)?

But, after all this discussion, do BPM suites necessarily mean “build for change?” Do they by default mean easy automation, rapid iteration, and execution?

The bar has to be set higher, since pragmatic buyers are increasingly looking for proven fixed-cost business-driven enterprise-wide BPM deployments. An astute BPM suite should take a process-centric approach to managing business operations that can deal with any business workflow with high impact on overall customer service operations.

Metastorm’s [evaluate this product] white paper “Building a Business Case for BPM” asserts that there are three fundamental characteristics of BPM that make this technology the game-changer:

1. BPM is Incremental. One of the core advantages of BPM is that it need not require you to conquer all problems at once in order to deliver results. Rather projects can start small, while still making a large impact…To paraphrase, it is less important to start with the perfect process candidate than it is to establish a leverage point from which to extend into other opportunities.
2. BPM is Measurable. BPM is unique among technology-based initiatives in its ability to incorporate metrics and measurement parameters at the outset of the project and to automatically capture and track them along the way. BPM presents the opportunity for an immediate and material impact on business performance and visibility.
3. BPM is Repeatable. BPM presents a compound benefit where the skill set and competencies gained from the first process deployed can be leveraged to automate and improve multiple processes throughout the organization for years to come.

Clarifying the BPM Value Proposition

So, has all this lengthy discussion about BPM parts and parcels has brought some clarity to you? Well, I could understand if you are still having an “as clear as mud” feeling. Therefore, I was recently fortunate to witness a witty presentation that attempted to explain the essence of BPM via some humor and metaphor of the classic “Wizard of Oz” movie.

Namely, on March 23, 2009, Alan Trefler, Pegasystems’ founder and CEO, gave his luncheon keynote presentation at the Gartner BPM Conference in San Diego. His theme was “Don’t just Survive…Capitalize.” Trefler begun by reminding the audience that in today’s turbulent economy we are all “not in Kansas anymore” and may just need some ruby slippers to find our way back home to profitability. If you have 14 minutes to spare, you can re-capture the spirit of the event here.