Sidney Hill, Jr.: Let’s talk supply chain management, or whatever else is on your mind

As a writer, I like getting email—or any form of communication for that matter—about my work. It tells me that at least someone out there is reading it. It's even more gratifying when a reader's comment provokes an ongoing, intelligent discussion. That's what happened after I wrote an analysis of the recent announcement that JDA Software plans to acquire supply chain management soft...
By Sidney Hill, Jr., executive editor September 1, 2008

As a writer, I like getting email—or any form of communication for that matter—about my work. It tells me that at least someone out there is reading it. It’s even more gratifying when a reader’s comment provokes an ongoing, intelligent discussion.

That’s what happened after I wrote an analysis of the recent announcement that JDA Software plans to acquire supply chain management software specialist i2 Technologies.

My analysis concluded that this transaction is a sign that supply chain management is no longer the highly specialized function it was perceived to be just a few years ago. I didn’t just write that off the top of my head.

Before keyboarding this analysis, I spoke with several industry experts. The consensus among longtime industry observers was that ERP companies—largely by acquiring best-of-breed suppliers—now offer supply chain software that is nearly functionally equivalent to that offered by i2 and other specialists. Therefore, users have become more interested in tight links to the applications that hold the information that goes in a plan—typically an ERP suite—than they are in having the most sophisticated supply chain system.

I also mentioned that vendors like Oracle and SAP had made it easier to connect supply chain applications to their ERP backbones by creating their own application integration and business process management platforms.

Those comments struck a cord—and sparked a dialogue—with the folks at GT Nexus, which offers on-demand global logistics and trade management solutions. Greg Johnsen, a GT Nexus executive VP, told me via email that he agrees that users want solutions that easily integrate with their ERP backbones. But he believes users still want the best-of-breed when it comes to supply chain functionality, and the only way to get both is through the on-demand model.

“If the natural home of supply chain management [applications] was among the broader offerings of Oracle and SAP, they would have made broader inroads to this region,” Johnsen wrote. “But they remain novices in the area, despite buying expertise in the form of smaller software companies. The beauty of on-demand supply chain management software is that it offers focused knowledge in a particular sector while also providing capability that’s easy to plug in to existing operations.”

But isn’t that what the ERP vendors are offering by acquiring best-of-breed vendors and building platforms for connecting those systems to an existing ERP backbone? Not quite, Johnsen argues.

“Because these solutions are installed on the customer’s premises, all connectivity and data translation is the user’s responsibility, regardless of the middleware solution,” Johnsen contends. “Data comes in from partners and it must be standardized, and there can be millions of messages a day. With on-demand, you have thousands of customers sharing a single instance of software, a single network of integrations, and a common data quality model that performs translations for the entire industry. This is a fundamentally different model.”

It’s different yes, but is it superior? It just so happens that we have a feature story in this issue that tackles the question of on-premise versus on-demand software (beginning on page 40). We welcome your comments on this or any other topic that MBT covers.