A changing of the guard

It has been some time since anyone dared to say publicly that we are witnessing the dawn of a new economy. Such words surely conjure images of the dot-com era, which ended badly for almost everyone associated with information technology.

But Tony Friscia, CEO of Boston-based AMR Research, made that exact statement in opening remarks at his firm's most recent supply chain management conference. He was quick to point out, however, that this new economy is not being driven by a frantic rush to acquire new technology. Instead, it is marked by a fervent desire to ensure the right technology is being used to support sound business strategies.

Evidence of this shift is showing up in numerous places, including analysts' projections on IT spending over the next several years, as well as in the makeup of MSI's list of the top 100 business application and manufacturing system software suppliers, 2004.

The MSI list now contains nearly 30 vendors—among them Documentum, Business Objects, Sterling Commerce, and Ascential Software—that weren't there just a year ago. And it's no coincidence that these companies are in markets that analysts expect to grow the fastest over the next few years.

Most analysts expect overall IT spending to grow at an annual rate of no more than 5 percent to 6 percent over the next five years, even if the economy continues to improve. Enterprise and supply chain management vendors, which traditionally have dominated the MSI Top 100, are expected to match that pace. Meanwhile, vendors in these new software categories—enterprise integration, content management, and business intelligence—are expected to see double-digit growth rates.

The disparity can be attributed to the roles the different classes of software play. "Enterprise applications, specifically ERP systems, were installed simply to automate processes," explains Jim Murphy, a senior analyst with AMR. "In the early days of ERP, that offered a competitive advantage. Now, most manufacturers have an enterprise backbone in place, which means the playing field is level and companies are looking for new ways to gain a competitive edge."

Suppliers of these new technologies say they can help manufacturers grab and hold a competitive edge by making strategic use of the information stored in their enterprise systems. Murphy says manufacturers should buy that argument as long as these vendors offer solutions that enable manufacturers to meet the twin objectives of boosting revenues and cutting costs. He also points out that in the short term, more manufacturers are likely to be looking for customer-focused solutions that boost revenues since they have devoted the last several years to cutting costs.

"Undeniably, companies should be looking at these new technologies," Murphy declares. "There is at least one compelling argument for each one."

The advent of the Sarbanes-Oxley Act and other emerging regulations present a glaring need for content management technology, which at the most basic level offers a systematic way of creating and managing documents related to various business processes. But Murphy says this technology also can improve everything from collaboration on product designs to posting product catalogs on a Web site.

Business intelligence carves data into small slices and picks out trends that paint a picture of how closely a business is meeting performance goals, while integration technology pulls together sets of data or links various applications needed to execute a business process.

While these technologies are generally lumped in separate categories, vendors typically blend elements of all three in their solutions. Most of these solutions also contain at least some characteristics of business performance management, or BPM.

In generic terms, a BPM solution includes a framework for mapping business processes—usually by establishing data flows or links between applications—along with a mechanism for alerting the appropriate people when a process is not working properly. This mapping cannot be done without some type of integration technology, which explains why some of the companies that call themselves BPM vendors—e.g., SeeBeyond, TIBCO, and webMethods—started out as developers of enterprise integration platforms.

Some industry experts argue that properly exploiting any of these new technologies, not just BPM, requires at least some type of integration platform. Murphy says the enterprise portal is the most obvious piece of integration technology spanning these solution categories. "Portals integrate applications and information on users' desktops," he says. "Portals require content management functionality to organize and present that information, and they serve as business intelligence or performance management dashboards."

Sam Starr, CEO of Sterling Commerce, says his company's primary mission is helping manufacturers comply with customer mandates for transmitting data electronically, and it couldn't accomplish that without the use of integration technology. "The minute you have to go outside your four walls to communicate with trading partners, you are into an integration play," he says. "We built an integration broker to help our customers satisfy those mandates."

Sterling Commerce calls its integration broker the Gentran Integration Suite, or GIS. Starr says it allows users to create process flows for sending the data their customers want to see, in the exact format they request. Q.E.P., a Boca Raton, Fla.-based manufacturer of hand tools for the flooring industry, uses this solution to prepare and transmit information about its products to the UCCnet GLOBAL registry, a repository used by major retailers searching for products they might want to carry.

Getting this information into the registry requires pulling information from Q.E.P's ERP system—PRMS from SSA Global, which runs on IBM's iSeries—and putting it into XML format. "That requires technologies and skills we don't have," says Ron Stitch, Q.E.P.'s UCCnet coordinator. "So we are paying Sterling Commerce to handle that for us."

Before the data goes to UCCnet, the Sterling solution performs a cleansing and validation process to ensure data is accurate and in the format UCCnet requires. This process, known as data synchronization or rationalization, is a key part of any integration project.

Two of the industry's leading business intelligence vendors—SAS and Business Objects—offer data synchronization capabilities in their product suites. SAS handles it through a product named Enterprise ETL (extract, transform, and load) Server. Jason Mann, SAS's manufacturing industry strategist, calls this product "a powerful component of the full spectrum of technology needed to carry out a true business intelligence strategy."

ETL Server pulls data from various sources—business applications, databases, or other repositories—and transforms it into any format required for use in a business process. Mann says SAS also has solutions that make it easier for manufacturers to turn that data into valuable information. Among them is Warranty Analysis, which allows predicting when products might fail by analyzing past failure patterns.

"When we show companies [ETL Server], we use their data," Mann says. "They know when they identified problems with their products, and our analysis consistently shows they could have spotted those problems three to six months sooner using our solution."

Device maker Possis Medical, Minneapolis, is using technology from Business Objects to improve product quality via near-real time monitoring of its production processes. And while this could be considered a combination business intelligence/performance management solution, it would not work without some up-front integration work.

The integration at Possis involved pulling data from numerous databases, spreadsheets, a homegrown shop-floor reporting system, and Possis' ERP system (Fourth Shift from SoftBrands). All of this data is sorted, cleansed, and transformed for placement inside a set of data marts that are part of the Business Objects framework.

Robert Scott, VP of manufacturing and IT at Possis, visits one of those data marts regularly to check on potential production problems. "[The data marts] tell me where I have issues on the production floor as they are occurring, rather than at the end of the month," Scott says. "We can see scrap rates almost in real time and quickly let our engineers know where they should be focusing their time."

York International—a manufacturer of heating, ventilation, air conditioning, and refrigeration systems based in York, Pa.—discovered that the recent addition of a business process management component greatly increased the value of Documentum's content management suite.

"We sold Documentum [to York's executive management] as a means of consolidating document or content management," says Tim Fives, York's manager of global content solutions. "We are creating a central repository for all of our product and parts specifications."

That project is necessary because York operates on three continents—North America, Europe, and Asia—and facilities on each continent use different parts in similar products. "Once we roll all of those specifications into a single repository, we can start using standard parts lists for each product," and thus reduce the overall cost of producing those products, Fives explains.

York also uses the Documentum suite to streamline access procedures for York's IT network. Historically, access was granted only after various York managers signed a series of paper forms. Now the forms are electronic, and routed to the appropriate managers by a Documentum workflow engine, which cuts days off the approval cycle.

With the new BPM engine, York is looking to drive all of its Sarbanes Oxley compliance efforts. "[The BPM engine] takes the Documentum system to another level by making it easer to roll out new processes," Fives says. "We can use the workflow manager to map out all of the processes we need to put in place to comply with Sarbanes-Oxley."

Lawn and garden product supplier The Scotts Company, Marysville, Ohio, knows the broad effect these new technologies can have on a manufacturing enterprise. When the company wanted to improve product demand forecasting, it turned to Ascential, a supplier of data integration technology, rather than a supply chain management or ERP vendor.

"We were basing our forecasts on our own shipment data, and we recognized the need to base it on point-of-sale [POS] data, which is a better reflection of true demand," recalls Deb Masdea, director of business information and analysis.

Scotts first tried solving this problem by storing data in SAP's Business Warehouse, a companion product to SAP's R/3 enterprise suite. Scotts got the data from customers via EDI and then wrote programs using SAP's proprietary ABAP language to load the data into the business warehouse. But for various reasons, this did not solve the problem.

First, says Masdea, writing and modifying ABAP programs was an arduous process. Second, checks of the data in the business warehouse routinely uncovered errors.

What Scotts needed was a means for matching retrieved POS data to its own shipment, production, and inventory data. This would generate a true picture of what items needed to be produced and shipped to match customer demand.

The solution emerged when SAP announced a partnership with Ascential to convert data from other systems into a format that SAP's applications could read. "We went to Ascential and outlined our problem, and three days later they had a demo showing us how to solve it," Masdea says.

Within 12 weeks, Scotts had a complete data conversion system online. Now POS data coming from Scotts' customers is almost instantly converted to SAP format. The data is then compared with inventory and production data, telling Scotts exactly what products it should ship next. This program also lets Scotts know which products are selling best at various locations, which betters overall sales.

Scotts now has a faster, less-expensive process that results in higher sales, and that's exactly what manufacturers will expect from any new technology they purchase in the new economy.