Line56: 2003 In Review
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by Jim Ericson, Line56
Thursday, January 08, 2004
In e-business, 2003 was a year mostly dominated by the economy, flat spending and a wait for a turnaround. By requirement, enterprises examined existing and new infrastructure and application investments closer than ever with a focus on value.
The vendor marketplace also contracted to the point where business models could no longer be sustained, where venture capital was flat, and where a even a good idea could no longer ride its own coattails.
Whatever the economic future holds, the bar for e-business technology has been permanently moved to a more credible place. Thanks to the businesses, consultants, analysts, readers and vendors who spoke with us and provided feedback, we came up with our own list list of 12 topics that made 2003 the most interesting year yet in e-business.
1. Consolidation
If it hadn't been for the Oracle-PeopleSoft imbroglio, the latter's acquisition of J.D. Edwards would have been enough to lead this category last year. We certainly have a makeover view of Oracle EVP Chuck Philips, the ex-Morgan Stanley icon who keeps talking like his plan is a fait accompli, though some fans are heading for the exits.
Among the big application vendors, SAP appears to have reaped the most benefit from the continuing uncertainty, but the new ERP slugfest has also firmed up realities for the whole takeover crowd. Fact: It's cheaper to buy and maintain technology than to develop it, and it's cheaper to acquire customers than it is to sell to them. The best proof of this came from SSA Global, which has suddenly become the fourth largest ERP provider -- with the biggest manufacturing base by number. For all the high-minded talk of platform architectures, there are a lot of CIOs out there happy they don't have to rip out expensive infrastructures from Baan and others who were supposed to be out of the picture by now.
The content management vendor landscape also condensed notably in 2003, with new get-it-all-here strategies to offer a range of structured, unstructured, DAM, and printing products. Open Text moved furiously, Interwoven and iManage merged, while IBM continues to support multiple partners as it slowly bakes its own content plan. In a separate case, EMC made a big statement by acquiring Documentum, and suddenly sees its future in software, as Sun has already.
2. Outsourcing
The notion of what is and isn't a core process was made clearer by the biggest-dollar deals of 2003. Gartner identified the average value of an outsourced contract at $47 million in May, but since then steady stream of multi-billion dollar contracts has made IT outsourcing a spectator sport that is not without risk. It also serves to show how competitive the landscape has and will become among the top infrastructure service providers and partner consultancies, though it's up to businesses to insure they extract the proper value.
Business process outsourcing in areas like HR, payroll and call centers were the fastest growing part of outsourcing in 2003, and a late rush was also detected in procurement process outsourcing.
As it relates to the category, regional job gains and losses can be tracked, but in fluid markets there is no way to identify the true causes of fluctuation and job migration in the employment market. In any case, Yankee Group predicts this trend will continue with growing opportunities in the government sector, but warned vendors to polish strategies and avoid fads. (Also see supply chain -ed)
3. Mid-Market Grind
We can't think of a vendor outside the esoteric that is not after mid-market "loose change" as the new revenue stream going forward, and all this attention is sure to make potential customers cautious. Even Siebel dove back into the CRM mid-market it once dismissed after an earlier project didn't work out.
Customer relationship management was the mid-market hotspot. The threat of Microsoft, the big bear lurking in both the general and CRM mid-market neck of the woods, didn't deter anyone from pushing their case. Research from Line56 and A.T. Kearney backs up the importance of this market, finding that 23.7 percent of application budgets were headed at CRM among companies of less than $1 billion in revenues, almost 50 percent more than larger peers, with no suggestion that this market has been sewn up.
Since then, the mid-market has been carved six ways from Sunday, everything from horizontal to "microverticals" and in every category from CRM to portals to supply chain. IBM wins our unscientific most marketing award with mid-tier advertising that was On Demand equally with its products. Of great importance, especially to big vendors, is the role and opportunities for general and value-added resellers, for without them this cake won't bake.
4. Portals
The economy runs on productivity gains, so workplace technology was bound to be one of the biggest hits of 2003. Line56/A.T. Kearney research put portal application spending in the number two spot in 2003, just behind ERP. Separate research from Line56 found that the average organization fields more than 120 Web-based applications, making portals the logical point of lightweight human integration.
While employee-facing or M&A driven self-service portals are just being deployed at many companies, the new message is the creation of business solutions, targeted investments that may be the eventual answer to the ROI question surrounding portals and everything else, and some are choosing to build rather than buy.
The main camps today are either application-centric, or collaboration-centric, or both, meaning that infrastructure and framework messages of the past are receding as standards are codified and the market matures. IBM made its collaboration intentions clear by combining Lotus with WebSphere, while SAP's theory of composite applications or xApps was underscored by a retiring Hasso Plattner, who called the portal the most important technology development in SAP's history.
With the exception of Plumtree, the main standalone portal names diminished, with Corechange bought by Open Text and Epicentric already gone to Vignette, content management plays that underscore the related nature of data and communities. Above or below the radar, portals are becoming ubiquitous, more targeted, and inherent to application strategies.
5. Integration Evolves
Much of this category is married to various standards movements, which can be tedious to follow. Fortunately for the rest of us, all those ongoing meetings are bearing fruit, though not without some proprietary complications.
Tops on the list is Web services where increasing use is leading by baby steps to service-oriented architectures, an integration migration from point-to-point connections to loosely connected applications along more continuous nodes. WS-I continued its tread with Oracle as a test bed, and with various partners, Tibco offered a new collaboration group while Siebel continued a similar undertaking.
Signs of progress include new emphasis on Web services management, security and orchestration, and growing use of directories and registries, a lagging indicator of Web service adoption. Standards were also incomplete but arriving for portal interoperability, and best practice/data sharing projects are under way in PLM and other areas.
Akin to standards is the open source movement, which did not make the top list this year but will almost certainly have a category of its own in 2004. Linux will be the main driver even if SCO is able to throw a monkey wrench in the works, and companies like Novell and Oracle have also joined the Linux bandwagon. Presaging this, Covalent hit the ground with one of the first products for open source application management.
6. Supply Chain Gains
This category consolidated in 2003, and not only by corporate acquisition. While the traditional supply chain planning and execution strategies are still mostly discrete (and spreading downstream to smaller companies), an enterprise trend was toward gathering many internal and external domains: sourcing; PLM; SRM; spending and contract management into more virtuous cycles in imaginative ways, sometimes with the portal as central delivery interface. More often these topics are becoming subsumed into the supply chain discussion.
It's not to say that the pure-play supply chain vendors are yet facing extinction. Categories like spend management, forecasting and even sourcing are still bedsores at almost every company that merit attention of their own. As scheduling and other efficiency opportunities increasingly are met, outsourcing plays a role as well, especially in warehousing, transportation and logistics, (we got our first taste of what a 4PL is), though handing off problems doesn't fix them, since growth in connectivity also leads to an increasing need to manage risk. Some suggest it's time for the CFO to step up and take charge of the bottom line directly.
We'll deal with RFID separately, but in the realm of EDI, Web forms and barcodes are increasingly powering supply chain efficiency, especially where a business is able to mandate them. Evans Data found overall that B2B transactions are tops among current enterprise projects.
7. BI/Analytics
There are signs businesses are getting closer to reaping the benefits of near real-time business intelligence, and Gartner outlined some category leaders and visionaries in an ETL magic quadrant, even as alternate models like EII (enterprise information integration) come on the scene. But Gartner's term of business activity monitoring, or catching data on the fly, is a topic that remains, subjective and carries infrastructure issues. For all the interest in BI, Forrester reported that most companies are still struggling with fragmented data silos; META Group says data consolidation is the new theme.
The BI vendor landscape also shrank with the acquisitions of Brio, Data Distilleries, and Crystal Decisions. Mainstream vendors like SAP and E.piphany upgraded CRM analytics with more tools for marketing, sales and campaigns, though others feel that the CRM analytics space should be segregated between tools that deliver reporting on historical information versus those that predict behavior in the future. BI mobility is also in the offing, but not yet much of a topic.
Besides CRM, analytic solutions are extending to their other realms, in finance and supply chain for example to consider the landed cost of goods in DCs and retail stores, while Zeborg was another analytic acquisition tuned to sourcing.
8. CRM Crossroads
Not for the first time, customer relationship management was both the most widespread and bashed topic in the industry in 2003. While some alternately blamed or defended costly enterprise software deployments, a surprising number of senior executives still fail to set, align or measure CRM strategies across departments and properly manage sales opportunities. The stakes are high, yet META and Aberdeen see CRM as an area of increased application spending for both suite and point solutions in the private and public sector.
This drew attention from high roller SAP as it seeks to better penetrate the U.S. market. Along with its on demand strategy, market leader Siebel refreshed its enterprise offering with a slew of products and services.
The traditional enterprise/mid-market space was dominated by turmoil, with Pivotal being sold to a Chinese holding group, while Onyx, Kana and others scrambled to modularize and secure their niche.
The hosted versus license space also heated up. Siebel created a hybrid of sorts with its acquisition of UpShot, while others like Salesforce.com pushed its own On Demand branding. Other acquisitions like ACCPAC continued the shrinkage theme even as functionality for small businesses widened. But for small customers the focus still remains mostly on sales force automation.
A continuing trend is the crossover of CRM with partner and employee-facing initiatives, both internal and outsourced. Whether it's called employee-relationship management or human capital management, issues like training and merit pay are seen as new ways to drive productivity and efficiencies in retail and enterprise settings, often with the portal as centerpiece.
9. Offshore
Along with traditional infrastructure and software lifecycle work, business process outsourcing (BPO) ventures further raised awareness of human and technology resource opportunities in India and elsewhere for both captive offshore centers and service providers. Now it's a political football as well as a business imperative. We have two words to say why we'll be hearing a lot about offshore in 2004: Election Year. We're already developing a story on this one.
As the offshore market matures and spreads to and beyond India, Ireland, Israel and Russia, service providers are seeking to strategically stereotype themselves for specific skill sets as well as their relative economic advantages. As awareness has grown, offshore providers would like to productize R&D work to separate themselves from competing on hourly rates, but market penetration has barely taken place so far.
10. IT Meets Business
The new yardstick of accountability spreads risk and responsibility for IT projects across business and finance units, as well as IT. Shared service models and charge backs to business units spread as ways to quantify if not quite align IT resources with business strategies. IT portfolio management projects spread in 2003 and will continue to do so in 2004.
Among the many, software strategies for technology optimization came from Mercury Interactive, an appliance offering from VIEO, Tibco (with HP) and EMC offered ways to view and move business data. In anticipation of next year, we even saw one of the first application management solutions for open source.
Overlapping the IT/business space were some of the first position statements on grid computing, with the loudest noise coming from IBM, Oracle, HP and Sun.
11. RFID
While the huge supply chain, security and fraud prevention potential of radio frequency identification and electronic product codes are still on the horizon, you can tell an idea has arrived when social activists start warning us loudly about new technology. Previous such barometers were microwave ovens (radiation) and cell phones (brain cancer).
Had Wal-Mart not swung its big stick, radio frequency identification would have remained on the 2004 candidate list with grid computing, service architectures and most open source news. Now it looks like suppliers of both the retailer and other first movers like the U.S. DoD will pay for and accelerate the learning curve for everyone else, and also hasten volume cost reductions required to power the movement. Again, the value-added resellers will be of great importance making this happen.
12. Business Process Management
If we had not come across a strong case reference that proves a point, this topic would have remained on the bubble for next year. Then again, most BPM discussions fly high above the radar in the minds of experts like Michael Hammer, who draw timelines from the industrial revolution to describe where enterprises have arrived today. It's not the sort of thing you'd expect at an annual budget meeting, and besides, most business process strategies are held close to the vest.
But smaller vendors are slowly gaining mind share, advanced BPM tools to further these mostly people processes are now being embedded within conventional technology platforms where they can help break through the walls of applications and departments to contribute more continuous business processes. Research from AMR has indicated that all the ERP platforms have or will develop a strategy for this, a logical step for managing things like invoice workflow and projects.
(Editor's note: In well over 1,000 items covered by Line56 during 2003, several themes emerged or grew in relevance. Breaking them out we inevitably ran into some sub-categorization and crossover. The subtext to much of our news was the economy, but choosing topics also hinged on spending momentum and speaking with end users with plans or in production. Line56 covers business strategy more than IT so issues like spam and network security, though important, are not generally areas of coverage.)
(Jim Ericson is senior news editor and editorial director at Line56 Media) |
