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How clear is our crystal ball
How clear is our crystal ball
How clear is our crystal ball
How clear is our crystal ball
How clear is our crystal ball
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How clear is our crystal ball


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  • 1. How Clear Is Our Crystal Ball BY JOHN MOORE DECEMBER 20, 2001 ARC INSIGHTS 2001-054E Keywords: ATP, CTP, SCP, Logistics, Components, E-Markets, ISMs, TEAM, ERP, Por- tals Issue: At the beginning of the year, ARC’s team of supply chain and enterprise analysts collectively contributed to making ten predictions for the coming year. How well did we do? Our predictions were surprisingly close to the mark in a tumultuous year. Summary: The beginning of the year saw a slowdown in many of the world’s econo- mies, which continues today. While there were faint signs of a recovery at the end of summer, the tragic events of September 11th, dashed such hopes. Virtually all software suppliers interviewed by ARC In a year where many predictions saw a drastic decline in sales during September, whichby pundits belong in the trashcan, has only recently begun to let-up.ARC’s analysts did surprisingly well in predicting the future.. Our overall prediction that there will be little let-up in the adoption of software technologies did not hold-up under the weight of an increasingly tough economy. Companies of all sizes began to closely scrutinize their software purchases, demanding suppliers to show some real ROI for their solution offerings. In many cases, compa- nies have simply postponed purchases till the economy improves. We have also seen a dramatic pull-back from large, expansive, multi-million dollar deals with implementations that can extend for over a year in favor of much smaller, tighter and quicker implementations that deliver quick pay- back. The following is an assessment of the predictions we made for 2001. We will publish an accompanying Insight at the beginning of the year with our predictions in 2002. ENTERPRISE & AUTOMATION STRATEGIES FOR INDUSTRY EXECUTIVES
  • 2. ARC Insights, Page 2ISMs Struggle to Attract Suppliers and Grow OperationsOur prediction for Industry Sponsored Marketplaces (ISMs) was clairvoy-ant. Most marketplaces have struggled over the past year to define whattheir value-add would be to those companies and industries that fundedtheir formation. Governance issues, lack of supplier involvement, and anunclear value proposition still plagues many ISMs. We even saw the de-mise of a few. The most notably were the Petrocosm oil & gas ISM that wasformed by Chevron and Texaco (before their merger) and Envera, the mid-market chemical ISM, which was acquired by the neutral marketplaceChemconnect.After a Sabbatical, ERP Comes Roaring BackWe saw ERP growth in the crystal ball, but it was not the growth of ERPsoftware sales, as we had predicted, but the growth (or at least relative sta-bility) of the large ERP suppliers. It was actually a pretty poor year for ERPsoftware sales, something that is further highlighted in our soon to be re-leased Market Outlook Study.While the large ERP suppliers have weathered the economic storm betterthan most, it is not from the sale of ERP systems. Rather, large ERP suppli-ers have done well by selling new solution offerings, such as CRM andSCM applications, to their existing customers. Customers who have beenspooked by shaky economic conditions or the demise of many smallersoftware suppliers, are returning to the large and relatively stable ERP sup-pliers for other applications. This has led to the resurgence of suchsuppliers as Baan (slowly recovering), Oracle, Peoplesoft, SAP, and others.Beginning Evolution of Component Software MarketARC was right on target with this one. The component software market isdeveloping at a rapid clip, with most software suppliers developing strate-gies for their products that will leverage a component architecture. J2EEand EJB (Enterprise Java Beans) have become the de facto standard, with amajor vote for their support coming from SAP when it stated in Novemberat its TechEd conference that it would be adopting the Java platform forintegrating its various modules. There has also been a rise in Web services,an off-shoot of a component architecture that we will be hearing muchmore about in the coming year.© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 •
  • 3. ARC Insights, Page 3 Increasing Focus on Enabling SCP for Tier 2 and 3 Suppliers Our psychic abilities continued to shine forth with our prediction here, al- though like our prediction for the ERP market, the reasons behind the shift to enabling Tier 2 and Tier 3 suppliers were slightly different than what we foretold. Instead of Supply Chain Planning (SCP) suppliers creating completely new software packages targeted for lower Tier customers, these suppliers have been forced to unbundled their traditionally large, all encompassing solu- tions into smaller modules in response to tighter IT budgets that could no longer support large, multi-million dollar deals. Along with the unbun- dling of solutions, suppliers have also had to dramatically drop prices to keep their project pipelines full, creating an opportunity for mid and low Tier companies to purchase SCP solutions. Migration from ATP to CTP We were too optimistic on this one. While we thought that there would be a rapid migration from Available-To-Promise (ATP) to Capable-To-Promise (CTP) as manufacturers strive to lower their costs and remain competitive in an increasingly global market, the reality is that manufacturers stuck to what they knew in a difficult environment and tried not to “rock-the-boat.” Moving to a CTP model is too drastic a culturalSupplier Action change for most, and companies are hedging theirArzoon Acquires From2 bets conservatively as they ride through this globalClearCross Merges with Atrion recession.Descartes Acquires Centricity and assets of NeoModal Pricing Management Attracts AttentionQiva Merges with Capstan This was another prediction where we were slightlyVastera Acquires SpeedChain off the mark. Manugistics has certainly been beating the drum loudly on this one, but to date, adoption hasStrengths of Leading CTP Suppliers been slow among manufacturers. To Manugistics’ credit, they have made some beach-heads with their pricing optimization solution being used in - among other areas - for seismic exploration applica- tions in the oil & gas industry. ARC research published in our December Strategy Report showed, how- ever, that the application of activity based costing (ABC) methods in distribution-centric supply chains is delivering high ROI and has some very © 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 •
  • 4. ARC Insights, Page 4satisfied customers. If this message gets out to a broader audience, we maysee greater uptake in the year to come. We’ll keep you posted.Semblance of Order in Transportation LogisticsThis was another clairvoyant call by an ARC analyst. In 2001, we saw a lotof consolidation take place with many mergers and acquisitions, as well asmany more ventures that simply went bust. With few exceptions, theplethora of transportation-centric public marketplaces have all washed-out.The old-timers have survived the storm, while only a few new players havepersevered long enough to see a new year. In short, the noise-level in thetransportation sector has been significantly reduced.Mergers, Acquisitions, and Partnerships Dominate TEAMMarketOur ability to predict accurately in this sector did not match some of ourother successes. While the market for many asset management solutionsuppliers continues to be tough, the leading suppliers and countless smallersuppliers still remain. There has been little if any consolidation and no sig-nificant partnerships to solidify this market.The year 2001 saw some of the lowest market valuations for many EAMsuppliers, but none were acquired. Could it be that this market’s projectedgrowth and opportunity prospects are not promising enough to justify amove by one of the leading automation suppliers to acquire one of the lead-ing, public EAM suppliers? Or are leading automation suppliers havingsome difficulty in selling their current asset management offerings (whichoften include some sort of partnership with an EAM supplier) to custom-ers?Enterprise and Plant Portals ProliferateThis was another clear view of the future from ARC. We predicted a goodnews/bad news scenario, which came to pass. Our prediction that the useof Enterprise portals would proliferate has indeed happened, and continuesto grow in importance and relevance as virtually all enterprises try to pulltogether disparate information into one comprehensive view that helps theend user/employee and boost productivity.We also were correct in predicting that on the plant/shop floor side, portalswould struggle in these tight economic times where budgets are scrutinized© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 •
  • 5. ARC Insights, Page 5carefully and the ROI for a plant portal is often hard to determine prior toimplementation. Recent reports from several plant portal suppliers sub-stantiate this point. While these suppliers have reported that theircustomers are deriving significant ROI from implementing such portals, itmost often comes from areas that were not expected. As these solutions seemore experience in the market, a clearer definition of ROI will become ap-parent, which could lead to greater adoption in the future.Channels Have the Last LaughARC was right on target with this prediction. Indeed, most companies areno longer trying to side-step their channel partners to directly reach the endcustomer. Rather, companies of all sizes are now implementing a widerange of channel partner management solutions to insure that their chan-nels have the most updated information to serve the end customer andmake the sale.For further information, contact your account manager or the author Recommended circulation: All EAS clients.© 2001 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 •